Legislation binding the Government to halve the UK's ballooning public deficit in four years was put before Parliament yesterday.
The Fiscal Responsibility Bill published alongside the pre-Budget report was announced in the Queen's Speech last month as the Government tried to shore up confidence in Chancellor Alistair Darling's ability to keep control of the UK's spiralling debts.
Under the proposed rules the Government must put forward a plan "for delivering sound public finances" before MPs, and will be legally required to fulfil it. The first such plan, also published yesterday, lays out targets for the period from 2009/10 to 20015/16 and includes the well-publicised commitment to halve public sector net borrowing over the four years from 2009/10, as well as a pledge to reduce borrowing every year to 2015/16. The Government will also ensure that public sector net debt is falling as a share of GDP by 2015/16, with a target for borrowing to be 5.5 per cent of GDP or less in 2013/14 to be set in secondary legislation enabled by the Bill.
The Government is keen to trumpet both the fiscal sense of the scheme, and the enhanced role it sets out for Parliament. "These measures provide a specific focus for Parliamentary accountability and represent a significant evolution of the extent to which the Government is held to account for its medium-term fiscal policy," the Treasury said yesterday.
The idea is not new. A similar plan was proposed by the Conservatives last year, but with the addition of an independent Office for Budget Responsibility to oversee its implementation.
The Government's measures have met with a sceptical response. Howard Archer, the chief economist at IHS Global Insight, said: "The Government had its 'golden rule' before but it simply moved the goalposts around. And there is still nothing that spells out the sanctions if the Government fails."
Even if the legislation proves effective as a political tool, the targeted reduction is not stretching enough. Vicky Redwood, at Capital Economics, said: "The Government has set itself a low hurdle. Although it is still possible that the target will be missed – if the economy goes back into recession – the probability is that it will be achieved. But in reality the government will need to do much more than that."