UK Government Introduces New Policy for Budget Oversight

The UK government announced a new requirement for its official budget watchdog to assess significant fiscal changes impacting at least 1% of the economic output. This policy follows through on a commitment made by the Labour Party before winning the election on July 4.

In a move aimed at enhancing fiscal transparency, the UK's new government declared on Thursday that significant changes to tax policy and public spending, affecting at least 1% of economic output, will now be assessed by the country's budget watchdog.

This new requirement aligns with a pledge made by the Labour Party during their election campaign, which culminated in a victory on July 4. The Office for Budget Responsibility will scrutinize all major fiscal events that involve 'significant and permanent' changes.

The policy arises partly due to the fiscal instability caused in 2022 when former PM Liz Truss and her finance minister Kwasi Kwarteng announced substantial tax cuts without OBR assessment, leading to a drop in government bond prices. (Writing by William Schomberg; editing by David Milliken)

(With inputs from agencies.)