UK's Osborne ties investment spending to growth, sees budget surplus


MANCHESTER, England (Reuters) - British finance minister George Osborne said the ruling Conservative party would aim to increase investment spending by at least the same pace as economic growth if it won the next election in 2015.

Osborne also told a Conservative Party conference that he would aim to return Britain to a budget surplus in the next parliament, as long as the country's economy continued to mend.

"When we've dealt with Labour's deficit, we will have a surplus in good times as insurance against difficult times ahead," Osborne said, referring to the huge shortfall in Britain's public accounts at the time of the last election.

"And provided the recovery is sustained, our goal is to achieve that surplus in the next parliament."

Osborne plan depends on his party winning the next election. One opinion poll on Sunday said it was 11 percentage points behind the opposition Labour party.

In March, Britain's budget watchdog forecast that the public sector budget would be in surplus from the 2016-17 fiscal year, based on the government's preferred, cyclically adjusted measure of the deficit.

The opposition Labour party has criticized the government for not spending more on infrastructure projects as a way to help the economy out of its post-recession stagnation, although a recovery has accelerated in recent months.

Osborne said it was important to distinguish between day-to-day spending, including welfare expenditure, and longer-term investment on infrastructure.

"So we should commit, alongside to growing a surplus and capping welfare, to grow our capital spending at least in line with our national income," he said. "And these principles will form the foundation of our public finance policy and I will set out the details next year."

By spending less on welfare and routine costs, a new Conservative government would pave the way for lower taxes, Osborne said, adding he wanted to keep an existing freeze on fuel duty for the remainder of the current parliament.

(Reporting by Guy Faulconbridge and Andrew Osborn; Writing by William Schomberg; Editing by Kate Holton)