UPDATE 1-Britain’s Osborne to launch new fiscal watchdog

* Osborne to announce new fiscal watchdog

* Cabinet to discuss how to cut 6 bln pounds later this
week

* Treasury to re-examine spending approvals since Jan 1
(Adds details)

By Sumeet Desai

LONDON, May 17 (BestGrowthStock) – New British finance minister
George Osborne will on Monday launch a new fiscal watchdog to
ensure the government is held to account on how it tackles the
record budget deficit.

The independent Office for Budget Responsibility will be
headed by former Bank of England Monetary Policy Committee
member Alan Budd, according to plans made by Osborne’s
Conservative Party before this month’s election.

Britain’s budget deficit is running at close to 12 percent
of GDP, similar to that of crisis-hit Greece, and the new
Conservative/Liberal Democrat coalition government has said
bringing it down is a priority.

Osborne, who became Britain’s youngest Chancellor of the
Exchequer, or finance minister, in 120 years last week, has
promised an emergency budget within 50 days of taking office
and the OBR will be charged with giving independent advice for
it.

It will be expected to publish fiscal forecasts at least
twice a year around the time of the budget and pre-budget
report, based on existing government policy at the time.

And it will also have to come up with a recommendation for
the amount of net fiscal tightening or loosening it judges
necessary for the Treasury to have a better than 50 percent
chance of achieving a mandate set by the chancellor.

While the government would not have to follow that
recommendation, the finance minister would have to explain why
not to parliament.

The coalition government has also promised to take an extra
6 billion pounds ($8.7 billion) out of the economy in the
current fiscal year beyond what was planned by the outgoing
Labour government.

Treasury officials have been working hard over the last
month during the election campaign to identify possible cuts
but Osborne is expected to shy away from announcing them just
yet.

Instead officials said that Osborne’s deputy at the
Treasury, Liberal Democrat David Laws, will meet colleagues
this week to agree on the 6 billion pounds of spending cuts
this year, following advice from the Treasury and the Bank of
England.

Osborne will also announce that the Treasury will
re-examine all spending approvals since Jan. 1 to ensure they
provide value for money.

But markets will be keen to see details of any fiscal
tightening as quickly as possible and Bank of England Governor
Mervyn King warned last week that the ongoing crisis in the
euro zone has made it even more urgent the new government gets
to grips with the yawning budget gap.

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UPDATE 1-Britain’s Osborne to launch new fiscal watchdog