European Union Finances

Lord Hammond of Runnymede Excerpts

Friday 16th March 2018 Written Statements

[The Chancellor of the Exchequer (Mr Philip Hammond)]

I have today laid before Parliament the European Union Finances 2017: statement on the 2017 EU Budget and measures to counter fraud and financial mismanagement (Cm 9576).

This is a routine annual publication. It is the 37th in the series.

The statement gives details of revenue and expenditure in the 2017 European Union Budget, recent developments in EU financial management and measures to counter fraud against the EU Budget. It also includes a chapter and annex updating on the use of EU funds in the UK over the period.

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Spring Statement

Lord Hammond of Runnymede Excerpts

Tuesday 13th March 2018 Commons Chamber

[The Chancellor of the Exchequer (Mr Philip Hammond)]

I am pleased to introduce to the House the first spring statement. The UK was the only major economy to make hundreds of tax and spending changes twice a year, and major international organisations and UK professional bodies alike have been pressing for change. In 2016, I took the decision to move to a single fiscal event in the autumn, giving greater certainty to families and businesses ahead of the new financial year and allowing more time for stakeholder and parliamentary engagement on potential fiscal changes.

Today’s statement will update the House on the economic and fiscal position, report progress on announcements made at the two Budgets last year and launch further consultations ahead of Budget 2018, as I set out today in my written ministerial statement. I will not be producing a Red Book today, but of course I cannot speak for the right hon. Member for Hayes and Harlington (John McDonnell).

I am pleased to report today to the House on a UK economy that has grown in every year since 2010—an economy that, under Conservative leadership, now has a manufacturing sector enjoying its longest unbroken run of growth for 50 years, that has added 3 million jobs and seen every single region of the UK with higher employment and lower unemployment than in 2010, that has seen the wages of the lowest-paid up by almost 7% above inflation since April 2015 and that has seen income inequality lower than at any time under the last Labour Government. That is solid progress towards building an economy that works for everyone.

So I reject the Labour party’s doom and gloom about the state of the nation. Every Wednesday, we have to listen to the Leader of the Opposition relentlessly talking Britain down, and every year since 2010 we have had to listen to the right hon. Member for Hayes and Harlington predict a recession—none of which has actually happened. So if there are any Eeyores in the Chamber, they are on the Opposition Benches; I, meanwhile, am at my most positively Tigger-like today, as I contemplate a country that faces the future with unique strengths: our language is the global language of business; our legal system is the jurisdiction of choice for commerce; we host the world’s most global city and its international finance and professional services capital; our companies are in the vanguard of the technological revolution, while our world-class universities are delivering the breakthrough discoveries and inventions that are powering it; British culture and talent reaches huge audiences across the globe; and our tech sector is attracting skills and capital from the four corners of the earth, with a new tech business being founded somewhere in the UK every hour, producing world-class products, including apps such as TransferWise, Citymapper and Matt Hancock.

Today, the Office for Budget Responsibility delivers its second report for the fiscal year 2017-18, and I thank Robert Chote and his team for their work. It forecasts more jobs, rising real wages, declining inflation, a falling deficit and a shrinking debt. The economy grew by 1.7% in 2017, compared with the 1.5% forecast at the Budget, and the OBR has revised up its forecast for 2018 from 1.4% to 1.5%. Forecast growth is then unchanged at 1.3% in 2019 and 2020, before picking up to 1.4% in 2021 and 1.5% in 2022. That is the OBR’s forecast, but forecasts are there to be beaten; as a nation, we did it in 2017, and we should make it our business to do it again.

Our remarkable jobs story is set to continue, with the OBR forecasting more jobs in every year of this Parliament and over 500,000 more people enjoying the security of a regular pay packet by 2022. I am pleased to report that the OBR expects inflation, which is currently above target at 3%, to fall back to target over the next 12 months, meaning that real wage growth is expected to be positive from first quarter of 2018-19 and to increase steadily thereafter.

I reported in the autumn that borrowing was due to fall in every year of the forecast and debt was to fall as a share of GDP from 2018-19. The OBR confirms that today, and further revises down debt and borrowing in every year. Borrowing is now forecast to be £45.2 billion this year. That is £4.7 billion lower than forecast in November and £108 billion lower than in 2010, which, coincidentally, is almost exactly the total cost of the additional spending pledges made by the Labour party since the general election in June last year; it has taken them just nine months to work up a plan to squander the fruits of eight years’ hard work by the British people.

As a percentage of GDP, borrowing is forecast to be 2.2% in 2017-18, falling to 1.8% in 2018-19, 1.6% in 2019-20, then 1.3%, 1.1% and finally 0.9% in 2022-23, meaning that in 2018-19 we will run a small current surplus, borrowing only for capital investment. And we are forecast to meet our cyclically adjusted borrowing target in 2020-21 with £15.4 billion of headroom to spare, which is broadly as forecast at the Budget. The more favourable outlook for borrowing means the debt forecast is nearly 1% lower than in November, peaking at 85.6% of GDP in 2017-18 and then falling to 85.5% in 2018-19, then 85.1%, 82.1%, 78.3%, and finally 77.9% in 2022-23.

That is the first sustained fall in debt in 17 years; a turning point in this nation’s recovery from the financial crisis of a decade ago; light at the end of the tunnel; another step on the road to rebuilding the public finances that were decimated by the Labour party. And it is one that Labour would again place at risk, because under Labour’s policies, our debt would not fall over the next five years; it would rise by more than £350 billion to more than 100% of our GDP, undermining our recovery, threatening investment in British jobs, burdening the next generation and wasting billions and billions of pounds more on debt interest. There is indeed light at the end of the tunnel, but we have to make absolutely sure that it is not the shadow Chancellor’s train hurtling out of control in the other direction towards Labour’s next economic train wreck.

In autumn 2016, I changed the fiscal rules to give us more flexibility to adopt a balanced approach to repairing the public finances. We are reducing debt not for some ideological reason, but to secure our economy against future shocks, because we in the Conservative party are not so naive as to think that we have abolished the economic cycle, because we want to see taxpayers’ money funding our schools and hospitals, not wasted on debt interest, and because we want to give the next generation a fair chance. But I do not agree with those who argue that every available penny must be used to reduce the deficit; nor do I agree with the fiscal fantasists opposite who argue that every penny should be spent immediately. We will continue to deliver a balanced approach. We are balancing debt reduction against the need for investment in Britain’s future, support to hard-working families through lower taxes and our commitment to our public services.

Judge me by my record. [Interruption.] We will see whether the Opposition have done their homework; they might be surprised. Since the 2016 autumn statement, I have committed to £60 billion of new spending, shared between long-term investment in Britain’s future and support for our public services, with almost £9 billion extra for our NHS and our social care system. There is £4 billion going into the NHS in 2018-19 alone and, as I promised at the autumn Budget, more to come if, as I hope, management and unions reach an agreement on a pay modernisation deal for our nation’s nurses and “Agenda for Change” staff, who have worked tirelessly since the autumn, in very challenging circumstances, to provide the NHS care that we all value so highly. There is £2.2 billion more for education and skills and £31 billion to fund infrastructure, research and development and housing, through the national productivity investment fund. That takes public investment in our schools, hospitals and infrastructure in this Parliament to its highest sustained level in 40 years.

At the same time, we have cut taxes for 31 million working people by raising the personal allowance again, in line with our manifesto commitment. We have taken more than 4 million people out of tax altogether since 2010. We are freezing fuel duty for an eighth successive year, taking the saving for a typical car driver to £850, compared with Labour’s plans, and raising the national living wage to £7.83 from next month, giving the lowest paid in our society a well-deserved pay rise of more than £2,000 for a full-time worker since 2015.

Since becoming Chancellor, I have provided an extra £11 billion of funding for 2018-19 to help with short-term public spending pressures and to invest in Britain’s future. In the longer term, I can confirm that, at this year’s Budget, I will set an overall path for public spending for 2020 and beyond, with a detailed spending review to take place in 2019 to allocate funding between Departments. That is how responsible people budget: first, they work out what they can afford; then they decide what their priorities are; and then they allocate between them. If, in the autumn, the public finances continue to reflect the improvements that today’s report hints at, then, in accordance with our balanced approach and using the flexibility provided by the fiscal rules, I would have capacity to enable further increases in public spending and investment in the years ahead, while continuing to drive value for money to ensure that not a single penny of precious taxpayers’ money is wasted. We are taking a balanced approach—getting our debt down, supporting our public services, investing in our nation’s future and keeping taxes low—as we build a Britain fit for the future and an economy that works for everyone.

There is much still to do. Since autumn 2016, we have set out our plan to back the enterprise and ambition of British business and the hard work of the British people. It is a plan to unleash our creators and innovators, our inventors and discoverers, to embrace the new technologies of the future and to deliver the skills that we will need to benefit from them. It is a plan to tackle our long-standing productivity challenges and to say more loudly than ever that our economy will remain open and outward looking, confident of competing with the best in the world.

We choose to champion those who create the jobs and the wealth on which our prosperity and our public services both depend, not to demonise them. The shadow Chancellor is open about his ideological desire to undermine the market economy, which has driven an unparalleled increase in our living standards over the past 50 years. We on the Conservative Benches reject his approach outright. The market economy embraces talent, creates opportunity and provides jobs for millions and the tax revenues that underpin our public services, so we will go on supporting British businesses. We are reducing business rates by more than £10 billion, and we committed at autumn Budget 2017 to move to triennial revaluations from 2022. Today, I am pleased to announce that we will bring forward the next business rates revaluation to 2021 and move to triennial reviews from that date. We will also launch a call for evidence to understand how best we can help the UK’s least productive businesses to learn from, and to catch up with, the most productive, and another on how we can eliminate the continuing scourge of late payments—a key ask from small business. We are the party of small business and the champions of the entrepreneur.

Since the Budget, we have made substantial progress in our negotiations with the European Union to deliver a Brexit that supports British jobs, businesses and prosperity. I look forward—[Interruption.] I do not know what the hon. Member for Wansbeck (Ian Lavery) does, but I look forward to another important step forward at the European Council next week. We will continue to prepare for all eventualities. Today, my right hon. Friend the Chief Secretary is publishing the departmental allocations of over £1.5 billion of Brexit preparation funding for 2018-19, which I announced at the autumn Budget.

Our modern industrial strategy sets out our plan to keep Britain at the forefront of new technologies with the biggest increase in public research and development spending for four decades. Much of this new technology depends on high-speed broadband, and today I can make the first allocations of the £190 million local full-fibre challenge fund announced at the autumn Budget and confirm £25 million for the first 5G testbeds.

As our economy changes, we must ensure that people have the skills they need to seize the opportunities ahead, so we have committed over £500 million a year to T-levels—the most ambitious post-16 reforms in 70 years. From next month, £50 million will be available to help employers to prepare for the roll-out of T-level work placements. Last week the Education Secretary and I chaired the first meeting of the national retraining partnership between the Government, the TUC and the Confederation of British Industry. I can reassure the House that there was no beer and no sandwiches—not even a canapé—but there was a clear and shared commitment to training in order to prepare the British people for a better future ahead. Next month our £29 million construction skills fund will open for bids to fund up to 20 construction skills villages around the country.

The Government are committed to delivering 3 million apprenticeship starts by 2020, with the support of business through the apprenticeship levy, but we recognise the challenges that the new system presents to some small businesses looking to employ an apprentice, so I can announce today that my right hon. Friend the Education Secretary will release up to £80 million of funding to support those small businesses in engaging an apprentice. We publish a consultation on improving the way in which the tax system supports self-funded training by employees and the self-employed. Because we currently understand more about the economic payback from investing in our infrastructure than we do about investing in our people, I have asked the Office for National Statistics to work with us on developing a more sophisticated measure of human capital so that future investment can be better targeted.

We are undertaking the largest road building programme since the 1970s. As Transport Secretary in 2011, I gave the green light to fund the new bridge across the River Mersey, and I was delighted to see it open late last year. The largest infrastructure project in Europe, Crossrail, is due to open in just nine months’ time. We are making progress on our plans to deliver the Cambridge-Milton Keynes-Oxford corridor. We are devolving powers and budgets to elected mayors across the northern powerhouse and midlands engine. We are in negotiations for city deals with Stirling and Clackmannanshire, Tay cities, borderlands, north Wales, mid Wales and Belfast. Today we invite proposals from cities across England for the £840 million fund that I announced at the Budget to deliver on their local transport priorities as part of our plans to spread growth and opportunity to all parts of this United Kingdom.

At the heart of our plan for building an economy that works for everyone is our commitment to tackle the challenges in our housing market, with an investment programme of £44 billion to raise housing supply to 300,000 a year by the mid-2020s. Today I can update the House. The Housing Minister is working currently with 44 authorities who have bid into the £4.1 billion housing infrastructure fund to unlock homes in areas of high demand. We are concluding housing deals with ambitious authorities that have agreed to deliver above their local housing need. I can announce today that we have just agreed a deal with the West Midlands Combined Authority, which has committed to deliver 215,000 homes by 2030-31, facilitated by a £100 million grant from the land remediation fund. My hon. Friend the Housing Minister will make further announcements over the next few days on the housing infrastructure fund.

We will more than double the size of the housing growth partnership with Lloyds Banking Group to £220 million, providing additional finance for small builders. London will receive an additional £1.7 billion to deliver a further 26,000 affordable homes, including homes for social rent, taking total affordable housing delivery in London to over 116,000 by the end of 2021-22.

My right hon. Friend the Member for West Dorset (Sir Oliver Letwin) has outlined his initial findings on the gap between planning permissions granted and housing completions in a letter that I have placed in the Library. I look forward to his full report at the Budget. I am delighted to inform the House that an estimated 60,000 first-time buyers have already benefited from the stamp duty relief that I announced at the autumn Budget. I remind the House that the Labour party voted against this.

In the autumn we published a paper on taxing large digital businesses in the global economy. Today we follow up with a publication that explores potential solutions. I look forward to discussing this issue with G20 Finance Ministers in Buenos Aires at the weekend. We also publish a call for evidence on how online platforms can help their users to pay the right amount of tax, and we will consult on a new VAT collection mechanism for online sales to ensure that the VAT that consumers pay actually reaches the Treasury. We will also call for evidence on how to encourage cashless and digital payments while ensuring that cash remains available for those who need it.

The Government are determined that our generation should leave the natural environment in a better state than we found it and improve the quality of the air that we breathe, so we will publish a call for evidence on whether the use of non-agricultural red diesel tax relief contributes to poor air quality in urban areas. Following our successful intervention to incentivise clean taxis, we will help the Great British white van driver to go green with a consultation on reduced vehicle excise duty rates for the cleanest vans.

We will follow up on the vital issue of plastic littering and the threat to our oceans with a call for evidence to support us in delivering on our vow to tackle this complex issue. It will look at the whole supply chain for single-use plastics, and at alternative materials, reusable options and recycling opportunities. It will look at how the tax system can help to drive the technological progress and behavioural change that we need—as a way not of raising revenue, but of changing behaviour and encouraging innovation. We will commit to investing to develop new, greener products and processes, funded from the revenues raised. As a down payment, we will award £20 million now from existing departmental budgets to businesses and universities in order to stimulate new thinking and rapid solutions in this area during the call for evidence.

We are delivering on our plan with a balanced approach, restoring the public finances, investing in our economy and our public services, raising productivity through our modern industrial strategy, building the homes our people need, tackling the environmental challenges that threaten our future, embracing technological change and seizing the opportunities ahead as we build our vision of a country that works for everyone and an economy where prosperity and opportunity are in reach of all, wherever they live and whatever their gender, colour, creed or background, where talent and hard work alone determine success, as a beacon of enterprise and innovation and an outward-looking, free-trading nation, confident that our best days lie ahead of us, a force for good in the world and a country that we can all be proud to pass on to our children. I commend this statement to the House.

--- Later in debate ---

[John McDonnell]

I am appealing to Tory MPs today, if they are serious about ending austerity, to vote with us this afternoon to give those children the free school meal they are entitled to.

The Chancellor has shifted the deficit on to the Home Secretary and the Justice Secretary. Crime is rising, yet he has cut the number of police officers by 21,500 and the number of firefighters by 8,500, and our prisons and probation service are in dangerous crisis.

In shifting the deficit on to the shoulders of the Secretary of State for Housing, Communities and Local Government, in reality he has shifted the burden on to local councillors—Labour, Lib Dem and Conservative councillors alike. I raise again the stark reality of what that means for the most vulnerable children in our society. There has been a 40% cut in early intervention to support families. The result is the highest number of children taken into care since the 1980s. Children’s charities—not us but children’s charities—are saying that this crisis could turn into a catastrophe without further funding. Last year, 400 women seeking refuge were turned away because there were no places available for them in refuges. There are now nearly 5,000 of our fellow citizens sleeping rough on our streets—more than double the number in 2010. Tragically, one of our homeless citizens died only feet away from the entrance to Parliament.

