Sajid Javid's speech on re-writing of Britain’s fiscal rules
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Article from Bloomberg Chancellor of the Exchequer Sajid Javid
announced a re-writing of Britain’s fiscal rules that will allow
the government to borrow for increased investment. The new rules
commit the government to balancing the day-to-day budget and
limiting investment to 3% of gross domestic product, Javid said in
his first speech of the general election campaign Thursday. Debt,
he promised, would be lower at the end of the next parliament than
it was at the start....Request free
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Article from Bloomberg The new rules commit the government to balancing the day-to-day budget and limiting investment to 3% of gross domestic product, Javid said in his first speech of the general election campaign Thursday. Debt, he promised, would be lower at the end of the next parliament than it was at the start. The announcement ends months of speculation over what would replace the current fiscal rules, which require borrowing to be less than 2% of GDP in 2020-21. Javid will almost certainly breach that ceiling after announcing an extra 13.4 billion pounds ($17.2 billion) of spending on public services in September. Javid said low interest rates, which he expects to continue, mean it is now a responsible time to invest. Historically, Britain has spent around 1.8% on infrastructure, he said, so in practical terms the new ceiling allows an extra 20 billion pounds or so for investment.
The extra spending was needed to deliver a decade of renewal, he
said, though investment plans would be reassessed, however, if
debt-servicing costs rise. “It’s great to be back here in Manchester… …. and out of Westminster. We didn’t call this election because we want one. We want to get on with governing… …and we know the next few weeks are going to be tough. But we’re going back to the people… …because we have to end the political paralysis that has gripped this country for more than three years. And the only way to do that is to break the deadlock in parliament. We must end the dither and delay. And get Brexit done. That’s the most important thing our economy needs right now. And now we can, because the PM’s got a good deal. That was a huge achievement, because you’ll remember, that so many people said wasn’t possible. This Deal is good for democracy - and it’s good for the economy. A strong economy ultimately depends on a strong democracy. Getting this deal through will give business the confidence that it needs and certainty that it needs to plan and invest for the future. Of course, I talk to businesses all the time, I listen to their concerns. By far the biggest fear of business is a Corbyn led government. One of the prizes of this election is the chance to end that threat… … defeat Corbynism on December 12th and they will be gone for good. And now that we have a Deal, we can finally provide that certainty on Brexit too. Businesses, like the rest of us, they have deadline-fatigue. We can finally see the light at the end of the tunnel. But all the Lib Dems, Labour and SNP, all they want to do is to continue to extend that tunnel. We’ve all had enough of that. Now, the Governor of the Bank of England has said that the Deal is positive for the economy. And the certainty of that positive deal will unleash the private sector to investment even more in our country. And we’ll all benefit from that Deal dividend. Then we can focus on the people’s priorities… ...and priming our economies that lie ahead outside the EU including all the opportunities that will come from that best-in-class free trade agreement with our European friends. Now all of this is put at risk by Labour, the Lib Dems and the SNP. So I wanted to take this opportunity today to set at the outset of this campaign… … to address the key issues that I know that people up and down the country will understandably be asking. What is the state of the economy? What’s the difference between the Tories and our opponents on how we think our economy should be managed and run? And most importantly, what does that mean for me and my family? Now later today, the Bank of England will give its latest economic forecast. Forecasts vary, and there are a number of global headwinds and challenges… ... but I am clear that the fundamentals of the UK economy remain are strong. Our economy has confounded expectations. Nine years of consecutive growth. Rising wages. Record employment. We’ve seen 1,000 news jobs on average created every single day. Absolute poverty at its lowest on record. Income inequality is lower than when Labour left office in 2010. We’ve promoted productivity, created job opportunities and driven growth in the economy. In fact, the IMF predicts that, next year… … the UK will grow faster than France, than Italy, than Germany, than Japan. None of this, none of this, happened by accident. Just look at where we were back when I was first elected to Parliament in 2010. The new Conservative government had just inherited the highest levels of borrowing in Britain’s peacetime history. A deficit that was equal to 10% of GDP… …that was equivalent to borrowing £5000 every single second. An economy that’s been scarred by Labour’s Great Recession… …it was the deepest recession in almost one hundred years. And we saw the worst banking crash, not just in British history… … but in global history. The transformation from where we were then… … to where we are now… … was not the result of some fiscal cycle or economic inevitability. It’s down to solid economic stewardship by successive Conservative governments. The hard work and the sacrifice of the British people. And an incredible effort by British businesses of all