My fiscal rules will provide the stability on which growth depends

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The writer is chancellor of the exchequer

The Budget next week will deliver on the promise of change. That change will be driven by this government’s number one mission — to deliver sustainable growth after a decade and a half of stagnation.

But growth can only be built on stable foundations. So my first and most important job next week at the despatch box is to turn the page on years of instability and uncertainty which have — for far too long — deterred investment and undermined business confidence.

That is why my fiscal rules are so important: they will be the rock of stability at the core of my Budget. They will set the basis for stable fiscal policy, prudent management of day-to-day spending and responsible investment for growth.

But sustainable growth does not come from short-termism. It comes from a responsible, long-term plan to invest in the future and improve living standards.

That involves addressing three challenges.

First, the £22bn black hole in the public finances we discovered when arriving in government, the vast majority of which will persist into future years. Second, the compensation for those who have suffered so much because of the infected blood and Horizon scandals, which was announced by the previous government, but not budgeted for. Third, the state of the UK’s public services, which cannot survive a return to the austerity that has done so much damage over the past 14 years — including by holding back growth.

To address this, my fiscal rules will do two things. The first and most important: my stability rule will mean that day-to-day spending will be matched by revenues.

Given the state of the public finances and the need to invest in our public services, this rule will bite hardest. Alongside tough decisions on spending and welfare, that means taxes will need to rise to ensure this rule is met. I will always protect working people when I make these choices, while taking a balanced approach.

Crucially, my stability rule will also cover the interest on our national debt and unlike the previous government I won’t cut capital budgets to make up for shortfalls in the day-to-day running costs of departments.

My second fiscal rule, the investment rule, will get debt falling as a proportion of our economy. That will make space for increased investment in the fabric of our economy, and ensure we don’t see the falls in public sector investment that were planned under the last government.

We will invest alongside business, through expert bodies like the National Wealth Fund, multiplying the impact of public money. And I will invest wisely — we won’t just increase investment, we will also invest differently. We won’t repeat the costly mistakes of the past.

A new set of institutions will focus on ensuring value for money and a strategic plan to deliver infrastructure, a combination of the National Infrastructure and Service Transformation Authority, who will clear the way for the delivery of infrastructure, and the Office for Value for Money will rigorously scrutinise spending.

This will be matched with a new set of standards with a focus on transparency, backed by robust auditing by the National Audit Office.

These fiscal rules, and the guardrails I put around them, will help us build the decade of renewal we promised, while providing the stability we need to support investment.

I am in Washington today and will be making the case for investment in Britain. The IMF has been clear that weak investment and low productivity are holding back growth. 

We need to change that and the investments we will make in the UK will boost productivity, enhance the green transition and deliver the infrastructure we need to grow.

At my Budget next week, I will show that we have a choice between investment and decline.

I am choosing to invest in Britain so we can turn the page on 14 years of slow growth and start making the country better off.

This is the only way we will change Britain — by drawing a line under the chaos and bringing back growth on stable foundations so that all parts of the country can prosper.