General election: Sajid Javid hints at tax cuts in Tory manifesto as he rips up fiscal rules

Labour and Tories go head to head over the economy as election campaign begins in earnest

Sajid Javid has signalled there could be tax cuts in the Tory manifesto as he tore up fiscal rules in a bid to woo voters.

In his first appearance on the campaign trail, the chancellor announced he would take advantage of low interest rates by borrowing an additional £20bn a year for capital projects such as roads and hospitals.

Mr Javid insisted that he could still deliver cuts to taxes under his new rules, but refused to set out where the axe might fall ahead of the publication of the Tory election manifesto.

He hinted at possible cuts to inheritance tax at last month’s Conservative conference, saying there was a “real issue” around the levy which affects estates worth more than £325,000.

Labour and the Conservatives went head to head over the economy on Thursday as the election campaign got underway, as both sides seek to win votes with ambitious spending pledges.

Speaking in Manchester, the chancellor said he would overhaul the rules to increase borrowing for new infrastructure, saying: “While we must retain spending, if we want growth to continue and get stronger in the future then we need to invest in it.

“Taking the opportunity offered by those historically low borrowing rates.”

Asked if he could still afford tax cuts under his new rules, Mr Javid said: “It means that if we stick to these rules that I have set out today, we can afford to do a lot.

“We can afford to make sure we live within our means in day-to-day spending. We can afford the infrastructure revolution that I have talked of, the re-levelling up across the country, investing billions more but keeping an eye on debt.”

He added: “We’ve worked out the numbers and within these rules we can have tax cuts, investment in infrastructure and balance the day-to-day funding of the economy.”

Mr Javid faced questions over whether he was saddling future generations with debt after using his speech to tear into Labour for its plans, which would remove borrowing for investment from targets.

He said: “The difference between our approach and Labour’s approach is like night and day. There is a huge gulf in difference in our economic approach.

“What I’ve set out today is the sensible stewardship of the economy.

“Realising that there can be good reasons to borrow, especially at these historic low interest rates, as long as you are going to turn that borrowing into productive investment, the road, the rail, the fibre optics, the flood defences, the things that are actually going to improve our productivity over time.”

Elsewhere, John McDonnell told an audience in Liverpool that Labour would bring about an “irreversible shift” of power and wealth from London to the rest of the UK – with a £150bn boost for schools, hospitals and council housing.