The Chancellor mentioned additional housing funding in London. The additional housing funding announced for London today is not a new announcement: this is money already announced. Any new funding is welcome, but it is simply not enough and it represents a cut in London’s budgets compared with the money that Labour allocated in 2010. One million vulnerable older people have no access to the social care they need. Conservative Councils are going bust. Many will be forced to hike up council tax. Councils are running out of reserves, as the National Audit Office explained to us. I ask the Chancellor: will he listen to Conservative council leaders, such as the leader of Surrey, who said:

“We are facing the most difficult financial crisis in our history. The government cannot stand idly by while Rome burns”?

How many more children have to go into care? How many more councils have to go bust? How many more have to run out of reserves before the Chancellor wakes up to this crisis and acts?

Today’s statement could have been a genuine turning point but it is, depressingly, another missed opportunity. People know now that austerity was a political choice, not an economic necessity. The Conservatives chose to cut taxes for the super-rich, the corporations and the bankers, and it was paid for by the rest of us in society. They even cut the levy on the bankers in the Finance Bill. We were never “all in this together” as they claimed—never. They cut investment at the very time when we should have been developing the skills and infrastructure needed to raise productivity and grasp the technological revolution with both hands. And when they had a responsibility to meet the challenge of Brexit, we have a Chancellor who this weekend admitted he has not even modelled the Government’s options.

Today we have the indefensible spectacle of a Chancellor congratulating himself on marginally improved economic forecasts, while he refuses to lift a finger as councils go bust, the NHS and social care are in crisis, school budgets are cut, homelessness has doubled and wages are falling. This is not a Government preparing our country for the future; it is a Government setting us up to fail.

[Mr Hammond]

The right hon. Gentleman supported the switch to a single fiscal event, and now he is complaining that I have not delivered a mini Budget today. I am not surprised that he cannot quite understand anybody passing up the opportunity to introduce some new taxes, because that is what a Labour Government would be doing, not once a year or twice a year but every other week.

I heard the right hon. Gentleman referring to some of my hon. Friends as “Tory bully boys”. I remind the House that this is the man who still refuses to apologise to my right hon. Friend the Secretary of State for Work and Pensions, so I do not want to hear anything about bullying from the Labour Benches. The public will draw their own conclusions.

The right hon. Gentleman knows his Lenin, of course. The task is to win power, and that is why we see from him the smooth reassuring mien of the bank manager, but every now and again, the mask slips, and we get a glimpse of the sinister ideology that lies beneath—an ideology that would wreck our economy if he ever gets anywhere near the controls, threatening confiscation, dismissing property rights, undermining the cornerstones of our economy and the basis of our freedom and prosperity.

The right hon. Gentleman talks about political choices. Let me tell him the political choices we have made. We have closed the tax gap to one of the lowest in the developed world. We have raised £175 billion by 100 measures against tax evasion and avoidance. We are collecting 28% of all income tax from the richest 1% in our country—a higher percentage than in any year under Labour. He says that real wages are falling. I have good news for him: the OBR expects real wages to rise from quarter one 2018, which, in case he has not worked out, starts in two weeks’ time.

The right hon. Gentleman talks about spending on the disabled. Well, I have good news for him again: spending on the disabled will be higher in every year of this Parliament. He talks about research and development to support our economy. Research and development spending is at a record high.

The right hon. Gentleman reels out the same old bogus statistics on regional distribution; I think he has got the briefing from Russia Today. Let me tell him this: the Infrastructure and Projects Authority has published figures that clearly show that the highest per capita spending on transport infrastructure investment is in the north-west region, not, the last time I checked, one of the southern regions. All regions have benefited from the boom in employment. All regions will end this Parliament with lower unemployment and higher employment.

The right hon. Gentleman talks about £700 billion of increased national debt. We have had to deal with the legacy of Labour’s meltdown in 2009 because they did not fix the roof while the sun was shining. Our historical function is to clean up Labour’s mess, and my report today shows that we are doing it once again.

The right hon. Gentleman talks about funding for the NHS. I have put £9 billion into the NHS since autumn statement 2016. He talks about school budgets. School budgets are increasing per pupil in real terms. On children’s services, he must know that Department for Education research shows that spending on the most vulnerable children has increased by around half a billion pounds in real terms since 2010. We have committed £1 billion to tackling rough sleeping and homelessness and made a manifesto pledge to eliminate rough sleeping by 2027 and halve it by 2022.

No one watching our exchanges today can be in any doubt that Britain faces a choice. We have a plan to get our economy growing. The shadow Chancellor says it does not matter whether GDP grows or not. We have a plan to get people on the housing ladder, while the shadow Chancellor does not want “to get bogged down in property rights”. We have a plan to deal with our debts. The shadow Chancellor wants to send debts soaring because he fantasises that he can borrow for free.

The choice is clear: our vision of a dynamic, modern economy, or the Labour party’s vision of an inward-looking, narrow-minded country. We have to win this argument, because if we do not, it will be ordinary people—not the rich and the powerful and not the globally mobile—who pay the price, as they always do for Labour’s failings.

[Mr Kenneth Clarke (Rushcliffe) (Con)]

I congratulate my right hon. Friend on his very forceful statement based on competent government and grown-up politics, which are worlds that the shadow Chancellor will never enter. When my right hon. Friend comes to prepare his Budget for November, I am sure he will be looking for any new source of taxation that may be needed to put even more money than he already has into the NHS and social care, which are facing vast increases in demand.

May I suggest that my right hon. Friend looks at some of the extraordinary anomalies he has inherited in the tax treatment of older prosperous people in full-time work in this country? [Laughter.] Well, I think I am perfectly well placed to make my point and cannot be accused of personal bias. It is absurd that older employees pay less tax on their income than their younger colleagues because they do not pay national insurance. It cannot be right that people in large houses enjoying capital gains from the housing market have those disregarded for means test purposes if they ever need certain types of social care. As the early Budgets in a Parliament are a time for tough and difficult decisions, will my right hon. Friend let me know that he will be looking at those much overdue anomalies, which need to be addressed? Some justice between the generations, I think, is being demanded by our constituents.

[Mr Hammond]

I am a great fan of the concept of intergenerational fairness. My right hon. and learned Friend will know, as a former Chancellor of the Exchequer, that all Chancellors look at all options in the run-up to every Budget. I can undertake that I will do so in the run-up to Budget 2018. In the meantime, I can tell him that there is a mechanism for voluntary donations to Her Majesty’s Treasury, and in case he has mislaid it, I will send him a copy of our bank details.

[Ian Blackford (Ross, Skye and Lochaber) (SNP)]

I have to say, that was much ado about nothing. The real tragedy is that we are 10 years on from the financial crisis, but austerity is still with us, and there was a lack of hope given to the people of the United Kingdom from the statement today.

At the weekend, we saw the hon. Member for Moray (Douglas Ross) at the Glasgow Celtic versus Rangers football match, in his other job as a linesman, waving his flag and enthusiastically calling for a red card. If anybody deserves a red card today, it is the Chancellor of the Exchequer.

We hear the Chancellor proclaiming that we have had consistent economic growth since 2010 and that we can look forward to continued economic growth over the course of the coming years. The reality is that in 2019, when we are supposed to be leaving the European Union, the OBR predicts that growth will be a measly 1.3% and is forecast to remain at around 1.5% over the coming years, significantly below the historical trendline of growth for this country.

When I hear the Chancellor talking about wage growth, he ought to reflect that we have had a lost decade of wage growth in the United Kingdom. Let me prick his balloon on this one, because the OBR book is very clear that real earnings growth will “remain subdued” for the next five years. That is the reality, and perhaps the Chancellor should stop spinning and be honest with people about what is going to happen. The Chancellor talks about light at the end of the tunnel. Let me tell him that the light at the end of the tunnel is a hard Brexit and the impact of lower growth, which is going to cost jobs and prosperity in this country.

Slow earnings growth, higher inflation and cuts to the benefit system are resulting in falling incomes for the poorest households and in rising inequality. Once again, the Chancellor has failed to bring his Government’s disastrous austerity programme to an end. Worse still, he has his head firmly in the sand over Brexit.

This Government are going ahead with a devastating cut to Scotland’s budget. [Interruption.] I hear the Scottish Tories shouting “Rubbish”. Perhaps they could join those of us on the SNP Benches and defend Scotland’s interests. Let me explain the reality: over the decade from 2010-11 to 2019-20, Scotland’s block grant has been cut by £2.6 billion in real terms, which is an 8.1% cut. [Interruption.] The people of Scotland should watch the Scottish Tory MPs who are calling out: once again, they are failing to stand up for Scotland’s interests. [Interruption.] Let me say respectfully that these Tory MPs have been here for quite some months, and they should understand that if they want to speak, they should try to catch your eye, Mr Speaker. It is undignified to call out in the way they are doing. [Interruption.]

[Ian Blackford]

Thank you, Mr Speaker. These are, after all, serious matters. The extent of the block grant reduction is highlighted by the Fraser of Allander Institute, which has noted:

“By 2019/20 the resource block grant will be around £500 million lower than in 17/18”.

I pay tribute to my hon. Friends on the SNP Benches who fought so hard on behalf of their constituents to have Police Scotland and Scottish Fire and Rescue Service VAT scrapped. That was a fantastic result. However, the reality is that Scotland has suffered under this policy for the past five years. Will the Chancellor be bringing forward plans to return the £175 million that has already been paid? VAT should never have been charged: it was a vindictive measure imposed on Scotland by a Tory Government. Give Scotland back the £175 million to invest in our frontline services. Will Scottish Tory MPs join the SNP in standing up for Scotland, or will they remain silent on the cash grab we have seen from Westminster?

This Tory Government’s austerity policies disproportionately affect the most disadvantaged individuals, while giving tax breaks to the better-off in society. The Resolution Foundation recently estimated that the Government’s austerity programme will leave the poorest third of households an average of £715 a year worse off by 2022-23. In Scotland, we have a new progressive income tax policy. [Interruption.] I can hear Conservatives saying, “Up”, but the reality is that for most people in Scotland tax is lower. The Scottish Government are able to reverse this year’s real-terms budget cut inflicted by this Tory Government, and ensure that the majority—I repeat, the majority—of taxpayers in Scotland pay less than in the rest of the UK.

However, Scotland’s new taxation powers should not exist simply to mitigate UK Government austerity. In Scotland, the SNP Government have gone further to support those on low incomes. In the recent budget at Holyrood, a package was secured that raises the threshold of a guaranteed 3% increase for those earning up to £36,500, benefiting up to three quarters of Scottish public service workers—a Scottish Government on the side of hard-working public sector workers.

As we near the EU summit at the end of this month in Brussels, the progress of this Government in readying for Brexit has been nothing short of shameful. The UK Government’s own analysis tells us that, under all scenarios, Scotland would suffer a relatively greater loss in economic output than the United Kingdom as a whole. A no-deal scenario would be significantly devastating, threatening to reduce growth by a massive 9% over 15 years.

Make no mistake: a hard Brexit is going to hit the pockets of families and lead to a loss in tax revenue expectations, and is therefore going to affect spending on public services, yet the Chancellor is silent on the risks to our economy—risks to our economy when the stresses and strains of a near decade of austerity are hurting. The fact is that Scotland is shackled to a sinking ship.

The Scottish budget passed last month illustrates the real divergence in political choices across the UK. In Scotland, we have chosen to stand by our outstanding public sector staff and give them the pay increase they deserve. We continue to mitigate the worst atrocities of this Government’s ideological austerity agenda. We will continue to press for nothing less than continued UK membership of the single market and customs union to prevent the economic catastrophe of an extreme Tory Brexit. We will never stop fighting to get justice for the 1950s women, whom the SNP are so happy to support.

In conclusion, the choices are clear and the opportunities obvious. The Chancellor must wake up to the economic injustices he has overseen, and he must tell this House as a matter of urgency how the economy will stand a hard Brexit.

[Mr Hammond]

Probably a matter of rather more immediate urgency for the people of Scotland is how their economy will withstand the highest rates of taxation in the United Kingdom—an economy that, under the SNP Government, is already growing more slowly than the economy of the United Kingdom. I do not know about a sinking ship; I suggest to the right hon. Gentleman that this is about keeping afloat.

The right hon. Gentleman talks about earnings. I suggest that he looks at real household disposable income, which, as I am sure he knows, is now 4.4% higher than at the start of 2010. We have cut taxes for 31 million people across this country, at a time when his Government are putting taxes up. We have taken 4 million people out of taxation, improving the ability of people to retain their hard-earned incomes.

The right hon. Gentleman talks about Brexit, spreading alarm, but he knows very well that my right hon. Friend the Prime Minister is working tirelessly to deliver a Brexit that will secure British jobs, British businesses and British prosperity. We would be aided in that enterprise if he and his Government worked closely with us to deliver an outcome that is good for the whole of the United Kingdom.

The right hon. Gentleman talks about Scotland’s budget and the block grant, but of course Scotland now has its own tax-raising powers, and the people of Scotland know how he intends to use them. Perhaps he has forgotten, but I will try to help him with his short-term amnesia: at the autumn Budget in 2017—just four months ago—Scotland received an additional £2 billion of funding as a result of the measures announced then.

As for the VAT on police and fire services measures being vindictive, the Scottish National party Government were told explicitly that it would not be possible to refund VAT if they went ahead with the police reorganisation, and they decided to do so anyway. He may use the adjective “vindictive”, but I suspect my right hon. and hon. Friends will be able to think of another adjective to describe a Government who pursued such a ridiculous course of action.

[Several hon. Members rose—]

[Nicky Morgan (Loughborough) (Con)]

I congratulate the Chancellor on his balanced approach. He and the Prime Minister have rightly identified housing as an economic and social priority. He will be aware that the Treasury Committee’s report on his autumn 2017 Budget recommended that the housing revenue account borrowing cap could be lifted to allow local authorities to play their part in building the right homes in the right places. Is that something he will consider?

[Mr Hammond]

I am grateful to my right hon. Friend. We have already relaxed the borrowing cap for local authorities in areas with high demand and low affordability. We will monitor the consequences carefully and keep how it delivers under continuous review.

[Mr Chris Leslie (Nottingham East) (Lab/Co-op)]

The light that the Chancellor can see at the end of the tunnel is the Brexit locomotive barrelling headlong towards him, and towards our schools and hospitals. What will he do to prevent that free trade agreement-style scenario, which his own Treasury officials say will leave a £55 billion train wreck in our public services?

[Mr Hammond]

As the hon. Gentleman knows, I am committed to delivering a Brexit that protects British jobs, British businesses and British prosperity, and I spend a significant amount of my working time ensuring that that is the route we follow. I expect that we will make further progress at the March European Council. I understand the concerns that he expresses on behalf of British businesses, but I talk to businesses all day, every day, because that is my job—[Interruption.] The shadow Chancellor says so does he, so he will know this already. Business is concerned about what the consequences of a bad Brexit deal could be, but business is much more concerned about the consequences of the policies advanced by his right hon. Friends on the Opposition Front Bench.

[Mr Iain Duncan Smith (Chingford and Woodford Green) (Con)]

May I say what a huge pleasure it is to hear the Chancellor so upbeat, and indeed Tiggerish? He has a right to be so, given that unemployment is at its lowest level for 40 years, and manufacturing is seeing its best performance for 50 years. Given his answer to our right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) on looking at every avenue for money, and given that we will be about four months away from our official departure date, at the next Budget will my right hon. Friend consider setting out in the Red Book what he plans to do with the money that we will no longer have to pay in contributions to the European Union?

[Mr Hammond]

It is always a pleasure to hear from my right hon. Friend. We are absolutely not complacent, because there are many challenges as well as opportunities ahead of us, but we have a plan to embrace the opportunities and rise to the challenges. This country has many advantages that our neighbours would give their right arm to enjoy. We must go forward robustly and in good heart to seize those opportunities and make the best of them for the future. On his specific point, of course in the forthcoming Budget we will look at taxation and spending over the future period. The OBR, of course, will decide what to present in its report to the House. He will have an opportunity to question OBR officials about their approach when they appear before the House shortly after the Budget statement.

[Rachel Reeves (Leeds West) (Lab)]

Consumer credit has risen by 9% over the past year, and the ratio of household debt to income, at 138%, is rapidly approaching a level not seen since before the financial crisis. With interest rates now forecast by the OBR to rise faster than we previously envisaged, are we not asking consumers to keep the wheels on the road for the economic recovery? Is that sustainable, and is that the right thing to do?

[Mr Hammond]

The hon. Lady is right to raise this issue. It is something we keep under constant review, and I talk regularly with the Governor of the Bank of England about personal debt. She will probably know that personal household debt rose in all but one of the 13 years of the Labour Government, and it is now lower than it was before the financial crisis. The judgment of the authorities at the moment is that household debt levels are sustainable, but she is right to draw attention to it. It is something we keep under close review.

