Fiscal Risks Report 2019
Lord Hammond of Runnymede Excerpts(5 years, 3 months ago)
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The Chancellor of the Exchequer (Mr Philip Hammond)
In accordance with the charter for budget responsibility, the Office for Budget Responsibility (OBR) has today published its second fiscal risks report (FRR). The OBR published its first FRR in 2017, which the Government responded to in 2018 through the managing fiscal risks report (MFR). FRR 2019 fulfils the OBR’s legal obligation to publish a statement setting out the main risks to the public finances at least once every two years. The report features an updated risk assessment of the original issues the OBR raised in FRR 2017, in addition to highlighting new risks to the public finances. It was laid before Parliament earlier today and copies are available in the Vote Office and Printed Paper Office.
The UK is one of the few countries in the world to publish a standalone report on fiscal risks and the FRR is the only such report to be published by an independent agency rather than the Government itself. The UK is a world leader in fiscal risk disclosure and management and is determined to set the global standard not only for the disclosure of fiscal risks but also for the active management of those risks. The IMF’s 2018 article IV consultation noted that “The UK continues to set international standards with respect to fiscal transparency”. This report keeps the UK at the frontier of fiscal management internationally and demonstrates the Government’s commitment to fiscal transparency and accountability. The publication of FRR 2019 further strengthens the cycle of accountability that the first report started. As required under the charter for budget responsibility the Government will respond formally to the FRR 2019 within the next year.
The Government have helped to build a stronger, fairer economy—dealing with the deficit, helping people into work, and cutting taxes for people, families, and businesses. The economy has grown continuously for the past nine years, the employment level is currently at a record high, unemployment is currently at its lowest rate and level since 1975, inflation is at the Bank of England’s target and real wages are rising. We are tackling the productivity challenge head on because it is the only way to sustainably improve living standards in the long term.
The Government have also made substantial progress in improving the health of the public finances since 2010, which have now reached a turning point. The deficit has been reduced by more than four fifths and debt has begun its first sustained fall in a generation. At the spring statement 2019, the OBR confirmed that the Government are forecast to meet both of the interim fiscal rules early, with the structural deficit now below 2% and debt falling in every year of the forecast. The Government have achieved this through a balanced approach to fiscal policy; continuing to reduce debt, while also supporting vital public services, keeping taxes low and investing in Britain’s future.
Within this balanced approach, the Government took the decision to make the NHS the number one spending priority, committing to an historic settlement that provides a cash increase of £33.9 billion a year by 2023-24. This record level of additional funding for our public services has been delivered within a responsible fiscal framework, and has been accompanied by a clear and credible NHS long-term plan, which includes measures to put the NHS back onto a sustainable financial path.
Furthermore, the Government have taken concrete action to reduce a number of risks, which the OBR has acknowledged in FRR 2019. This includes better management of new contingent liabilities, reducing the issuance of index linked gilts and improvements in the management and reporting of legal risks in the welfare system. The Government have also made significant improvements in monitoring and transparency of their fiscal risks, including introducing stricter disclosure requirements for asset sales and revised budgetary treatment for financial transactions.
While the Government have acted, many of the risks discussed by the OBR in its first report remain. In the medium term, the largest potential risks come from the macroeconomy and financial sector in the form of financial crises and major economic downturns. The OBR has also modelled the fiscal implications of the UK leaving the EU without a deal in its fiscal stress test. The stress test is based on the IMF’s less disruptive no-deal scenario. The OBR notes this scenario is not necessarily the most likely outcome and it is relatively benign compared to other possible scenarios (for example, assuming limited short-term border disruptions). The OBR reports that this scenario would add around £30 billion a year to borrowing from 2020-21 onwards and around 12% of GDP to net debt by 2023-24, compared with the OBR’s March forecast baseline.
In the long term, the most significant fiscal risks come from structural economic and societal trends such as lower productivity growth, higher interest rates, changes in consumption and working practice, demographic pressures and technological change. Additionally, the report highlights new risks—such as climate change and the costs associated with measures designed to adapt and mitigate the effects. The risks the OBR has highlighted further reinforce the need for prudent management of the public finances and the reduction of debt to more sustainable levels.
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ECOFIN: 9 July 2019
Lord Hammond of Runnymede Excerpts(5 years, 3 months ago)
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The Chancellor of the Exchequer (Mr Philip Hammond)
A meeting of the Economic and Financial Affairs Council (ECOFIN) was held in Brussels on 9 July 2019. The UK was represented by Mark Bowman (Director General, International Finance, HM Treasury). The Council discussed the following:
Early morning session
The Eurogroup President briefed the Council on the outcomes of the 8 July meeting of the Eurogroup, and the European Commission provided an update on the current economic situation in the EU. Ministers then discussed potential new sources of revenue for the upcoming multiannual financial framework the EU’s long-term budget.
Own resources
The Finnish presidency gave an update to the Council on the potential new sources of revenue for the upcoming multiannual financial framework, following a discussion during the early morning session.
Presidency work programme
The Finnish presidency presented its work programme on economic and financial matters for July to December 2019.
Appointment of the President of the European Central Bank
The Council adopted a Council recommendation on the appointment of Christine Lagarde as the next President of the European Central Bank.
European semester
The Council adopted the 2019 country-specific recommendations as part of the European semester process.
Any Other Business
The Dutch Finance Minister briefed ministers on the topic of aviation taxation and carbon pricing.
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ECOFIN
Lord Hammond of Runnymede Excerpts(5 years, 3 months ago)
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The Chancellor of the Exchequer (Mr Philip Hammond)
A meeting of the Economic and Financial Affairs Council (ECOFIN) will be held in Brussels on 9 July 2019. The UK will be represented by Mark Bowman (Director General, International Finance, HM Treasury). The Council will discuss the following:
Early morning session
The Eurogroup President will brief the Council on the outcomes of the 8 July meeting of the Eurogroup, and the European Commission will provide an update on the current economic situation in the EU. Ministers will then discuss potential new sources of revenue for the upcoming multiannual financial framework: the EU’s long-term budget.
