Morning Call: pick of the papers

The ten must-read comment pieces from this morning's papers.

1. Michael Heseltine's on the right road – so who's going to take it? (Guardian)

The Treasury must hate the maverick former minister's report, but it should realise his ideas have deep Tory roots, says Martin Kettle.

2. The coalition can’t keep facing two ways at once on public spending (Daily Telegraph)

Agreement on reducing debt between the Conservatives and Lib Dems is vital if the government is to make it through to 2015, says Peter Oborne.

3. America Decides (Times) (£)

President Obama has lost the campaign and his record has many holes, says a Times editorial. But he has done enough to earn a second term.

4. The Commons has spoken for the nation on the EU (Daily Telegraph)

The time has come for Britain to take a stand against the profligacy of the European Commission - real-terms spending must be cut, says a Telegraph leader.

5. New York’s ascent meets the rising ocean (Financial Times)

The city is not the only global economic hub at the mercy of climate change and rising tides, writes John Gapper.

6. Britain must atone for its sins in Palestine (Daily Telegraph)

Ever since the Balfour Declaration of 1917, Britain has denied our people their rights, says Nabeel Shaath.

7. Who profits from being in care? It's not the children (Guardian)

Dumped in areas cheap enough for contractors to make a decent return, it's little wonder 'cared-for' children fail to thrive, writes Zoe Williams.

8. The tragedy of Britain is the lack of a governing class brave enough to make big decisions (Daily Mail)

Democracy shouldn’t mean buckling into noisy minorities selfishly defending their corner, writes Stephen Glover.

9. How to improve life for the 'squeezed middle' (Independent)

The onus is on the politicians to act – or explain why they will not, says an Independent leader.

10. Banking may lose its allure for the best and brightest (Financial Times)

The really stark relative shrinkage of finance might lie ahead, writes Gillian Tett.

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Brexit has forced the Tories to retreat from austerity

George Osborne's decision to abandon his budget surplus rule is an acknowledgment of economic reality.

Before Brexit, it was intensified austerity that was threatened by George Osborne. But after the event, the Chancellor has taken the reverse course. In his speech to the Manchester Chamber of Commerce, Osborne abandoned the ambition that has defined his Treasury tenure: a budget surplus.

He said: "The referendum is expected to produce a significant negative economic shock to our economy. How we respond will determine the impact on jobs and growth.

"We must provide fiscal credibility, continuing to be tough on the deficit while being realistic about achieving a surplus by the end of the decade. That's exactly what our fiscal rules are designed for."

Rather than a dramatic reversal, Osborne's decision is now merely an acknowledgment of economic reality. The rule is automatically suspended when growth falls below 1 per cent (as it almost certainy will) in order to avoid further depressing output. But even before Brexit, Osborne was regarded by the IFS as having only a 50 per cent chance of achieving his target.

Labour is highlighting its consistent opposition to the rule, which it again called for the abandonment of after Brexit. A senior source hailed a "huge victory" for the "centrepiece of our economic criticism of the government over the last nine months since Jeremy [Corbyn] took over the leadership." I'm told that Labour will not abandon its Fiscal Credibility Rule as it is "more robust and flexible". Unlike the government's surplus target, it allows borrowing for investment, mandating only that day-to-day spending be balanced (a condition suspended if the Bank of England believes monetary stimulus has become ineffective).

As well as reflecting the new economic reality, Osborne's announcement was also an acknowledgment of the new political one. It will most likely be a future Chancellor who determines the path of fiscal policy (starting with this year's Autumn Statement). At her leadership launch yesterday, Theresa May pre-empted Osborne by declaring that "we should no longer seek to reach a budget surplus by the end of the parliament". Among the Home Secretary's notable supporters is Cabinet Office minister and arch-Osborneite Matt Hancock. The Chancellor's decision to echo May's stance is being seen by some as the prelude to an endorsement. But Michael Gove, who reportedly wants Osborne to remain in post, also acknowledged the new fiscal reality at his launch this morning.

Far from more austerity, it is already clear that Brexit will mean considerably less. As Osborne knows, there is no alternative.

George Eaton is political editor of the New Statesman.