In a speech in Manchester today, the chancellor said the referendum result was likely to lead to a “significant negative shock” for the British economy, and how the country responds to this will determine the impact on people’s jobs.
“The Bank of England can support demand,” he said. “The government must provide fiscal credibility so we will continue to be tough on the deficit but we must be realistic about achieving a surplus by the end of this decade. That's exactly what our fiscal rules are designed for,” he said.
A pledge to reach a surplus by the end of the decade is the last of the chancellor’s fiscal rules to have not been broken. A target to get debt down as a percentage of gross domestic product year on year has been missed, as has a self-imposed cap on welfare spending.
Osborne announced plans to make additional savings of £3.5bn by 2019/20 in this year’s Budget in order to ensure that the surplus was met, but the Institute for Fiscal Studies concluded he was only on track thanks to some “fiddling around” with incomings and outgoings of the public purse.
Reaching and maintaining a surplus in the public finances is part of the Charter for Budget Responsibility, which was passed by MPs last October. However, this can be suspended if the Office for Budget Responsibility has judged the economy to be facing abnormal pressures or when gross domestic product growth is below 1%.
In his speech today, Osborne added that there was a need to be realistic that North will be affected by any negative shock. However, he said he wanted to reassure businesses and said that the best response would be to redouble efforts with the Northern Powerhouse, which includes devolution proposals for councils and combined authorities.
