George Osborne is risking needless austerity cuts with a new move to force future governments to balance the books, a former Bank of England economist warned today.
In his annual Mansion House speech in the City of London tonight, the Chancellor is due to unveil plans to enshrine in law the practice of running a budget surplus in 'normal times'.
Mr Osborne will say that national debt is so 'unsustainably high' that it is time to legislate to force governments to "fix the roof while the sun is shining".
The Office for Budget Responsibility will decide what constitutes 'normal times', but critics believe Mr Osborne is trying to secure his place in history as the Chancellor who got Britain back in the black after the financial crisis.
Former Bank economist Danny Gabay asked why Mr Osborne had to 'take it out on the rest of us' for his own failure to get a grip on the UK's record deficit.
"Given that the last five years was the tightest fiscal settlement that we've seen in modern times... it was extremely hard on spending, and yet the level of debt continued to go up.
"You can sense his [Mr Osborne's] frustration, but does it make sense to take it out on the rest of us? No, not really."
Mr Osborne is set to announce the recreation of the Committee for the Reduction of National Debt, a body last seen when Britain was trying to pay of debts incurred by the Napoleonic Wars in the 19th century.
But Mr Gabay pointed out it was growth not cuts that had allowed the country to halve its debts back in Victorian times.
"From what I’ve understood… he’s talking about having a surplus in what he calls ‘normal times’. What most economists would advocate is running a surplus in good times, ie boom years, not normal times,” he told BBC Radio 4's Today programme.
Institute for Fiscal Studies (IFS) director Paul Johnson told Radio 4's World At One: "You can perfectly happily run down the national deficit as a proportion of national income - and that’s what matters - whilst still running small deficits."
A House of Commons vote on Mr Osborne's proposal is expected to take place later this year, allowing Mr Osborne to use his move to overshadow the Labour leadership contest this summer.
Shadow Chancellor Chris Leslie said the law would be used to draw attention away from the problem of low productivity.
“We need to deal with the deficit, and no-one would disagree with a surplus when economic circumstances allow or that investment is needed if the economy is in a downturn,” Mr Leslie said.
“But rather than giving speeches full of distraction techniques the Chancellor should be focusing on driving up productivity, setting out how he will pay for his multi-billion-pound election pledges and explaining who will bear the burden of the still unexplained cuts planned."
Mr Osborne was also expected to signal an end to bank levy rises of recent years, part of his strategy to stop 'banker bashing' in the hope of retaining firms such as HSBC.
The bank outlined 8,000 UK job cuts this week and has threatened to pull its HQ from the UK, partly in protest at the rising levy.