Brown lays down law on fiscal prudence

GORDON BROWN polished his Iron Chancellor image yesterday by announcing that governments will in future be required by law to run a prudent fiscal policy.

Confirmation of his intention to introduce a Code for Fiscal Stability came a day ahead of a Budget expected to be tough on spending and borrowing. Although the government's finances are in better shape than he predicted as recently as November, the Chancellor has made it plain he will not ease his tax and spending plans.

The new code will subject levels of tax and expenditure to stricter parliamentary and public scrutiny. It is intended to mirror the transparency in interest rate policy resulting from the Bank of England's independence since last May.

The Chancellor is determined to prevent the British economy from reverting to its old pattern of boom and bust. His proposals got a guarded welcome yesterday.

Kevin Darlington at ABN Amro said: "It does open up fiscal policy to much greater scrutiny." Simon Briscoe at Nikko Europe said firm rules would be helpful, but added: "It is only a way of dressing up what is already accepted practice."

Mr Brown has indicated that if there is leeway for any increase in spending, he will make sure this takes place in the second half of Labour's term of office. But he is determined to refute allegations he is being tough on spending now simply to build up a pre-election "war chest".

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