Chancellor scraps 2020 budget surplus target

Chancellor of the Exchequer, Philip Hammond, has confirmed he will be abandoning plans for the UK Government to run to a budget surplus by 2020 in his first speech to the Conservative party conference.

Mr Hammond stated the targets – set by his predecessor, George Osborne – “were the right ones for that time”, but “when times change, we must change with them”.

The Chancellor warned “there is no room for complacency” and stated that with the £1 in every £10 spent, minimising the budget deficit was still essential.

“But make no mistake – the task of fiscal consolidation must continue,” added Hammond.

Within his overall statement on the national economy, the Chancellor claimed the markets had calmed since the outcome of the EU referendum vote and the vast majority of the latest data has been better than anticipated.

“Throughout the negotiating process, we are ready to take whatever steps are necessary to protect this economy from turbulence,” said Hammond.

The Chancellor listed his key tasks for the coming months and years as raising productivity, minimising the deficit, rebalancing the economy and rebuilding the UK’s infrastructure.

“If we raised our productivity by just 1% every year, within a decade we would add £250bn to the size of our economy; £9,000 for every household in Britain,” added Hammond.

“Our productivity performance is grossly uneven. Still too reliant upon a few key sectors. Still too focussed on London and the South East.”

Hammond also reinforced his commitment to the Northern Powerhouse scheme, with the Government setting aside considerable funds for major infrastructure work.

Yet unlike his predecessor, Hammond refused to confirm or deny whether the UK planned to reduce its rate of corporation tax to 15 per cent post-referendum.

“At 20% [currently], we have a highly competitive corporation tax rate. And as it falls to 17% over the next three years, it will be more attractive still,” said Hammond.

Hammond concluded by affirming his commitment to making “the British economy the most outward-looking, most dynamic, most competitive, high wage, high skilled, low tax economy in the world”.

Date published 5 Oct 2016 | Last updated 5 Oct 2016