Labour's Liz Kendall has "no problem" with a budget surplus

Jessica Morris
Follow Jessica
Kendall said Labour needs to make sure its economic policy isn't defined by the Conservatives (Source: Getty)

Labour leadership candidate Liz Kendall has said she has "no problem" with aiming for a budget surplus, a policy the government wants to enshrine in law, which commentators say is a political move designed to pressure the Labour party.

Read more: UK budget since 1986: There has been deficits for 22 of 30 years

"Labour should never be in favour of budget deficits for the sake of it. I have no problem aiming for a surplus. We must learn the lessons of what happened after the 2010 election and make sure our economic policy is defined by us and not by the Conservatives," Kendall said according to the Guardian.

"We lost the last election because we were not trusted with the economy or with taxes and this time we have to be crystal clear what our deficit policy is as early as possible."

While it's not yet known how the new fiscal mandate will be enforced, further details are due to be included in the summer Budget on 8 July.

Read more: Business sounds alarm over Osborne's "fiscal straightjacket"

Political commentators have since said Osborne's announcement was a primarily political, rather than economic, calling it a move designed to draw attention to the Labour party's fiscal policies ahead of its leadership elections.

Ex-chancellor Lord Lawson told Radio 4's Today programme: "George Osborne is very political and I think that, bearing in mind the gross irresponsibility of the increases in public expenditure towards the latter part of the last Labour government, it is understandable that he should want to make a point about this."

Business groups have also warned that the new law would limit the ability of governments to use fiscal policy as a tool to counter any future economic downturns.

"While running a budget surplus is a laudable aim, economic history shows that the national interest sometimes requires fiscal flexibility," John Longworth, director general of the British Chambers of Commerce, said.

"It is impossible to predict global economic conditions with any certainty, so no government should not put itself into a fiscal straitjacket that limits its scope to respond."

Related articles