Charter for Budget Responsibility
Lord Hammond of Runnymede Excerpts(7 years, 10 months ago)
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The Chancellor of the Exchequer (Mr Philip Hammond)
I beg to move,
That the Charter for Budget Responsibility: autumn 2016 update, which was laid before this House on 17 January, be approved.
This debate is not about the technicalities of fiscal policy. It is about our commitment to budget responsibility and delivering it in a way that is appropriate to our current circumstances. It is about supporting our economy through the uncertainty following the Brexit vote and preparing it to take full advantage of the new opportunities ahead. It is about securing Britain’s economic future, supporting working families and ensuring that our children are not burdened with debts that our generation chooses not to pay.
When my predecessor came into office in 2010, he inherited the highest budget deficit in post-war history, with Government borrowing £1 of every £4 that they spent. Debt had almost doubled since 2005-06, unemployment was at 8% and the UK’s percentage increase in national debt between 2007 and 2010 was the biggest in the G7. The 2008 recession showed us the price that is paid for seven years of irresponsible fiscal policy, and it demonstrated once again that it is always the poorest in our country who suffer the most when the economy crashes and unemployment rises.
We remain resolute in our determination to return the public finances to balance, to get debt falling and to pay our way in the world, but we have to do so in a way that protects our economy and our living standards in challenging times. At the same time, we must maintain our focus on the long-term challenge of productivity—a challenge we must rise to if we are to seize the opportunities that lie ahead for Britain.
In proposing this charter, I build on the work of my right hon. Friend the Member for Tatton (Mr Osborne). His plans, actioned by the hard work of millions of people up and down the United Kingdom, have turned our economy around. The employment rate is at a record high, unemployment is at an 11-year low and income inequality is at its lowest level in 30 years. The OECD and the International Monetary Fund expect the UK to have been the fastest growing economy in the G7 in 2016. The economic plan that has delivered jobs and growth also reduced the deficit from 10.1% to 4% of GDP last year, so that, in 2015-16, we borrowed £1 for every £10 we spent. These are significant achievements, but we have further to go.
In the medium term, we are well placed to take advantage of the opportunities that leaving the European Union presents. But at the time of the autumn statement, the Office for Budget Responsibility judged that, in the near term, uncertainty about our new trading relationship with the EU, coupled with the impact of higher inflation driven by the depreciation of the pound, is likely to reduce the rate of economic growth relative to its previous expectations.
George Kerevan (East Lothian) (SNP)
The Chancellor makes an interesting case about the strength of the economy. Does he not associate some of the growth in the economy with the fact that the Government borrowed and invested in the economy? Borrowing is therefore not necessarily a bad thing in itself.
Mr Hammond
I think my track record—of one fiscal event—answers the hon. Gentleman’s question. Clearly, I made the decision in November to borrow a discretionary £23 billion to invest in areas specifically focused on raising productivity in the UK economy. So, of course, the answer to the question “Can borrowing to invest ever be sensible?” is yes—if the circumstances are right, if it is a judicious amount of borrowing and if it is precisely targeted to achieve a purpose.
Jeremy Quin (Horsham) (Con)
This point is related to the one raised by the hon. Member for East Lothian (George Kerevan). Does the Chancellor believe that the charter gives him enough flexibility to address any economic issues that may come through over this Parliament?
Mr Hammond
As I shall explain in a moment, one purpose of the charter and the new fiscal rules is to allow sufficient flexibility to deal with any unexpected, unforecast shocks during a period of more-than-usual uncertainty in the economy.
The OBR’s judgment at autumn statement implied £84 billion of additional borrowing over the forecast horizon, although I should say that the OBR acknowledges a higher-than-usual degree of uncertainty in that forecast. So, at autumn statement, I had to make a judgment: I could have looked for further savings to maintain the trajectory of consolidation my predecessor set out, but I judged that that would not have been the responsible way to support the economy in present circumstances. So, at the autumn statement, I set out our new plan, which offered fiscal headroom, if needed, to deal with unforeseen, unforecast economic shocks, and scope to invest to raise productivity and so to lift real wages and living standards.