Own resources
The Finnish presidency will then give an update to the Council on the potential new sources of revenue for the upcoming multiannual financial framework, following a discussion during the early morning session.
Presidency work programme
The Finnish presidency will present its work programme on economic and financial matters for July to December 2019, followed by an exchange of views.
Appointment of the President of the European Central Bank
The Council will be invited to adopt a Council recommendation on the appointment of Christine Lagarde as the next President of the European Central Bank.
European semester
The Council will be invited to adopt the 2019 country-specific recommendations as part of the European semester process.
Any Other Business
The Dutch Finance Minister will brief Ministers on the topic of aviation taxation and carbon pricing.
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Oral Answers to Questions
Lord Hammond of Runnymede Excerpts(5 years, 4 months ago)
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Patrick Grady (Glasgow North) (SNP)
The Chancellor of the Exchequer (Mr Philip Hammond)
I regularly discuss EU exit with the Secretary of State for Scotland and other members of the Cabinet. The Government remain committed to securing a deal that works for the entire United Kingdom.
Patrick Grady
There might be two people competing to be Prime Minister, but I think there are at least five who think they will be the next Chancellor, so perhaps the right hon. Gentleman should just get to stay in post and then they will all be equally disappointed. He seems to be concerned that they are somehow going to ruin his deal dividend, but is not the truth that there is no real dividend from any Brexit, that the best possible deal for Scotland and the rest of the UK is the one we already have, which is membership, and that that is the case that he and other sensible Government Members should have the courage to be making?
Mr Hammond
I have consistently made the case and explained to this House that there is fiscal headroom within the current fiscal rules. If we have a smooth exit from the European Union through a transition that will remove the economic uncertainty that is hanging over our economy, it will then be safe to release that headroom and make it available for additional public spending or, at the choice of the next Government, to reduce taxation. Either way, we have the headroom available once we have removed the Brexit uncertainty.
Nicky Morgan (Loughborough) (Con)
Is it not the case that Scotland, like everybody else, will know the plans for future public spending, for fiscal headroom and for the economic effects overall if the comprehensive spending review were to be started sooner rather than later? Is the Chancellor able to tell the people of Scotland, the people in this House and the people beyond when the comprehensive spending review will be starting?
Mr Hammond
I announced at the spring statement that it is the Government’s intention to conduct a three-year spending review concluding this autumn, subject to a deal with the EU being completed. Departments are already commissioned to carry out the work necessary for such a spending review, but it will be for the new Government to decide whether the circumstances make it appropriate to conduct a full three-year spending review or a single-year exercise.
Gavin Newlands (Paisley and Renfrewshire North) (SNP)
Mr Hammond
As I have consistently said in this House, I do not believe that a no-deal exit would be in the interests of this country, and I will do everything I can to ensure that we avoid it, but an exit based on a negotiated deal that allows us to continue a close trading relationship with the European Union can work for Britain, and that is what I will be arguing for.
Chris Philp (Croydon South) (Con)
Is the Chancellor aware that only 18% of Scottish exports go to the rest of the European Union but 61% go to the rest of the United Kingdom? Is not the Union that really matters to Scotland the Union of the United Kingdom?
Mr Hammond
Yes, my hon. Friend is exactly right. The Scottish economy would be far more adversely affected by a breach of trading relationships with the rest of the United Kingdom than it will by a breach in trading relationships with the European Union.
Preet Kaur Gill (Birmingham, Edgbaston) (Lab/Co-op)
Tom Brake (Carshalton and Wallington) (LD)
The Chancellor of the Exchequer (Mr Philip Hammond)
As the right hon. Gentleman would have heard me say if he had been in his place earlier, I announced in the spring statement that it is the Government’s intention to conduct a three-year spending review, concluding this autumn, subject to a deal with the EU being completed. He asks whether I plan to launch the spending review before the summer recess: I can tell him that Departments have already been commissioned to carry out the work necessary for such a review. It must be for the new Government to decide, in the circumstances, whether it is appropriate to conduct a full three-year spending review or a one-year exercise.
Tom Brake
I can assure the Chancellor that I saw him give that response on television earlier. What would be the impact on the comprehensive spending review of either the proposal of the Secretary of State for Foreign and Commonwealth Affairs, the right hon. Member for South West Surrey (Mr Hunt), for a £13 billion cut in corporation tax and a £12 billion increase in defence spending, or the proposal of the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) for a £9 billion higher rate income tax threshold cut, £11 billion national insurance contributions cut and showing the public sector “some love”? Would those unfunded bribes be paid for by tax increases, cuts in services or both?
Mr Hammond
I fear that the right hon. Gentleman is manifestly asking the wrong person that question. I literally cannot answer it. The purpose of a spending review is that such matters can be looked at in the round, and the responsible way to do a spending review is first to set the envelope of what is affordable, and then to look at the different bids, which will—I can confidently predict—greatly exceed the available spending power, and prioritise. That is the difficult business of government, and that is why I am not in favour of ad hoc spending commitments or tax cut commitments being made.
Mr Speaker
The Chancellor is a clever chap, but his capacities do not include the capacity to penetrate the minds of colleagues, especially those in competitive vote-seeking mode.
Sarah Newton (Truro and Falmouth) (Con)
Homes England indicates a current pipeline of some 15,000 community- led homes in England. That shows the significant positive impact of the community housing fund. Will my right hon. Friend confirm the continuance of the fund so that those much-needed homes can be built?
Mr Hammond
As my hon. Friend knows, we have signed off the Truro funding decision, and I am sure she is happy about that. The Prime Minister has made it very clear that dealing with the challenges in the housing market is a priority for the Government, and in the spending review we will continue to prioritise funds to support both the housing market and the provision of social and affordable housing.
Chuka Umunna (Streatham) (LD)
If the UK leaves the EU without a deal and the Chancellor is still in his post, does he envisage there being enough fiscal headroom following the spending review to give the top 10% of earners a tax cut worth more than £9 billion? Surely that is wholly unjustified.
