The Budget Responsibility Act 2024 came into force on 15 October 2024. This creates a ‘fiscal lock’ that is designed to ensure that fiscally significant announcements made by the Government are subject to independent assessment and will not upset the financial markets.
The Budget Responsibility Act 2024, which received Royal Assent on 10 September 2024, was brought into force from 15 October 2024 by commencement regulations laid on the previous day.
The Act will require any fiscally significant measures announced by the Government to be accompanied by an independent assessment by the Office for Budget Responsibility (OBR).
Previously, under the 2011 Budget Responsibility and National Audit Act (BRNAA), the OBR must produce at least two forecasts a year. The Budget Responsibility Act amends the BRNAA such that where the Government announces to Parliament a measure, or measures, that:
- Have not been included in an OBR economic and fiscal forecast.
- The OBR is of the opinion that it is ‘fiscally significant’,
The OBR must notify the Treasury Committee of its opinion and prepare a report that includes costing for each measure as soon as reasonably practicable.
A measure or combination of measures is ‘fiscally significant’ where they cost at least 1.0% of Gross Domestic Product (GDP) in any financial year in the forecast period. This equates to around £30 billion.
An OBR assessment will not be required where measures are both:
- Temporary (i.e. intended to end within two years).
- In response to an emergency.
If the OBR reasonably disagrees with the Treasury’s assessment that these conditions are met, it will have the discretion to trigger the fiscal lock and prepare a report.
Useful guides on this topic
Highlights (for tax and business) of the King's Speech
King Charles III made his speech at the State Opening of Parliament on 17 July 2024. He confirmed the 'big ticket measures' that the new government will privatise the railways and introduce a new Great British Energy company. In terms of business and tax it will ensure that every decision is consistent with set fiscal rules and scrutinised by the Office of Budget Responsibility, there will be reforms of audit and corporate governance and new measures on pensions and investment. VAT will be charged on private school fees.
Finance Acts 2024-25 tax update and Rolling Tax Planner
This rolling planner tracks the key tax announcements that impact the 2024-25 tax year and beyond. This planner is updated on an ongoing basis.
External links
Budget Responsibility Act 2024
The Budget Responsibility Act 2024 (Commencement) Regulations 2024
OBR: The Budget Responsibility Bill
Policy paper: Draft Charter for Budget Responsibility text on the fiscal lock