Let me set out the principles that inform the fiscal rules I have placed before the House today. First, the public finances should be returned to balance at the earliest date that is compatible with the prudent management of the economy. I judge, in current circumstances, that that will be in the next Parliament, after our EU exit is complete. In the interim, I have committed to reducing the structural deficit to below 2% of GDP by the end of this Parliament. Targeting a structural deficit means that I can let the public finances respond to any unforeseen short-term fluctuations in the economy through the operation of the so-called automatic stabilisers. The OBR forecast at autumn statement 2016 that I will meet this rule two years early. This leaves some headroom—about £27 billion—for a discretionary response to any further shocks, should such a response be necessary.
Secondly, I have committed to getting debt falling by the end of this Parliament. This will be the first time since the start of the century that debt has fallen. Again, the OBR forecasts that debt will begin falling two years before our rule requires.
Delaying the return to balance until the next Parliament not only ensures that we have fiscal headroom to respond to shocks, but means that the Government have scope to invest to improve the UK’s productivity. The productivity gap is the biggest challenge facing the UK economy. It has been said many times before, but I am going to say it again: it takes workers in Germany less than four days to produce what we produce in five days. That means that many British workers work harder—longer hours—for lower pay than their counterparts. This has to change if we are to build an economy that works for everyone.
Michael Fabricant (Lichfield) (Con)
My right hon. Friend is absolutely right to point to the productivity gap, but may I gently chide him by letting him know that in this respect the Nissan plant in Sunderland is second only to the plant in Yokohama in Japan—its headquarters? It is, outside Japan, the most profitable and productive engineering plant in the Nissan group.
Mr Hammond
It is always a pleasure to be gently chided by my hon. Friend, who is of course absolutely right. That is the conundrum about Britain’s productivity. We have some of the most fantastically productive companies and businesses—indeed, some of the most productive cities—in the world, but we also have some of the poorest examples of productivity performance. The challenge before us is to work out how to spread across the economy the best practice in productivity that we see in our economy so that all regions, and all corners and sectors of our economy, can share in this productivity performance and thus deliver the higher real wages and living standards that that implies. This is the biggest challenge facing the UK economy, but one that successive Governments have failed to do anything effective about.
Mark Field (Cities of London and Westminster) (Con)
I am certainly not in the mode of wanting to chide my right hon. Friend for anything in particular, but it is worth putting the productivity issues into context. It is also the case, as it has been during his time in office, not just as Chancellor but since 2010, that our unemployment rate has been rather lower, and that may have been a factor in the poor productivity that the UK economy has had relative to many of our European partners. This Government—or perhaps more importantly, British businesses—have made keeping employment rates a higher priority than the urgent need for improvements to productivity to which he refers.
Mr Hammond
My right hon. Friend, who represents one of the most productive sub-regions in the entire European Union, is of course right. There is a perfectly respectable economic argument that, as participation in the labour force increases, bringing more marginally productive workers into the labour force, that may have a depressing effect on labour productivity overall. However, the employment participation rates in Germany and in the UK are not all that different. I do not think we can explain a 30% productivity performance gap by differences in levels of participation in the economy. Indeed, there is much debate among economists about the cause of this productivity gap, and the cause of the generally poor productivity performance of developed economies over the past few years.
We chose at autumn statement 2016 to invest an additional £23 billion through a national productivity investment fund, which aims to raise productivity, support job creation, and boost real wages and living standards. Every penny we spend from this fund will be used to boost economic infrastructure, research and development, and housing. It will bring total investment in these areas to £170 billion over the next five years. It means that gross public investment will be at least 4% of GDP for the rest of this Parliament—that is higher than in any period between 1993 and the great crash.
Stephen Hammond (Wimbledon) (Con)
The Chancellor is right to place productivity at the centre of the economic problem, and the productivity fund will undoubtedly be helpful in infrastructure. Another challenge is to get the corporate sector back into investing. The factory of which my hon. Friend the Member for Lichfield (Michael Fabricant) spoke is a new one with new technology. Surely, one of the lessons that we can learn from his experience is that getting corporates to invest will boost productivity, and I wonder what measures the Chancellor is hoping to bring forward in that area.
Mr Hammond
My hon. Friend is absolutely right. Public investment in infrastructure is part of the story, as is public and private investment in skills. Increasing the stock of capital available for each worker to use is also part of improving labour productivity.