Mr Hammond
I think the hon. Gentleman has sketched a highly unlikely scenario, but I can answer his question. We have built up about £26 billion or £27 billion of fiscal headroom, and the purpose of that headroom is precisely to protect the UK economy from the immediate effects of a possible no-deal exit. I have no doubt whatsoever that in the event of a no-deal exit we will need all that money and more to respond to the immediate impacts of the consequent disruption, which will mean that no money will be available for longer-term tax cuts or spending increases.
Let me go further: the Government’s analysis suggests that in the event of a disruptive no-deal exit there would be a hit to the Exchequer of about £90 billion, and that will also have to be factored into future spending and tax decisions.
Kevin Hollinrake (Thirsk and Malton) (Con)
I certainly agree with my right hon. Friend that we need to be careful with our spending pledges, but I think that investment spending is different, particularly when the investment is in the north. Has my right hon. Friend had time to consider our letter of 29 April—signed by 80 parliamentarians—which calls for £120 billion of investment spending over 30 years and a bringing forward of the Northern Powerhouse Rail programme?
Mr Hammond
We are committed to investment in infrastructure. One of the things that I have done in my three years as Chancellor is move the balance of spending towards investment in economic infrastructure, and we now have the highest level of public capital investment for 40 years. We have a National Infrastructure Commission to set long-term guidance for the Government on how to invest in infrastructure investment, and that will be considered in the zero-based capital spending review that sits alongside the main spending review. However, I assure my hon. Friend that this Government are committed to investing in the productive capacity of the UK economy, because it is the only way to raise real wages and living standards, and that is what government is all about.
Alan Brown (Kilmarnock and Loudoun) (SNP)
Mary Glindon (North Tyneside) (Lab)
The Chancellor of the Exchequer (Mr Philip Hammond)
My principal focus is to ensure the continued resilience of the UK economy and public finances at this time of uncertainty. Thanks to the hard work of the British people, our national debt is now falling sustainably for the first time in a generation, but it is still too high and it is vital that the Government continue to get debt down to ensure that the economy is resilient against future shocks, to prevent the wasting of billions of pounds more on debt interest payments, and to avoid burdening the next generation.
Mary Glindon
Since 2013 this Government have given tax handouts worth £4.1 billion to the big alcohol corporations at a time when the NHS is short of 40,000 nurses. Would it not be a sensible choice to invest in the nurses, doctors and police officers who have to deal with the problems caused by cheap alcohol?
Mr Hammond
We have done so: by 2023-24 we will be spending an extra £34 billion a year on the national health service. That is a record cash injection to our national health service, which represents this Government’s commitment to it.
James Cartlidge (South Suffolk) (Con)
Mr Philip Hammond
Yes, it is a vital cornerstone of our institutional structure that the Bank of England remains independent, and those who have suggested that they would seek to politicise appointments to the Bank of England would be doing a great disservice to this country and our economy.
John McDonnell (Hayes and Harlington) (Lab)
The Chancellor, like most of us, has been watching the accumulation of spending promises by the Tory leadership candidates. They amount now—[Interruption.] They amount now to nearly £100 billion, and one of the Chancellor’s colleagues commented yesterday that they make me look like a fiscal moderate. May I ask the Chancellor what impact this level of unfunded commitments would have on his economic strategy, or can he tell us how they could possibly be funded?
Mr Hammond
There are many people who could comment on spending commitments that have been made by candidates in the Tory leadership competition, but the right hon. Gentleman is not one of them.
John McDonnell
Let me try this one. Both Tory leadership candidates are threatening no deal. This morning, the Chancellor has eloquently set out the consequences of no deal. Bearing in mind what he said, may I ask him very straightforwardly whether he will join us and commit himself to doing everything he possibly can to oppose the Prorogation of Parliament to try to sneak no deal through, and also to voting against no deal?
With your permission, Mr Speaker, if I may: this might be the Chancellor’s last Treasury questions and I just want to thank him for the civility with which he has always maintained our relationship. I also admit that there have been times when we have enjoyed his dry sense of humour. I gave his predecessor a little red book as a present. We have another red book today, but this is a guide to London’s rebel walks and we hope that he will enjoy it in his leisure periods.
Mr Hammond
That is very kind of the right hon. Gentleman; I much prefer this little red book to the one he gave my predecessor, although I have to say that I have not read this one and I have read the other one.
On the broader question, I have been consistently clear that I believe that a no-deal exit would be bad for the UK, bad for the British economy and bad for the British people. We cannot rule out that happening, because it is not entirely in our hands, but I agree with him that it would be wrong for a British Government to seek to pursue no deal as a policy. I believe that it will be for the House of Commons, of which I will continue proudly to be a Member, to ensure that that does not happen.
Mr Barry Sheerman (Huddersfield) (Lab/Co-op)
Mr Philip Hammond
The hon. Gentleman is right to point to storm clouds over the global economy. We tend to focus on Brexit-related issues and the domestic agenda, but I have just come back from the G20 in Osaka, and looking more widely, we can see that global growth is slowing and that global trade growth is slowing even more dramatically. A great deal hinges on finding a solution to the disputes between China and the United States. It is hugely in our interests that that dispute is resolved and that normal trading relations are resumed between the world’s two economic superpowers. As a middle-sized open economy, we are bound to be adversely affected if global trade slows down.
Colin Clark (Gordon) (Con)
Mrs Pauline Latham (Mid Derbyshire) (Con)
Mr Philip Hammond
We made an announcement this morning about our plans for green finance. Over the coming months and years, it will be essential to demonstrate how we are able to mobilise our capital markets and the instruments of a market economy to deliver on this huge enterprise. If we do not demonstrate how the market economy can provide solutions to decarbonising our economy, there are others with alternative solutions to present.
Patrick Grady (Glasgow North) (SNP)
Mr Philip Hammond
As I think the hon. Gentleman knows, that position is enshrined in statute, and only this House of Commons could change it.
Royston Smith (Southampton, Itchen) (Con)
More of my Southampton constituents are in work than ever before, but many of their jobs are low-paid, with few career prospects, if any. What are the Government doing to improve employment opportunities for my constituents?
