Theresa May signals 'end of austerity', frees councils to build homes

The Prime Minister Theresa May has called an end to austerity as she urged the party faithful to get behind her vision for Brexit.

Addressing delegates on the last day of the Conservative Party conference, May said that in next year’s spending review, borrowing would go down while spending on public services would go up.

May, who walked out to Abba's Dancing Queen in a self-deprecating nod to her recent trade mission to Africa, also detailed plans to introduce new borrowing powers to allow councils to build more homes. Currently there is a cap on the amount local authorities can borrow to build social housing.

May said: “There can be no return to the uncontrolled borrowing of the past. No undoing all the progress of the last eight years. No taking Britain back to square one. But the British people need to know that the end is in sight. And our message to them must be this: we get it.

“A decade after the financial crash, people need to know that the austerity it led to is over and that their hard work has paid off.”

May also used her speech to defend her under-fire Brexit plans, a day after former Foreign Secretary Boris Johnson told a fringe event that the party should “chuck Chequers”.

Although she did not directly refer to Johnson’s speech, the Prime Minister said her strategy for Brexit was “in the national interest” and warned that pursuing “our own visions of the perfect Brexit” could lead to “no Brexit at all”.

May said she was not afraid of no deal but conceded the damage it would do the UK economy, especially if tariffs were introduced.

"May's claim that this is an end to austerity is a complete con," said John McDonnell, the shadow chancellor, on Twitter. "The Tories have promised this before - and it was a con then too. The Government has already told us that spending for the next 4 years will be hit by many more vicious cuts."

Carolyn Fairbairn, director-general of the CBI, said: “A new relationship with Europe based on the Chequers model starts with frictionless trade has strong business support. The Prime minister stood her ground, resisting the fiction that a Canada-style deal works for jobs. Now politicians should support her to get a deal – and the critical withdrawal agreement – over the line.”

On the plans to scrap borrowing caps for councils, Hew Edgar, RICS head of policy, the PM has taken a "large and very positive step".

“RICS has long called for councils to be alleviated from the restrictive borrowing cap, and this policy will allow them to re-establish themselves as genuine players in housing again. Indeed, 40 years ago, local councils built 40% of all new homes; but for too long, councils have been limited in their capacity to make this significant contribution. We will monitor the outcomes of this policy closely in the hope this will genuinely bring in a new era of well-built, affordable council homes, delivered at scale, across the UK."

The pound dipped further below $1.30 during May’s speech but remained flat by the closing remarks.

David Cheetham, chief market analyst at xtb, said: “May warned of the short-term damage that a no-deal would bring to the UK economy before adding that she will not rule this out, as it would weaken the country’s negotiating position – seemingly oblivious that this public admission may well do just that.

“Event risks remain high for the pound, with the next seven days likely to reveal whether there is a realistic chance that a deal can be reached by the EU Summit or whether this game of brinkmanship lurches ever closer to the cliff edge.”