[Justine Greening (Putney) (Con)]

Can the Chancellor give more detail on the announcement that the Office for National Statistics will work with the Treasury on a more sophisticated measure of human capital? In a knowledge-based economy, that becomes more crucial than ever for driving our economic productivity. Can he give us more detail on the timelines and the nature of that work?

[Mr Hammond]

I am glad that my right hon. Friend has asked this question, because it gives me an opportunity to thank her for sparking this line of inquiry in a letter she wrote to me. I did challenge the Treasury with the idea that it is more focused on the returns to infrastructure investment than on skills investment. When we looked at it in detail, we discovered that the metrics for measuring the returns to investment in human capital are not as well developed as they should be. That is something the ONS has to take forward, but it is important, as we move increasingly into a knowledge-based economy, with a huge set of technological changes ahead of us, that we can compare appropriately and objectively investment in physical infrastructure with investment in human capital, and that is what we will be able to do if we get the new metrics right.

[Mr Alistair Carmichael (Orkney and Shetland) (LD)]

The Chancellor of the Exchequer is doubtless aware that the OECD this morning published its own growth forecasts, putting us at the bottom of the OECD economies, with forecast growth this year of 1.3%. It is pretty clear that there is no Brexit dividend on the scene for the British economy. It is to be welcomed that the deficit is getting back to a manageable level, but he must know—even his own Back Benchers are telling him—that extra money is needed now for our hospitals, our schools and our police. That money is not there because of previous decisions to make premature cuts to capital gains tax and inheritance tax. He must have heard the Institute for Fiscal Studies calling for increased capital investment in housing, up to 3% of our economy. Why does he not listen to the IFS?

[Mr Hammond]

First, the right hon. Gentleman knows, as I do, that our economy still faces uncertainty as we go through the negotiation process with the European Union. I am convinced, from every conversation I have had with business leaders and investors, that as we deliver greater clarity about our future relationship with the European Union over the coming months, we will see business investment and consumer confidence increasing. We beat the forecast in 2017. Let us beat it again in 2018. I do believe that economic growth matters. The shadow Chancellor says that it does not matter what the level of GDP is, but I do not agree—[Interruption.] Well, I will send him the quote if he cannot immediately recall what he said. I do believe that GDP matters, because it is what drives living standards. We are putting extra money into public services—£11 billion since I have been Chancellor. I agree that we have a major challenge in the housing market. We have put a significant amount of money—£44 billion—into dealing with the challenge over the rest of this Parliament, but there are significant non-financial constraints on being able to do more, such as physical bottlenecks in relation to skilled labour and materials. But it is something we will keep under review.

[Sir Edward Leigh (Gainsborough) (Con)]

Perhaps the current Conservative Chancellor of the Exchequer could remind the previous Conservative Chancellor of the Exchequer that, given where our electoral support comes from, it might not be wise politics to impose a targeted new tax on our older supports. He could also remind our right hon. and learned Friend that he will be delighted to know that after we leave the EU we will be saving £12 billion a year in contributions.

[Mr Hammond]

I assume that my hon. Friend is referring to the previous Conservative Chancellor but one, in which case I think our right hon. and learned Friend has probably heard him.

[Yvette Cooper (Normanton, Pontefract and Castleford) (Lab)]

The winter crisis in the NHS left us with cancelled operations, ditched targets, patients sleeping on the floor, and a public apology in the end from the Prime Minister. Neither the spring nor the spring statement has provided any easing of those pressures. Given that the right hon. Gentleman knows the November Budget will be too late to provide any additional funding that he knows both the NHS and social care will need for next year’s winter crisis—he knows this both in his heart and in his spreadsheet—will he now follow the Prime Minister and announce a public apology to the staff and patients of the NHS who are going to have to endure next year’s crisis because of this failure?

[Mr Hammond]

I have already made it clear that we admire greatly the work of NHS staff who, with the pressures of flu and extreme winter weather, faced extremely difficult circumstances this winter. This is a spring statement, not a fiscal event, but I have said and I will say again to the right hon. Lady that we are putting an additional £4 billion into the NHS in 2018-19, and I have committed to putting in further money in-year in 2018-19 to fund a pay settlement for nurses and “Agenda for Change” staff, if the management and the unions reach an agreement.

[Damian Green (Ashford) (Con)]

It is very welcome to hear from the Chancellor such good news on debt and growth, in particular their effect on the real lives of people in my constituency, where since 2010 youth unemployment is down 48% and apprenticeships are up 6,850. In continuing his successful balanced approach, will he commit to dealing with the social care sector, because we both know it will become an increasingly important issue in the years and decades ahead?

[Mr Hammond]

I am grateful to my right hon. Friend, who has done a great deal of work on this issue. We are absolutely aware of the pressures on the social care system. They are not short-term pressures; they are driven by the demographics of an ageing population. We have to do three things. In the short term, we have provided additional money. In the spring Budget last year, I put in £2 billion of additional support. My right hon. Friend the Secretary of State for Housing, Communities and Local Government put in another £150 million of social care grant at the local government settlement just a few weeks ago. In the medium term, we have to work to get all authorities meeting the standards of the best. There is excellent practice across the country, but it is not everywhere. The variation in delayed discharges between different authorities is completely unacceptable. In the long term, we are committed to publishing a Green Paper on social care and the future of social care, which we will deliver to the House before the summer recess.

[Alison McGovern (Wirral South) (Lab)]

The Chancellor says that forecasts are there to be beaten and I agree with him, so can he explain to me why, since his Budget in November, the OBR has not been able to increase the growth forecast for 2019, 2020, 2021 or 2022? It cannot be the negative impact of Brexit, because the OBR still does not have the information from the Government to be able to forecast that, so what on earth is his excuse?

[Mr Hammond]

I will perhaps remind the hon. Lady that the OBR’s autumn report in November was only four months ago and that in the normal course of events one would not expect, in the absence of some shock to the economy, economic forecasts to change very significantly. The front-end forecast has changed, because the outturn for 2017-18 has changed. The OBR forecast growth 0.2% lower than it turned out to be in 2017-18 and that has a knock-through effect, which has increased its growth projection for this year.

[Stephen Hammond (Wimbledon) (Con)]

Investing in our economy creates jobs and growth, and successful businesses drive that. Will my right hon. Friend tell the House how much the corporate tax take has gone up since the cut in corporation tax? Will he confirm that he will do nothing to hinder our internationally competitive corporate tax rates?

[Mr Hammond]

Yes, I can. I am happy to tell my hon. Friend that since we reduced the rate of corporate tax to 19%, the yield—the amount of tax we raise for our public services, our hospitals and schools—has gone up 54%. It is clear that being one of the most competitive tax jurisdictions in the G20 is one of the determining factors in many investment decisions coming to the UK, creating the jobs and prosperity we need for the future.

[Sammy Wilson (East Antrim) (DUP)]

The Chancellor is right to talk up the UK economy when there is good news, because there are plenty in this House who will recklessly talk it down. There was, however, one gap in today’s statement. He promised an inquiry, in time for the autumn Budget, into air passenger duty and VAT on the hospitality industry. When will he make an announcement on when that inquiry will start and on the terms of it?

[Mr Hammond]

I have laid a written ministerial statement today that sets out the reviews and consultations, and that is among them. If the right hon. Gentleman looks at that after this statement he will see that it is there.

[Mr Mark Harper (Forest of Dean) (Con)]

May I draw the attention of the Chancellor to the recent research published by the International Monetary Fund, which shows that the choice we made in 2010 to deal with the deficit primarily by controlling spending rather than raising taxes, as the Opposition would have done, was the right choice? It meant that the economy grew faster than those of our European competitors and has put him in the position where he can deliver more money for our priorities, while reducing the debt in the balanced way he has set out.

[Mr Hammond]

I am grateful to my right hon. Friend. He is right: it was the right choice. Because we made that choice, throughout that period employment in this country continued to grow. We avoided the very high levels of unemployment suffered by many of our European neighbours. We avoided the catastrophic, generation-blighting levels of youth unemployment suffered by many of our European neighbours, which will be affecting their economies and societies not just for a few more years but for 30, 40 or 50 years to come. It was the right decision. We have executed our plan and we should stick to it.

[Ms Angela Eagle (Wallasey) (Lab)]

The Chancellor has been very upbeat today, but why is he so upbeat when the growth figures show that we have gone from being near the top of the G7 and the G20 growth lists to the bottom of both?

--- Later in debate ---

[Mr Hammond]

I am clear—I think I have alluded to this already—that one of the factors depressing the forecast growth is the uncertainty that still exists around the economy. If the hon. Lady, like me, expects that uncertainty to dissipate over time, she should look through it to the fundamentals of our economy and its underlying strengths. This economy is in a fundamentally good shape. Once we can restore confidence and certainty about our future path, I am confident that those fundamental strengths will deliver increased economic growth.

[James Cartlidge (South Suffolk) (Con)]

My right hon. Friend made a fantastic statement. Does he join me in welcoming the 65% fall in youth unemployment in South Suffolk since 2010? Does he agree that while my right hon. and learned Friend the Member for Rushcliffe (Mr Clarke) is entirely right to mention inter- generational fairness, the worst form of intergenerational unfairness would have been to allow our youth unemployment to peak at socially dangerous levels, as it has in the rest of Europe?

[Mr Hammond]

My hon. Friend is absolutely right. I welcome the very large fall in youth unemployment in his constituency, but that will be from a base that was very much lower than what has come to be considered normal by many of our European neighbours. As he rightly says, this is not just an economic factor, but a societal factor. Persistent high levels of youth unemployment have a hugely damaging effect, as we have discovered in the past in this country to our cost. If someone is unemployed during their formative years, they are far more likely to remain unemployed and unemployable for the rest of their working lives.

[Wes Streeting (Ilford North) (Lab)]

It is astonishing that Brexit, the single biggest risk to the economy, merited only two sentences in the Chancellor’s otherwise uneventful spring statement. If the economy and economic outlook are so rosy, perhaps he can explain why almost every school in my constituency is facing budget cuts, why my local NHS trust is in special measures, and why, when my constituents are crying out in the face of one of the worst waves of burglaries we have ever seen, the police are not responding because the Metropolitan police is subject to real-terms budget cuts. Is that not the grim reality facing our country, and is it not set to get worse because of the hard Brexit course his Government are following?

[Mr Hammond]

No. The Government are pursuing a Brexit that protects British jobs, British businesses and British prosperity, as the hon. Gentleman well knows. We have protected school funding so that it will rise in real terms per pupil over the next two years, and as we move to the fair funding formula for schools, every school will receive a cash increase. The police settlement on which the House recently voted provides £450 million of additional resource for police forces across the country. We have protected police budgets since 2015.[Official Report, 24 April 2018, Vol. 639, c. 8MC.]

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

The OBR’s report—I refer to table B.7 and chart B.4—assumes that the Brexit dividend will be recycled into ordinary expenditure. I wonder whether the Chancellor accepts that conclusion. If so, what thought has he given to spending this money, and is the NHS near the top of his list?

[Mr Hammond]

As I suspect my hon. Friend knows well, this is the assumption that the OBR has adopted at the last three fiscal events. It has assumed that any saving from a lower contribution to the European Union will be recycled to fund things that would have been funded by the EU, but will no longer be so. How we choose to use that money and what our priorities are will, of course, be an issue for this Parliament, but we should note that we have already made certain commitments—to our agricultural community, for example—to maintain spending at EU levels until the end of this Parliament.

[Caroline Lucas (Brighton, Pavilion) (Green)]

I have to say that the levels of hypocrisy from the Government are quite extraordinary. How can the Chancellor pledge to be improving air quality while simultaneously boasting of undertaking the largest road building programme since the 1970s? How can he say that the plastics crisis is urgent and then propose a deadline for the elimination of plastics in a quarter of a century’s time? Where is the latte levy? Where is the deposit scheme? Where is the urgency for action? Why is there such a gulf between the Government’s action and words?

[Mr Hammond]

I am tempted to say, “Eeyore.” I think that the hon. Lady is making a fundamental mistake by linking the road building programme to air quality. I urge her to take at least a medium-term view of the world. The vehicle fleet is decarbonising. Certainly within her lifetime, if not mine, we will have fully electric vehicles, and probably autonomous ones as well. We should think of the road building programme not as a negative feature, but as an enabler in the transformation of how our vehicle fleet works. We have made announcements today, and I hope that she will be pleased with the consultation on VED for vans. This is a much-needed approach to incentivise van drivers to buy the cleanest and greenest vehicles available.

[Robert Halfon (Harlow) (Con)]

I strongly welcome the housekeeping dividend that my right hon. Friend set out in the spring statement, particularly with its focus on the cost of living and skills. In the forthcoming Budget, I ask him to continue that focus on the cost of living, to maintain the freeze in fuel duty, and to develop a skills strategy with the Department for Education to ensure that we meet the needs of the fourth industrial revolution.

[Mr Hammond]

If my right hon. Friend will forgive me, I will not make a commitment ahead of the next Budget on any specific tax or duty measures, but of course we will maintain the focus on the cost of living and living standards. He will know—I certainly know—that one of the biggest problems that we have faced over the last year has been the impact on real wages of high levels of inflation. Getting that inflation back down to target is a crucial priority, and I am delighted that we will see real wages rising again from next month as a result of falling inflation and strong nominal wage growth.

[Chuka Umunna (Streatham) (Lab)]

I cannot believe that the Chancellor did not have more to say about the NHS in this statement. The NHS in my area is not just in crisis, but at breaking point. He refers to putting an extra £4 billion into the NHS in the current financial year, but if we extrapolate what the OBR says that the NHS will need just to keep current standards of care going and to meet rising demand, we will need at least £30 billion extra going into the NHS by 2022-23. We need a solution that can subsist across Governments of different persuasions, so will he meet the demand that the hon. Member for Totnes (Dr Wollaston) and others across both Houses have made for a proper, cross-party convention on how we put our NHS on a sustainable footing? Secondly, will he support the suggestion of the former permanent secretary of his Department for a proper, hypothecated NHS tax to help to give it the funding that it needs?

[Mr Hammond]

I suspect that now is not the moment for a long debate about the structural funding challenges of the NHS, but the hon. Gentleman is right. We have an ageing population. Technology is driving an ever-wider array of interventions that can and should be made to support people with medical conditions—particularly chronic medical conditions—and we have to look at how to ensure that our NHS remains sustainable in the future. Of course we are looking at that issue. I will not give him a commitment today at the Dispatch Box on how we will do that, but it is absolutely something that we need to do. I very much hope, as he suggests, that this could be done on a serious, cross-party basis, but I fear that his Front Benchers would not be able to resist the temptation to try to play politics with any such serious discussion.

[Mrs Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)]

It was excellent to hear the Chancellor talk about educational investment and our human capital. Further to the comments made by my right hon. Friend the Member for Putney (Justine Greening), will he explain further whether the Treasury will create standards that will technically value human capital across our Government Departments? That can then drive decision making so that taxpayers’ money is best spent to maximise the human capital that we invest in so much through education and training, rather than being wasted.

[Mr Hammond]

We have asked the ONS to look at this and to consider the metrics that we could use. The objective is to be able to assess clearly where the marginal pound of capital investment should go to achieve the best effect on the economy. Without wanting to pre-empt the outcome of that work, I suspect that in the future, in a very rapidly changing economy, we will find that retraining and upskilling will be a very large part of our investment requirement.

[Alan Brown (Kilmarnock and Loudoun) (SNP)]

Would the Chancellor be good enough either to meet me or send me a letter to outline the blockers to the Ayrshire growth deal, to which the UK Government have not yet committed?

[Mr Hammond]

It would be for my right hon. Friend the Secretary of State for Housing, Communities and Local Government to have that meeting with the hon. Gentleman, but I am very happy to pass on his request.

[Andrew Bridgen (North West Leicestershire) (Con)]

Has my right hon. Friend made any assessment of the Venezuelan economic model that is so favoured by the shadow Chancellor? I understand the Venezuelan Government have made huge progress on reducing income inequality. Unfortunately, as is always the case with socialism, they have done so by pushing 80% of the population into poverty.

[Mr Hammond]

Actually, while watching Russia Today, I saw a very interesting piece on the Venezuelan economy—apparently everything is going swimmingly.

[Liz Kendall (Leicester West) (Lab)]

In response to my hon. Friend the Member for Wallasey (Ms Eagle), the Chancellor suggested that our economy will be stronger once there is greater certainty over Brexit. Can he confirm that the Treasury analysis published last week showed that under all the Government’s Brexit options, long-term growth will be lower than it would otherwise have been? Does he not realise that that will be the true legacy of his Government and his party, which can no longer claim to act in the national economic interest?

[Mr Hammond]

Just to correct the hon. Lady on a couple of points, the report that she refers to, which was published by the Exiting the European Union Committee, was not done by HM Treasury. It was prepared, as I think she knows very well, by a cross-departmental group of Government economics professionals in response to the criticism that had been levied at the Treasury model that was used before the referendum. Of course it did not model the Government’s preferred outcome scenario; it modelled a couple of standardised outcome scenarios that the Prime Minister has already rejected. We are not going for a Norway model or a Canada model. We are negotiating with the EU for a bespoke solution. When we have made progress in those negotiations, we will model the outcome that we expect to get, and when Parliament comes to vote on this issue—hopefully later this year—it will have in front of it the output of that modelling.