We know that business hates uncertainty, and the uncertainty that has been created by the Brexit vote has undoubtedly slowed down business investment decisions. However, the problem of productivity that we are looking at is not a short-term problem in response to the Brexit vote; it is a much longer-term challenge in the UK economy. Large companies in the UK are well capitalised, and their levels of capitalisation are similar to those of comparable businesses elsewhere. I suggest that there is a challenge over the capitalisation of smaller businesses in the UK, and that access to long-term capital in the UK is one of the challenges that we need to address. The Government undertook at autumn statement to conduct a review of the availability of patient, long-term capital for smaller businesses in the UK.
The money that I have just spoken about for public investment through the national productivity investment fund will provide the financial foundations for our industrial strategy, which was launched yesterday and builds on Britain’s strengths. Let me be clear that this charter is not consistent with Labour’s proposal to borrow at all times for anything that it terms “investment”. If any of my hon. Friends are thinking that that sounds horribly familiar, that is probably because it is essentially Gordon Brown’s old golden rule, which is the very antithesis of budget responsibility. We all know where that got us: an unsustainable boom in Government spending that took us into the great recession with the largest structural deficit in the G7. Labour’s big idea is to repeat the same mistake all over again. That is yet another demonstration that the Opposition are not willing to learn from the past and have no ideas for the future.
What I propose is different. The national productivity investment fund will be targeted at economic infrastructure projects, housing and research and development that will boost national productivity. The National Infrastructure Commission will ensure that our future infrastructure decisions are based on independent, robust analysis. We choose to invest in productivity not just because doing so can transform the growth potential of our economy, but because it contributes to addressing the social challenges that we face. Sustainable living standards, for all parts of our country and all sectors of our population, depend on our improving our productivity through better skills, opportunities to retrain, better infrastructure and better private investment. That investment is possible only because we are prepared to take tough decisions to maintain control of current spending.
As the OBR made clear last week in its fiscal sustainability report, the end of the Parliament is not the end of the challenge. That report contains some tough messages and some important early warnings. The OBR sets out clearly the significant challenges we will face as our population continues to age over the next half century. Driven by increasing life expectancy, low fertility rates and the retirement of the baby boomer bulge, our dependency ratio will go from 3.5 people of working age supporting each retiree to just 2.2 in 2066. The OBR projects that those demographic trends will lead to increased spending in age-related areas such as health, long-term care and the state pension, but that the same demographic and economic trends mean that revenues will remain broadly stable.
The OBR notes that we are not the only country facing those challenges. It also notes that the long-term figures are highly uncertain and should be seen as illustrative projections rather than precise forecasts. None the less, the potential impact on the public finances is significant.
On the assumption of no policy response—in other words, that the Government do nothing, which I promise hon. Members will not be the case—debt could rise to 234% of GDP by the end of the 50-year projection period, with two thirds of the increase since the 2015 report attributable to healthcare spending. In the rather nearer term, the report also shows that without further policy action we will not hit a surplus in the next Parliament.
That is why at autumn statement 2016 I reiterated that the tax and spending commitments for this Parliament set out in the 2015 spending review will be delivered, and we will meet our manifesto commitments to protect the budgets of priority public services. I also confirmed that the Government will review public spending priorities and other commitments for the next Parliament in the light of the evolving fiscal position at the next spending review. There will be more difficult choices to make before we have completed the job of restoring the public finances to health.
Controlling our welfare bill is a vital element of getting back to balance. At £220 billion, welfare represents a quarter of all Government spending. In the absence of an effective framework, spending on working-age benefits tripled in real terms between 1980 and 2014. By 2014, each person in work in this country was contributing, on average, £3,000 per year to the cost of working-age benefits. Action taken since 2010, including the welfare cap in the previous charter, has stabilised welfare spending, and we will maintain that stability.
The charter before the House introduces a new medium-term welfare cap, which is set to reflect the current forecast of eligible welfare spend, taking into account the policy changes made since the last Budget. The cap will apply to welfare spending in 2021-22, and performance against this cap will be formally assessed by the OBR once—in the year before that, 2020-21. In the interim, progress towards the cap will be monitored by the Government, based on the OBR’s forecasts of welfare spending. Shifting from an annual to a medium-term cap will avoid the Government having to make short-term responses to changes in the welfare forecast, while ensuring that welfare spending remains sustainable over the medium term.
