The chancellor has stated that he will attempt to bind future governments to maintaining a budget surplus at times when the economy is growing. George Osborne made his annual Mansion House speech and outlined his plan to make sure that governments run a surplus. In January, Osborne first proposed the changed to the fiscal policy.
The government plans to sell its stake in the Royal Bank of Scotland, the chancellor confirmed in his speech. Since the financial crisis, concerns over the national debt have doubled. However, the plan would legally prevent future governments from spending more than they receive in tax revenue whilst the economy is growing.
National debt refers to the amount of money owed by the UK government and has been built up over many years by different governments. During April this year, the national debt stood at £1.48 trillion, which is the equivalent of 80.4% of the UK’s annual economic output, the Office for Nation Statistics (ONS) announced. Back in 2008, the debt was about £600 billion, or 42% of economic output.
An independent watchdog called the Office for Budget Responsibility (OBR) will be responsible for policing the new rules. As well as this, the OBR is set to have the power to decide when the government should be able to spend more than it is taking in revenue.
A vote by the House of Commons will be taken concerning Osborne’s proposal and is due to take place later on this year.