Sajid Javid rips up the Tories' fiscal rules as he vows to boost public spending by £20bn
Sajid Javid has ditched the Government's rules for keeping borrowing low as he pledged to spend an extra £20bn a year on public services if the Conservatives win the election.
The Chancellor made the promise at the same time as he attacked Labour for promising to dramatically increase spending.
Under the current fiscal rules established by Mr Javid's predecessor, Philip Hammond, the Government aims to keep borrowing below 2% of national income.
But Mr Javid said that he wanted to take advantage of low interest rates to increase that figure to to 3%, freeing up billions more to spend on infrastructure projects like new hospitals, schools, roads and railways.
At the same time, he insisted that the current budget - which covers day-to-day spending - would be balanced within three years.
He said: "I’m announcing new fiscal rules that if elected will allow us to take advantage of the opportunity to invest in our future and our public services but without squandering the hard work of the British people.
"Like anyone who budgets whether it’s a household or small business or large business, I know that we must keep track of what we’re spending, and what we bring in.
"We can’t run an overdraft forever on day-to-day spending, so I can confirm that our first rule will be to have a balanced current budget. What we spend cannot exceed what we bring in."
"Now, while we must retain spending if we want growth to continue and get stronger in the future, then we need to invest in it. Taking the opportunity offered by those historically low borrowing rates."
Mr Javid added: "Investment in long-term projects like road and rail will not exceed 3% of GDP.
"Now compared to the long-term average of 1.8%, that represents a huge step change in what we currently invest. It means billions of pounds more to spend and the infrastructure revolution that this country needs.”
However, he insisted government borrowing would slow down if interest rates began to rise.
The Chancellor also rejected suggestions that he was trying to ape Labour's own big-spending plans, insisting the two parties' proposals were like "night and day".
He said the Tories wanted to invest in the future, while Labour would "saddle the country with debt".
Meanwhile, John McDonnell also said a Labour government would shake up the fiscal rules to allow more borrowing for investment.
He said: "Our fiscal rule for the next Parliament will exclude borrowing for investment from our borrowing targets.
"It will mandate us to deliver an improvement in the overall balance sheet by the end of the Parliament.
"So that when we invest in the infrastructure our country desperately needs it’s recognised both as a cost and as a benefit.
"Yes – adding to the Government’s debt, but also adding to the Government’s assets and strengthening our public sector to deal with the future."