Hammond will not target surplus, speech gives £3bn boost for housebuilding

Ahead of next month's autumn statement, the new Chancellor confirmed he has abandoned his predecessor's aim of maintaining a budget surplus by the end of the parliament, also unveiling new guarantees to help the economy cope with Brexit turbulence and funds to boost housebuilding, infrastructure and technology.

In speech delivered to the Conservative party conference in Birmingham on Monday, Philip Hammond said he intended to balance the budget and remain fiscally disciplined but "in a pragmatic way that reflects the new circumstances we face", moving away from George Osborne's harsh austerity policy.

"When times change, we must change with them. So we will no longer target a surplus at the end of this parliament," he said in the speech, in which he also extended for at least two years the Treasury's guarantee of funding for EU-backed deals signed by universities and businesses.

Hammond revealed a £3bn rejigged housing scheme, which contains £1.1bn of new funds added to existing housebuilding packages, as the Chancellor looks to balance the needs of the deficit and keeping a handle on what he called the "turbulence" of the Brexit process.

Talking to BBC radio on Monday, the day after Theresa May announced she would formally trigger the process to separate from the EU by the end of March 2017, the Chancellor said: “Our circumstances have changed. The exit vote, the slowing of the world economy creates a new set of circumstances. And as we go into a period where inevitably there will be more uncertainty, we need to have the space to be able to support the economy through that.”

Accelerating housebuilding, especially on brownfield land

Hammond's new package, which was launched alongside communities and local government minister Sajid Javid, is intended to deliver a million new homes by 2020 by speeding the level of house building, including using surplus public land and brownfield sites.

Around £1bn of the scheme set aside in short-term loan funding to help smaller builders and “custom builders and innovators" offering technology such as modular housing to add more than 225,000 homes, with the Treasury criticising traditional building firms for taking "too long to build houses”.

The scheme's other £2bn is to be poured into infrastructure to help create up 200,000 more homes, especially on brownfield land and an initiative to accelerate construction on public land, including affordable 'aesthetically pleasing' properties, making use of the government's portfolio of around 180,000 brownfield sites from industrial estates to airports.

Speaking to the media on MondayHammond said that while there was a need to keep a lid on day-to-day spending "there is a case for targeted infrastructure investment".

"What we can’t do is send a signal we are abandoning fiscal discipline. We are not. We are maintaining fiscal discipline," he said to Sky News.

"Public spending needs to remain under control. We do need to bring the public finances back to balance but we need to do it in a way that reflects the circumstances the country now faces."

Technology funding and EU fund bids

Hammond also earmarked £220m of new funding for companies and projects looking to transform biomedical and computer innovations into marketable products.

To help reduce the turbulence around Brexit, the speech also offered more certainty for businesses currently bidding for EU funding, with an announcement that the Treasury would guarantee funding for EU-backed deals signed by universities and businesses.

The Treasury confirmed this backing would apply to all structural and investment funds, including agri-environment schemes, that provide "strong" value for money and are in line with domestic strategic priorities.

Having previously guaranteed the funding for projects signed prior to the 23 November Autumn Statement, Hammond on Monday said he would go further: "The Treasury will offer a guarantee to bidders whose projects meet UK priorities and value for money criteria, that if they secure multi-year EU funding before we exit, we will guarantee those payments after Britain has left the EU."

The extended commitment was welcomed by business groups, though there were calls for more substantive details on many of the issues hinted at by Hammond.

“Guaranteeing the monies for new bidders seeking EU funding is a positive move, that will ensure regions and localities will continue to benefit," said Adam Marshall, acting director general of the British Chambers of Commerce.

"The new housing package will also work to boost local business confidence, provided that firms see diggers in the ground. Increased house-building is near the top of our requests from the Chancellor at the Autumn Statement, so it is reassuring that the government is looking at this ‘quick-win’ for infrastructure development.

But the BCC called on Hammond to now give the green light to major infrastructure projects and set out other measures to boost business investment, with "unambiguous commitments" to runways, roads and railways.