The Chancellor said the “rainy day” measure, requiring Britain to generate more in revenues and tax yields than it spends, would act as “insurance against difficult times ahead”.
“Provided the recovery is sustained, our goal is to achieve that surplus in the next Parliament,” he added.
In effect it commits the Conservatives to two extra years of austerity, beyond the current plans that run until 2017-18. But Mr Osborne also strengthened the Tories’ commitment to infrastructure spending by promising to ensure capital spending rises at least in line with national income. He also promised to freeze fuel duty for the rest of the Parliament in a £750m surprise giveaway.
Mr Osborne told the Conservative Party conference in Manchester that the economy was recovering and that after years of recession and low growth, the “sun had started to rise above the hill”. However, he warned that “discipline and spending control” was still required. “There is no feeling at the conference of a task completed or a victory won,” he said. “The battle for turning Britain round is not even close to being over.”
The Institute of Directors welcomed the move, saying that “breaking government addiction to debt and achieving a surplus in public finances is the most important ambition any administration can have”.
However, the Institute of Economic Affairs said Mr Osborne was “still failing to tackle government spending sufficiently” and was in danger of missing his own targets.
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