Money (12)

The Chancellor's plans to introduce a law forcing future governments to achieve a budget surplus have taken a hit after a committee of MPs described it as "not credible".

Following widespread condemnation from economists, the Treasury Committee said it "agrees with the economists from whom it has heard and it is not convinced that the "surplus rule" is credible in its current form".

The committee highlighted a speech made by George Osborne at the start of the year in which he said the UK economy faces a "dangerous cocktail" of risks. At the time, the Chancellor pointed towards "stock market falls around the world, the slowdown in China, deep problems in Brazil and Russia" and commodity prices.

But the committee said the surplus law "leaves the government unable to use fiscal policy to respond either to such shocks abroad, or to turn in the economic cycle at home, unless they happen to depress GDP growth below the arbitrary rate of one per cent".