Mr Hammond
We have worked hard to build a stronger, fairer economy, dealing with the deficit that we inherited, helping people into work and cutting taxes for people, families and businesses, and the result is that the economy has grown continuously for the past nine years. Employment is currently at record high levels, unemployment is currently at the joint lowest rate since 1975, and real wages are rising again. We have created 3.5 million new jobs, but the next stage must be about increasing real wages by raising productivity, because that is the only sustainable way to raise the living standards of working people in this country.
Marsha De Cordova (Battersea) (Lab)
Rushanara Ali (Bethnal Green and Bow) (Lab)
I welcome the Chancellor’s remarks about a no-deal Brexit and the disaster it would be for our country, costing jobs and livelihoods. Does he agree that both Conservative leadership candidates, who support a no-deal Brexit, should stop selling out the country to serve their own political ambitions? Will he commit to joining us in voting against a no deal when and if he returns to the Back Benches, and to voting with us on a no-confidence motion, if it comes to that, to stop a no deal?
Mr Philip Hammond
At this stage of my career, I will not speculate on my future actions. What I will say is that the Government’s analysis shows that a no-deal exit would mean that all the regions, nations and sectors of the UK economy have lower economic output compared with today’s arrangements and compared with the White Paper scenario that the Government set out. It is important we all understand that preparing for a no deal, which is a perfectly sensible thing to do because it might happen to us without our volition, is not the same as avoiding the effects of a no deal.
Martin Vickers (Cleethorpes) (Con)
Net zero emissions by 2050 is a desirable but very costly policy. Does the Chancellor agree that we must do everything to protect low-income families in my Cleethorpes constituency and elsewhere from bearing an unfair burden?
Mr Hammond
Yes. This is a huge commitment, but it is the right commitment to make. The Committee on Climate Change recommended that the Treasury should undertake a review of the funding and financing mechanisms to ensure that this huge undertaking can be funded, and that it will be funded in a way that is fair to families, households and businesses across the UK, which is exactly what we will do.
Alison Thewliss (Glasgow Central) (SNP)
The “All Kids Count” report, on the impact of the two-child limit after two years, was published last week by the Church of England, the Child Poverty Action Group, Women’s Aid, Turn2us and the Refugee Council. The report illustrates the devastating impact of the two-child policy, particularly on working families who are unable to compensate for the £2,780 a year cut by working longer hours. Before the Chancellor leaves office, will he scrap the two-child policy and its devastating impact on families?
Jeremy Lefroy (Stafford) (Con)
The decision by the European Union to suspend the equivalence agreement with Switzerland seems to be very damaging. My right hon. Friend the Chancellor has done a fantastic job over the past few years. Will he confirm whether the United Kingdom was consulted on whether the decision should go ahead?
Mr Hammond
We have been closely involved in this issue, discussing it both in the EU and with the Swiss. I can tell the House that although on the face of it the withdrawal of equivalence had a very significant effect on the ability of UK shareholders to trade Swiss shares on the Swiss stock exchange, the measures that the European Securities and Markets Authority announced on Friday significantly mitigate the impact. So we very much hope that the European Union and Switzerland will be able to reach agreement, and of course there is a very direct relevance to the UK’s own negotiations with the European Union.
Ruth George (High Peak) (Lab)
Will the Chancellor commit to enabling the 120,000 families on very low incomes who find out about a tax credit overpayment when they claim universal credit to have a fair chance to appeal against those deductions averaging £1,500 being made and to giving them a chance to raise themselves out of poverty?
Mr Hammond
My hon. Friend knows that I do share his concerns on this matter. The Public Works Loan Board is there to support local authorities’ capital spending. Some of the development activities of local authorities are perfectly legitimate: for example, the regeneration of urban areas. What is not legitimate is local authorities arbitraging the low interest rates of the PWLB to buy commercial property for yield, in order to develop income-yielding property portfolios. The Treasury is looking at how we can manage that situation.
Several hon. Members rose—
ECOFIN
Lord Hammond of Runnymede Excerpts(5 years, 4 months ago)
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The Chancellor of the Exchequer (Mr Philip Hammond)
A meeting of the Economic and Financial Affairs Council (ECOFIN) was held in Luxembourg on 14 June 2019.
ECOFIN was preceded by a meeting of the European Investment Bank (EIB) Board of Governors:
Annual EIB Board of Governors meeting
The meeting included: statements from the Chairman, President and Chairman of the Audit Committee; a governors discussion; a presentation on the annual report of the Audit Committee; and a vote for partial renewal of the Audit Committee. The UK was represented by Mark Bowman (Director General, International Finance, HM Treasury) during the EIB meeting.
Following this, EU Finance Ministers discussed the following at ECOFIN:
Early morning session
The Eurogroup President briefed the Council on the outcomes of the 13 June meeting of the Eurogroup, and the European Commission provided an update on the current economic situation in the EU.
Banking union
The Council endorsed the progress report on the banking union.
Financial transaction tax
The Council received a progress update in relation to the enhanced co-operation on financial transaction tax.
G20 follow-up
The Romanian presidency and Commission presented the main outcomes of the G20 meeting of Finance Ministers and Central Bank Governors, which took place on 8 to 9 June in Fukuoka, Japan.
European semester
The Council discussed a horizontal note on the draft 2019 country specific recommendations, and progress towards the Europe 2020 targets.
Stability and growth pact
The Council adopted Council decisions and recommendations on the implementation of the stability and growth pact.
Clean planet
The Council held an exchange of views on a strategic long-term vision for a climate-neutral economy.
Non-performing loans
Under any other business, the Commission provided an update on the implementation of the action plan to tackle non-performing loans in Europe.
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ECOFIN
Lord Hammond of Runnymede Excerpts(5 years, 4 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Mr Philip Hammond)
A meeting of the Economic and Financial Affairs Council (ECOFIN) will be held in Luxembourg on 14 June 2019.
ECOFIN will be preceded by a morning meeting of the European Investment Bank (EIB) board of governors:
Annual EIB board of governors meeting
The meeting of the EIB board of governors will include: statements from the Chairman, President and Chairman of the Audit Committee: a governors discussion: a presentation on the annual report of the Audit Committee; and a vote for partial renewal of the Audit Committee. The UK will be represented by Mark Bowman (Director General, International Finance, HM Treasury).