Let me reiterate to the House what I have said previously: the Government will deliver the overall total of welfare savings already identified, but we have no plans to introduce further welfare savings in this Parliament beyond those already announced.
Michael Fabricant
My right hon. Friend is being very generous in giving way. He quite rightly points out that Brexit creates uncertainty, which business does not like, but on the welfare cap and overall welfare spending, can he identify any advantages from Brexit? Tighter controls on certain types of immigration might mean that the forecasts are lower than he anticipates.
Mr Hammond
My hon. Friend is of course right that we will have the ability to set our own immigration controls after leaving the European Union, and there could be an impact at the margin on welfare claims. I think the OBR would say, although this is for them, not for me, that that would probably have quite a marginal effect, as all the data suggest.
This and the previous Government have made significant progress in bringing this country back from the brink of financial collapse and fiscal ruin. The framework provided by our charter for budget responsibility played a major role. My predecessor aspired to eliminate the deficit entirely in this Parliament, but autumn statement 2016 revealed new fiscal pressures and the referendum result has created additional uncertainty in the economy. When the facts change, it is right to change plans. This charter strikes the right balance for our current circumstances. It is a credible plan to restore the public finances to health, with enough flexibility to support the economy in the short term and scope to invest in productivity to boost real wages and living standards in the medium term. It is a charter that will support Brexit, helping us through the short-term uncertainty and preparing us to seize the opportunities that lie beyond it. It is a charter that underpins our vision of an economy that works for everyone, and I commend it to the House.
John McDonnell (Hayes and Harlington) (Lab)
The motion before the House rewrites the rule by which the Government intend to manage their fiscal policy, as the Chancellor has set out. This rewriting is urgently needed because the Government’s previous fiscal rule lies in tatters. As we argued when the old rule was introduced in November 2015, it was a political device rather than a sound economic tool.
We argued that the commitment in the previous version of the charter to reach a budget surplus by the end of the decade was unachievable. That became obvious by the Budget of last year, when the previous Chancellor had to stretch budget accountancy to breaking point simply to claim that the economy was still on course to achieve the target. That was well before the referendum. By the summer, the target had to be abandoned entirely. It was dropped because the surplus target was never about sound management. No credible economist could be found to support the surplus target because it had no plausible economic justification. The Treasury Committee rightly concluded that the old surplus rule was not
“credible in its current form”.
The previous Chancellor made a political choice to impose the surplus target. Therefore, the austerity measures that the target required were not just cruel, but unnecessary. Members will recall that those measures meant that people living with disability were suddenly threatened with the loss of their independence, and those going to work, doing the right thing, looking after their children and just attempting to get by were suddenly faced with serious cuts to their income. The tragedy is that all those sacrifices and all that suffering were in vain.
The record of this Government in office speaks for itself: at the same time as imposing grinding spending cuts, they have added, as of this morning’s figures, almost £700 billion to the national debt. That is not just more than the previous Labour Government borrowed; it is more than the borrowing of every post-war Labour Government added together. It is equivalent to £25,600 of extra debt for every household in the country.
Mr Philip Hammond
For clarification, will the right hon. Gentleman confirm that it is still his policy to borrow another £500 billion on top of that?
John McDonnell
That is interesting; I am pleased the Chancellor has raised that point. We have seen £700 billion borrowed over the last seven years as a result of economic failure. The Labour party’s policy, based on the recommendations of the CBI and others, is to spend £500 billion on investment over a decade. There would be £200 billion of mainstream direct funding and £100 billion would go to a national investment bank, which would prise from the private sector and elsewhere, on European Investment Bank rates, £250 billion. Such long-term investment in our economy has been recommended. Infrastructure investment is required to tackle the productivity crisis that has been caused by his Government.
John McDonnell
Don’t worry, Madam Deputy Speaker; I was enjoying that.
The reality is that this is Government investment, and those figures are just not acceptable. Investment of £5,000 per head in London compared with £400 in the north-east is an unacceptable level of inequality that has to be challenged. The right hon. Gentleman is usually fair, so I am sure that he would accept that, no matter how much we are both champions for our capital city.
While the shift in rhetoric is welcome, it must be backed up by meaningful action, and that is where the revised charter still falls short. It is good to see the Chancellor taking on board Labour’s recommendations and ditching the surplus target. In doing so, he has held out at least the possibility of lifting some of the burden of the austerity measures that have led to crises in health and social care. I deeply regret, however, that he failed to take that option at last year’s autumn statement. His failure to act on both NHS and social care funding has contributed to the worst funding crisis in the NHS for decades and a social care system pushed beyond breaking point.