shapes and sizes. Together, we have laid a foundation on which… … with the right decisions, the right policies… … we can build a decade of growth, of opportunity, of prosperity for all. Not just more jobs and higher wages… … but more investment in our schools… … in our NHS… …in our environment… … and in the rail, road and digital infrastructure that we all rely on. That’s the kind of future that I want to see for my kids, for your kids, for the whole country. But, just as the UK’s economic miracle did not happen by accident… … that future is not guaranteed. And that’s why this election is so important. Because we can bring about that future with the right government. Not a government of endless debt and failed ideology. But a sustainable, responsible government… A Conservative government. And if you want to see what the next decade could look like… … just look at the trail that we’ve blazed in the past 100 days. We are taking the country forward from a decade of recovery to a decade of renewal. In my Spending Round in September we were able to give a £13.4 billion boost to the people’s priorities. It meant more money for 20,000 new police officers… …20 new hospital upgrades… … and levelling up of school funding across the country. It also included £2.2 billion for our Armed Forces… … and an extra £1.5 billion for social care. I’m extremely proud of how much we’ve been able to achieve in such a short time… … and the lasting impact that these decisions will have. You see, public services were a lifeline for people like me when I was growing up. We must nurture them so future generations can say the same. That doesn’t mean we believe in an ever-expanding state. For Conservatives, that is neither moral nor sustainable. We believe in social responsibility and sensible stewardship. In this year’s Spring Statement, there was some £27 billion of headroom identified at that time. I chose to use half of that. A sound framework continues to be essential. As Conservatives, we will always have one. And as I said in my Spending Round… … that historic low borrowing rates means that we should adjust our framework to fund a decade of renewal. Incredibly, at the moment, we can borrow in real terms at negative interest rates… …meaning it is a responsible time to invest. And there is a growing consensus around the world that the time is right to do that … as I saw for myself recently when I was at the IMF meetings… So today, I am announcing new fiscal rules that, that if elected…. …. will allow us to take advantage of the opportunity to invest in our future and our public services… … but without squandering the hard work of the British people. Now like anyone who budgets… … whether in a household, a small business, or a large business… … I know we must keep track of what we’re spending and what we bring in. We can’t run an overdraft forever on our day-to-day spending. So I can confirm that our first rule will be to have a balanced current budget. What we spend cannot exceed what we bring in. Now, while we must maintain spending restraint… … if we want growth to continue in future then we need to invest in it. Taking the opportunity offered by those historically low borrowing rates. In our manifesto, and at our first Budget in the new year… …we will announce new plans to level-up the entire United Kingdom… … from Manchester to Midlothian… ... spreading opportunity and renewing the fabric of our nation. There will be new hospitals, schools, roads, railways, better broadband… New connections and opportunities in every part of our nation. So I can confirm today we will borrow some more to invest. We know all too well what happens if debt gets out of control. Excessive debt would risk everything the British people have worked so hard to achieve over the past decade of recovery. The question at this election is who do you trust to protect that? It’s why our second rule will ensure we can invest more, but we will continue to live within our means. Investment in long-term projects like roads and rail will not exceed 3% of GDP. Now compared to a long term average of around 1.8%... … that represents a huge step-change in what we currently invest. It means billions of pounds more to spend on the infrastructure revolution this country needs… … on projects like this airport, Terminal 2 airport which I think is the largest construction project in the North right now. So it allows us to rekindle our ambitions and be ambitious about the future. But we also need to strike the right balance with keeping debt in check. The combination of these rules means debt will never be allowed to get out of control. Unlike Labour, we won’t kick the can down the road… … leaving another toxic legacy of debt for our children and grandchildren to deal with. As we set out the detail of our plans, it will be clear that debt will be lower in the medium term… …meaning it will be lower at the end of the next Parliament than it will be at the start. Now, we can borrow cheap because rates are currently low… …and I expect them to stay low for some time. But the cost of servicing our debt should never be allowed to spiral out of control either… … putting the burden back on to taxpayers. So our third rule means that if borrowing costs rise significantly in the future… …and what we’re paying to service debt starts to exceed historical averages… …we would re-assess how much we would be willing to borrow for capital projects. This extra safeguard ensures we will spend the money and manage costs responsibly. So there you have rules to control borrowing. To control debt. And to control debt interest. New rules for a new economic era. I’ll set out more details of these rules in the next budget. But my mission at No11 is ultimately about more than numbers and