In a speech to his Labour Party's annual conference in Brighton, Darling also promised legislation very soon to end the "reckless culture" of excessive bonuses at financial institutions.
After 12 years in power, polls predict Labour will face a stinging defeat at an election due within nine months. Darling and Business Secretary Peter Mandelson told the conference that the party needed to fight back and not succumb to defeatism.
Mandelson said the government had been right to put billions into the economy to fight the worst recession in decades and announced on Monday an extension to the car scrappage scheme to cover an additional 100,000 vehicles.
We will introduce a new Fiscal Responsibility Act to require that the government reduces the budget deficit year on year
Chancellor Alistair Darling
But the recession has sent public debt soaring to record levels, knocking the pound, putting Britain's triple-A credit rating under threat and making expenditure control a key battleground for the next election.
"We will introduce a new Fiscal Responsibility Act to require that the government reduces the budget deficit year on year, ensuring that the national debt remains sustainable in the medium term," Darling said.
Government officials told Reuters that the proposed deficit reduction laws would be fleshed out in the pre-budget report, which usually takes place in November, and a range of options were on the table, pointing to international examples.
These included the Gramm-Rudman-Hollings balanced budget act in the United States in 1985 which provided for automatic spending cuts if the deficit exceeded a particular level.
This was followed in 1990 by the budget enforcement act which set caps on spending or had a "pay as you go process" where any new commitments had to be matched by cuts or tax hikes elsewhere.
And Germany has recently committed to a debt reduction programme where every year the budget deficit has to be reduced by a quarter of a percentage point.
Greed And Recklessness
Darling said spending will have to be cut in order to get the deficit down and put the public finances on a sounder footing but the difference between Labour and the Conservatives was that the latter would cut indiscriminately.
Neither main political party, however, has offered much detail on how they plan to cut borrowing besides vague promises on protecting front-line services such as schools and hospitals.
Areas such as defence are more likely to come under the spending axe, although Darling said on Monday that a proposal to reduce the nuclear submarine fleet by a quarter would not save much money.
Analysts were sceptical about the plans to enshrine budget deficit reduction in law, saying they would prefer to see more concrete proposals on spending cuts or tax rises.
"A better way to give the Budget plans more credibility would be to say how exactly you intend to get borrowing down," said Carl Emmerson of the Institute for Fiscal Studies.
With public anger against the banks over their role in causing the financial crisis still high, Darling also said he was introduce legislation in the next few weeks to curb excessive bonuses in the financial sector such as deferring payments over times and subjecting them to clawback.
"We won't allow greed and recklessness to ever again endanger the whole global economy and the lives of millions of people," Darling said.
Prime Minister Gordon Brown will address the conference on Tuesday.
