Prime Minister Theresa May promised on Thursday to wipe out Britain’s budget deficit by the mid-2020s if her Conservative Party wins the June 8 national election, sticking to a softer fiscal programme she adopted after taking power last year.
“Sound money and responsible public finances are the essential foundations of national economic success,” a manifesto document listing the Conservatives’ policy proposals said.
“There is still work to do on deficit reduction, so we will continue to restore the public finances over the course of the next parliament,” it said.
A new Conservative government would continue with the fiscal rules announced by finance minister Philip Hammond at the end of last year “which will guide us to a balanced budget by the middle of the next decade,” the document said.
Hammond said in November that he would aim to bring down the deficit to 0.7 per cent of gross domestic product by 2021/22 before wiping it out as quickly as possible after that.
The deficit stood at 2.6 per cent of GDP in the last financial year which closed in March, down sharply from 10 per cent in 2010 when the Conservative Party took power, after the global financial crisis blew a massive hole in the public finances.
Hammond’s predecessor as finance minister George Osborne had been aiming to wipe out the deficit by 2020. But those plans were blown off course by last year’s Brexit vote which is expected to weigh on economic growth in the coming years, hurting tax revenues.
Thursday’s policy document said there would be no increases in value-added taxes and corporation tax would be cut to 17 per cent by 2020, as previously planned.
But it did not repeat promises made by the Conservatives at the previous national election in 2015, under then prime minister David Cameron, not to increase income tax or national insurance contributions.
Hammond attempted to increase national insurance contributions in his first budget statement in November but was forced into a U-turn when Conservative lawmakers protested that the planned change breached the party’s 2015 election promises.
Hammond said at the time that the promises tied his hands on how to steer the public finances back to full health.
A leading budget analyst said that while there was no promise not to raise income tax and national insurance contributions, the Conservative spending proposals looked modest, especially by comparison with the plans of the left-wing opposition Labour Party.
“The big difference is that from the Labour Party you have got much more spending, much more tax,” Paul Johnson, director of the Institute for Fiscal studies, told BBC television.
Thursday’s document committed the Conservatives to stick to a series of increases between now and 2020 in the amount of money that workers can earn before they start to pay income tax and to a rising threshold for when workers have to start paying the higher rate of income tax.
Budget analysts have said those promises are expensive for the public purse.