rules. Economic growth means nothing if it doesn’t mean more jobs… … more money in people’s pockets… …stable prices in our shops. It’s about ensuring the state doesn’t take a penny more than it needs to run good services. It means making sure that the cost of living is more affordable for families. We have that record: We’ve doubled free childcare to 30 hours a week for working families of three and four year olds. We’ve increased the amount that someone can earn before their Universal Credit is reduced… … making 2.4 million working households better off. And we’ve also taken some 4 million of people out of income tax altogether by raising the personal allowance. Most importantly, managing the economy is about people having good jobs and a fair and decent wage to live off. That’s why as Business Secretary I introduced a National Living Wage. And why, as Chancellor, I’ve announced plans to increase it to two-thirds of median earnings…. … taking it up to £10.50… … and extending it to workers aged over 21. That’s how we will end low pay in our country by 2024. We’ll be one of the first nations in the world to do so… …a legacy we can all be very proud of. Anyone who understands economics knows that public and private, they go hand in hand. They’re mutually reinforcing. I got ahead because of family, hard work and public services. But Conservatives understand that it’s a dynamic free market that is the single best way to fund those public services. And if people are going to carry on starting a business… … carry on creating jobs… … carry on paying the taxes that fund our schools and our NHS… … then they need to know government is on their side. Because starting, running and growing a business is one of the hardest things in the world. I remember when I was a boy and there was a family of seven sharing a two bedroom flat above the family business. We were just getting by. My parents were running the shop downstairs and every night I’d help Dad count the day’s takings on the dinner table. And even then, as a kid, I could see whether the piles of notes and coins were high enough, if they were too small, we knew there may be some problems ahead. We may not be able to have that lunch we had planned on a Sunday. We might have to save a bit more during the week. And while the numbers are now more likely to be on a spreadsheet or on a mobile phone than on the kitchen table… …that’s still everyday life for all small businesses. So I’m proud that this government is making it that little bit easier for you. Proud that we’re committed to doing more to help firms prosper. We’ll keep the cost down for businesses… … since 2016 we’ve confirmed plans to slash £13 billion from business rates. Since 2010 we’ve introduced more than 100 measures to tackle aggressive tax avoidance and evasion. And we are continuing to make our tax system simpler – and, most importantly, fairer. That shows we are both the party of business and the party of workers. Because, unlike Labour, we never take taxpayers’ money for granted. Labour believe that your money belongs to the government, unless they choose to graciously give it back to you. Conservatives believe that your money is your money. Labour believe that taxes should be as high as possible, that people should be punished for doing well. Conservatives believe that you ultimately raise more by taxing less… … and that if you work hard and get that promotion and you get that pay rise, you shouldn’t be worse off. And, that’s why this election is so important. It’s not just a choice of who governs Britain… … but whether you want that government to make this country stronger, richer and more united… … or more indebted and even more divided than ever before. John McDonnell likes to claim he won’t raise taxes on anyone earning less than £80,000. But it’s just not true. It just isn’t. He just cannot be trusted. It’s easy to poke fun at Comrade Corbyn and his fantasy economics. But this will be a close election. We cannot anything for granted. We won’t let Labour off the hook like last time. Look to the lessons of history… … they’ll ruin your finances, they will raise your taxes and they will saddle the next generation with debt. Every single Labour Government has left this country with an economic crisis. Some of you may remember the Winter of Discontent in 1979. Where rubbish piled up on the streets and bodies went unburied. Or those of you who are younger might remember the aftermath of the financial crash in 2008. Where an arrogant and out of touch Labour government took its eye of the ball… …and allowed the economy and our public services to come to the edge of ruin. We’ve spent a decade recovering from that one. It’s taken years of responsible Tory management… … and hard work by the British people… … for wages and living standards to get back to pre-crisis levels. Last time, after promising to stick to Tory spending plans initially… … it took 13 years for Labour to completely mess it up. This time it won’t even take them 13 months. Just listen to the things McDonnell is openly proposing. I gather you wont have to wait long. He is about to speak not far from here in Liverpool. Spending billions on renationalising vast industries… … but without paying market rates to their owners. Those owners aren’t tycoons - they are mostly small investors, often holding this investment through their pension pots. He told savers and businesses he had nothing up his sleeves… … but then he went on to announc plans to confiscate, confiscate, £300 billion of shares from private investors. That would be one of the biggest ever state raids on the savings of hard working people. That’s not socking it to the rich… That’s stealing private investments.
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