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Tuesday, U.K.'s Chancellor of the Exchequer Alistair Darling said U.K. faces huge challenges over its debt in coming years.
During a debate on the Treasury's Fiscal Responsibility Bill in parliament, Darling said the bill will ensure substantial strengthening of fiscal responsibility and it is necessary to ensure sustainable borrowing as the economy recovers.
U.K. is facing a record budget deficit of 12.6% GDP, the biggest among the developed nations. All political parties agree that this level of deficit is unsustainable. Moreover, the HM treasury estimates the net debt to GDP ratio to be twice higher in coming years than its pre-crisis levels.
The Fiscal Responsibility Bill, presented to Parliament on December 9, requires the Treasury to make sure that government borrowing in each financial year between 2010/11 and 2015/16 is lower than the previous year, measured as a percentage of GDP and government debt is lower in 2015/16 than in 2014/15, measured as a percentage of GDP.
Moreover, Darling said its important to reduce debt in such a way that should not disrupt economic recovery. He warned that quick fiscal tightening would derail Britain's recovery.
Opposition Conservative treasury chief George Osborne criticized the bill and called the legislation as the biggest "load of nonsense" and a "feeble stunt".
On the economy, Darling said U.K. is expected to exit recession in the fourth quarter. The statistical office is yet to release fourth quarter GDP figures.
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