Chancellor to raise borrowing while claiming Labour would ‘saddle country with debt’

This article is more than 10 months old

This article is more than 10 months old

Sajid Javid has ripped up the Conservative party’s former fiscal rules and loosened constraints on borrowing to the tune of £20bn a year, while attacking Labour for planning to “saddle the country with debt”.

The chancellor was repeatedly challenged over his decision to increase borrowing at the same time as criticising Labour for wanting to do the same.

He claimed the parties’ approaches were “like night and day”, with the Tories having “good reasons” to borrow to invest in infrastructure while Labour could not be trusted to manage the economy.

Labour and Tories race to ramp up spending despite borrowing risks Read more

Javid said his two main new fiscal rules were that the Conservatives would run a balanced current account budget by the middle of the next parliament and that borrowing for infrastructure would not exceed 3% of GDP.

Under a third rule, the framework would be reassessed if future borrowing costs rose significantly to above average.

He hinted the Conservatives still believed there would be room for tax cuts to be promised in the party’s election manifesto and suggested there would be enough money to commit to the Northern Powerhouse rail project in full.

Javid said now was a responsible time to increase borrowing because interest rates were negative for the government and it was a moment for “new rules for a new economic era”.

Speaking from an aircraft hangar outside Manchester, he said: “Our first rule will be to have a balanced current budget. What we spend cannot exceed what we bring in.”

Javid said the exception would be borrowing to build, as he promised new hospitals, schools, roads, railways and better broadband.

“Investment in long-term projects like roads and rail will not exceed 3% of GDP,” he said. “Now compared to a long-term average of around 1.8%.”

The rule breaks the previous framework imposed by the Conservatives in 2017, which set a 2% rule. Figures from the Office for Budget Responsibility were expected to show a breach of the target this week, but the publication of the report was blocked by the civil service because of election purdah rules.

The Liberal Democrats said the decision “smacks of political interference”.