Following this, EU Finance Ministers will discuss the following at ECOFIN:
Early morning session
The Eurogroup President will brief the Council on the outcomes of the 13 June meeting of the Eurogroup, and the European Commission will provide an update on the current economic situation in the EU.
Banking union
The Council will be invited to endorse a progress report on the Banking Union.
Financial transaction tax
Ministers will receive a progress update in relation to the enhanced co-operation in the area of financial transaction tax.
G20 follow-up
The Council presidency and Commission will present the main outcomes of the G20 meeting of Finance Ministers and central bank governors, which took place on 8-9 June in Fukuoka, Japan.
European semester
Ministers will discuss the draft 2019 Country Specific Recommendations (CSRs) and progress towards the Europe 2020 targets.
Stability and growth pact
Ministers will be invited to adopt Council decisions and recommendations on the implementation of the stability and growth pact.
Clean planet
Ministers will exchange views on a strategic long-term vision for a climate-neutral economy.
Non-performing loans
Under any other business, the commission will provide an update on the implementation of the action plan to tackle non-performing loans in Europe.
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ECOFIN
Lord Hammond of Runnymede Excerpts(5 years, 5 months ago)
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The Chancellor of the Exchequer (Mr Philip Hammond)
A meeting of the Economic and Financial Affairs Council (ECOFIN) was held in Brussels on 17 May 2019. The UK was represented by Mark Bowman (Director General, International Finance, HM Treasury). The Council discussed the following:
Early morning session
The Eurogroup President briefed the Council on the outcomes of the 16 May meeting of the Eurogroup, and the European Commission provided an update on the current economic situation in the EU. Ministers then discussed the possibility of the European Investment Bank developing country strategies. Lastly, the Commission updated on the state of play on negotiations on the definitive system of value added tax.
Excise duties
The Council discussed the directive on general arrangements for excise duty (recast), the regulation on administrative co-operation of the content of electronic registers, and the directive on the structures of excise duty on alcohol and alcoholic beverages.
Current financial services legislative proposals
The Romanian presidency provided an update on current legislative proposals in the field of financial services.
International meetings
The Council held an exchange of views on digital taxation in the international context, and the presidency and Commission updated the Council on the outcomes of the G20, IMF and World Bank spring meetings that took place in April. The Council then mandated the Economic and Financial Committee to approve the terms of reference for the upcoming G20 meeting in June. Lastly, the Finnish delegation debriefed the Council on the first meeting of the Finance Ministers coalition for climate action.
European semester
The Council adopted conclusions on the outcomes of the 2019 in-depth reviews of macroeconomic imbalances in member states as part of the macroeconomic imbalances procedure; and the implementation of 2018 country-specific recommendations.
Institutional cycle priorities
Under the non-legislative AOB, the presidency informed the Council on the follow-up discussions in regards to priorities for the next institutional cycle in the ECOFIN area.
Working lunch
Following on from the discussions at April informal ECOFIN in Bucharest, EU Finance Ministers held a working lunch to discuss the challenges of labour mobility and their potential solutions, followed by an exchange of views on the way forward in areas of the economic and monetary union, specifically in regards to the reform support programme.
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Oral Answers to Questions
Lord Hammond of Runnymede Excerpts(5 years, 5 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
David Linden (Glasgow East) (SNP)
The Chancellor of the Exchequer (Mr Philip Hammond)
The NHS pension scheme and other public service schemes are among the most generous pension schemes available in this country today. The tapered annual allowance is focused on the highest-earning pension savers to ensure that the tax relief that they receive is not disproportionate to that of other savers. However, I do accept that there is some evidence that the annual allowance charge is having an impact on the retention of high-earning clinicians in the NHS. I am in discussion with my right hon. Friend the Health Secretary about how to provide additional pension flexibility for NHS doctors affected by the annual allowance tax charge, and he will make an announcement as soon as possible.
Paul Masterton
I am grateful to the Chancellor for that answer, and particularly to the Government for accepting that the taper contributes to capacity gaps and retention issues in the NHS. Given that the costs of increased waiting times, delayed diagnosis and knowledge gaps far outweigh the tax revenue generated, would not the sensible and fiscally responsible thing be just to scrap the taper altogether?
Mr Hammond
I understand my hon. Friend’s point. However, the overall reforms to pensions allowances that were made in the previous two Parliaments and include the tapered annual allowance are necessary to deliver a fair system and to protect the public finances. These measures affect only the highest-earning pension savers and are expected to raise £6 billion a year. But, as I said, we are monitoring the response of high earners in the NHS, and I expect that my right hon. Friend the Health Secretary will be able to make an announcement soon.
Ruth Jones
A number of hospital consultants who live in my constituency have written to me to express their concern at the implications of the tapered annual allowance. With GP numbers continuing to fall, ongoing shortages across consultant specialties and armed forces doctors currently experiencing a 23% workforce shortfall, how is the Chancellor going to help doctors and patients by resolving the unintended consequences caused by the annual tapered allowance and lifetime annual allowance that are leading to doctors who would otherwise be happily continuing to work having to leave the profession to avoid disproportionate and unfair tax bills?
Mr Hammond
I think I have answered that question, but it is good to hear Labour MPs focusing on the disincentive effect of high taxation, particularly on professionals in our public services. Someone has to be earning £150,000 a year before the tapered annual allowance affects them. I would suggest that perhaps Labour Members who do understand the detrimental effect of very high marginal tax rates on professionals in our public services make those representations to their right hon. Friend the shadow Chancellor, who is intending to raise tax for everybody earning more than £80,000 a year.
David Linden
One of the constituents I have in Barrachnie is a consultant who has told me that there are concerns about recruitment and retention. Given that a recent survey shows that 40% of doctors have retired early as a result of pension tax changes, I would urge the Chancellor to look again at this and make as strong a case as possible to the Health Secretary so that he can make sure that we have the staff in the NHS to serve our communities.
