Charter ‘will fend off storms’

A NEW ‘fiscal charter’ will ensure that Britain always runs a surplus in the good times to prepare the country for ‘storms’ ahead, the Chancellor said yesterday.

George Osborne said there can be no turning back to the ‘staggering and unsustainable’ borrowing of the Labour years.

The charter commits the Government to keeping the national debt on a downward path as a percentage of national income every year and to reaching a budget surplus by 2019-20.

Osborne said future governments must then ‘maintain that surplus in normal times – in other words when there isn’t a recession or a marked slowdown’.

He said borrowing would only be permitted when the Office for Budget Responsibility ruled the economy was growing by less than 1pc a year.

Even then, the Chancellor of the day would have to set out a plan to restore finances to health – with targets then voted on by MPs.

Osborne said the charter is ‘sensible, pragmatic and keeps Britain secure’, adding that it is ‘not the richest but the poorest’ who suffer when governments lose control of the public finances.

‘Therefore in normal economic times governments should run an overall budget surplus, so our country is better prepared for whatever storms lie ahead,’ he said. ‘We should always fix the roof while the sun is shining.’

MPs will vote on the charter in the autumn, but critics cast doubt on how it would work.

Ben Brettell, senior economist at Hargreaves Lansdown, said: ‘It is a sad indictment of politicians that financial prudence has to be written into law. The principle is a sound one, however in practice the definition of normal is pretty arbitrary and subject to forecast error – high in the sphere of national economics.’

Ross Campbell, director of public sector at ICAEW, said: ‘It seems an extraordinary proposal to legislate to constrain the fiscal policy choices of future elected governments, and one which looks more like a political manoeuvre than being about sound management of the public finances.’