George Osborne announced on Monday that a Conservative government would seek to run an overall budget surplus by 2020, a move that would put further pressure on welfare spending beyond the cuts already announced until 2017.
In his setpiece speech to the party conference, Osborne said he would rewrite his fiscal mandate so that the Tories achieved an absolute surplus in the next parliament, provided the recovery was sustained.
At the same time, capital spending would grow at least in line with GDP, decisions that Treasury officials say will put real pressure on current spending, particularly welfare budgets.
Osborne said fuel duty would be frozen until May 2015, making it 20p per litre lower than it would have been if Labour had stayed in power.
Treasury officials said the chancellor would have foregone £22.6bn in planned fuel duty revenues by the end of the parliament by refusing to go ahead with Labour's planned rises.
Osborne's fuel duty commitment follows intense backbench pressure and is his riposte to the promise last week by the Labour leader, Ed Miliband, to freeze electricity prices for 20 months after the 2015 election.
The chancellor dismissed the Labour freeze as a gimmick that would force prices up by deterring companies from investing.
"Provided we can find the savings to pay for it, I want to freeze fuel duty for the rest of this parliament," said Osborne to loud applause. "Conservatives don't just talk about being on the side of people. We show it, day in, day out, in the policies we deliver."
Osborne set out plans for a "help to work" scheme under which the long-term unemployed will be required to do community work, such as picking up litter or cleaning graffiti, in return for their benefits.
He said that people who had been unemployed for more than three years would have to work for their dole, attend jobcentres daily to search for employment or accept help for underlying problems such as illiteracy or drug dependency.
Describing himself as an optimist, the chancellor told Tory activists that, after a series of positive economic indicators, "the sun has started to rise above the hill and the future looks brighter than it did just a few dark years ago".
But he said work to bring down the deficit was not yet complete. "The battle to turn Britain around is not even close to being over and we are going to finish what we have started," he said.
His commitment to run a surplus on capital and current spending in the next parliament was challenged by Labour, who said Osborne had failed to meet his two fiscal targets in this parliament.
Based on current Office for Budget Responsibility forecasts, Britain will still be in deficit by about £43bn in 2017-18, or 2.3% of GDP.
Osborne said: "I can tell you that when we've dealt with Labour's deficit, we will have a surplus in good times as insurance against difficult times ahead.
Provided the recovery is sustained, our goal is to achieve that surplus in the next parliament. That will bear down on our debts and prepare us for the next rainy day. "That is going to require discipline and spending control.
Because if we want to protect those things we care about, like generous pensions and decent healthcare, and buy the best equipment for the brave men and women who fight in our armed forces, all of us are going to have to confront the costs of modern government – and cap working age welfare bills.
"And only if we properly control public expenditure will we be able to keep lowering taxes for hard-working people in a way that lasts. I've never been for tax cuts that are borrowed. I want low taxes that are paid for."
He said he would continue to invest in essential infrastructure of our country –, "the roads and railways and science and communications that are the backbone of the future economy.
So we should commit, alongside running a surplus and capping welfare, to grow our capital spending at least in line with our national income".
His officials said a new fiscal mandate would be drawn up by the time of the next election, a move that Osborne clearly believes Labour will struggle to match.
So far, Labour has simply said it would match current government spending plans in 2015-16, but has not said if it would seek to eradicate the deficit by 2017-18, let alone put the budget into total surplus through the parliament.
Treasury officials said the surplus commitment represented a break with the past since the government had run a surplus in only seven of the last 50 years and three of the last 20.
The officials said Britain had cut the size of the national debt as a percentage of GDP after the second world war, but mainly through controls on bank lending and inflation eroding the value of the debt. The shadow chief secretary to the Treasury, Rachel Reeves, said no one would believe Osborne's pledges on capital spending and the deficit.
"His failure on growth means that, far from balancing the books by 2015 as he promised, borrowing is now set to be £96bn. And for all the warm words about capital spending, he is cutting it in 2015," she said.
"By opposing [Labour] measures to freeze energy prices and expand free childcare for working parents, the Tories have shown once again that they only ever stand up for a privileged few not for hard-working families."
In his speech, Osborne said: "And for those who ask: is this necessary? I say: what is the alternative? To run a deficit for ever? To leave our children with our debts? To leave Britain perilously exposed to the next time the storm comes?