[Richard Drax (South Dorset) (Con)]

I congratulate my right hon. Friend on his upbeat performance, and on standing up for the economy and our country. As a former soldier, may I put in a plug for our armed forces? They undoubtedly need more money. We live in dangerous times. Will he take that into account in the Budget?

[Mr Hammond]

As a former Defence Secretary, I yield to no one in my admiration for the armed forces. I understand the challenges that defence faces and the complexity of the defence budget, with its many long-term projects operating at the cutting edge of technology. In case there is any misapprehension, however, I would like the House to be absolutely clear that defence will receive more than £1 billion of additional funding in each year of this Parliament. It has the fastest-growing RDEL—resource departmental expenditure limits—budget of any Department across Whitehall. We will, of course, continue to consider the specific needs of defence, but I would not like anyone to have the impression that, as I have read in some organs, the defence budget is being cut. It is not—it is being substantially increased.

[Helen Goodman (Bishop Auckland) (Lab)]

Much is not under the Chancellor’s control, but the subject of my question is. One year ago, we were promised that Making Tax Digital would be put back to help small businesses, but in the intervening time—since the election—very little progress has been made in the countryside on broadband roll-out, so will he please consider putting it back by another year for small businesses?

[Mr Hammond]

No. We made our decision to defer Making Tax Digital mainly because there was a need for greater awareness among businesses and more time to prepare for the relevant software and so on. We are confident that businesses will be able to roll out the programme on the current schedule. Although I readily accept that there is some disquiet among potential business users, I also confidently predict to the hon. Lady that once they have got used to it, they will find that it is hugely beneficial to them, and that it saves them a lot of time and angst in their dealings with HMRC.

[Chris Philp (Croydon South) (Con)]

Since 2010, the minimum wage has increased from £5.93 to £7.83 an hour—a rise of 32%. At the same time, the take-home pay of someone on the minimum wage has gone up by 37%, thanks to the increase in the income tax threshold. Will the Chancellor join me in welcoming the fact that the Government have directed assistance at those on the lowest earnings, and will he assure the House that that excellent approach will remain at the heart of the Government’s strategy?

[Mr Hammond]

We are focused on the needs of those on the lowest pay who are in the workforce. Making work pay, particularly low-paid work, is a priority. I repeat what I said in the statement: partly as a result of the introduction of the national living wage and its subsequent increase to £7.83 an hour, income inequality in this country is now lower than at any point under the last Labour Government. It is falling in this country while it is rising in all other G7 countries.

[Laura Smith (Crewe and Nantwich) (Lab)]

Today’s statement was an opportunity for the Government to ease the burden on care providers by offering a solution to the sleep-in crisis. Sleep-in shifts are an integral part of public services which the Government have a statutory obligation to provide. Have the Government ruled out paying directly and in full the six years of back pay to which low-paid careworkers are entitled?

[Mr Hammond]

I am not sure about the end of the hon. Lady’s question. Is she asking whether the Government have ruled anything out? The Government have not ruled out anything—we are still considering this issue. Of course these workers must have the pay to which they are entitled and which they should have been paid. What we are doing—the Cabinet Office is leading on this—is working with the key providers to see how best to deliver that in a way that does not have negative impacts on the provision of care.

[Mr Simon Clarke (Middlesbrough South and East Cleveland) (Con)]

Youth unemployment in my constituency has fallen by 55% under the Conservatives, which is fantastic news. Does my right hon. Friend agree that the last thing young people in Teesside need is a reckless borrowing binge to reverse that progress?

--- Later in debate ---

[Mr Hammond]

My hon. Friend is absolutely right. Over the past few years, parts of the country that have suffered for far too long from low employment and investment have seen increased investment—much of it foreign investment—as well as increased employment and rising wages. They absolutely do not need to take risks on the kind of policies that the shadow Chancellor is proposing, which would plunge us back into a place we have been before and have no wish to revisit.

[Alison Thewliss (Glasgow Central) (SNP)]

People doing the same job should be entitled to the same day’s pay, but the Chancellor continues to ignore the fact that his pretendy living wage is not for under-25s, as 21 to 24-year-olds will earn 45p less an hour; 18 to 20-year-olds £1.93 less; 16 and 17-year-olds £3.63 less; and apprentices a full £4.13 less. Why does he believe in state-sponsored age discrimination?

[Mr Hammond]

The hon. Lady will know, I think, that we also announced—again, this is due to come in in April—record increases in the youth rates of the minimum wage. We have had several exchanges in this Session about the importance of maintaining low levels of youth unemployment and about the devastating effects of youth unemployment—[Interruption.]. I am sorry if she does not like this. The Government take advice from the Low Pay Commission about the impacts of different pay rates on employment prospects, and we balance the need to give people a fair wage with the need to maintain high levels of youth employment, in the interests of those people themselves and of our economy.

[Jeremy Quin (Horsham) (Con)]

I welcome the projection that real wages will increase in the coming year, but that can continue in the longer term only if we improve our productivity. In that context, may I welcome not only what the Chancellor has said about human capital and long-term endeavour, but the improvements in productivity over the last six months?

[Mr Hammond]

Yes, and my hon. Friend is right to draw attention to two quarters of very good productivity data. I do not want to change policy or to pivot on the basis of two quarters’ data, because data can be revised, but we are starting to think that we might just be at the beginning of a turn in the trajectory of productivity performance in this economy.

[Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)]

Liverpool has many success stories, but 30% of its children are in poverty and our public services are under pressure as Liverpool City Council loses 68% of its funding. The whole economy is threatened by Brexit. What will the Chancellor do differently to address these injustices?

[Mr Hammond]

Obviously the best way out of poverty is to get people into work, and the proportion of workless households is at its lowest level since records began. The hon. Lady will know that 200,000 fewer children are in absolute poverty than was the case in 2010. We are focused on using our modern industrial strategy to drive economic growth across the regions of our country, and on working with the elected Mayors and the devolved authorities to ensure that the necessary investment is made in all corners of the British economy to deliver the growth that is the only way to get people sustainably out of poverty and into well-paid work.

[Anne Marie Morris (Newton Abbot) (Con)]

May I congratulate the Chancellor on his progress to date, but ask him to consider investing in a long-term innovative strategy for transport infrastructure—road, rail, air and sea—in the south-west so as to drive productivity north and south of the peninsula, and to include a commitment to such a strategy in the Budget so that we build a great south-west to rival the northern powerhouse? We thank him for his support for the Peninsula Rail Task Force. It is welcome, but not enough.

[Mr Hammond]

My hon. Friend will have to think of a snappy name for that—if she can, please will she let me know?

We are investing already in the south-west, including, as my hon. Friend will know, in the crucial A303 programme—£2 billion in a vital transport artery feeding the south-west. I know that many of the bids to the housing infrastructure fund come from south-west authorities, and we are acutely conscious that as we ask authorities to build more homes, we must provide them with the resource to build the supporting infrastructure—that is the purpose of the fund. I hope that she will get some good news when my hon. Friend the Housing Minister makes announcements in due course.

[Stephen Timms (East Ham) (Lab)]

The number of apprenticeship starts plummeted after the botched introduction of the apprenticeship levy last year. I welcome the additional support for apprenticeships in small businesses that the Chancellor has announced today, but does he recognise that to get anywhere near the 3 million target by 2020 will require much more radical action, and will he return to that at the time of the Budget?

[Mr Hammond]

Our target—our commitment—is to deliver 3 million apprenticeships by 2020. The introduction of the apprenticeship levy changed the game, and we were always anticipating that it would have an impact on the profile of starts. The additional £80 million announced today is targeted specifically at small, non-levy-paying businesses to help them to take on apprentices. In a couple of weeks, at the beginning of April, large businesses that pay the levy will be allowed to transfer 10% of their levy funds to small businesses in their supply chain to support their engagement and training of apprentices. We will, however, keep the programme under close review. This is a commitment that we must deliver, and if we need to intervene in a different way to deliver it, we will.

[Huw Merriman (Bexhill and Battle) (Con)]

According to page 193 of the OBR report,

“The future is uncertain and the likelihood of unexpected…political developments means…there are significant…downside risks to…forecasts for the public finances.”

Does the Chancellor see any of those political downside risks sitting directly in front of him?

--- Later in debate ---

[Mr Hammond]

Yes. As I said earlier to an Opposition Member, in conversation, businesses—[Interruption.] Perhaps I should just sit down while the shadow Chancellor conducts his own conversation.

As I said earlier, businesses, in conversation, identified two risks about which they were concerned: the risk of a bad Brexit deal, which will have an impact on our economy, and the risk of the right hon. Gentleman’s ever getting his hands on any of the levers of power in our economy. Of those two, there is no doubt that business—as represented in the voice of Paul Drechsler this morning—regards the risk posed by the right hon. Gentleman as by far the bigger.

[Marsha De Cordova (Battersea) (Lab)]

The Chancellor has claimed that spending on disabled people has gone up, but we know that next month cuts in social security will hit them the hardest. He has also spoken about apologies. Would he like to apologise to the millions of disabled people whom he blamed for low productivity?

[Mr Hammond]

Of course I did no such thing. [Interruption.] No, I did not. We spend more than £50 billion a year on benefits to support disabled people and people with health conditions. That is a record high, and we have spent £7.5 billion more in real terms since 2010. As a share of GDP, our public spending on disability and incapacity is the second highest in the G7. It amounts to 2.5% of our GDP and to 6% of all Government spending.

[Mr William Wragg (Hazel Grove) (Con)]

My right hon. Friend has struck the right balance between the need for financial discipline and the justifiable need for investment in public services. With that in mind, will he ensure in the autumn Budget that additional funds are provided for schools to ensure the successful implementation of the national funding formula, which we welcomed in Stockport?

[Mr Hammond]

When she was Education Secretary, my right hon. Friend the Member for Putney (Justine Greening) announced that the fair funding formula would be introduced in a way that would protect per capita spending per pupil, and we would guarantee that every school would receive a cash-terms increase. That guarantee stands today.[Official Report, 24 April 2018, Vol. 639, c. 8MC.]

[Stephen Twigg (Liverpool, West Derby) (Lab/Co-op)]

My right hon. Friend the shadow Chancellor talked about the increasing number of children being taken into care. In Liverpool, there has been an 11% increase in the past 12 months alone. Local authorities in the north-west wrote to the Chancellor last month calling for additional funds to address the growing crisis in children’s social care. May I ask him to address that growing crisis, and to do so as a matter of urgency?

[Mr Hammond]

As I said earlier, spending on support for the most vulnerable children has increased by £500 million since 2010. There is a distinction to be drawn between services provided for the most vulnerable children—children in care, children in the adoption and fostering process, and children at risk—and the wider children’s services budgets. The shadow Chancellor has made that point several times over the past week or so. Let me repeat, however, that we are giving local authorities £225 billion of spending power over a five-year period, and it is for them to decide how they allocate those funds.

[Rachel Maclean (Redditch) (Con)]

There can be no truer test of a Government’s commitment to fairness than their commitment to the next generation, and I know that the 7,110 young people who started apprenticeships in Redditch under this Government would agree with my right hon. Friend. Can he say more about the funds that he has set aside to help more small businesses such as those that I visited last week to access apprenticeships, and does he agree that the best place for his construction skills village is Redditch, a new town in the heart of the country?

[Mr Hammond]

I am glad to be able to tell my hon. Friend that there will be 20 construction skills villages. We look forward to the bid from Redditch, and I am sure that it will be considered carefully.

As I said earlier, my right hon. Friend the Education Secretary is contributing an extra £80 million specifically to help small businesses that are non-levy payers with the costs of engaging apprentices, and from April many small businesses will benefit from the flexibility that allows large business levy payers to transfer 10% of their levy funds to small businesses in their supply chain. The impression that I have from talking to the CBI and other organisations is that businesses are keen to do that, and many of them will make such transfers.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Is the OBR right to calculate in its report that the United Kingdom will be making payments to the European Union until 2064 as part of the divorce settlement and that that will not include any new commitments that the British Government may make in the remaining parts of the negotiation? Would it not be better just to stay in the EU?

[Mr Hammond]

The payment profile has three parts. There are payments during the two years—more or less—of the implementation period; there are payments as the EU dispenses the so-called reste à liquider over the following few years; and then there is a very long tail of what will actually be very small payments relating to pensions. Of course, by their nature, they will stretch over a very long period, but they are very small amounts of money.

[John Stevenson (Carlisle) (Con)]

Carlisle Lake District airport is about to open for passenger flights; we have a garden village development south of the city; and there is the prospect of a borderlands growth deal. Does the Chancellor agree that the only way to grow the economy and balance the books is through such investments? Does he also agree that it is important for the Government to support local initiatives of that kind, because they will help to rebalance the economy and sort out our finances?

[Mr Hammond]

Yes. Local government, local people and local businesses understand best how to grow the economies of their regions. I welcome the initiatives that my hon. Friend has mentioned. I am aware of the garden village, and I look forward to perhaps being able to visit it in the spring.

[Seema Malhotra (Feltham and Heston) (Lab/Co-op)]

Is it not true that young people in our communities are paying the biggest price for this Government’s choices and failures? Local government faces a funding gap of £5.8 billion by 2020. The income of my local council, Hounslow, has been cut by 40% since 2010, with more to come. There are 400,000 more children in poverty than five years ago, and in some wards in my constituency the proportion is now hitting 40%. The Chancellor asked to be judged on his record. Is that a record of which he is proud?

[Mr Hammond]

Yes, it is, because the figures given by the hon. Lady are not quite right. There are 200,000 fewer children in absolute poverty than in 2010. [Interruption.] Absolute poverty is the relevant measure. The crucial point that she simply skirts around is that, after the financial crash during the last Labour Government, we could have gone down a route that many of our continental neighbours went down, which would have seen hundreds of thousands, if not millions, of young people cast on to the scrapheap of unemployment and left there potentially for decades. We did not go down that route, and we have seen youth unemployment in this country relatively low and falling, and that is a huge benefit to the next generation, who will be able to benefit from their engagement in the workforce and, as they go forward, from rising living standards.

[Andrew Jones (Harrogate and Knaresborough) (Con)]

I welcome my right hon. Friend’s statement and the balanced approach to the economy he detailed. I particularly welcome the attention on digital and skills, as these are the main issues businesses are raising with me, and I hope Yorkshire will be one of his local full fibre allocations. Will he continue to focus on fibre and digital as critical to boosting our national productivity?

[Mr Hammond]

Yes, if we do not have these enabling network technologies—a good fibre-optic backhaul network, good digital technologies—we will not be able to exploit the technologies of the fourth industrial revolution, and we must do so.

[Neil Gray (Airdrie and Shotts) (SNP)]

The Office for Budget Responsibility says that real earnings growth for the next five years is expected to remain subdued, averaging just 0.7% a year, and real household disposable income per person is expected to average only 0.4% per year. So why will the Chancellor not properly fund his Departments to ensure that the public sector pay freeze is properly lifted, as has been done in Scotland?

[Mr Hammond]

The public sector pay freeze has been lifted: we have removed the 1% cap, so it is up to departmental Secretaries of State to make appropriate recommendations and provide appropriate evidence to pay review bodies. But we do expect them, where they recommend settlements above the level they are already funded for, to use workforce management measures and efficiency improvement measures negotiated with the workforce, to ensure that over time increases are self-funded through higher efficiency and productivity.

[Mark Pawsey (Rugby) (Con)]

The Chancellor is right to focus on how the tax system might be used to encourage improvements in the environment, and I know that the packaging industry recognises the need to reduce waste and will respond positively to his call for evidence. I ask for it to include two things: first, that it is people who cause litter, and the Chancellor spoke about the need for behaviour change; and, secondly, will it recognise the important role packaging has in reducing food waste by keeping food fresh for longer?

[Mr Hammond]

Yes, of course, and the point of having a call for evidence is to make sure that the decisions we make are based on full knowledge and full information. My hon. Friend makes a very important point: it would be massively shooting ourselves in the foot to make a change in relation to packaging that then massively increased food waste and the energy cost of food that was wasted.

[Carolyn Harris (Swansea East) (Lab)]

Why is the Chancellor refusing to share the light at the end of his tunnel with grieving parents who are struggling to pay for their children’s funerals? Their lives are forever blighted by darkness. A children’s funeral fund is the dignified, compassionate and sympathetic thing to do.

[Mr Hammond]

The hon. Lady is a tireless campaigner on this issue, and both I and my right hon. Friend the Prime Minister have heard her pleas on behalf of parents in this terrible situation. I am sure, however, that the hon. Lady recognises that this is not a fiscal event; there have been no fiscal announcements today, but I am absolutely certain that she will want to make a representation to me ahead of the Budget in the autumn.

