Badenoch to set out new rule to cut borrowing and taxes
Party leader Kemi Badenoch said in her opening speech at the party conference that the Conservatives would stick to a new economic “golden rule” designed to reduce government debt and taxes.
The party says the rule will ensure that half of any savings made by a future Conservative government are spent on reducing the deficit, which is the difference between spending and tax revenues.
The other half of every pound saved will be used on policies aimed at growing the economy, including tax cuts.
Badenoch will say the Conservatives are the only party “with a plan to get the economy back on track”.
“This starts with fiscal responsibility,” Badenoch will say. “We must reduce the deficit and also show how every tax cut or spending increase is paid for.”
He will accuse the Labor government of putting Britain’s financial stability at risk with a “disaster cycle of borrowing and taxation”.
Badenoch will say Labour’s economic plans are “unsustainable” and equate government borrowing with “stealing from our children and grandchildren”.
At the conference, his party pledged to save £47bn a year in cuts to welfare, public services and foreign aid if it was re-entered into government.
He also pledged to spend £9bn on policies including a £5,000 tax refund for young people and the abolition of business rates for High Street shops.
Badenoch will seek to rebuild the party’s credibility on the economy and distance itself from former Tory Prime Minister Liz Truss, whose tax-cut mini-budget spooked financial markets and led to her resignation in 2022.
The Conservative leader will also seek to wrest fiscal prudence from Labor, which has sought to position itself as the party of sound money and economic stability since coming to power.
But the government faces a tough autumn budget, especially after a rebellion by Labor MPs derailed plans to save billions of dollars in welfare spending earlier this year.
Economists say taxes will have to rise if Chancellor Rachel Reeves follows her own set of borrowing rules to fund public services.
The Conservatives want to focus on reducing public sector net borrowing (PSNB), which represents the difference between total government spending, including capital investment, and total tax revenues.
In its latest forecast, the Office for Budget Responsibility said PSNB was forecast to fall from £137.3bn (4.8% of GDP) this year to £74bn (2.1% of GDP) in 2029-30.
Conservatives say they are concerned about the overall level of borrowing and interest payments on the debt.
Party sources say they are skeptical of Labour’s plans to cut the budget deficit and doubt the OBR’s forecasts will actually come true.
Reducing the budget deficit was one of the key economic policies of David Cameron’s coalition and Conservative governments from 2010.
Under Badenoch, the Conservatives are moving back in that direction, and the language in his speech echoes that of former Conservative Chancellor George Osborne, who oversaw years of spending cuts to reduce the budget deficit.
Reform UK has also pledged to make billions of dollars worth of savings to offset huge spending on tax cuts, the NHS and defence.
At the conference, the Conservatives branded Reform UK “socialist” for its promises to increase spending and nationalize industries.
Like other parties, the Conservatives have stepped up their attacks on Reform UK, which is leading in opinion polls across the UK.
Badenoch faced repeated questions about his leadership at the conference in Manchester.
This will be his first conference as Conservative leader after being elected last year following the party’s heavy defeat in the 2024 general election.
His party performed poorly in local elections earlier this year, and the Conservatives have fallen far behind Reform UK and Labor in polls since then.
But speaking to the BBC before his speech, Badenoch insisted his approach would work in the long term.
He said: “I’m not losing. I’m going to win.”
