Rishi Sunak Announces New Charter For Budget Responsibility To Urge Government "Discipline"
Rishi Sunak has confirmed he will publish a new charter for budget responsibility, aimed at keeping the government “on the path of discipline and responsibility”.
The charter, which was announced today as part of the Chancellor’s Budget, comprises of two fiscal rules.
The first rule is that underlying public sector net debt, excluding the impact of the Bank of England, must as a percentage of GDP be falling.
The second is that “in normal times” the state should only borrow to invest “in our future growth and prosperity”. Everyday spending, under the new charter, must be paid through taxation.
Both rules will be required to be met by the third year of every forecast period.
“This gives us the flexibility to respond to crises while credibly keeping our public finances under control,” Sunak told the Commons.
The Chancellor also announced today that the new fiscal orders will be supplemented by targets to spend up to 3% of GDP on capital investment and to keep welfare spending “on a sustainable path”.
“Coronavirus left us with borrowing higher than at any time since the second world war. As the Prime Minister reminded us in his conference speech, higher borrowing today is just higher interest rates and even higher taxes tomorrow,” Sunak said.
“We need to strengthen our public finances so that when the next crisis comes we have the fiscal space to act,” he added.
MPs will be given the opportunity to vote on the new charter, which will easily pass given the Conservatives’ 80 seat majority.
Speaking to a packed Commons, Sunak said: “The vote will give members a simple choice: to abandon our fiscal anchor and leave our economy adrift with reckless unfunded pledges or to vote on what we on this side of the house know is the right course – sound public finances and a stronger economy for the British people.”
PoliticsHome provides the most comprehensive coverage of UK politics anywhere on the web, offering high quality original reporting and analysis: Subscribe