£750m pre-election sweetener for motorists
Published 01/10/2013 | 03:06
Motorists were offered a £750 million pre-election sweetener today, as Chancellor George Osborne declared his ambition to impose a freeze on fuel duty until polling day in May 2015.
The freeze - which is conditional on finding savings elsewhere - was announced as Mr Osborne set out a tough new economic policy which will require future Conservative governments to run an absolute surplus during periods of growth.
Coupled with a commitment to increase infrastructure spending at least in line with GDP growth, the policy means that there will be no let-up in public spending discipline if the Tories win the next election, even after they have achieved their target of eliminating the deficit, said aides.
British governments have run a surplus, by spending less than they take in through taxes and other revenues, in only seven out of the past 50 years.
But Mr Osborne told the Conservative annual conference in Manchester that this is the only way to bring down national debt, paving the way for sustainable tax cuts and preparing the UK for future turbulence in the global economy.
Attacking the former Labour government for running deficits even during the boom times ahead of the 2008 crash, he warned: "This crisis took us to the brink. If we don't reduce our debts, the next could push us over."
Mr Osborne used his keynote speech to deliver a broadside on Ed Miliband's economic plans, comparing the Labour leader with Karl Marx, accusing him of a "retreat to the left" and dismissing his proposed freeze on gas and electricity prices as a "quick-fix con".
By contrast, Mr Osborne told activists that he was offering "a serious plan for a grown-up country", which would create jobs, keep mortgage rates low and let people keep more of their income free of tax.
Buoyed by a series of positive economic indicators, the Chancellor said he was an "optimist" about Britain's future and declared: "T he sun has started to rise above the hill and the future looks brighter than it did just a few dark years ago".
But he warned: "The battle to turn Britain around is not even close to being over and we are going to finish what we have started."
He confirmed plans to require the long-term unemployed to work for their benefits and to accelerate a Government-backed mortgage scheme to help property-buyers raise a deposit for their home.
And he derided Labour's focus on cost-of-living issues, telling the conference that Mr Miliband failed to recognise that increases in mortgage rates caused by a loss of economic credibility would more than wipe out any gains for households from lower energy bills.
"Without a credible economic plan, you simply don't have a living standards plan," said the Chancellor.
However, he said he hoped to extend the freeze on fuel duty, which has already stretched more than two and a half years, by cancelling the 2p-a-litre rise pencilled in by former Labour chancellor Alistair Darling for September 2014 .
"Provided we can find the savings to pay for it, I want to freeze fuel duty for the rest of this Parliament," said Mr Osborne to loud applause. "Conservatives don't just talk about being on the side of hard-working people. We show it day in day out in the policies we deliver."
If Mr Osborne scraps the rise in next year's Budget as planned, motorists will save £750 million a year, leaving pump prices 20p a litre lower than under the plans inherited from Labour and bringing the total reduction in the tax burden to £22.6 billion over the course of the Parliament, said aides.
The Tories' new fiscal mandate will be set out in detail by the Chancellor next year, and will commit the party to running an absolute surplus in the years after the deficit is eliminated - no earlier than 2018 under current plans - and to boost investment in infrastructure by at least as much as the year-on-year percentage increase in national income.
Investment in infrastructure should mean pushing ahead with the controversial HS2 rail link between London, the Midlands and the North of England, developing technologies to exploit shale gas resources and building new nuclear power stations, he said.
Mr Osborne told the conference: "W hen we've dealt with Labour's deficit, we will have a surplus in good times as insurance against difficult times ahead.
"Provided the recovery is sustained, our goal is to achieve that surplus in the next Parliament. That will bear down on our debts and prepare us for the next rainy day.
"That is going to require discipline and spending control. Because if we want to protect those things we care about, like generous pensions and decent healthcare, and buy the best equipment for the brave men and women who fight in our armed forces, all of us are going to have to confront the costs of modern government - and cap working age welfare bills.
"And only if we properly control public expenditure will we be able to keep lowering taxes for hard-working people in a way that lasts."
Mr Osborne's help for drivers was welcomed by motoring organisations, though the RAC Foundation pointed out that the Chancellor will still be taking 60% of the price of a litre of fuel in taxation.
But Labour Treasury spokeswoman Rachel Reeves said Mr Osborne had "nothing concrete to say on helping families with the rising cost of living".
"The few things he has said are already unravelling," said Ms Reeves. "His panicky announcement on fuel duty turns out to be just an aspiration if he can find savings elsewhere. This is on top of £1.6 billion of unfunded commitments already made by ministers during the party conference season.
"As for George Osborne's pledges on capital spending and the deficit, nobody will believe a word he says. His failure on growth means that far from balancing the books by 2015 as he promised, borrowing is now set to be £96 billion. And for all the warm words about capital spending he is cutting it in 2015."
Simon Walker, director general of the Institute of Directors, said: " Breaking government addiction to debt and achieving a surplus in public finances is the most important ambition any administration can have."
And John Longworth, director general of the British Chambers of Commerce (BCC), said: " If Britain's economy is to go from being just good to truly great, the focus the Chancellor exhibited in his speech must be maintained relentlessly for years to come. We must be ambitious for Britain - and our political leaders must get moving, and ensure that their commitments to growth and wealth creation are not just warm words."
TUC general secretary Frances O'Grady said: "Having been forced to face up to the UK's cost of living crisis, all the Chancellor offered today was more of the same failed austerity policies that has made families thousands of pounds worse off.
"The Chancellor has shown his priorities by using the proceeds from a bedroom tax that is forcing disabled people out of their homes to give a minority of married couples an extra £3.85 a week.
"Ordinary families will now be worried how they'll be made to pay for the unfunded fuel duty freeze.
"The Help to Work proposals are an admission that the Work Programme - which is helping just one in 25 disabled people into work - is failing. But instead of offering positive support, such as a job guarantee to help people into proper paid work, the Chancellor has chosen to punish a small number of struggling long-term dole claimants."
Mark Serwotka, general secretary of the Public and Commercial Services union (PCS), said the "work for dole" plan showed Tories using an "evidence-free approach to tackling unemployment... to win support from the worst extremes of their party".
"It will not only do nothing to help people find work, it is cruelly and deliberately designed to set neighbour against neighbour at a time when George Osborne is preparing to spend millions of pounds of taxpayers' money fighting in the courts to protect bankers' bonuses," said Mr Serwotka.
"Osborne says he doesn't think people should get something for nothing, but appears to be happy to hand employers free labour."
Dave Prentis, general secretary of public sector union Unison, said: "Most of the long-term unemployed would prefer to have a job that pays a decent living wage.
"And the Chancellor would be better advised to concentrate on promoting growth and creating real jobs in the economy. But he seems to prefer trotting out the same old Tory tactics of divide and rule."