Osborne to push ahead with deficit-cutting commitment

British chancellor of the exchequer George Osborne will seek to burnish his deficit-cutting credentials on Wednesday, fresh from a decisive Conservative victory in last month's election, by reinforcing a long-term commitment to run budget surpluses.

Mr Osborne will draft legislation to compel future governments to spend less than they raise in taxes during normal economic times -- something that very few governments in British postwar economic history have managed - according to extracts of a speech that he will give to London’s finance industry.

He is also expected to give details on how the government will sell its 80 per cent stake in Royal Bank of Scotland.

Bank of England governor Mark Carney, who is also speaking at the annual Mansion House dinner, is due to announce tougher regulation for financial markets, which have been rocked by a string of scandals.

“In the budget, we will bring forward this strong new fiscal framework to entrench this permanent commitment to that surplus, and the budget responsibility it represents,” Mr Osborne is due to say in the speech.

Next month, Mr Osborne will announce updated borrowing and growth forecasts in his first post-election budget statement.

Last December, he promised a faster pace of deficit reduction in order to achieve an outright budget surplus by the 2018/19 tax year, a tough message that surprised some observers in the run-up to May’s closely fought national election.

The opposition Labour Party promised a slower pace of deficit reduction, including tax rises, but failed to convince voters. Mr Osborne looks set to try to capitalise on this later on Wednesday.

“In normal times, governments of the left as well as the right should run a budget surplus to bear down on debt and prepare for an uncertain future,” he will say, according to excerpts of the speech released in advance by his ministry.

Even if that condition is enshrined in a law, however, future governments would still be able to repeal it.

Mr Osborne also intends to revive a 19th-century committee tasked with debt reduction whose members included the governor of the Bank of England and the speaker of parliament.

Staff at the International Monetary Fund said this month that Britain's economy might be better off if the government reduced its debt levels relatively slowly.

But Mr Osborne believes Britain risks being caught out if the world economy sours while its national debt exceeds 80 per cent of gross domestic product, around double its level before the financial crisis.

Reuters