Osborne pledges capital spending boost

George Osborne has pledged that a future Conservative government would increase capital spending at least in line with GDP in the next parliament.

In his key note speech at the Conservative Party conference in Manchester this week, the chancellor said the commitment, which was made alongside a pledge to generate a budget surplus in the next parliament, would be paid for by further cuts to day-to-day spending and capping welfare payments.

Osborne said: “We want to go on investing in the essential infrastructure of our country - the roads and railways and science and communications that re the backbone of the future economy.

“So we should commit, alongside running a surplus and capping welfare, to grow our capital spending at least in line with our national income.

He said the pledge would form the foundation of a future Conservative government’s public finance policy, and that he would set out more details next year.

The Conservative party will publish the specific fiscal mandate it will commit to before the next election, which will then be audited by the Office of Budget Responsibility.

Osborne also defended the government’s Help to Buy scheme, which has been accused of creating a housing price bubble.

This week the government said it was accelerating the second phase of the scheme, which comprises a mortgage guarantee, by bringing it forward three months, with banks now able to offer mortgages that would receive backing through the scheme from next week, rather than January as originally planned.

This comes after the government last week said the Bank of England would review the impact of the scheme on the housing market each September, with the Bank able to recommend measures to reduce the scope of the scheme if the housing market is found to be overheating.

In his speech, Osborne said: “I’m the first person to say we must be vigilant about avoiding the mistakes of the past.

“That’s why I gave powers to the Bank of England to stop dangerous housing bubbles emerging. But too many people are still being denied the dream of owning their own home.

“So instead of starting the second phase of Help to Buy next year, we’re starting it next week. There are some people - many living in the richest parts of London - who say we shouldn’t be doing these things.

“I have this to say: Take you arguments down the road to Nelson or Colne, where house prices have fallen for the past five years.

“Take your arguments to Bury, or Morecambe, where young working couples are still living at home with their parents. Take your arguments to our great towns and cities where there are families who have saved for years, earning decent salaries, who can afford the mortgage repayments but can’t possibly afford the deposit being asked by the banks these days.

“Take your arguments to those families and say: “This policy is not right. You shouldn’t be allowed to get your home.”

“I tell you what they’ll say back: It’s alright for you. You’ve got your own home. We’ve been saving for years. What about us?”

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