THE CODE FOR FISCAL STABILITY
The framework within which the Government will formulate and implement fiscal (including debt management) policy is set out in The Code for Fiscal Stability, published in March 1998.
The Code, which will shortly be given the force of law in the 1998 Finance Bill, ensures that the framework for fiscal policy is characterised by openness, transparency and accountability, mirroring the reform of the monetary policy framework introduced last May.
The Code requires fiscal and debt management policy to be formulated and implemented in accordance with a set of five key principles that are fundamental to a commonsense approach to fiscal management:
- transparency in the setting of fiscal policy objectives, the implementation of fiscal policy and the publication of the public accounts;
- stability in the fiscal policy-making process and in the way fiscal policy impacts on the economy;
- responsibility in the management of the public finances;
- fairness, including between generations; and
- efficiency in the design and implementation of fiscal policy and in managing both sides of the public sector balance sheet.
A number of other commitments follow from this. For example, governments must state explicitly their short and long-term fiscal policy objectives, and must ensure these objectives are consistent with the fiscal principles embodied in the Code.
A further important requirement of the Code is that governments report regularly on progress in meeting their fiscal objectives. From now on, the familiar Financial Statement and Budget Report will be supplemented each year by an Economic and Fiscal Strategy Report, setting out the Government's long-term strategy and objectives. The present document is the first of this series. The Code also requires a Pre-Budget Report to be published, reflecting the Government's desire to draw upon the skills and experience of others when forming policy. Together, these reports will ensure that Parliament (in particular, the Treasury Select Committee) and the public, can scrutinise fully the Government's fiscal plans.
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