(Alliance News) - UK ministers will be forced to consult the official watchdog before making major tax and spending changes, in a new bill designed to avoid a rerun of Liz Truss's 2022 mini-budget which spooked investors and sparked a run on the pound.
The Office for Budget Responsibility will have new powers to scrutinise and publish a financial forecast of any "significant and permanent tax and spending changes" by the government, Labour confirmed in the King's Speech today.
Labour described the new bill as a "fiscal lock", adding that it would "prevent significant uncosted measures from being announced without sufficient scrutiny to mitigate the impact on the public finances".
The King said in his speech: "Stability will be the cornerstone of my Government's economic policy and every decision will be consistent with its fiscal rules."
It was announced alongside dozens of other bills as part of the State Opening of Parliament, where the government outlines its legislative agenda for the years ahead.
The bill comes less than two years after Conservative Prime Minister Truss and her chancellor Kwasi Kwarteng's GBP45 billion string of planned tax cuts in a so-called mini-budget in autumn 2022.
Kwarteng broke with tradition by refusing to publish the OBR's autumn forecast, which contributed to financial market jitters ahead of the announcement.
After he announced the plans, markets panicked, triggering a run on sterling, gilt market freefall and soaring mortgage costs. Kwarteng was sacked as chancellor three weeks later, and after only 38 days in the job.
When the OBR's forecast was eventually published the next year, it revealed the watchdog had told Kwarteng that the economy was heading for a recession, and that higher interest rates were making it more expensive for the UK to service its debts.
The OBR, founded by Conservative chancellor George Osborne in 2010, usually produces forecasts twice a year, to accompany the spring budget and autumn statement.
Labour first mooted the bill in 2023. It said today that the measure would "reinforce market credibility and public trust by preventing large-scale unfunded commitments that are not subject to an OBR fiscal assessment".
It added: "The 'fiscal lock' is intended to capture and prevent those announcements that could resemble the disastrous Liz Truss 'mini-budget', announced on September 23 2022, which would have cost GBP48 billion per year by 2027/28, and was not subject to an OBR forecast and damaged Britain's credibility with international lenders."
By Alex Daniel, PA Business Reporter
Press Association: Finance
source: PA
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