[Giles Watling (Clacton) (Con)]

I thank the Chancellor for his very spring-like statement, and it is good to hear that there is light at the end of the tunnel. What plans does he have to support our vital £90 billion creative industries sector, which is growing in my constituency of Clacton?

[Mr Hammond]

Creative industries is an increasingly important part of the UK economy, and one in which we have a significant comparative advantage, and the best way the Government can support the creative industries, apart from the obvious one of training and skilling, is through supporting the roll-out of digital technologies on which so many of the creative industries these days depend.

[Tony Lloyd (Rochdale) (Lab)]

The Chancellor’s constituency will have families on the national living wage, and I have many more. Does he agree with the Joseph Rowntree Foundation, which has demonstrated that a two-parent family with one working and two children will, because of tax credit cuts, be £450 a year worse off? That is not fair shares, is it?

[Mr Hammond]

The national living wage has given a pay rise of more than £2,000 a year to anyone in full-time work since it was introduced in 2015, and of course it is not just the national living wage; it is also the increase in the personal allowance, which means that people are now able to keep more of what they take home, and because it is an allowance, rather than a rate cut, it disproportionately benefits those on the lowest earnings.

[Alan Mak (Havant) (Con)]

Fourth industrial revolution technologies are transforming and boosting productivity across the whole country, particularly in the small and medium-sized enterprise sector. As my right hon. Friend considers future spending priorities ahead of the Budget, may I urge him to continue and accelerate support for our entrepreneurs and innovators, who create the wealth of the future?

[Mr Hammond]

My hon. Friend is a tireless advocate of the technology that will fuel the fourth industrial revolution, and the important thing is that, while we are talking about it, this is actually happening across the country. These technologies are actually being used by large, medium and small businesses. They are not just something in the laboratory or the university classroom; they are actually happening in the factories and business parks across Britain, and they will transform the way we live and work.

[Peter Kyle (Hove) (Lab)]

I am sure the Chancellor will agree that it is not talking down the economy to report in this place the real lived experiences of the people we represent, the majority of whom will not see real average wage incomes exceeding the pre-crash levels until 2022. Does he not agree that all the measures announced today and the rhetoric will not make a difference to those who need it most until their average incomes increase above the pre-crash levels? When will that happen?

[Mr Hammond]

Real income growth is the principal target that we focus on, but the country suffered a recession after the financial crisis that wiped out 6% of our national income, and we are rebuilding our economy from that crisis, hindered and hampered by the fact that the previous Government were ill-prepared for the crisis when it came. As I have made clear today, we are determined to ensure that our economy and public finances are in good shape to deal with the economic cycle in the future, because we do not believe that we have abolished that economic cycle, and we have to prepare for future downturns because that is the nature of economic life.

[Robert Courts (Witney) (Con)]

I welcome the progress made in reducing the debt and the deficit, but will the Chancellor confirm that we are still spending £50 billion in debt interest—more than the armed forces and police force combined receive—and if we do not get control of this, there will be less money for the things we value, such as the housing infrastructure fund, Oxfordshire’s excellent submission for which is so important to my constituents?

[Mr Hammond]

My hon. Friend is absolutely right. This is current spending; this is £50 billion that we could spend on hospitals, on schools, or, if we chose, on investment in infrastructure. The answer to this from the right hon. Member for Hayes and Harlington (John McDonnell) is to increase the amount of borrowing we have, and to increase the amount of money we are pouring down the drain every year on debt interest, reducing the amount of money available for our public services. That cannot be the right way to go.

[Ruth George (High Peak) (Lab)]

In spite of the claims for what will happen to real wages on April fool’s day, the fact is that real wages are now lower than in 2010, and debt has grown twice as fast under this Government as it did under the previous Labour Government, in spite of the global economic crash in 2008. So does the Chancellor agree that his strategy is failing people like my constituents, who are suffering from £6 billion of cuts to social care? They can no longer get care packages so they can die at home surrounded by their loved ones, but instead are stuck in hospital.

[Mr Hammond]

I do not agree with the hon. Lady, and her numbers are wrong, as I am sure she knows. The soaring deficit in 2009-10 has created a legacy that of course was going to lead to increasing debt. Our challenge has been to get the deficit down so that debt can now start to fall, and as debt starts to fall, we are able then to fund our public services, invest in Britain’s future, and provide some relief for hard-pressed families and small businesses through easing their tax burden, and that is exactly what we intend to continue to do.

[Alex Burghart (Brentwood and Ongar) (Con)]

A number of hon. Members have mentioned the next generation. Is it not the case that only this Government’s approach can really deliver true intergenerational fairness, because the alternative is ever-increasing borrowing, which would be put on the shoulders of young people?

[Mr Hammond]

My hon. Friend is absolutely right, and that point needs to be made more often. When the right hon. Member for Hayes and Harlington talks about borrowing an extra £100 billion, £250 billion or £350 billion—or whatever figure he is thinking about this week—and when he talks about nationalising an industry for £190 billion or whatever, he is talking about burdening the next generation with yet more debt that will blight their futures and limit their chances. That is not fair; it is not right, and we must make sure that he never gets the chance to do it.

[James Frith (Bury North) (Lab)]

Some small businesses in Bury are still picking up the pieces following the Carillion collapse. Small business confidence in the north-west is at its lowest in four years, with UK skills shortages being blamed for some £3 billion of lost earnings. The Chancellor chose to come to the House today to give us this spring statement, yet he had nothing to say. We heard a fake news forecast with nothing for the real job creators. Will he give some certainty to the small businesses that are providing the jobs in towns such as mine, and will he stop this outsourcing to puffed-up vehicles such as Carillion, which appear to be too big to fail until the point when they do fail?

[Mr Hammond]

On the statement, the reason that I have come to the House to make this statement today is because the OBR has published its second report of the fiscal year. It is mandated by Parliament to produce two reports a year, and I think that the House would have regarded it as a gross discourtesy if I had published the report without coming to the House to answer questions on it. I am glad that the hon. Gentleman has mentioned skills shortages. He will recognise that, while skills shortages are a serious problem, it is in a sense the better problem to have, rather than having skilled people looking for employment. The work is there, the jobs are there and the economic growth is there; we now have to respond to that by delivering the skills that people need. On outsourcing, we will continue to pursue the best value for money for every pound of taxpayers’ money that we spend, and where that involves collaborating with the private sector, that is what we will do. The way in which we have handled the Carillion situation has ensured that public services continue to be provided and that the public purse has not had to bail out a private company.

[Luke Graham (Ochil and South Perthshire) (Con)]

I should like to join the Scottish National party Finance Secretary in Holyrood in acknowledging the additional funding for Scotland’s block grant. The extra £479 million will mean a real-terms increase over the next few years. Given that Scotland’s GDP growth is forecast to be less than 1%, will my right hon. Friend commit to driving economic activity across all our constituencies through initiatives such as the Stirling and Clackmannanshire city deal?

[Mr Hammond]

Yes, but it is a pity that the SNP spokesman here did not feel inclined to acknowledge the same thing. My hon. Friend is right to suggest that we are a Government for the whole of the United Kingdom. It is not the Scottish people’s fault that they have a Government who are adopting policies that are depressing economic growth in Scotland and will depress it further in the months and years ahead. We will go on delivering policies that are designed to improve the economy across the whole of the United Kingdom, including the growth deals in Scotland.

[Luke Pollard (Plymouth, Sutton and Devonport) (Lab/Co-op)]

Last week, it was revealed that the Ministry of Housing, Communities and Local Government returned £1.1 billion of unused housing money to the Treasury over the past two years. That money should have been spent on recladding tower blocks that were found to be unsafe after the Grenfell Tower tragedy. Will the Chancellor use his autumn Budget to fund the work that is required to keep our tower blocks and their residents safe?

[Mr Hammond]

My hon. Friend the Housing Minister and I have both made the point that local authorities and social landlords that have blocks that need recladding should carry out that work. Any work that is required for urgent safety reasons should be done, and any local authority or housing association that has a genuine inability to fund the work should get in touch with the Ministry of Housing, Communities and Local Government, which will work with them to find an appropriate solution. Safety-critical work must be carried out. That is the legal obligation of the landlord, and we will work with them to ensure that it is carried out.

[Maggie Throup (Erewash) (Con)]

I welcome my right hon. Friend’s continued commitment to increasing the housing supply. I would also like to put in a bid for Erewash in relation to the construction skills villages. Does he agree that measures such as the housing infrastructure fund and the cut in stamp duty for first-time buyers will help many of my constituents to realise their ambition and aspiration to get on to the housing ladder?

[Mr Hammond]

Yes, the housing investment package that we have put together is important, because it has ensured that financial support will not be the constraining factor in building more homes in this country. We have other constraints—including skills constraints, land supply constraints and materials supply constraints—but finance will be available. The measure that I announced in the autumn Budget to remove stamp duty for 1 million first- time buyers will allow 1 million mostly young people once again to aspire to the dream of home ownership.

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

On the Chancellor’s announcement on cashless and digital measures, he claims that he will ensure that cash will be available for those who need it. He further claims that his is the party of small business. If he stands by that, will he come to Nairn, Grantown and Aviemore to explain to businesses there why, with more than 70% of the shares in the Royal Bank of Scotland at his command, he is failing to block the closure of its branches? The Federation of Small Businesses says that those closures will make it more difficult to do business in Scotland.

[Mr Hammond]

It is absolutely always a pleasure to visit Nairn, but I have no immediate plans to do so. As the Prime Minister has told the hon. Gentleman and his hon. Friends on several occasions, we do not interfere in the day-to-day management decisions of the Royal Bank of Scotland—[Interruption.] Let us treat this seriously. The consultation that we published today is about cashless and digital payment systems, but it specifically acknowledges, as I said in my statement, that we also have to ensure that cash is available to people who need it. If the hon. Gentleman looks at the consultation when it is published, he will see that we are determined to address that issue. I hope that he will engage in that consultation.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

The Chancellor is right to look at the impacts of the VAT threshold on business. It is a disincentive to growth and an incentive to avoid tax through cash deals. Does he agree, however, that registering for VAT does not just have financial implications—it also has an administrative impact? Would this be an appropriate time to look at the entire VAT regime?

[Mr Hammond]

I think that that would involve widening the scope of the intended consultation rather dramatically. I remind the House that, when I referred to this issue in the autumn Budget, I said that I was not minded to lower the VAT threshold because I recognise that, at its current level, it keeps a lot of small businesses out of the administrative burden of VAT. However, we are keen to ensure that the cliff-edge effect, which has a damaging impact on businesses that are trying to grow, should be addressed if it is possible to do so. The consultation will pursue those ideas.

[Rachael Maskell (York Central) (Lab/Co-op)]

There is a reason why we need to invest in our public services. In York, our schools have gone from being the seventh worst funded to the very worst funded authority, our NHS is in a capped expenditure process, and no social housing has been built. Should not the Chancellor invest in our children and in the sick, and provide homes for the homeless?

--- Later in debate ---

[Mr Hammond]

I am afraid that it is characteristic of the Opposition that they are able to see the world only through the lens of inputs—

[Rachael Maskell]

That is the reality!

[Mr Hammond]

The reality is that since 2010 we have increased the number of schools that are good or outstanding. That means that 90% of schools are now either good or outstanding, and that 1.9 million more children are being taught in good or outstanding schools. That is the metric that matters to parents and to children themselves in terms of their life chances. It is not always just about the money; it is also about the outcomes.

[Ross Thomson (Aberdeen South) (Con)]

I welcome the measures introduced by the Government to help the oil and gas industry, including a £2 billion package of support and the introduction of transferable tax history, which has been a much-needed shot in the arm. With the industry set to contribute over £1 billion in tax to the Treasury this financial year, will my right hon. Friend tell me what further steps the Government can take to support this vital sector?

[Mr Hammond]

We are committed to the oil and gas industry and, as my hon. Friend knows, to measures that will ensure that every drop of economically recoverable oil and gas in the UK continental shelf is recovered, which is in the interests of the Scottish economy, the UK economy and Her Majesty’s Treasury. I am delighted that the increase in the price of oil, together with the uptick in activity as a result of that rise and of the measures that we have announced, means that the oil sector’s contribution to the UK Treasury will again become positive in the year to come.

[Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)]

The Conservatives have cut the Welsh Government’s budget by around £1 billion a year since 2010, and the knock-on impact on public services in Wales and on Welsh local government’s ability to deliver key services has been huge. Will the Chancellor apologise for the failed Tory austerity that has caused so much damage to public services in Merthyr Tydfil and Rhymney and across the UK? Given his outlining of a rosy picture, will he set out his plan adequately to fund the public services on which many people rely?

[Mr Hammond]

I do not have the figures to hand, but if my memory serves me correctly, I was able to confirm at the Budget last year that Wales will receive over £1 billion of additional funding, including as a result of changes to the agreed formula. So funding is not down, but up. The failure of services in Wales, mainly in the Welsh health service, that we regularly catalogue across the Dispatch Box is a result of decisions made and priorities set by the Welsh Government, not the UK Government.

[Alex Chalk (Cheltenham) (Con)]

Economies move in cycles. Does my right hon. Friend agree that there is a moral case for ensuring that our public finances are in a state to help the poorest in society, some of whom live in my constituency, when the next slowdown comes? Does he also agree that the Labour party manifestly failed to take that approach?

--- Later in debate ---

[Mr Hammond]

It did. My hon. Friend is right. It is precisely because we have seen the devastating impact of being unprepared for a serious economic downturn following a financial crash that we are determined to ensure that the UK economy is robustly prepared for the next normal cyclical downturn, whenever it occurs. Such things are normal, they happen in everyday economic life, and we must be able to ride through them without damage to our economy and without the poorest in our society paying the price. The poorest always pay when Labour’s model fails.

[Matt Western (Warwick and Leamington) (Lab)]

Following the global financial crash, the American Recovery and Reinvestment Act 2009, introduced by Obama, saw $800 billion of investment pumped into the US economy, leading to the most sustained period of growth. By contrast, the UK embarked on a sustained period of austerity, and UK growth is now half that of the US and the eurozone. Which was the right ideological choice?

[Mr Hammond]

The United States is in a different position from the United Kingdom. Sadly, we no longer operate the world’s reserve currency and are no longer able to borrow under the same conditions as the United States. Decisions on the United States economy are for the United States Administration. This Government have made the right decisions for the UK economy, and the benefit of those decisions—the outcomes that we are now beginning to see—demonstrates the case for them.

Spring Statement: Consultations

Lord Hammond of Runnymede Excerpts

Tuesday 13th March 2018 Written Statements

[The Chancellor of the Exchequer (Mr Philip Hammond)]

Today I set out the Government’s first spring statement, as part of the move to a single fiscal event. As described in the paper HM Treasury published in December, the new fiscal cycle provides opportunities for the Government to consult more openly at earlier stages of policymaking. This statement delivers on that commitment, it does not make tax or spending changes, but sets out some areas on which the Government will consult over the summer.

Tax and the digital economy

Today the Government will publish the following policy documents that set out our approach to adapting the tax system to meet the challenges and opportunities of the digital economy:

Corporate tax and the digital economy—an update on the Government’s position paper on the challenges posed by the digital economy for the international corporate tax framework. This sets out the Government’s proposed approach to addressing those challenges to ensure the corporate tax system is fair across different types of businesses, while protecting the UK's start-up culture and position as a global tech leader.

Alternative methods of VAT collection—split payment—a consultation on a proposed split payment model to reduce online VAT fraud and improve how VAT is collected.

The role of online platforms in ensuring tax compliance by their users—a call for evidence to explore what more online platforms can do to help their users pay the right amount of tax.

Cash and digital payments in the new economy—a call for evidence looking at the role of cash and digital payments in the new economy. This will explore how the Government can further support digital payments, ensure the ability to pay by cash is available for those who need it, and crack down on the minority who use cash to evade tax and launder money.

Business rates: delivering more frequent revaluations—a summary of responses to a consultation on the implementation of more frequent revaluations of non-domestic properties for business rates purposes, and the announcement that the next revaluation will be brought forward by one year to 2021. This means three-year revaluations will take effect in 2024.

Growth & productivity

Today the Government will publish the following consultations on changes to help boost productivity and growth across the UK economy:

Self-funded training—a consultation on improving the way the tax system supports self-funded training by employees and the self-employed. This will explore extending the scope of tax relief currently available to employees and the self-employed for work-related training costs to support upskilling and retraining.

The VAT registration threshold—as set out at autumn Budget 2017, the Government are not minded to reduce the VAT threshold. This call for evidence will seek views on whether the design of the VAT threshold could better incentivise small business growth.

Allowing Entrepreneurs’ Relief on gains made before dilution—a technical consultation on changes to entrepreneurs’ relief to ensure that it does not discourage entrepreneurs from seeking external finance for their companies.

Knowledge intensive Enterprise Investment Scheme (EIS) fund—a consultation on the introduction of a new knowledge intensive EIS fund structure with additional incentives to attract investment.

