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Fiscal watchdog to monitor budget deficit actions

Chancellor George Osborne will today launch a new fiscal watchdog to ensure the government is held to account on how it tackles the record budget deficit.

The independent Office for Budget Responsibility will be headed by former Bank of England Monetary Policy Committee member Alan Budd, according to plans made by the Conservative Party before this month's election.

Britain's budget deficit is running at close to 12% of GDP, a similar level to that of crisis-hit Greece, and the new Conservative/Liberal Democrat coalition government has said bringing it down is a priority.

Osborne, who became Britain's youngest chancellor in 120 years last week, has promised an emergency budget within 50 days of taking office.

The OBR will be expected to publish fiscal forecasts at least twice a year around the time of the budget and pre-budget report, based on existing government policy at the time.

And it will also have to come up with a recommendation for the amount of net fiscal tightening or loosening it judges necessary.

While the government would not have to follow that recommendation, the chancellor would have to explain why not to parliament.

The coalition government has promised to take an extra £6 billion out of the economy in the current fiscal year beyond what was planned by the outgoing Labour government.

Osborne's deputy at the Treasury, Liberal Democrat David Laws, will meet colleagues this week to agree on the £6 billion pounds of spending cuts this year, following advice from the Treasury and the Bank of England.

Osborne will also announce that the Treasury will re-examine all spending approvals since January 1 to ensure they provide value for money.

 

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