MONETARY POLICY

Mr Deputy Speaker it is because we have a credible fiscal plan that the Bank of England can provide the support needed to businesses and families.

Yesterday, I confirmed the appointments of Anthony Habgood to Chair the Court and Ben Broadbent and Minouche Shafik to be the new Deputy Governors for Monetary Policy and Markets and Banking respectively.

All three make a strong team at the Bank stronger still.

I today re-confirm my remit for the Monetary Policy Committee, including the target of 2 per cent CPI inflation – which the OBR expect will be met this year, next year and in the years ahead.

I also set out the remit for the Financial Policy Committee, the body created by us to avoid the mistakes of the past.

Although the OBR forecast that house prices will remain below their real terms peak until at least 2018, I have asked the Committee to be particularly vigilant against the emergence of potential risks in the housing market.

And to enhance our resilience, and protect us from economic shocks, we will also continue rebuilding our foreign exchange reserves.

Those reserves are now 50% higher than when we came to office.

£1 COIN

Of course, the prerequisite of sound money is a sound currency.

And, Mr Deputy Speaker, the £1 coin has become increasingly vulnerable to forgery.

Now among the oldest of coins in circulation; one in thirty pound coins are counterfeit – and that costs businesses and the taxpayer millions each year.

So I can announce that we will move to a new, highly secure, £1 coin.

It will take three years. We will consult with industry.

Our new pound coin will blend the security features of the future with inspiration from our past.

In honour of our Queen, the coin will take the shape of one of the first coins she appeared on – the threepenny bit.

A more resilient pound for a more resilient economy.

FISCAL POLICY

Mr Deputy Speaker, sound money depends too on sound public finances.

We are entering a critical phase and we must learn from the past.

Every time a post-war government has embarked on public spending cuts, real spending has risen back to its previous heights within three years.

And sure enough there are those today who say: ease up, spend more, borrow more.

That would mean debt rising towards 100% GDP - undermining growth.

It would be a huge mistake and we are not going to let that happen.

Many Chancellors, faced with a recovering economy and improved borrowing forecasts before an election, would be tempted to squander the gains.

I will not do that today.

These gains were hard won by the British people – and we’re not going to jeopardise their economic security.

Britain is not going back to square one.

So in this Budget all decisions are paid for. Taxes are lower but so too is spending.

For we must bring our national debt substantially down.

Analysis published today shows just running a balanced current budget does not secure that.

Instead, Britain needs to run an absolute surplus in good years.

We will fix the roof when the sun is shining – to protect Britain from future storms.

So I can confirm that in addition to the cuts this year and next, there will be cuts in the next Parliament too.

To lock in our country’s commitment to this path of deficit reduction we will seek the support of Parliament in a vote.

And I will bring forward a new Charter for Budget Responsibility this autumn.

We are taking further difficult decisions now so we can reduce the deficit and protect our NHS and schools and meet our obligations to the world’s poorest by contributing 0.7% of our national income to help them.

On public service pensions, we implement the reforms proposed by John Hutton.

We will ensure schemes are properly valued, saving the taxpayer over £1 billion a year.

We are continuing with pay restraint in the public sector – an essential part of maintaining sound finances and economic stability.

We will also insist on the prudent management of departmental finances.

Thanks to the efforts of my colleagues in Cabinet, these now regularly come in under budget.

In order to lock-in these underspends, I said in December that we would reduce spending by £1 billion in 2015-16. Today, I am making that overall billion pound reduction permanent.

And I look forward to the work my excellent colleague the Chief Secretary is now doing, with the Cabinet Office, to find further efficiencies.

Difficult decisions on public service pay and pensions.

Further savings in departments.

A cap on welfare bills.

None of these decisions are easy, but they are the right thing to ensure Britain lives within her means.