VAT, Air Passenger Duty and tourism in Northern Ireland—a call for evidence that will look at the impact of VAT and Air Passenger Duty on tourism in Northern Ireland.

In the coming months the Government will publish:

Improving business productivity—BEIS will publish a call for evidence to understand how best we can help the UK’s least productive businesses to learn from, and catch-up with, the most productive.

Delivering a fair payment culture for small businesses—BEIS will launch a call for evidence on how to eliminate unfair payment practices to small businesses.

Prompt payment by Government suppliers—the Cabinet Office will launch a consultation on making a supplier’s approach to payments to its own suppliers part of the selection process for larger government contracts.

Transferable Tax History (TTH) for oil and gas—a consultation on draft legislation to introduce a transferable tax history for oil and gas companies, to encourage new investment in UK oil and gas fields.

Petroleum Revenue Tax (PRT) deduction for decommissioning costs—a consultation on draft legislation to allow a petroleum revenue tax deduction for decommissioning costs incurred by a previous licence holder, to encourage investment in UK oil and gas fields.

Green growth

The tax system can be a lever to encourage people and businesses to make healthier, more environmentally responsible choices. The Government are committed to improving air quality in the UK’s towns and cities, and protecting the environment for future generations.

Today the Government will publish:

Single-use plastics waste—a call for evidence seeking views on how the tax system or charges could reduce the amount of single-use plastics waste, to protect the environment. This will look at the whole supply chain for single-use plastics, including alternative materials, reusable options and recycling opportunities, to consider how the tax system and charges can help drive technological progress and behavioural change.

In the coming months the Government will publish:

Red diesel use in non-agricultural, non-road mobile machinery—a call for evidence into whether the use of red diesel tax relief discourages the purchase of cleaner engines. The primary focus of this call for evidence will be on improving air quality outcomes, particularly in urban areas. Red diesel for agricultural use will be outside the scope of the call for evidence, as will home heating use and other static generators.

Reforming VED rates for vans—a consultation on reducing VED rates for the cleanest vans through creating a graduated first year rate, as is already in place for cars, to encourage cleaner choices and improve environmental outcomes.

Tax avoidance, evasion & non-compliance

Today the Government will publish:

Extension of security deposit legislation—a consultation on how to extend existing security deposit policy to include corporation tax and Construction Industry Scheme deductions for taxpayers deemed at high risk of not paying and with a history of non-compliance.

In the coming months the Government will publish:

Off-payroll working—a consultation on how to tackle non-compliance in the private sector, drawing on the experience of the public sector reform. The Government will work with businesses and individuals to mitigate the potential administrative burdens of any future changes.

Tackling Corporate Insolvency and phoenixism risks—a discussion document exploring further means for tackling the small minority who deliberately abuse the insolvency regime in trying to avoid or evade their tax liabilities, including through the use of phoenixism.

Tackling construction sector supply chain fraud—a technical consultation on draft legislation for a VAT reverse charge. This will help to eliminate the threat of ‘missing trader’ fraud in construction industry supply chains, which is where the supplier retains the VAT that it collects on its sales. The reverse charge will achieve this by shifting responsibility to the customer for paying VAT to HMRC where the customer is a VAT-registered construction business.

Profit fragmentation—a consultation on the best way to prevent UK traders or professionals from avoiding UK tax by arranging for UK trading income to be transferred to unrelated foreign entities.

Other/maintaining the tax system

Today the Government will publish:

Heated tobacco—a response to the consultation on the tax treatment of heated tobacco products.

In the coming months the Government will publish:

Gaming Duty: review of accounting periods—a consultation to seek views on bringing the administration of gaming duty more into line with the other gambling duties.

Short-term business visitors—a consultation on how to simplify the tax treatment of short-term business visitors from the foreign branch of a UK company, to ensure the UK is an attractive location to headquarter a business.

Capital Gains Tax payment window—a technical consultation on the design of the system requiring capital gains tax due on a disposal of residential property to be paid within 30 days of completion.

VAT and vouchers—a response to a consultation on changes to the VAT treatment of vouchers. This change will amend VAT law to ensure that when customers pay with vouchers, businesses account for the same amount of VAT as when other means of payment are used.

Taxation of trusts—a consultation on how to make the taxation of trusts simpler, fairer and more transparent.

Large business compliance—a response to the consultation into HMRC’s process for risk- profiling large businesses, to improve HMRC’s Business Risk Review process, reflecting and further enhancing the shift in large business compliance behaviours.

[HCWS541]

ECOFIN: 20 February 2018

Lord Hammond of Runnymede Excerpts

Tuesday 6th March 2018 Written Statements

[The Chancellor of the Exchequer (Mr Philip Hammond)]

A meeting of the Economic and Financial Affairs Council (ECOFIN) was held in Brussels on 20 February 2018. The UK was represented by Mark Bowman, director general, international and EU, HM Treasury. EU Finance Ministers discussed the following:

Early morning session

The Eurogroup President briefed Ministers on the outcomes of the 19 February meeting of the Eurogroup, and the Commission provided an update on the current economic situation in the EU. Ministers also discussed developments regarding United States tax reform.

Appointment of the vice-president of the European Central Bank

The Council agreed a recommendation confirming the nomination of Luis de Guindos as vice-president of the European Central Bank.

Financial services legislation

The Bulgarian presidency provided an update on current legislative proposals in the field of financial services.

Sustainable finance

The Council exchanged views on the recommendations of the high-level expert group on sustainable finance.

Discharge of the 2016 EU budget

Ministers approved a Council recommendation to the European Parliament on the discharge to be given to the Commission in respect of the implementation of the 2016 EU budget.

EU budget guidelines for 2019

Ministers adopted Council conclusions on the guidelines for the 2019 budget, which will serve as a point of reference in the forthcoming budgetary cycle.

Public procurement and strategic investment

The Commission presented information on the public procurement strategy it adopted on 3 October 2017.

[HCWS510]

Treasury

Lord Hammond of Runnymede Excerpts

Thursday 1st March 2018 Ministerial Corrections

[Sir Hugo Swire]

Reducing tourism VAT to 5% after we leave the European Union would create an extra 121,000 jobs and £4.6 billion in revenue to the Treasury over 10 years. It would be a great boost not only to our great cities, but to our great coastal towns, such as Exmouth, Sidmouth and Budleigh Salterton in my East Devon constituency. Will the Chancellor commit to looking again at this issue as we leave the EU?

[Mr Hammond]

My right hon. Friend is nothing if not persistent and consistent. I cannot remember how many times he has raised this issue. There have been numerous requests for new VAT reliefs since the referendum, some of which are currently not permitted under EU law. We have calculated that if we were to grant all the VAT relief requests that we have received, that would come to more than £38 billion a year. On VAT and tourism, the Government have received representations on this issue, and we are looking again at the case for change. We have issued a call for evidence on the impact of VAT and air passenger duty on tourism in Northern Ireland, and we will certainly keep this issue under careful review. [Official Report, 27 February 2018, Vol. 636, c. 678.]

Letter of correction from Mr Hammond:

An error has been identified in the Oral Answer given to the right hon. Member for East Devon (Sir Hugo Swire) at Treasury Topical Questions on 27 February 2018. The correct answer should have been:

[Mr Hammond]

My right hon. Friend is nothing if not persistent and consistent. I cannot remember how many times he has raised this issue. There have been numerous requests for new VAT reliefs since the referendum, some of which are currently not permitted under EU law. We have calculated that if we were to grant all the VAT relief requests that we have received, that would come to more than £38 billion a year. On VAT and tourism, the Government have received representations on this issue, and we are looking again at the case for change. We will publish a call for evidence on the impact of VAT and air passenger duty on tourism in Northern Ireland, and we will certainly keep this issue under careful review.

Oral Answers to Questions

Lord Hammond of Runnymede Excerpts

Tuesday 27th February 2018 Commons Chamber

[Graham P. Jones (Hyndburn) (Lab)]

3. Whether he has reviewed his Department’s procedures for authorising and monitoring private finance initiative contracts as a result of the liquidation of Carillion.

[The Chancellor of the Exchequer (Mr Philip Hammond)]

I am sure that the hon. Gentleman knows this, but just to put it in context, the vast majority of all current PFI projects—86%—were signed under the previous Labour Government. Since coming into office in 2010, this Government have reformed the approach, so that now PF2 contracts deliver better value for money for taxpayers. The performance of PFI contracts, including those where Carillion is involved, are monitored by the procuring authorities. New PF2 contracts will be subject to a rigorous value for money assessment. There are currently no PF2 projects in procurement.

[Graham P. Jones]

I am concerned about the workers. Apparently, 90% of Carillion’s private sector contractors have suggested that they will continue to pay staff, but only in the interim period. What about the 10% who are not going to be paid, and what is going to happen to the staff after the interim period? Are the Government going to guarantee the employment status and pay of those individuals?

[Mr Hammond]

The hon. Gentleman may be slightly confusing PFI contracts with outsourcing contracts that do not involve capital structures. The resolution of Carillion continues. So far, there has been a very high rate of uptake by private clients of Carillion to continue the services that are being delivered, and we have high hopes of protecting the vast majority of the jobs involved.

[Alex Burghart (Brentwood and Ongar) (Con)]

What are the Government doing to improve transparency in public-private partnerships?

[Mr Hammond]

We absolutely value transparency in the public-private partnerships that are delivered. They are an important part of the overall infrastructure. As I just explained to the House, there are currently no PF2 projects in procurement. That indicates that we have set the bar for value for money in public-private partnerships very high, and we will continue to do so.

[Mr Speaker]

Order. This is a rather extraordinary state of affairs. I hope that the hon. Member for Hyndburn (Graham P. Jones) is not indisposed, and if he is I am sorry, but otherwise there is absolutely no basis for his leaving the Chamber during the exchanges on his question. That is a rank discourtesy to the House—and a discourtesy to the Chancellor as well, for that matter. It must not happen.

[Anneliese Dodds (Oxford East) (Lab/Co-op)]

The shadow Chancellor recently wrote to the Chancellor asking when he will produce revised value for money guidance, as highlighted by the National Audit Office; an updated list of PFIs, as existing data is nearly two years old; and details of any assessment the Treasury carried out on Carillion’s readiness to fulfil its PFI contracts. When will we get them?

[Mr Hammond]

I have not yet received a letter from the shadow Chancellor, but if he has written to me, I shall of course reply to him and answer his questions.

[Damien Moore (Southport) (Con)]

4. What recent assessment the Government have made of the effect of the national productivity investment fund on road and rail infrastructure in the north-west.

--- Later in debate ---

[Giles Watling (Clacton) (Con)]

8. What plans the Government have to invest in major infrastructure during the 2017 Parliament.

[The Chancellor of the Exchequer (Mr Philip Hammond)]

As my hon. Friend the Exchequer Secretary to the Treasury has just told the House, there has been more than £0.25 trillion of public and private investment in infrastructure since 2010. We continued to invest in infrastructure in the autumn Budget 2017 by expanding the national productivity investment fund, so that it will now provide £31 billion of additional investment, including more than doubling the housing infrastructure fund to £5 billion. The Institute for Fiscal Studies said after the Budget that our plans will see public investment increase to levels not sustained in 40 years.

[Julian Sturdy]

Through the major road network, vehicle excise duty will be made available for investment in strategic roads outside the remit of Highways England. I understand that economic growth must be a priority, but how much will the pressure of future housing developments be considered in any of these future schemes? My constituency in York, for example, is surrounded by the northern ring road and we have a lot of housing coming forward.

[Mr Hammond]

My hon. Friend is right that the major road network will support the creation of new housing developments by improving access to future development sites and boosting suitable land capacity, so investment decisions for this funding will include consideration of how proposed schemes will unlock land for housing developments, helping to improve how transport is planned for new developments at the outset. The ring road to which he refers is, of course, part of the proposed major road network.

[Priti Patel]

The Chancellor will know of the great eastern main line taskforce, which has made the economic and business case for rail infrastructure directly to the Treasury. He will also know that Greater Anglia commuters are forking out £3.7 billion to the Treasury under the current rail franchise. Will he ensure that we can get some of that money back out to invest in the much-needed infrastructure improvements for which our commuters are campaigning?

[Mr Hammond]

My right hon. Friend is a great champion of infrastructure in Essex, and I share her wish to create a more dependable railway with an increased focus on punctuality and reliability, which is why the Government are pursuing the biggest rail investment programme since Victorian times. Under the Greater Anglia franchise, there is a commitment to deliver more services and faster journey times, including two “Norwich in 90” trains each way a day from May 2019. The great eastern main line proposals are currently at an early stage of development, but we will carefully consider the case she has made for the passing loop.

[Giles Watling]

Will the Chancellor update the House on the steps being taken to ensure the Government’s ambitious plans for housing are supported by local infrastructure investment, such as through the housing infrastructure fund?

[Mr Hammond]

My hon. Friend is right to observe that we cannot build the homes this country needs without infrastructure. Often, the push-back from local communities against the idea of accommodating greater numbers of homes is caused by the fear that infrastructure will not keep pace. The autumn Budget 2017 more than doubled the housing infrastructure fund, taking it to a total of £5 billion. On 1 February 2018, we announced the first £866 million of investment from that fund to support 133 projects, which will unlock infrastructure for up to 200,000 new homes.

[Rachel Reeves (Leeds West) (Lab)]

It is now two years and two months since the Boxing day floods hit much of Yorkshire, including my constituency. Kirkstall in Leeds is no better protected from floods than it was on Boxing day 2015, and the Government still have not signed off money for the phase 2 Leeds flood alleviation scheme. When will that happen? The scheme is urgently needed to protect my constituents and local businesses from devastating floods such as those that we have already experienced.

[Mr Hammond]

My constituency has also been affected by flooding, and some of the responses are major engineering projects that take time to develop. The Department for Environment, Food and Rural Affairs and the Environment Agency have funding for flood relief projects, but those developments have to be prioritised and worked up into proper business cases. I will look at the specific case the hon. Lady raises and, if I may, I will write to her and place a copy of my letter in the Library of the House.

[Sir Vince Cable (Twickenham) (LD)]

Some of the most important national infrastructure projects include the network of tidal lagoons for low-carbon energy. As the Treasury has, apparently, approved the project as good value for money, why is it allowing dinosaurs in the Department for Business, Energy and Industrial Strategy to block it?

[Mr Hammond]

I imagine that the right hon. Gentleman is referring to the Swansea Bay tidal lagoon project which, as he knows, is under consideration by the Government. An announcement will be made in due course.

[Clive Lewis (Norwich South) (Lab)]

Contrary to the Treasury’s own assessment, a report by the Institute for Public Policy Research North recently found that transport investment in London is two and a half times higher per capita than in the north. We know that in Norwich Britvic is shedding hundreds of jobs, citing poor transport as a key cause. That inequality hurts business and local authority revenue, so what actions will Ministers take to redress this unjust imbalance? Will they commit to working with the Mayors of Manchester and Liverpool on the convention for the north that was announced this morning?

[Mr Hammond]

I just do not recognise or agree with the hon. Gentleman’s figures. The Infrastructure and Projects Authority’s analysis shows that infrastructure investment per capita in the north is actually higher than in the south-east.

[Kevin Hollinrake (Thirsk and Malton) (Con)]

21. The Chancellor has spoken out in favour of rebalancing the economy via a fairer distribution of transport spending. Will he therefore consider Transport for the North’s strategic transport plan, which calls for a 50% increase in transport spending across the north of England?

[Mr Hammond]

The Government are committed to the northern powerhouse project and recognise that that has to be supported through infrastructure investment. We are looking at northern powerhouse infrastructure investment projects on a case-by-case basis, and we will continue to support the development of the northern powerhouse.

[Geraint Davies (Swansea West) (Lab/Co-op)]

6. What recent assessment he has made of the effect on the economy of the UK leaving the single market and the customs union.

--- Later in debate ---

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

10. What recent discussions he has had with the Secretary of State for Exiting the European Union on the Government’s preliminary EU exit analysis; and if he will make a statement.

[The Chancellor of the Exchequer (Mr Philip Hammond)]

The cross-Whitehall analysis referred to is provisional internal analysis—it is part of a broad, ongoing programme of analysis—and further work is in train. The analysis has been developed as a tool to inform Ministers on the European Union Exit and Trade Committee and its Sub-Committees about the choices that must be made as negotiations progress.

[Catherine McKinnell]

I thank the Chancellor for that answer. Does he agree with the former permanent secretary at the Department for International Trade that giving up the single market and the customs union is like giving up a three-course meal for a packet of crisps in the future? If not, can he identify what specific evidence his Department has seen to suggest that the benefits of future trade agreements will outweigh the damage of leaving the single market and the customs union to businesses and jobs across the country, particularly in the north-east?

[Mr Hammond]

The Government intend to maintain the greatest possible access for British businesses to European Union markets. The hon. Lady is right that we should approach this on the basis of evidence. We should look for evidence of the value of our trade flows with Europe and what jobs they generate in the UK, and we should look objectively at the opportunities that arise with third-country trade deals and with the likely profile of the new jobs, trade and opportunities that can be created, and then weigh those carefully.

