Boris plans to borrow to fund tax pledges

As PM, he would loosen purse strings on public spending and pause policy to reduce the deficit to help squeezed middle classes

Boris Johnson is prepared to turn on the spending taps by borrowing money to help the squeezed middle classes if he is confirmed as the new Tory leader today. The former foreign secretary is in favour of a policy of “fiscal loosening” that would reverse the tight controls on public spending imposed by Philip Hammond. He is determined to honour promises to give tax breaks to everyone who earns less than £80,000.

BORIS JOHNSON is prepared to turn on the spending taps by borrowing money to help the squeezed middle classes if he is confirmed as Tory leader today.

The former foreign secretary is in favour of a policy of “fiscal loosening” that would reverse the tight controls on public spending imposed by Philip Hammond. He is determined to honour promises to give tax breaks to everyone who earns less than £80,000, and is ready to pause the current policy of bringing down the deficit.

Mr Johnson will also make a call for party unity if he is announced as leader, after foreign office minister Sir Alan Duncan yesterday became the first to resign in anticipation of a Johnson win.

Mr Johnson is 1/100 on to become leader, with Jeremy Hunt priced at 20/1. Ladbrokes said a Hunt win would be “the biggest shock in the history of political betting”.

Mr Johnson has made more than £26billion of spending pledges so far, with several other uncosted promises likely to add billions more, but he has not set out how he would foot the bill.

He has said that money saved when Britain leaves the EU will cover part of the cost, but the news that he is premr pared to borrow more appears to answer where the rest might be found.

Sources close to Mr Johnson said he believes that increased borrowing in the short-term is sensible to “get the economy moving” by cutting tax and putting money in people’s pockets.

Philip Hammond, who was proud to be nicknamed “fiscal Phil”, has brought down the deficit – the difference between public spending and Government income – to a 17-year low. Public sector net borrowing was £24.7billion in the last financial year, having peaked at £153.1billion in 2009-10.

Mr Johnson has already said he would be prepared to increase borrowing to fund “great infrastructure projects” but allies say he is also open to pausing or even temporarily reversing Mr Hammond’s drive to get borrowing down to zero to fund tax cuts.

Mr Johnson has promised to raise the 40p income tax threshold from £50,000 to £80,000, which would cost £9billion according to the Institute for Fiscal Studies, and to raise the National Insurance threshold to £12,500 to help low earners, at a cost of £11billion. He also wants to increase the minimum wage, cut stamp duty and restore free TV licences for the over-75s.

One close adviser said: “We are talking about a fiscal loosening of less than 1 per cent of total public spending. It would do a lot to get things moving for the middle classes, to get them spending more money.”

Johnson believes that tax-cutting measures will provide a net gain to the economy because it will increase consumer spending and create jobs.

A former minister in Mr Johnson’s camp said: “In order to honour Boris’s spending pledges, the next budget is going to have to put a temporary freeze on deficit reduction. Of course it is important to continue fixing the roof but there is going to have to be some flexibility there to give the economy the post-brexit boost that it needs.”

A senior Tory source added: “The main point is that whatever happens with Brexit, the economy is slowing down. The US Federal Reserve has just recommended a cut in interest rates and the next budget will have to give the economy a shot in the arm.

“If you’re cutting taxes and increasing spending then there needs to be a more expansionary policy on deficit reduction. You can sense that the economy is starting to gum up a bit. Boris’s upbeat rhetoric, signalling a break in the miserable, dour and downcast tone of the May government will be reflected in the budget. We’ve all had enough of Fiscal Phil.”

If Mr Johnson wins, he will be appointed prime minister by the Queen tomorrow afternoon before making a speech outside 10 Downing Street. Aides said his three key themes were likely to be delivering Brexit, bringing the Tories together and seeing off the threat of Jeremy Corbyn.