An image can sometimes capture the plight of a particular situation. A couple of years ago, it was the image a child’s body on the shores of the Mediterranean that brought to our attention the plight of people in the refugee crisis. Last year it was that photo of a child in an ambulance, covered in blood and dust after being pulled out of the debris in Aleppo. Two weeks ago, the image that put the NHS crisis into focus for me was that of a child below the age of five, in a hospital corridor, being treated on two plastic chairs that had been pushed together. That is unacceptable in the sixth richest country in the world, and it is the result of a failure to address underfunding in the autumn statement.
I have written to the chair of the Office for Budget Responsibility to ask whether it will look into providing an assessment of healthcare funding against expected need. In the last month, the British Red Cross has described the ongoing situation as a “humanitarian crisis”. The Government’s response has been to play down the situation, despite the volume of continuing complaints from frontline NHS staff. I strongly believe that this is leading to widespread public distrust of the Government’s presentation of funding and support for the NHS and social care. It makes sense to attempt to provide an objective assessment of the real needs of the NHS to help to prevent the real-terms funding cuts that have taken place under this Government. Let me say to the Chancellor again that he can and must take action now to ensure that both health and social care are properly funded in this period of crisis.
I am afraid that the charter represents only the smallest improvement on the previous dire fiscal policy. Unbelievably and, I think, contrary to all advice, it still attempts to keep investment spending within the spending control framework. That has already been criticised by experts from the Institute for Fiscal Studies. Keeping the investment spending cap inside the overall spending cap means that every pound delivered for investment comes at the expense of possible spending on public services. At a time when the capital costs for the Government are close to their lowest in history, that choice makes little sense. As we face Brexit, the challenge for us all is to think boldly about how this country can respond, and the amended rule falls far short of that.
Mr Philip Hammond
What is the right hon. Gentleman’s position on public debt? Ours is set to peak at just over 90% of GDP, yet he is setting out a course of action that would cause it to rise indefinitely—it would go on rising forever. Is he comfortable with such a position?
John McDonnell
That is clearly not the case. If the Chancellor had looked carefully at Labour’s fiscal credibility rule—[Interruption]—and, indeed, adopted it, he would have seen that what we would actually be doing is reducing debt in the lifetime of a Parliament as a result of ensuring that we invest properly in tackling the productivity gap, in bringing people back to work and in ensuring that they have the highest skills. Those skills will produce the high wages that will make it possible to fund the economy through a tax regime that is fairer than the existing one.
It simply will not be possible to deliver the scale of support and investment that is needed to rebuild our economy within the strictures of the rules that the Chancellor is proposing. We will get half-measures and rhetorical commitments. What we will not get is a serious commitment to delivering the economic transformation that we now need, because that would require the Government to take on a few too many vested interests. Such a commitment would involve a serious attempt to clamp down on tax avoidance, reversing handouts to giant corporations and the super-rich, and ending—in reality, not just in rhetoric—the colossal imbalance in investment between a few favoured places in the south-east and the rest of the country.
In changing the rule, the Government are admitting their prior failure, but then failing to address its causes seriously. Investment is too low, productivity is too low and wages are too low. Labour’s own fiscal credibility rule follows the recommendations of world-leading economists, business organisations and trade unions by keeping day-to-day spending entirely separate from the Government’s plans to invest. In contrast, this Government’s fiscal rule is excessively tight on Government investment at the same time as being excessively loose on Government control.
The primary reason for introducing a rule is to show that a Government’s fiscal plans are consistent and planned well in advance. That allows businesses and investors themselves to plan, and reassures markets that a Government will not attempt to spend excessively. An ideal rule should be the basis of the strict enforcement of borrowing limits—we accept that—but it should also contain the flexibility for Governments to respond when unexpected shocks occur. Getting the balance between these two points is difficult so, following the best available economic advice, Labour’s fiscal credibility rule places the power to determine when we are outside normal times in the hands of the Monetary Policy Committee, which can declare under the terms of the fiscal rule that it is necessary for fiscal policy to adjust in response to an unanticipated shock. The freedom to determine the fiscal stance is a significant power for a Government, so it has to be used responsibly.