[Kirsty Blackman (Aberdeen North) (SNP)]

Leaks from the Brexit analysis show that UK Government borrowing will rise dramatically under Brexit, with figures ranging from £45 billion to £120 billion in a worst-case scenario. Can the Chancellor reassure us that he will not cut vital public services to plug this gap?

[Mr Hammond]

As the hon. Lady knows, the analysis to which she refers is based on standardised, off-the-shelf trade models. The Government are seeking a bespoke deal with the European Union to deliver a deep economic partnership, which would have a completely different set of outcomes. That remains our objective.

[Nick Thomas-Symonds (Torfaen) (Lab)]

11. What equality impact assessments his Department has undertaken on the Government’s policy on the public sector pay cap.

--- Later in debate ---

[Antoinette Sandbach (Eddisbury) (Con)]

13. What assessment his Department has made of the potential merits for the economy of the UK adopting an EEA Norway-style arrangement after the UK leaves the EU.

[The Chancellor of the Exchequer (Mr Philip Hammond)]

Membership of the European economic area would require free movement of people with the rest of the European Union, and the UK Government have been clear that the free movement of people cannot continue as it does now. We are seeking a bespoke, comprehensive and ambitious economic partnership in the mutual interests of the UK and the EU.

[Antoinette Sandbach]

The Government’s own forecast suggests that a no-deal Brexit will cut GDP growth by 12% in the north-west of England. What steps is the Chancellor taking to minimise the impact of a no-deal, WTO-terms Brexit on my constituents in Eddisbury?

[Mr Hammond]

As I said in answer to a previous question, the figures to which my hon. Friend refers are based on standardised trade models, not the bespoke deal that we are seeking to achieve. She asks what steps I am taking to protect her constituents’ interests. I am supporting my colleagues in seeking to negotiate an ambitious economic partnership with the EU that delivers the maximum possible benefits for both the EU and the UK.

[Thangam Debbonaire (Bristol West) (Lab)]

What assessment has the Chancellor made in particular of the potential benefits of EEA membership for the £91.8 billion contribution to the UK economy made by the creative industries that are so important for my constituents in Bristol West?

[Mr Hammond]

The hon. Lady is absolutely right that the creative industries are one of Britain’s great success stories. More broadly, our services sector is our strategic strength in many respects. As we negotiate our future relationship with the European Union, we have to ensure that we protect not only the market in goods, but the market in services, where Britain has such significant comparative advantage.

--- Later in debate ---

[Sir Hugo Swire (East Devon) (Con)]

T1. If he will make a statement on his departmental responsibilities.

[The Chancellor of the Exchequer (Mr Philip Hammond)]

My principal responsibility is to ensure economic stability and the continued prosperity of the British people, and I will do so by building on the plans set out in the autumn Budget. This Government are determined to meet the important challenges we face and to seize the opportunities ahead as we create an economy fit for the future. Our balanced approach to the public finances enables us to give households and businesses support in the near term and to invest in the future of this country, while also being fair to the next generation by reducing a national debt that remains far too large.

[Sir Hugo Swire]

Reducing tourism VAT to 5% after we leave the European Union would create an extra 121,000 jobs and £4.6 billion in revenue to the Treasury over 10 years. It would be a great boost not only to our great cities, but to our great coastal towns, such as Exmouth, Sidmouth and Budleigh Salterton in my East Devon constituency. Will the Chancellor commit to looking again at this issue as we leave the EU?

[Mr Hammond]

My right hon. Friend is nothing if not persistent and consistent. I cannot remember how many times he has raised this issue. There have been numerous requests for new VAT reliefs since the referendum, some of which are currently not permitted under EU law. We have calculated that if we were to grant all the VAT relief requests that we have received, that would come to more than £38 billion a year. The Government have received representations on VAT and tourism, and we are looking again at the case for change.[Official Report, 1 March 2018, Vol. 636, c. 6MC.] We have issued a call for evidence on the impact of VAT and air passenger duty on tourism in Northern Ireland, and we will certainly keep this issue under careful review.

[Peter Dowd (Bootle) (Lab)]

The Chief Secretary gave a speech last year calling for better value for money from the public finances and not spending money we do not have, and she has talked about not wasting money today, so how can she justify spending hundreds of millions of pounds on further tax giveaways worth £2,000 per child to the wealthiest families—those, for example, using private schools—via the tax-free childcare scheme? Is that not a waste of money and spending money we do not have?

--- Later in debate ---

[Mr Philip Hammond]

The Government are continuing with detailed preparations for all possible March 2019 scenarios, including ensuring that Departments have adequate resources to prepare effectively for EU exit. To date, the Treasury has allocated to Departments nearly £700 million for preparation activity, and we are currently in the process of allocating the 2018-19 funding from the additional £3 billion over two years that I announced at autumn Budget 2017.

[Lilian Greenwood (Nottingham South) (Lab)]

T4. “The health and social care system has been pushed to its limits in recent weeks”—those are not my words, but those of my local hospital trust. Last month, it was forced to cancel about 325 operations and 640 outpatient appointments. That not only means that my constituents who are unwell or in pain are being made to wait longer for treatment but makes the trust’s already challenging financial situation even worse. When is the Chancellor going to give our health and social care system the sustainable funding it needs?

--- Later in debate ---

[Stephen Hammond (Wimbledon) (Con)]

Will my right hon. Friend tell the House what assessment the Treasury has made either separately or jointly with the Department for Transport of how external initiatives on competitiveness and investment might help the rail sector and Network Rail in particular?

[Mr Philip Hammond]

Strictly, this is an issue for my right hon. Friend the Transport Secretary, and he is looking at how to improve productivity in the railway and how to ensure that every pound we invest in the railway delivers the maximum possible benefit to railway users. He will make further announcements in due course.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

T8. Could the Chancellor set out the benefits or otherwise of the arrangements the Government appear to have for a customs union between Camden, Islington and Westminster?

[Mr Hammond]

I am sure that when I go home and reflect on it, the deep meaning of that question will become clear to me. What I will say to the hon. Lady is that if we look at how goods and services flow freely between different parts of our own economy, and indeed between different parts of the United Kingdom, we see at once the huge benefit that it brings to have frictionless borders as we move our goods and services.

[Sir Patrick McLoughlin (Derbyshire Dales) (Con)]

I am very much in favour of gift aid, but some large charities say that they receive no direct support from Government but do receive gift aid and the Exchequer will not publish those figures. Will the Chancellor reconsider this?

--- Later in debate ---

[James Cartlidge (South Suffolk) (Con)]

If we want a sustainable rise in wages, we will need higher productivity. Does my right hon. Friend therefore welcome the recent improvement in the figures?

[Mr Philip Hammond]

Yes. We have had two quarters of good productivity data, but we should recognise that the productivity challenge we face is long term. The Government have taken a range of measures to address it and we will watch the evolution of the data very carefully, but there is certainly absolutely no scope for any complacency about the scale of the challenge we face, and we are determined to rise to it.

[Jo Swinson (East Dunbartonshire) (LD)]

Artificial intelligence brings huge economic opportunities, but to date big tech companies have seemed even more likely than traditional corporates to engage in aggressive tax avoidance and concentrate power in the hands of a narrow, homogenous group of people. What will the Treasury do to ensure that companies in this growing industry pay their own way fairly and take account of their wider corporate responsibility to society?

[Vicky Ford (Chelmsford) (Con)]

The services sector makes a huge tax contribution to the public purse. What confidence can the Chancellor give to my constituents who work in financial services that our new free trade agreement will cover services as well as goods?

[Mr Philip Hammond]

We are clear that a future comprehensive trade partnership with the European Union must include goods as well as services. A deal can only be done if it is fair to both sides, and because of the shape of the UK economy it would be very difficult to see how any deal could be fair if it did not include services. We have heard it asserted that it is impossible for services to be part of a trade agreement. I do not believe that that is the case. Next week, I shall make a speech in which I will set out our view of how it is possible to include services within such a trade deal.

[Mr Gregory Campbell (East Londonderry) (DUP)]

The Chancellor referred earlier to what he called the “continued prosperity” in the UK. Will he undertake to ensure that a simplification of the tax system is undertaken by looking at the level at which low paid full-time and part-time employees get the first £300 a week free of national insurance and income tax, to try to raise prosperity among all sections of the community?

[Mr Hammond]

We will continue to seek to simplify the tax system, although I have to say that my personal observation is that whenever there is a proposal to simplify, those who benefit from complexities quickly speak up. They are not always people on high incomes; they are often people on lower incomes. We shall continue to try to simplify the system in a way that is fair and appropriate for all.

[Johnny Mercer (Plymouth, Moor View) (Con)]

While accepting that the Ministry of Defence is in need of serious reform as well as more money, will the Chancellor confirm that he has agreed with the Secretary of State for Defence that there will be no further reductions in capability while the modernising defence review takes place, and that the money required to do that, in the region of £2 billion, will be forthcoming?

[Mr Hammond]

As the House will know, I had the privilege to serve for nearly three years as Defence Secretary and I yield to no one in my admiration for the work of our armed forces. I also understand how complex and challenging managing the defence budget is: it is a multi-annual budget with many complex procurements. My right hon. Friend the Prime Minister and I are working very closely with our right hon. Friend the Defence Secretary as he carries out the modernisation review. We will ensure that defence has the funding it needs to continue to defend this country appropriately.

[Ruth George (High Peak) (Lab)]

North Derbyshire clinical commissioning group finished last year £27 million in the red, and £16 million of cuts were demanded. In spite of closing hospital beds at a time when they are most needed, it will again end this year £27 million in the red. When will the Government give the NHS a sustainable settlement to enable it to provide proper services?

[Bim Afolami (Hitchin and Harpenden) (Con)]

As the Chancellor knows, investment in infrastructure is key to ensuring that we can build the thousands of homes that this country needs. Will the Chancellor agree to meet me, other Hertfordshire MPs and the leader of Hertfordshire County Council to discuss how we might be able to do that in Hertfordshire, where we need to deliver about 100,000 new homes?

[Mr Philip Hammond]

Yes, I am always delighted to meet my hon. Friend and his colleagues. Hertfordshire is one of the high-pressure housing areas, where it is absolutely essential that we deliver additional housing if we are to improve affordability.

[Catherine McKinnell (Newcastle upon Tyne North) (Lab)]

Cold weather payments were triggered in all postcodes in my constituency yesterday—information that I shared on social media—yet a constituent contacted me this morning to say that when she contacted the universal credit people, they said they knew nothing about it. Given the freezing weather and the fact that people will be nervous about turning on their heating if they do not know they can pay for it, will the Minister work with colleagues in the Department for Work and Pensions to resolve the situation as soon as possible?

[Mr Hammond]

I am grateful to the hon. Lady, and I will look into the point that she raised immediately. This is obviously an immediate issue in relation to the cold weather that we are having now. I will find out and let her know later.

[Several hon. Members rose—]

ECOFIN

Lord Hammond of Runnymede Excerpts

Tuesday 20th February 2018 Written Statements

[The Chancellor of the Exchequer (Mr Philip Hammond)]

A meeting of The Economic and Financial Affairs Council (ECOFIN) will be held in Brussels on 20 February 2018. The UK will be represented by Mark Bowman (Director General, International and EU, HM Treasury). European Union Finance Ministers will discuss the following:

Early Morning Session

The Eurogroup President will brief Ministers on the outcomes of the 19 February meeting of the Eurogroup, and the European Commission will provide an update on the current economic situation in the EU.

Financial services legislation

The Bulgarian presidency will present information on current financial services legislative proposals, followed by an exchange of views.

Sustainable finance

The Council will hold an exchange of views on the recommendations of the High-Level Expert Group on sustainable finance.

Discharge of the 2016 EU Budget

Ministers will be asked to approve a Council recommendation to discharge to the European Commission in respect of the 2016 EU Budget.

EU Budget guidelines for 2019

Ministers will be asked to approve Council conclusions on the EU Budget guidelines for 2019.

Public procurement and strategic investment

The European Commission will present information on the public procurement strategy it adopted on 3 October 2017.

[HCWS468]

ECOFIN: 23 January 2018

Lord Hammond of Runnymede Excerpts

Wednesday 7th February 2018 Written Statements

[The Chancellor of the Exchequer (Mr Philip Hammond)]

A meeting of the Economic and Financial Affairs Council (ECOFIN) was held in Brussels on 23 January 2018. EU Finance Ministers discussed the following:

Early morning session

The Eurogroup President provided briefing to Ministers on the outcomes of the 22 January meeting of the Eurogroup, and the Commission provided an update on the current economic situation in the EU.

Deepening of the economic and monetary union (EMU)

The Council held a policy debate on the deepening of the EMU.

Current financial services legislative proposals

The presidency presented information on the current legislative proposals in the field of financial services.

VAT: simplification of rates and simplification for SME’s

The Commission presented proposals to reform the rules on VAT rates and structures, and to simplify VAT obligations for SMEs.

Presidency work programme

The Bulgarian presidency presented its work programme for January to June 2018.

European semester 2018

The Council adopted the Council conclusions on the annual growth survey 2018 and the Council conclusions on the alert mechanism report 2018. The Council also approved a Council recommendation on the economic policy of the euro area.

Action plan to tackle non-performing loans in Europe

The Council exchanged views on a factual report by the Commission regarding the implementation of the action plan to tackle non-performing loans in Europe.

AOB: EU list of non-co-operative jurisdictions for tax purposes

The Council approved a report by the EU Code of Conduct Group (Business Taxation) to de-list eight jurisdictions from the EU list of non-co-operative jurisdictions for tax purposes that was agreed at December 2017 ECOFIN.

[HCWS458]

ECOFIN: 23 January 2018

Lord Hammond of Runnymede Excerpts

Monday 22nd January 2018 Written Statements

[The Chancellor of the Exchequer (Mr Philip Hammond)]

A meeting of the Economic and Financial Affairs Council (ECOFIN) will be held in Brussels on 23 January 2018. European Finance Ministers will discuss the following:

Early morning session

The Eurogroup President will brief Ministers on the outcomes of the 22 January meeting of the Eurogroup, and the Commission will provide an update on the current economic situation in the EU.

Deepening of the Economic and Monetary Union (EMU)

The Council will hold a policy debate on the deepening of the EMU.

Current financial services legislative proposals

The presidency will present information on the current legislative proposals in the field of financial services.

VAT: simplification of rates and simplification for SMEs

The Commission will present proposals to reform the rules on VAT rates and structures and to simplify VAT obligations for SMEs.

Presidency work programme

The Bulgarian presidency will present its work programme for January to June 2018, followed by an exchange of views.

European semester 2018

The Council will be asked to adopt Council conclusions on the Annual Growth Survey 2018 and the Council conclusions on the Alert Mechanism Report 2018. The Council will also be asked to approve a Council recommendation on the economic policy of the euro area.

Action plan to tackle non-performing loans in Europe

The Council will exchange views on a factual report by the Commission regarding the implementation of the action plan to tackle non-performing loans in Europe.

[HCWS419]

Oral Answers to Questions

Lord Hammond of Runnymede Excerpts

Tuesday 16th January 2018 Commons Chamber

[Royston Smith (Southampton, Itchen) (Con)]

2. What assessment he has made of the effect on average personal incomes of recent increases in the national minimum wage and national living wage.

[The Chancellor of the Exchequer (Mr Philip Hammond)]

In April, the national living wage will rise to £7.83. That means an annual pay rise of over £2,000 for a full-time national living wage worker since the introduction in 2016 of the national living wage, which has helped reduce the proportion of full-time jobs that are low paid to the lowest level in at least 20 years.

Sustaining long-term pay growth relies on improving productivity. That is why we have increased the national productivity investment fund to over £31 billion, and it is why we are taking further action on skills, retraining and capital investment as we build a Britain fit for the future.

[Royston Smith]

Could the Chancellor tell the House whether income inequality has gone up or down since 2010? How does income inequality today compare with levels under the last Labour Government?

[Mr Hammond]

Income inequality is lower than it was in 2010. In fact, it remains lower than at any point under the last Labour Government. The Gini coefficient, which is an internationally recognised measure of income inequality, is now 3% lower than in 2010. Since my autumn statement in 2016, we have increased the tax contributions of the highest earners while those on the lowest incomes have gained overall.

[Derek Twigg (Halton) (Lab)]

The problem is in constituencies like mine, which is one of the most deprived in the country, where more and more people are having to go to food banks. What is the Chancellor doing, in terms of the economic development of the country, to ensure that we get better-paid jobs, especially in places that are severely deprived such as Halton?

[Mr Hammond]

The hon. Gentleman makes an absolutely correct point. In the long run, higher wages can be delivered only through increased productivity. That means investment in infrastructure, investment in skills and training, and investment in research and development—with both public funding and tax incentives for private funding—and it means ensuring that capital is available for businesses to invest in the equipment that will raise the productivity of their workers. The Government’s ambition is for a high-wage, high-skill economy, and we are investing to deliver that.

