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Philip Hammond to set out his stall for balanced budget at Tory conference Philip Hammond to ditch George Osborne's economic targets
(about 11 hours later)
The chancellor is to tell the Conservative party conference that he remains set on achieving a balanced budget, while reiterating that this would happen in a “pragmatic” way without the need for a surplus this parliament. Philip Hammond has confirmed he will jettison George Osborne’s economic targets, although the chancellor remains set on achieving a balanced budget.
The scale of the deficit “remains unsustainable”, Philip Hammond is to say on Monday according to extracts of his speech released in advance. He will use his party conference speech on Monday – just weeks before his first autumn statement – to say the UK needs a new plan for post-Brexit times.
The Conservatives were elected “on a promise to restore fiscal discipline”, Hammond is to note, adding: “And that is exactly what we are going to do. But we will do it in a pragmatic way that reflects the new circumstances we face.” Hammond also signalled an intention to borrow more to invest in infrastructure projects as companies are being more cautious about spending after the vote to leave the EU.
The more rigorous austerity measures set out by his predecessor, George Osborne, “were the right ones for that time”, briefed out extracts of Hammond’s speech said. “But when times change, we must change with them. So we will no longer target a surplus at the end of this parliament.” He said there was a “distinction in my mind between investing in things that will make Britain’s economy more efficient in the future, transport systems, communications systems … and simply spending more on the day-to-day business of government”. He said there was a case for “targeted high-value investment in economic infrastructure” to support the economy and make Britain more productive.
But Hammond is to stress that the general aim of a balanced budget remained, saying: “Make no mistake: the task of fiscal consolidation must continue. It must happen within the context of a clear, credible fiscal framework that will anchor expectations, control day-to-day public spending, deliver value for money and get us back living within our means.” Told he sounded more like former shadow chancellor Ed Balls than his predecessor, Osborne, Hammond said he hoped he sounded like a “Conservative pragmatist”.
“Our circumstances have changed. The exit vote, the slowing of the world economy creates a new set of circumstances. And as we go into a period where inevitably there will be more uncertainty, we need to have the space to be able to support the economy through that,” he told BBC Radio 4’s Today programme.
The chancellor said he remained determined to achieve a balanced budget, while reiterating that this would happen in a “pragmatic” way without the need for a surplus this parliament. He said there needed to be a general framework to reassure the financial markets that there is a credible plan for reducing the UK’s deficit, which remains “unsustainable”.
The more rigorous austerity measures set out by Osborne “were the right ones for that time”, Hammond will say in his speech. “But when times change, we must change with them. So we will no longer target a surplus at the end of this parliament.”
But Hammond will stress that the general aim of a balanced budget remains, saying: “Make no mistake: the task of fiscal consolidation must continue. It must happen within the context of a clear, credible fiscal framework that will anchor expectations, control day-to-day public spending, deliver value for money and get us back to living within our means.”
The chancellor said the economy was in robust form but the government needed to make sure it was prepared for Brexit.
However, Labour said the prime minister’s drive for a “hard Brexit” – pulling the UK out of the single market to achieve her immigration controls – would undermine the decision to borrow to invest.
John McDonnell, the shadow chancellor, said this kind of model for leaving the EU could cause a £39bn hit to the public finances by 2019/20.
“All the signs are that after all our campaigning Philip Hammond is about to perform a sizeable U-turn on investment spending, but this will be undermined by Liam Fox and Boris Johnson’s hard Brexit strategy,” he said.
“The Tories are fighting among themselves and while Phillip Hammond tries to make his mind up Liam Fox is ideologically pushing for a ‘Hard Tory Brexit’, and writing cheques he wants working people in Britain to balance.
“We cannot be forced into a ‘Hard Tory Brexit’ because the chancellor won’t stand up to his fellow cabinet colleagues. It is time Philip Hammond found out who is in charge of Brexit, if not the prime minister, and took back control of his budget.”
Hammond will also unveil a £3bn package to speed up homebuilding, including using surplus public land and brownfield sites, encouraging smaller builders and innovations such as prefabricated modular homes.Hammond will also unveil a £3bn package to speed up homebuilding, including using surplus public land and brownfield sites, encouraging smaller builders and innovations such as prefabricated modular homes.
Jointly announced with the communities secretary Sajid Javid, it was billed as a major new scheme, although the centrepiece, a home-building fund, is primarily a repackaged version of an existing scheme, with only £1.1bn of the money being new. The package, which was jointly announced with the communities secretary, Sajid Javid, was billed as a major new scheme, although the centrepiece, a home-building fund, is primarily a repackaged version of an existing scheme, with only £1.1bn of the money being new.
Of the £3bn total, a third will be used as short-term loan funding for smaller housebuilders and what are described as “custom builders and innovators”, intended to create an extra 25,500 homes before 2020. Of the £3bn, a third will be used as short-term loan funding for smaller housebuilders and what are described as “custom builders and innovators”, intended to create an extra 25,500 homes before 2020.
The intention is to use builders who work more quickly, with the announcement saying traditional construction firms currently “take too long to build houses”.The intention is to use builders who work more quickly, with the announcement saying traditional construction firms currently “take too long to build houses”.
The remaining £2bn in the scheme would go on longer-term funding for infrastructure, in the hope of creating up 200,000 more homes in coming years, especially on brownfield land. The remaining £2bn would go on longer term funding for infrastructure in the hope of creating up to 200,000 more homes in coming years, especially on brownfield land.
Part of this will see surplus public land identified for rapid housebuilding, with measures to help development on brownfield sites and by smaller and innovative housebuilders, including those using offsite construction of modular homes. As part of this, surplus public land will be identified for rapid housebuilding, with measures to help development on brownfield sites and by smaller and innovative housebuilders, including those using offsite construction of modular homes.