Chancellor abandons George Osborne's surplus target to focus on infrastructure

UK chancellor in his keynote speech to Conservative party conference outlines a “pragmatic” approach after ripping up George Osborne fiscal policy of having a surplus by 2020

PHILIP HAMMOND has said that he will rip up his predecessor George Osborne’s target of having a surplus by the end of this parliament, and instead focus on infrastructure projects to boost the economy.

The UK chancellor told the Conservative party conference in Birmingham that, due to uncertainty about Britain leaving the EU, he would announce a new “pragmatic” fiscal discipline in his Autumn Statement in November.

Hammond told conference: “The fiscal policies that George Osborne set out were the right ones for that time.

“But when times change, we must change with them.

“So we will no longer target a surplus at the end of this parliament.” Philip Hammond

“So we will no longer target a surplus at the end of this parliament.

Hammond added: “But make no mistake, the task of fiscal consolidation must continue.

“And it must happen within the context of a clear, credible fiscal framework that will control day-to-day public spending deliver value for money”

“And it must happen within the context of a clear, credible fiscal framework that will control day-to-day public spending deliver value for money” Philip Hammond

Former chancellor George Osborne first committed to returning the national finances to a surplus by 2019/2220 at the Conservatvie Party conference in 2013 before announcing it as government policy in the 2015 budget.

At the time, there was some doubts as to whether he would meet the target when Carl Emmerson, deputy director of the Institute for Fiscal Studies, said that there was a “slightly better than 50/50 chance” of meeting the target.

Hammond will flesh out in the Autumn Statement ways of boosting the economy, such as borrowing £2bn to speed up the process to construction of new homes, “because making housing more affordable will be a vital part of building a country that works for everyone”.

“Because making housing more affordable will be a vital part of building a country that works for everyone.” Philip Hammond

Other announcements that Hammond made in his speech include setting up a National Infrastructure Commission to look at the nation’s long term infrastructure need, £220m to support tech innovation and £120m to develop a tech transfer office that will bring universities and entrepreneurs together to get the science from the lab into the factory.

Labour’s shadow chancellor, John McDonnell said that Hammond had performed a massive U-turn on investment by admitting that the failed “long-term economic plan” never really existed.

McDonnell said: “Labour is now the only national party with a fiscal frame work that supports patient long-term investment in our economy, and it's clear that Phillip Hammond is now borrowing from Labour to invest in his own speech. 

“As well as abandoning their own fiscal charter this was full of the same empty promises George Osborne made, only with worse gags.” John McDonnell

“As well as abandoning their own fiscal charter this was full of the same empty promises George Osborne made, only with worse gags.”

McDonnell added: “The chancellor should apologise today for the failed Tory approach that has meant he has had to abandon the failed economic agenda of the last six years, an approach which has seen them dragging their heels on tax avoidance, an increase in child poverty, and house-building falling to its lowest peacetime rate since the 1920s. 

“The dangerous divide in society the chancellor mentioned has come about as a direct result of the policies he has voted for since 2010.”

“The chancellor is set to preside over an act of economic vandalism that is simply reckless.” Stewart Hosie

SNP Treasury spokesperson Stewart Hosie said: “After the chancellor’s summer of silence on Brexit this was an incredibly complacent speech.

“Alongside the Tories’ damaging austerity plans they are now planning on taking the UK out of the single market, putting jobs, investment and trade at risk.

“The chancellor is set to preside over an act of economic vandalism that is simply reckless.

“The chancellor admitted his own government’s failure to turn around the UK's poor productivity levels  but there was no mention of the Conservative Government’s failure to stimulate it.”

Picture courtesy of Foreign and Commonwealth Office

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