Labour does not believe that it is desirable to return to the days when Governments would produce their own economic forecasts and then decide on their own terms where the business cycle was and how much extra fiscal leeway they were allowed. That meant that the Treasury had excessive power to determine fiscal policy, and that in turn meant Governments would have the power to favour short-term quick fixes at the expense of longer-term action to rebuild the economy. A credible fiscal rule should not allow that to happen. It should be bolted into place, compelling a Government to act for the longer-term good.
Labour’s fiscal rule does that by handing power to recognise economic shocks over to the MPC, yet the new charter for budget responsibility appears to hand the power to recognise economic shocks straight back to the Treasury. It returns us to the bad old days when short-term Treasury thinking would be allowed to dominate economic policy making. It could mean that once again Conservative Chancellors would be tempted to ease off on or tighten up their spending not because of the economy, but because an election is due. In other words, it largely defeats the purpose of having a fiscal rule in the first place. Instead of breaking with the short-term thinking of the past, it bolts it more firmly into place. How can the rule be taken seriously when it is so obviously open to being undermined? In other words, the revised charter leads us dangerously close to the worst of both worlds. It is excessively tight on Government investment when building a post-Brexit economy should demand Government intervention, yet it is excessively loose on the Government themselves, handing too much power back to the Treasury.
The Chancellor and the Government are squandering an opportunity here. They could have ditched the failed existing fiscal rule and put in place a new fiscal mandate that would grant the space needed to rebuild and transform our economy as we prepare for Brexit. Instead, they have handed more powers back to the Treasury while the Chancellor has insisted on maintaining austerity spending cuts. No part of the Government’s new fiscal rule can be supported and we will be voting against the charter as a whole.
George Kerevan (East Lothian) (SNP)
I am somewhat in awe that you are back in your place, Mr Speaker.
The Chancellor was very measured in his defence of the new charter, and his presentation was without the usual gimmicks and flamboyance of his predecessor, and was none the worse for that, but I have read my Sherlock Holmes and it is the dog that did not bark in the night that we have to look out for. It is only 15 months since we last debated a new set of Treasury rules. I am in favour of such rules; rules are put in place to create stability and sustainability in the national finances, to give confidence to lenders, and to restrain politicians from using the public purse for party advantage. That said, it should be obvious to anyone that if this Conservative Government are bent on rewriting the fiscal rulebook only 15 months after the last time they did so, their motivation and seriousness are open to question.
The Chancellor did not address that serious point. If he keeps changing the rules, even though he stands up and makes a very measured defence of the new set of rules, he has to explain why he keeps changing them if he wants people to have confidence in the next set of rules, and the Chancellor patently failed to do that.
Mr Philip Hammond
Let me explain to the hon. Gentleman. We suffered an exogenous shock that, according to the OBR, implied an extra £84 billion of additional borrowing over the forecast horizon. I would say that when the facts change, we should change our plan.
George Kerevan
That is not what rules are for. The rules should not change when the situation changes; the policy should change. The rules are there to protect our sustainability and the ability of the markets to feel confidence in the Government. Yes, of course Brexit produced an exogenous shock, the full force of which has yet to arrive in the British economy. And, yes, the Chancellor is preparing the ground for when the wave hits the economy, but the point is that that is a policy issue. Why should the rules change? The rules are there to protect sustainability. If they change every time the circumstances change, what is the point of having rules?
George Kerevan
I thank the right hon. Gentleman for illustrating clearly the point that I am trying to make. Conservative Members are saying that rules are a hostage to fortune. They are saying that the rules will change when the circumstances change and when they need to change them to get the result they want. What, therefore, is the point of having rules at all? The right hon. Gentleman confirms the point that the shadow Chancellor and I are putting forward, which is that rules are flexible politically, and that they are therefore not rules.
We can prove this by looking at this Government’s borrowing record. Between 2010, when this Government were elected, and 2015, the national debt rose by 50%. The latest forecast from the Office for Budget Responsibility suggests that between 2010 and the end of this Parliament, the national debt will have almost doubled. The Conservative Government cannot continue to blame that on the former Labour Government. This Government have doubled the national debt during their tenure of office. The Chancellor and his predecessor have got away with that because they keep coming to the House with rules and pretending that they are fiscally responsible, yet they have doubled the national debt.
