Labour and Tories accused of 'abandoning fiscal restraint' after spending pledges in northern cities

Chancellor Sajid Javid said the Conservatives will increase borrowing to pay for new infrastructure as he heralded new fiscal rules for a "new economic era".

He announced plans to borrow "some more" to invest in hospital and railway projects as he made his first major intervention in the Tories' General Election campaign.

Meanwhile, in a speech in Liverpool his Labour counterpart John McDonnell unveiled plans which would increase the party's previous borrowing commitment from £25bn a year to £55bn.

The Shadow Chancellor said a Labour government would exclude borrowing for investment from its borrowing targets, with rail, energy, water and mail considered along with other public sector assets on the nation’s overall financial balance sheet.

It comes as the Conservatives, Labour and Liberal Democrats promised to stand up for the North's interests in response to a plea by northern leaders to replace rhetoric with decisive action.

The ambitious Manifesto for the North included five key challenges to whoever is forming the next government, including a commitment to rebalancing the economy as a formal HM Treasury objective, delivering transformational investment.

Syed Kamall, Academic and Research Director at the Institute of Economic Affairs, said: "Today's election speeches show both parties have abandoned fiscal restraint in favour of increases in public spending to be paid for through extra borrowing.

“By spending the majority of the Government’s fiscal headroom, both parties risk glossing over the fact that the tax burden is at its highest for almost 50 years. If the state’s finances are as improved as the Chancellor says they are, tax cuts, especially for the least well off, should also be prioritised."

Mr Javid said the Tories, if elected, would increase borrowing to pay for new infrastructure as he heralded new fiscal rules for a "new economic era".

The Chancellor announced plans to borrow "some more" to invest in hospital and railway projects as he made his first major intervention in the Tories' General Election campaign.

In a speech in Manchester, Mr Javid said the election would be close between Labour and the Conservatives and that the party could not "take anything for granted".

He said that due to historic low borrowing rates now was a "responsible time" to invest, but that if costs rise significantly "we would reassess how much we would be willing to borrow for capital projects".

And Mr McDonnell said a Labour administration would ensure coastal communities benefit from plans to tackle climate change.

He said: "Those who need jobs linked with the need to create and build the new wind turbines.

"Those with ideas for new green technologies linked with areas where manufacturing investment has become for many a grandparent's memory.

"That means making sure - as we transition away from fossil fuels to green energy sources - that those new jobs are located in communities where they're needed.