General election 2019: Liberal Democrats say government should run permanent spending surplus in dig at Tories and Labour Deputy leader Ed Davey laid out the Lib Dem economic policy during a speech in Leeds

The government should run a permanent spending surplus, the Liberal Democrats have said in a bid to position themselves as the toughest party on public finances.

Laying out the party’s economic pitch in a speech in Leeds, deputy leader Ed Davey insisted the Conservatives and Labour were offering “fantasies” which would wreck the public finances.

And he claimed the Lib Dems are now the leading pro-business party as he pledged to crack down on US tech giants to help British start-ups challenge larger firms in future.

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Sir Ed said that if they got into government, the Lib Dems would run a 1 per cent surplus on current spending – meaning that day-to-day costs of public services would be lower than the amount raised in taxes. He claimed a “Remain bonus” would help shore up state finances.

Borrowing limit

Borrowing would only be allowed to pay for capital investment projects judged by an independent watchdog to generate more money for the taxpayer than their initial cost.

The fiscal rule is stricter than that proposed by the Conservatives, which would see current spending balancing taxation within three years. Labour also want a balanced budget but say it would take five years to reach. Sir Ed told activists: “Just look at the contrast with the other two parties. The spending competition between the Brexit parties, the Labour and Conservative fantasists, has made Santa Claus seem like Scrooge.”

The Lib Dem plans are in some ways stricter than the fiscal rules introduced by George Osborne when he was Chancellor – raising the prospect of a swift return to austerity.

Sir Ed said the party would raise spending, for example on childcare, but would balance it out by a rise in corporation taxes and capital gains tax. He added: “You can still meet fiscal rules and be economically responsible, and make important environmental, social and economic investments. You just have to be honest about where the money’s coming from. So on the revenue side we’ve talked about a Remain bonus, but we’ve also talked about modest tax rises.”

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The Lib Dems are calling for tougher new rules on competition which could see company bosses jailed if they breach antitrust laws – claiming this would help start-ups from the UK to challenge the entrenched champions. Sir Ed told i: “These big corporates, particularly from the USA, are just taking us to the cleaners. The Tories are going to be soft on big business and give the tech giants a free pass.” He dismissed Labour’s call for a nationalised broadband service as “just mad economics”.

The Lib Dems face continued questions over what they would do in the event of a hung parliament, when the party could hold the balance of power. They said they could work with a minority government led by Boris Johnson or Jeremy Corbyn on an “issue by issue” but ruled out a formal coalition or confidence and supply pact.