Economic Analysis: Time for Philip Hammond to spend, spend, spend...

The ambition of my predecessor to achieve a surplus in our public finances by 2020 was bold, but no longer suitable for the years ahead as we negotiate Brexit. A short-term squeeze affecting the confidence of both households and businesses to spend and invest is the last thing our economy needs.

Should the Conservatives win again in 2020 — as I firmly believe we will — we will retain our goal of achieving a budget surplus by the end of the following Parliament in 2025. But I want to avoid at all costs this target becoming a pointless handbrake on our economy, so we will review the target again in 2020 in the light of our final Brexit settlement.

Conference, that will mean a rise in borrowing. Slower growth will also have its impact on the public finances, as the Office for Budget Responsibility will show in November. But Brexit has not dented demand for our debt — far from it.

The UK has never seen such an appetite for its gilts from international investors in the world’s financial markets. Borrowing has never been so cheap. We will put that to work renewing our infrastructure up and down the country — creating a more modern Britain — and using infrastructure bonds to fund new projects, as the OECD recently recommended.

Bigger projects can take years to deliver, but I will sanction spending on rapidly deliverable schemes to work faster on growth and help overcome the economic hurdles as we establish our new relationship with Europe.

That in turn will help us begin to address the productivity shortfall which has consistently blighted the UK compared to its international rivals. That’s a gap I want to help close by the time I leave Number 11.

I’ll also double the annual investment allowance from £200,000 to £400,000 to encourage smaller companies to keep spending. And I want to stress to Conference that this Government will follow through on its manifesto pledge to take more people out of income tax by the end of the Parliament, raising the income tax threshold to £12,500 and smoothing household finances for the more uncertain times ahead.

John Maynard Keynes once famously said that “economists set themselves too easy, too useless a task, if in tempestuous seasons they can only tell us, that when the storm is long past, the ocean is flat again”. I agree. It is time for us to act.

Frankly, I doubt whether Hammond will go as far in Birmingham. But he needs to show he’s a man with a plan. Can he deliver?