Mr Hammond
As I have already said, both the Treasury and the Health Department wish to address this problem. We have to find a mechanism that does it in a way that is fair and appropriate. The right way to do it is through increasing flexibilities within the NHS and, potentially, other public sector schemes. My right hon. Friend the Health Secretary will make an announcement as soon as possible.
Eddie Hughes (Walsall North) (Con)
Yesterday I met representatives of Alliance Health Group who were making representations because a number of very experienced surgeons are leaving the NHS due to the problems with the pension. I just wondered how representations would have been made to the Treasury on behalf of consultant groups.
Mr Hammond
The British Medical Association has been vocal, I think is probably the right word, in making the case around the disincentive effect of annual allowance charges, in particular, but also lifetime allowance charges. The Health Secretary and I have been discussing this for some time, and I think we are close to reaching a conclusion.
Dr Sarah Wollaston (Totnes) (Change UK)
The workforce shortfall is the greatest challenge facing the NHS. What discussions has the Chancellor had with the Health Secretary about the combined impact of these changes together with the disastrous consequences for the NHS workforce that would follow a no-deal or WTO Brexit?
Mr Hammond
As the hon. Lady says, recruitment and retention is one of the big challenges facing the NHS. Clearly, anything that were to impede the NHS’s access to overseas workers coming into the UK to serve in our health service would have an impact on that. But I have also recognised and acknowledged today that the operation of the pension annual allowance charge does have a significant effect—particularly, it seems, on partners in GP practices.
Mrs Emma Lewell-Buck (South Shields) (Lab)
Mr Philip Dunne (Ludlow) (Con)
The Chancellor of the Exchequer (Mr Philip Hammond)
High streets are at the heart of our communities, and they serve a social as well as an economic purpose. To support them, at Budget 2018 I cut business rates for small and medium-sized retail premises operated by independent retailers by a third for two years from April 2019, saving businesses over £1 billion. We have also set up a £675 million future high streets fund.
Mr Dunne
I very much welcome those measures in last year’s Budget, but for this coming comprehensive spending review, will my right hon. Friend consider offering occupiers of listed premises in town centres with freehold or full repairing lease obligations a VAT exemption on repairs and maintenance of those premises, which is a cost they have to bear but their online competitors and other retailers outside high streets do not?
Mr Hammond
I have to say to my right hon. Friend that, under EU law, we cannot introduce a reduced rate of VAT that is limited to repairs, maintenance and renovation of listed buildings. In any case, VAT incurred on their properties by VAT-registered businesses may be recoverable from Her Majesty’s Revenue and Customs, subject to the normal VAT recovery rules. However, the good news is that we remain committed to supporting our high streets, and on Saturday we announced a £62 million fund to breathe new life into historic buildings on heritage high streets, which I hope will go some way to helping.
Mr George Howarth (Knowsley) (Lab)
Does the Chancellor agree with me that companies such as St Modwen that buy up town centres such as Kirkby in my constituency do nothing with them—in fact, they leave them to rot—and then simply sell them on to a pension fund? Is that the way we want to run the future of our town centres, and has he not got anything more imaginative that can be done about it?
Mr Hammond
The £675 million fund that I mentioned is specifically intended to allow local authorities to develop plans for responding to the transformation of the high street that is coming. Retailing is changing, and high streets have to change to reflect that. We cannot hold that tide back, but we can help to support the transition.
Mr Philip Hollobone (Kettering) (Con)
Boots the Chemist, one of the most popular high street stores, says that just 22 of its 2,400 stores qualify for the Chancellor’s excellent business rates reduction scheme—not because of anything the Chancellor has done, but because of EU state aid rules. What can the Chancellor do to assist and to get around those rules?
Mr Hammond
I am a little mystified by this story about Boots, which I too read in the newspapers. When I announced the policy, I said that it was designed to help small independent retailers, and Boots, with 22,000 providers, does not fall within my definition of a small independent retailer. We always understood that this policy initiative was designed to support small independent retailers as they transition to the high street of the future.
Mr Speaker
I call Anneliese Dodds. [Interruption.] No? I had the distinct impression that the hon. Lady wished to come in on this question, but it is not obligatory.
Jim Shannon (Strangford) (DUP)
Last Friday, I met members of the Chamber of Trade at Newtownards. Of three small shops in the town of Ards, one started off employing 10 and now employs 60, one started off employing six and now employs 30, and one started off employing 20 and now employs almost 100. Would the Chancellor consider rates reduction for those high street shops that increase employment?
Mr Hammond
As far as I am aware, rates is a devolved matter in Northern Ireland; it is a matter for the Northern Ireland Executive, which I very much hope will be back in operation very soon.
Tom Brake (Carshalton and Wallington) (LD)
Daniel Kawczynski (Shrewsbury and Atcham) (Con)
The Chancellor of the Exchequer (Mr Philip Hammond)
The Government are proud of their record of reducing income taxes to enable people to keep more of what they earn. We have increased the personal allowance by over 90% in less than a decade. We have given 32 million people an income tax cut compared with 2015-16, and thanks to the changes that I made at the last Budget, a typical basic rate taxpayer will pay £130 less income tax this year than last year.
Daniel Kawczynski
I thank the Chancellor for that answer, and I thank him and his team for getting to grips with the extraordinary annual structural deficit inherited from the Labour party. Bearing that in mind, and given that we are now on a course towards a balanced budget, will he focus with laser-like precision on continuing to reduce income tax for hard-working families, putting clear blue water between us and the socialists in the run-up to the next election?
Mr Hammond
My hon. Friend is absolutely right to focus on the much improved state of the public finances and the direct link between that and our ability to consider further tax cuts. What I said at the spring statement remains the case: for the first time in a decade, this country now has choices—we have headroom because of the improved state of the public finances. We can choose to use that to support additional spending on public services, or we can choose to reduce the deficit more quickly. We can choose to invest in Britain’s future, or we can choose to cut taxes on ordinary working families. The luxury of choice is something that this country has not seen for a decade.