[Charlie Elphicke (Dover) (Ind)]

Will the Chancellor confirm that the lowest-paid have in fact seen a 7% real- terms wage increase since 2015, and that income inequality is now at its lowest level for 30 years?

[Mr Hammond]

My hon. Friend is right. As I said, income inequality is lower than at any point under the Labour Government. People in full-time work on the national living wage have seen a £2,000 a year pay increase as a result of the national living wage and, of course, everybody in work has seen an improvement in their take-home pay as a result of the significant increases in the personal allowance that this Government committed to, and which this Government are delivering.

[Alison Thewliss (Glasgow Central) (SNP)]

The Chancellor’s living wage is a pretendy living wage and is not actually available to those under the age of 25. Can he explain why the age gap in the minimum wage between 25-year-olds and 16 and 17-year olds actually increased in his Budget from £3.45 to £3.63? How can this be an economy that works for everybody if the youngest are not getting paid equally?

[Mr Hammond]

The rates for people under 25 were increased in the Budget by the biggest amount ever—[Interruption.] Look, of course we would all like to see high rates of employment and high rates of pay across all age groups in the economy, but for young people, the most important thing—the Low Pay Commission highlights this fact—is that they get into work, because if they are in work when they are young, they are more likely to remain in sustainable work throughout their lifetime, and that must be the priority.

[Sir Hugo Swire (East Devon) (Con)]

3. What recent discussions he has had with the airline industry on air passenger duty.

--- Later in debate ---

[Chris Green (Bolton West) (Con)]

10. What assessment he has made of potential risks to the economy from high levels of Government borrowing.

[The Chancellor of the Exchequer (Mr Philip Hammond)]

In 2010, we inherited the largest deficit since the second world war, standing at nearly 10% of GDP. We have successfully reduced it by three quarters, meaning that it stood at 2.3% at the end of last year, but our debt is still too high. High levels of debt leave us vulnerable to economic shocks and incur significant debt interest, which is why the Government have clear and detailed fiscal plans to reduce borrowing further and to ensure that debt falls.

[John Howell]

Does the Chancellor agree it is essential that our policies continue to show that we are living within our means, because the alternative—a failure to do so—simply passes on our bills to the next generation?

[Mr Hammond]

Yes, I absolutely agree with my hon. Friend that a policy of increasing borrowing simply means passing the cost of today’s consumption to future generations and wasting more taxpayers’ money on debt interest. Even Labour’s shadow Education spokesperson has acknowledged that this is an ultra high-risk strategy that would be a gamble with our economic future.

[Chris Green]

Does my right hon. Friend agree that uncontrolled debt is bad for the economy and bad for the young people who have to pay the debt off, and that we should avoid following the model preferred by the Opposition, which has all the qualities of the parliamentary sewage system?

[Mr Hammond]

Yes, I can agree with my hon. Friend on that. Any party that aspires to government and is serious about properly managing the public finances should be able to explain how it would fund the expenditure it is committing to—and to do so without consulting an iPad.

[Helen Goodman (Bishop Auckland) (Lab)]

The Chancellor says that he does not want to incur more debt, but yesterday the Treasury approved a minute providing for a contingent liability on Carillion, for which we have had no estimate. Will he please explain to the House what sort of expenditure will be covered—I see that he has given an indemnity to the receiver—and how he will report to the House on how much money the Government will be liable for?

[Mr Hammond]

Yes, the Government have given an indemnity to the official receiver so that it can take on the role of special manager of Carillion’s assets to ensure the continuity of public services in the many schools, hospitals and local authorities that have contracts with Carillion. The Treasury has provided the official receiver with a line of credit that enables the official receiver’s office to operate the company’s public sector contracts, after which it will, in due course, recover the costs from the Department that would have paid fees for those services anyway. The official receiver can only step in and do this with the Treasury’s underwriting, and we deemed it appropriate to give that underwriting.

[Neil Gray (Airdrie and Shotts) (SNP)]

Clearly there is an element of risk in not just Government borrowing but companies’ borrowing against the UK Government. Will the Chancellor advise the House on what exposure his Government have from lending to Carillion via the likes of UK Export Finance or George Osborne’s direct lending scheme?

[Mr Hammond]

I am not aware of any direct exposure of Her Majesty’s Government as a creditor of Carillion, but I will check, write to the hon. Gentleman and place a copy of the letter in the Library of the House.

[Mr Philip Hollobone (Kettering) (Con)]

The Government have made good progress in cutting the deficit, but national debt as a percentage of GDP remains at a dangerously high level and will only start to fall next year—10 years after the crash. Will the Chancellor share with the House how our level of national debt to GDP compares with that of other major western economies?

[Mr Hammond]

My hon. Friend is right. Our level of debt is too high, and there is a reason why that matters. In response to the financial crisis in 2009, the then Government were able to allow debt to rise. If we had a similar crisis now—God forbid—we would be struggling to be able to do that, because debt is already very close to 90% of GDP. It is urgently necessary that we get our debt level down to create the headroom that will enable us to deal with any crisis that comes along in the future, whether internal or external.

[Jonathan Reynolds (Stalybridge and Hyde) (Lab/Co-op)]

It is amazing that the Government should want to plant questions about high levels of borrowing, given that they have missed every single one of their deficit reduction targets, and let us not forget that this Conservative Government have borrowed more than any Labour Government in history. Under Labour’s fiscal rules, we would close the deficit on day-to-day spending over five years, but exclude investment spending from that figure. Given the huge challenges that the country faces in relation to productivity, infrastructure and skills—challenges that he has already mentioned—does the Chancellor not recognise that that is a prudent and sensible way forward?

[Mr Hammond]

No, and neither do the Opposition. That is why they have already recognised that their plans would deliver the run on the pound for which they are wargaming. I will take no lectures from a party that oversaw a 165% increase in debt, and is proposing to add a further £500 billion to our debt level just when the Government are delivering a reduction in debt.

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[Chris Davies (Brecon and Radnorshire) (Con)]

7. What assessment he has made of the contribution of the UK internal market to the Scottish and Welsh economies.

[The Chancellor of the Exchequer (Mr Philip Hammond)]

The UK internal market benefits all the nations of the UK. The Scottish Government’s own latest figures indicate that 63% of Scotland’s exports are to the rest of the UK, compared with 16% that go to the EU, and for Wales it is 80% compared with 12%. Stakeholders across Wales and Scotland have made it clear that it is vital that we continue to support the smooth working of the UK internal market, and it is therefore essential that no new barriers to living and doing business in the UK are created as we leave the EU.

[Chris Davies]

I thank my right hon. Friend the Chancellor for his answer, and does he agree that leaving the UK single market would pose a far greater risk to the Welsh, Scottish and Northern Ireland economies than leaving the EU single market?

[Mr Hammond]

Yes, it is absolutely true that for both Scotland and Wales leaving the UK single market would be far more economically damaging than leaving the European single market, which prompts the question why the Scottish National party has advocated so strongly remaining in the European single market and also advocated so strongly breaking up the UK single market.

[Mr Speaker]

Order. I am not very interested in hearing that, which has nothing to do with Government policy, but I am interested in hearing Wes Streeting. I hope the Chancellor will take note: put very briefly, Chancellor, “Stick to your last—your business, not theirs.”

[Wes Streeting (Ilford North) (Lab)]

Thank you, Mr Speaker; that is the nicest thing anyone is likely to say to me today.

The Chancellor rightly extols the benefits of the UK single market, but is not the rank hypocrisy of the Government exposed by listening to the comments of the chief executive of Airbus last night that leaving the European single market would be hugely damaging to the UK economy? We do not have to pick and choose: why will the Chancellor not put a jobs first Brexit at the heart of the Government Brexit strategy and commit to keeping us in the European single market?

[Mr Hammond]

The hon. Gentleman will know that I have been arguing for the last year for a jobs-first, prosperity-first Brexit, which means negotiating the closest possible relationship with the EU after we leave that union, and that is what we intend to do.

[Ben Lake (Ceredigion) (PC)]

The contribution of the UK internal market is of course important to the economy of Wales. Under Westminster rule, the economy of London and the south-east of England has steamed ahead while Wales remains one of the poorest nations in western Europe. Will the Chancellor commit to ending this rank inequality by rebalancing the UK internal market to ensure that it is not based on a set of Westminster diktats but is instead a partnership of the four nations of the UK?

[Mr Hammond]

Yes, we have identified regional disparity as one of the drivers of low productivity in the UK. Raising the productivity performance, particularly that of our great cities outside London, is key to raising UK’s performance overall.

--- Later in debate ---

[Stephen Metcalfe (South Basildon and East Thurrock) (Con)]

T1. If he will make a statement on his departmental responsibilities.

[The Chancellor of the Exchequer (Mr Philip Hammond)]

My principal responsibility is to ensure the stability and prosperity of the economy, which means building on the ambitious steps laid out in the autumn Budget to tackle the key challenges we face so that we can create an economy fit for the future. I look forward to doing so, ably supported by my excellent ministerial team. Our balanced approach to the public finances enables us to give households and businesses support in the near term, and to invest in the future of this country, while also being fair to the next generation by reducing a national debt that remains too large.

[Stephen Metcalfe]

Does my right hon. Friend agree that lowering business taxes, as this Government have done, is not a race to the bottom but is vital in building and maintaining the strong economy on which we all depend?

[Mr Hammond]

Yes, I agree with my hon. Friend. Keeping business taxes competitive so that we can attract international investment to this country is essential, but there is a quid pro quo: if taxes are low, they must be paid. We are determined to ensure full compliance and to lead in international forums in looking at ways of improving corporate tax compliance.

[Peter Dowd (Bootle) (Lab)]

The NHS is in crisis due to the tight-fisted approach the Chancellor takes to the public finances—unless a big corporation, a railway company or a failing construction firm needs a handout or a bail-out. During any discussions he has had with the Health Secretary, has he raised the issue of the funding crisis? If so, what solution has he arrived at to fund it properly, or will he be sending in the receiver?

[Mr Hammond]

The hon. Gentleman may not have noticed but we have put an extra £6 billion into the NHS. The first two weeks of the year are traditionally the highest pressure weeks in the NHS, and we have seen extreme pressure over the past two weeks. He may also not have noticed that we have a flu crisis going on, which inevitably takes its toll. In an ethically based health service, we treat the sickest patients first, and it is right that we prioritise those with urgent needs over those with routine needs in our hospitals.

[Peter Dowd]

That was an insouciant attitude, if ever there was one. The Chancellor’s local media report that the A&E department in St Peter’s Hospital in Chertsey in his constituency had the highest number of 12-hour waits for patients in Surrey at the start of last year. What imaginative explanation does he have for his constituents, if not the whole House, as to why they, like many others, have to wait for so long to get emergency treatment? I ask again: what substantive funding will he provide to the NHS?

[Mr Hammond]

The answer to that is the £6 billion of additional money that we put in at the Budget. I am glad that the hon. Gentleman raised St Peter’s Hospital in my constituency, because that gives me the opportunity to make an important point. As other Members will know, whatever the media say about the NHS in general, when one speaks to one’s own constituents about their experience in their local hospital, it is invariably good and they invariably have nothing but praise for the service that they receive from our excellent national health service.

[Sir Hugo Swire (East Devon) (Con)]

T8. The cost of the backlog of repairs to our historic buildings is now estimated to stand at an alarming £1.3 billion, in large part because of the changes to VAT levied on repairs. Will my right hon. Friend show that, as a Conservative, he genuinely believes in conservation and that something will be left standing for future generations to enjoy?

--- Later in debate ---

[Nigel Huddleston (Mid Worcestershire) (Con)]

The Chancellor will be aware that Government debt per household is around £65,000. Another name for that debt is deferred taxation. Does the Chancellor agree that the best way to increase tax revenue and reduce our debt is to grow the economy, which is exactly what we are doing?

[Mr Hammond]

Yes. There are two ways to get our debt falling as a percentage of GDP. By far the easiest way, and the most agreeable way for our constituents, is to grow the economy so that the denominator shrinks.

[Stephen Timms (East Ham) (Lab)]

T3. Together with the Department for Work and Pensions, Her Majesty’s Revenue and Customs has a Late, Missing and Incorrect initiative to look into the problems with real-time pay-as-you-earn information—problems that may well explain many of the errors we see in universal credit awards. The Financial Secretary gave me a helpful answer on this topic in October. What progress has he made on quantifying those three problems—late, missing and incorrect—and what hopes does he have for the improvement of RTI quality?

--- Later in debate ---

[Mr Hammond]

As my hon. Friend knows, we are seeking a bespoke vehicle for a deep and special partnership, and we are certainly prepared to look into any constructive suggestion from any part of the House.

[Peter Kyle (Hove) (Lab)]

T4. Last night, the chief executive of Airbus said that every Brexit scenario that is currently on the table will weaken British industry. Is the Chancellor listening?

[Mr Hammond]

Yes. We engage frequently with industry, and our No. 1 priority is obviously to ensure that we protect the UK economy as we exit the EU. In fact, as a manufacturer of aviation equipment, which has a zero EU tariff, Airbus should be relatively minimally affected. Nevertheless, I think the company’s particular concern is about the ability to bring EU nationals into the UK to work, and we have assured it that we will make sure that high-skilled individuals can continue to come.

[John Stevenson (Carlisle) (Con)]

I appreciate that the next stages of the negotiations with Europe are about to start, and what we want to see is a good deal for industry, business and the service sector. Does the Chancellor agree that membership of the European Free Trade Association could offer that opportunity for us?

[Mr Hammond]

Membership of the European economic area, which EFTA would entail, involves under current rules compliance with the four freedoms, and that means free movement of people, which the British people rejected in the referendum in 2016.

[Tony Lloyd (Rochdale) (Lab)]

T5. With Carillion now the poster child for dodgy market capitalism, what duty does the Treasury owe to the wider public to prevent Government spending Ministers from engaging in inappropriate contracts, and what steps did the Treasury take?

--- Later in debate ---

[Nicky Morgan (Loughborough) (Con)]

There are many small and medium-sized enterprises in the Carillion supply chain, as both contractors and direct suppliers. What discussions will the Government have with Her Majesty’s Revenue and Customs and other businesses to make sure that these companies are able to continue to pay the tax liabilities and their employees?

[Mr Hammond]

HMRC already has a scheme that can assist companies that are having cash-flow difficulties in meeting tax liabilities. We agreed last night that HMRC will specifically signpost, via the Carillion-specific websites that are operating, that that facility exists.

[Afzal Khan (Manchester, Gorton) (Lab)]

T7. Greater Manchester police has faced eight years of real-terms cuts and has lost 2,000 officers. Week after week, constituents come to my surgery in deep distress over antisocial behaviour, muggings and burglaries to which the police cannot attend. As a former police officer myself, I know that they are doing the best that they can. Will the Minister commit to giving more funding for Greater Manchester police?

[Neil O'Brien (Harborough) (Con)]

The current funding formula for local government is opaque, historical and disadvantages Leicestershire. Does the Minister agree that it would be attractive to move to a transparent formula based on the real drivers of costs?

[Mr Hammond]

As my hon. Friend knows, the Government are committed to introducing a fair funding formula, and my right hon. Friend, the Secretary of State, has committed to move forward with that programme this year.

[Dr Philippa Whitford (Central Ayrshire) (SNP)]

T9. Yesterday saw the successful Second Reading of the Space Industry Bill, which could see Prestwick in my constituency become the UK’s first spaceport, but the Ayrshire growth deal is central to ensuring the widest economic impact from that development. The three local authorities and the Scottish Government are backing it, so will the Chancellor now commit to the Ayrshire growth deal?

--- Later in debate ---

[Alex Burghart (Brentwood and Ongar) (Con)]

Will the Minister welcome the fact that UK manufacturing is at an eight-year high?

[Mr Hammond]

Yes.

[Vernon Coaker (Gedling) (Lab)]

Councils such as Gedling Borough Council and Nottinghamshire County Council are setting their budgets now, and they face a funding crisis. What are the Government going to do about it?

[Tom Pursglove (Corby) (Con)]

Unemployment in my constituency is down by over 50%, but will my right hon. Friend consider a new round of enterprise zone bidding opportunities to help further that success story?

[Mr Hammond]

We will give consideration to my hon. Friend’s suggestion.

[Hilary Benn (Leeds Central) (Lab)]

Will the Chancellor clarify whether the terms of the public sector private finance initiative contracts with Carillion allow for those contracts to be sold on to other private companies in the event of liquidation?

[Mr Hammond]

My understanding is that the contracts that are strictly PFI contracts are actually in joint ventures. In that case, it is most likely that the joint venture partner will take over. There are outsourcing contracts that, in theory, could be sold on, but as the Government Department, as the contracting party, will invariably have a right to cancel the contract on the insolvency of the company, in practice it will not be able to be sold on by the official receiver without the agreement of the contracting Department.