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Chancellor pledges to boost capital expenditure in line with national income

Chancellor George Osborne has pledged to increase capital spending in line with rises in national income if the Conservatives win the next election.

Speaking at the party’s conference in Manchester, he said: “We also want to go on investing in the essential infrastructure of our country – the roads and railways and science and communications that are 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.

“These principles will form the foundation of our public finance policy and I will set out the details next year.”

The Conservatives did not say what figure it would use for national income – likely choices include gross domestic product or gross national income – nor whether the rises would be additional to those proposed in the 2013 Budget.

Capital spending levels are likely to be higher than those proposed in the Budget if they are linked to GDP.

The Office for Budget Responsibility predicted GDP would rise by 2.8 per cent in 2017, whereas a 1.8 per cent rise in capital spending (£900m) was proposed in the Budget for 2016/17.

Construction Products Association economics director Noble Francis pointed out that Mr Osborne could need to cut other spending significantly if he planned to raise capital spending in line with GDP and meet his goal of a budget surplus in 2020.

Mr Osborne also dismissed the idea that there would be no new nuclear power stations built under the current government.

He said: “Should we, the country that built the first civil nuclear power station, say: ‘We are never going to build any more – leave it to others?’ Not on my watch.”

Construction of new nuclear power stations has been beset by delays as the government and energy firm EDF continue to negotiate a guaranteed price for the electricity it produces.

Mr Osborne also said the country “absolutely should not” turn its back on shale gas and he gave his backing to High Speed 2, saying: “We will complete this great work of engineering in the best tradition of our country.”

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