Alison McGovern (Wirral South) (Lab)
I think there must be an election coming up, because the right hon. Member for Esher and Walton (Dominic Raab) is on the front page of The Daily Telegraph today saying that we should “Cut income tax for a ‘fairer’ Britain”. We do need a fairer Britain, because we have the highest level of inequality in Europe. The so-called living wage does not solve inequality, according to the Institute for Fiscal Studies and the House of Commons Library briefing of yesterday, so when it comes to the choices that the Chancellor is going to make, what is his choice in tackling inequality in Britain?
Mr Hammond
I am afraid I do not agree with the hon. Lady about the national living wage. We have set out an ambition for it to reach 60% of median earnings by next year, which we will achieve. As I said in the spring statement, we now need to give a new mandate to the Low Pay Commission for the future trajectory of the national living wage, and I want us to be ambitious in doing that, but I do not want us to price low-skilled people out of work. That is why I have started a series of roundtables, the first of which was the week before last, with representatives from industry and the trade unions to decide what our strategy will be to increase the national living wage in this country.
Mike Wood (Dudley South) (Con)
How many people in the west midlands are benefiting from recent increases to the personal allowance and the higher-rate threshold?
Mr Hammond
The answer is lots. Had I known my hon. Friend was going to ask me that, I would have been able to give him a precise answer. I will write to him.
Mr Speaker
Put a copy of the answer in the Library of the House—we will all find it most informative.
Mr Gregory Campbell (East Londonderry) (DUP)
My party has advocated the raising of the personal allowance, and I am glad that the Chancellor has done that over the past few years, but does he agree that part of the problem now is that part-time and full-time employees on low pay, just below the threshold of £12,500, pay national insurance contributions? Will he consider eliminating that to the same level as the allowance?
Mr Hammond
We always have to find the most cost-effective way to deliver the effect we are looking for. We have chosen so far to do that by raising the personal allowance thresholds, but the hon. Gentleman makes a perfectly legitimate argument for a different approach in the future. As I have said, we will have choices as a result of the much improved state of the public finances.
Sarah Champion (Rotherham) (Lab)
The Chancellor of the Exchequer (Mr Philip Hammond)
My principal focus is to ensure the continued resilience of the UK economy at a time of domestic and international economic uncertainty. By maintaining our balanced approach to the public finances and continuing to focus on investment and cutting taxes for working families, we have ensured that public debt is now falling sustainably, employment is at a record high, wages are rising and Britain’s economy is forecast to grow more than three times as fast as Germany’s this year.
Sarah Champion
The report by the all-party group on adult survivors of childhood sexual abuse demonstrated the economic impact of not supporting victims: 72% said it had had a negative impact on their career; 65% on their education; and 46% on their financial situation. The Chief Secretary to the Treasury said about survivors that
“it should be government’s responsibility to prioritise support for these people”.
Will the Chancellor prioritise support for these services in the spending review?
John McDonnell (Hayes and Harlington) (Lab)
The Chancellor’s speech to the CBI this evening has been much trailed. I welcome his clear warnings to his Conservative colleagues about the hit the economy would face from a no-deal Brexit, especially those who have said there is nothing to fear from a no deal. For the benefit of Members in the Chamber, will he explain what he sees as the impact of a no-deal Brexit and his clear view that with
“all the preparation in the world”
a no-deal Brexit will still damage our economy?
Mr Philip Hammond
I am grateful to the right hon. Gentleman: I may not have to take the trouble to go and deliver the speech this evening.
The right hon. Gentleman has raised a serious point. There are two separate effects of a no-deal Brexit that concern me. First, there will clearly be short-term disruption, which will have an unpredictable and potentially significant effect on our economy. Secondly, and probably more importantly, all the analysis that the Government and external commentators have published shows that there will be a longer-term effect, meaning that our economy will be smaller than it would otherwise have been. I did not come into politics to make our economy smaller; I came into politics to make our economy bigger, and to make our people better off.
John McDonnell
I shall be happy to deliver the Chancellor’s speech this evening. Any time!
The reality is that for many the Brexit vote was, and may well be again, a kick at the establishment: an establishment that has inflicted nine years of harsh austerity on them, and which many feel has ignored them. As has been revealed this week, that austerity programme has meant children going to school hungry, without warm clothes or dry shoes, and single mothers with no food in their cupboards skipping meals so that their children can eat. Does the Chancellor even acknowledge the role that his austerity politics have played in delivering the Brexit vote?
Mr Hammond
I think the reasons behind the Brexit vote are complex, and it would be trite to stand here and try to identify them simplistically. Let me also remind the right hon. Gentleman of the contribution that his party’s Government made to the situation that we inherited, which caused us to have to make the tough decisions to which he has implicitly referred.
Michael Tomlinson (Mid Dorset and North Poole) (Con)
Ten days ago, I met heads and chairs of governors from across my constituency at Corfe Hill School. Will the Chief Secretary to the Treasury meet me to discuss their specific concerns about schools funding, and the need for additional funding for our schools in Poole and in Dorset as a whole?
Peter Aldous (Waveney) (Con)
Will my right hon. Friend the Chancellor consider changing the method of assessing a property’s rateable value, so that all shops on the high street pay business rates that reflect their profitability and trading potential, putting them on a level playing field with their out-of-town and online competitors?
Mr Philip Hammond
I understand my hon. Friend’s wish to ensure the vibrancy of the high street, which is going through a very difficult period. Owing to the way in which the business rate system works, relieving the burden on any part of the system means imposing it somewhere else, so we would have to look carefully at that, but I will take my hon. Friend’s representation as a serious proposal and consider it.
Mary Glindon (North Tyneside) (Lab)
Mr Hammond
That is a matter for the Departments concerned. As the hon. Lady knows, there is a legal obligation to pay the national living wage, and we have put additional resources into ensuring that that obligation is enforced. We encourage employers to pay higher rates than the national living wage when they are able to, and we will continue to do so.
Kevin Hollinrake (Thirsk and Malton) (Con)
When Sally Masterton discovered a £1 billion fraud at Lloyds Bank the bank discredited her, constructively dismissed her and prevented her from working with the police investigation. Five years later Lloyds apologised for her mistreatment but nobody at the bank has been formally investigated or sanctioned for this mistreatment. Will the Minister use his powers to instruct the Financial Conduct Authority to carry out that investigation?