"This crisis took us to the brink. If we don't reduce our debts, the next could push us over. Let us learn from the mistakes that got Britain into this mess. Let us vow: never again. This time we're going to run a surplus. This time we're going to fix the roof when the sun shines."
theguardian.com
In his setpiece speech to the party conference, Osborne said he would rewrite his fiscal mandate so that the Tories achieved an absolute surplus in the next parliament, provided the recovery was sustained.
At the same time, capital spending would grow at least in line with GDP, decisions that Treasury officials say will put real pressure on current spending, particularly welfare budgets.
Osborne said fuel duty would be frozen until May 2015, making it 20p per litre lower than it would have been if Labour had stayed in power.
Treasury officials said the chancellor would have foregone £22.6bn in planned fuel duty revenues by the end of the parliament by refusing to go ahead with Labour's planned rises.
Osborne's fuel duty commitment follows intense backbench pressure and is his riposte to the promise last week by the Labour leader, Ed Miliband, to freeze electricity prices for 20 months after the 2015 election.
The chancellor dismissed the Labour freeze as a gimmick that would force prices up by deterring companies from investing.
"Provided we can find the savings to pay for it, I want to freeze fuel duty for the rest of this parliament," said Osborne to loud applause. "Conservatives don't just talk about being on the side of people. We show it, day in, day out, in the policies we deliver."
Osborne set out plans for a "help to work" scheme under which the long-term unemployed will be required to do community work, such as picking up litter or cleaning graffiti, in return for their benefits.
He said that people who had been unemployed for more than three years would have to work for their dole, attend jobcentres daily to search for employment or accept help for underlying problems such as illiteracy or drug dependency.
Describing himself as an optimist, the chancellor told Tory activists that, after a series of positive economic indicators, "the sun has started to rise above the hill and the future looks brighter than it did just a few dark years ago".
But he said work to bring down the deficit was not yet complete. "The battle to turn Britain around is not even close to being over and we are going to finish what we have started," he said.
His commitment to run a surplus on capital and current spending in the next parliament was challenged by Labour, who said Osborne had failed to meet his two fiscal targets in this parliament.
Based on current Office for Budget Responsibility forecasts, Britain will still be in deficit by about £43bn in 2017-18, or 2.3% of GDP.
Osborne said: "I can tell you that when we've dealt with Labour's deficit, we will have a surplus in good times as insurance against difficult times ahead.
Provided the recovery is sustained, our goal is to achieve that surplus in the next parliament. That will bear down on our debts and prepare us for the next rainy day. "That is going to require discipline and spending control.
Because if we want to protect those things we care about, like generous pensions and decent healthcare, and buy the best equipment for the brave men and women who fight in our armed forces, all of us are going to have to confront the costs of modern government – and cap working age welfare bills.
"And only if we properly control public expenditure will we be able to keep lowering taxes for hard-working people in a way that lasts. I've never been for tax cuts that are borrowed. I want low taxes that are paid for."
He said he would continue to invest in essential infrastructure of our country –, "the roads and railways and science and communications that are the backbone of the future economy.
So we should commit, alongside running a surplus and capping welfare, to grow our capital spending at least in line with our national income".
His officials said a new fiscal mandate would be drawn up by the time of the next election, a move that Osborne clearly believes Labour will struggle to match.
So far, Labour has simply said it would match current government spending plans in 2015-16, but has not said if it would seek to eradicate the deficit by 2017-18, let alone put the budget into total surplus through the parliament.
Treasury officials said the surplus commitment represented a break with the past since the government had run a surplus in only seven of the last 50 years and three of the last 20.
The officials said Britain had cut the size of the national debt as a percentage of GDP after the second world war, but mainly through controls on bank lending and inflation eroding the value of the debt. The shadow chief secretary to the Treasury, Rachel Reeves, said no one would believe Osborne's pledges on capital spending and the deficit.
"His failure on growth means that, far from balancing the books by 2015 as he promised, borrowing is now set to be £96bn. And for all the warm words about capital spending, he is cutting it in 2015," she said.
"By opposing [Labour] measures to freeze energy prices and expand free childcare for working parents, the Tories have shown once again that they only ever stand up for a privileged few not for hard-working families."
In his speech, Osborne said: "And for those who ask: is this necessary? I say: what is the alternative? To run a deficit for ever? To leave our children with our debts? To leave Britain perilously exposed to the next time the storm comes?
"This crisis took us to the brink. If we don't reduce our debts, the next could push us over. Let us learn from the mistakes that got Britain into this mess. Let us vow: never again. This time we're going to run a surplus. This time we're going to fix the roof when the sun shines."
theguardian.com
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