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Chancellor to commit future governments to new ‘budget surplus’ rule

Chancellor George Osborne has announced plans to introduce a new ‘fiscal settlement’ rule, which will commit future governments to run a budget surplus.

At his annual Mansion House speech, the Chancellor said: ‘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’.

The fiscal framework will be subject to a House of Commons vote later in the year.

Commenting on the plans, John Longworth, Director General of the British Chamber of Commerce said: ‘While running a budget surplus is a laudable aim, economic history shows that the national interest sometimes requires fiscal flexibility. It is impossible to predict global economic conditions with any certainty, so no government should put itself into a fiscal straitjacket that limits its scope to respond’.

Meanwhile, the Chancellor also confirmed plans to begin selling the Government’s stake in RBS to large institutional investors, as part of the ‘biggest privatisation programme in British history’.

The move has been criticised by some, as the sale of the shares will be at a potential £14bn loss to the taxpayer.

However, according to Bank of England Governor Mark Carney the sale would ‘promote financial stability, a more competitive banking sector, and the interests of the wider economy’.