Emma Dent Coad (Kensington) (Lab)
Mr Philip Hammond
We are chasing tax dodgers everywhere. [Interruption.] Yes, we are. We have raised £200 billion of additional revenue since 2010 by clamping down on tax avoidance and evasion. Yet what did I hear when I came into the Chamber today? I heard Labour Member after Labour Member challenging my right hon. Friend the Financial Secretary to the Treasury about the loan charge, a clear attempt to deal with a piece of egregious tax avoidance which Opposition Members seem to have a totally different view about.
Vicky Ford (Chelmsford) (Con)
If we want more renewables and more electric cars we need a more resilient electricity grid, and that needs more investment. Does my right hon. Friend agree that the last thing we need for a cleaner, greener Britain is for the Labour party to wipe billions of pounds off our National Grid’s investment capacity?
Dr Caroline Johnson (Sleaford and North Hykeham) (Con)
What estimate has my right hon. Friend made of the effect on national debt of nationalising the National Grid and the effect it would have on the taxes paid by ordinary working people and the public services they receive in my constituency?
Mr Philip Hammond
We know that the cumulative burden of the commitments made by the Opposition Front Bench would reach almost £1 trillion over a Parliament, and I have heard—[Interruption.] If the shadow Chancellor has a number, no doubt we will hear about it in a moment; I have heard him say that it does not matter because these companies are profitable, so the profits will pay the additional interest costs. But let me tell my hon. Friend the Member for Sleaford and North Hykeham (Dr Johnson) something: I remember the last time we had widespread nationalisation in this country and—do you know what?—none of the companies the Government owned was profitable. Funny that, isn’t it?
Anna Turley (Redcar) (Lab/Co-op)
Mr Philip Hammond
My right hon. Friend raises an interesting question, and I will look carefully at the taxation of the national lottery and any future lotteries.
Wera Hobhouse (Bath) (LD)
Anti-idling rules are a good start in reducing air pollution, but local authorities need the legal powers and resources to enforce them. Would the Treasury consider making new money available to local authorities to stop cars idling?
Mr Philip Hammond
I pay tribute to my right hon. Friend, because it was at her prompting that I originally asked the Office for National Statistics to look at how we measure and value human capital to ensure that there is no systematic bias against human capital in favour of physical capital. The ONS has in fact delivered its draft report, and the question of how we measure and value human capital will be at the centre of the spending review process.
Diana Johnson (Kingston upon Hull North) (Lab)
Has the time not come for the Chancellor to heed the call from the Westminster leaders of seven Opposition parties to fund proper compensation for those infected and affected by the NHS blood scandal across the whole United Kingdom?
Mr Hammond
That is an issue for the Department of Health and Social Care. I understand the hon. Lady’s concerns, and I will pass them on to my right hon. Friend the Secretary of State for Health and Social Care.
ECOFIN
Lord Hammond of Runnymede Excerpts(5 years, 5 months ago)
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The Chancellor of the Exchequer (Mr Philip Hammond)
A meeting of the Economic and Financial Affairs Council (ECOFIN) will be held in Brussels on 17 May 2019. The UK will be represented by Mark Bowman (Director General, International Finance, HM Treasury). The Council will discuss the following:
Early morning session
The Eurogroup President will brief the Council on the outcomes of the 16 May meeting of the Eurogroup, and the European Commission will provide an update on the current economic situation in the EU. Ministers will then discuss the possibility of the European Investment Bank developing country strategies.
Excise duties
The Council will be invited to reach a political agreement on the directive on general arrangements for excise duty (recast), the regulation on administrative co-operation of the content of electronic registers, and the directive on the structures of excise duty on alcohol and alcoholic beverages.
Economic and monetary union
The Council will hold an exchange of views on the way forward in areas of the economic and monetary union, specifically in regards to the reform support programme.
Current financial services legislative proposals
The Romanian presidency will provide an update on current legislative proposals in the field of financial services.
International meetings
The presidency and Commission will update the Council on the outcomes of the G20, IMF and World Bank spring meetings that took place in April, and the Council will be invited to approve the terms of reference for the upcoming G20 meeting in June.
The Council will then hold a policy debate on digital taxation in the international context, and the Finnish delegation will debrief the Council on the first meeting of the Finance Ministers coalition for climate action.
European semester
The Council will be invited to adopt conclusions on the outcomes of the 2019 in-depth reviews of macro- economic imbalances in member states as part of the macroeconomic imbalances procedure; and the implementation of 2018 country-specific recommendations.
Institutional cycle priorities
The presidency will inform the Council on the follow-up discussions in regards to priorities for the next institutional cycle in the ECOFIN area.
Working lunch
Following on from the discussions at April informal ECOFIN in Bucharest, EU Finance Ministers will hold a working lunch to discuss the challenges of labour mobility and their potential solutions.
[HCWS1564]
Informal ECOFIN 5-6 April
Lord Hammond of Runnymede Excerpts(5 years, 6 months ago)
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The Chancellor of the Exchequer (Mr Philip Hammond)
An informal meeting of Economic and Financial Affairs (ECOFIN) Ministers was held in Bucharest on 5-6 April 2019. Ministers discussed the following:
Working lunch—multiannual financial framework
Ministers discussed the multiannual finance framework in the context of the European semester and financing of the EU budget.
Working session I
Central bank governors joined for the first working session.
a) Institutional cycle priorities
Following a presentation from Bruegel, Ministers and central bank governors discussed priorities for the next EU institutional cycle.
b) Capital markets union
Ministers and central bank governors then discussed the way forward for the capital markets union.
Working session II
a) Labour mobility in the EU
Following a presentation from the Centre for European Policy Studies, Ministers discussed the macroeconomic and fiscal impact of labour mobility in the EU.
b) Taxation and economic growth
Ministers discussed the role of taxation in supporting EU economic growth.
c) Preparation of the April G20 and IMF meetings
Ministers approved the EU terms of reference for the G20 meeting and international monetary and financial committee statement, ahead of the Spring meetings of the World Bank Group and the International Monetary Fund in Washington DC.
[HCWS1515]