Britain will make annual budget deficit reduction a legal commitment in order to bind future governments to getting the national debt down, Chancellor Alistair Darling said today.
In a speech to his Labour Party's annual conference in Brighton, Mr Darling also promised legislation in the next few weeks to end the "reckless culture" of excessive bonuses at financial institutions.
The cost of the worst recession in decades has sent public borrowing soaring and the budget deficit is expected to top 12 percent of GDP this year, denting the value of sterling and putting Britain's triple-A credit rating under threat.
Government officials told Reuters that the deficit reduction laws would be fleshed out in the pre-budget report and a range of options were on the table.
"We will introduce a new Fiscal Responsibility Act to require that the government reduces the budget deficit year on year, ensuring that the national debt remains sustainable in the medium term," Mr Darling said.
"In the next few weeks, I will set out in the pre-budget report how we will protect front-line public services, bring the deficit down, and invest in the country's future."
The finance minister said spending will have to be cut to get the deficit down and put the public finances on a sounder footing.
But for now, he said, the stimulus had to stay in place until the economy was firmly out of recession. He stuck by his budget forecast that recovery would be under way by the turn of the year.
Analysts, however, were sceptical about the plans to enshrine budget deficit reduction in law, saying they would prefer to see more concrete proposals on how borrowing will actually come down.
So far neither Labour nor the opposition Conservatives have spelled out detailed plans to curb spending.
Mr Darling will meet directors of Britain's four biggest banks, asking them to change the way they compensate staff before the new law is enacted, his office said.
Agencies