Mr Philip Hammond
We must remember the size of the deficit that we inherited in 2010. There would have been a way of avoiding doubling the national debt, but it would have involved an even harsher period of consolidation of the public finances. The hon. Gentleman’s party and the Opposition voted against every single measure to consolidate. The previous fiscal rules called for a surplus in 2020-21. The hon. Gentleman seems to be advocating a policy response that would squeeze the economy harder in order to meet the old rules in the new circumstances. Is that what he would like?
George Kerevan
I am glad that the Chancellor has now admitted that this Government will have doubled the national debt by the end of this Parliament; so much for their fiscal prudence. I am happy to admit that, yes, actually I was in favour of doubling the national debt. That does not give me a problem. In fact, I think that that is what saved the economy. What I cannot abide is the rank hypocrisy of a Government who keep coming up with rule after rule in order to pretend that they are fiscally prudent—
Charter for Budget Responsibility: Autumn 2016 Update
Lord Hammond of Runnymede Excerpts(7 years, 10 months ago)
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The Chancellor of the Exchequer (Mr Philip Hammond)
Today I have laid before Parliament an updated charter for budget responsibility. The updated charter sets out a new fiscal framework, changes to the operation of the welfare cap, and minor amendments to text on the operation of debt management.
The updated charter laid today was published in draft on 23 November 2016. The charter was first published in draft as it includes modified guidance to the Office for Budget Responsibility. Under section 6(4) of the Budget Responsibility and National Audit Act 2011, if the Treasury proposes to modify the guidance to the Office for Budget Responsibility included in the charter, a draft of the modified guidance must be published at least 28 days before the modified charter is laid before Parliament.
Since publishing the charter in draft one operational amendment has been made, requiring the Debt Management Office to produce a debt management report annually rather than as part of the budget report. This change has been made to facilitate the move to a single fiscal event. The change does not modify guidance to the Office for Budget Responsibility.
A debate and vote in the House of Commons on the updated charter has been scheduled for Tuesday 24 January 2017.
[HCWS417]
Oral Answers to Questions
Lord Hammond of Runnymede Excerpts(7 years, 10 months ago)
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Chris Davies (Brecon and Radnorshire) (Con)
The Chancellor of the Exchequer (Mr Philip Hammond)
The only way to reduce debt sustainably is to return the public finances to balance. Our new fiscal rules commit us to doing that as soon as possible in the next Parliament. We have already reduced borrowing as a share of GDP by almost two thirds from the post-war peak that we inherited in 2010, and we are forecast to borrow less than 1% of GDP by the end of this Parliament.
Chris Davies
I thank the Chancellor for his answer. Government debt interest sits at around 5% of overall Government spending, which is equivalent to nearly 20% of the overall health budget. Would my right hon. Friend consider paying down our debt more swiftly to relieve the strain that debt interest is putting on the public finances?
Mr Hammond
We are committed to reducing debt while at the same prioritising investment in high-value infrastructure that will enhance our productivity. Of course, the only way we can pay down debt is to generate a current surplus, which means more tax or less spending. The trajectory that I set out at the autumn statement is the right one for this country in the circumstances. I intend to stick to that and ensure that we get the public finances back into balance as early as possible in the next Parliament.
Alison McGovern (Wirral South) (Lab)
But the total of UK Government debt owned by foreign investors now sums more than half a trillion pounds for the first time ever. As the value of sterling tumbles, what assessment has the Chancellor made of the risk of the cost of servicing our debt rising unsustainably?
Mr Hammond
The way it works is that the pricing of new Government debt is determined by the auctions around new issuance, which, clearly, is bought at current exchange rates by foreign purchasers of debt. The hon. Lady makes a good and important point: currency volatility, rather than the actual level of the currency, does introduce an additional dimension for foreign purchasers of UK Government debt. I have said many times that the process that we are embarked on of negotiating our exit from the European Union creates some uncertainty, some of which we have seen manifesting itself in the currency markets. The sooner we can get through that period of uncertainty and have clarity about our future relationships with the European Union, the better for markets, business and people in this country. The purpose of the speech that the Prime Minister is making right now is to start to give some clarity to the situation.
William Wragg (Hazel Grove) (Con)
The Chancellor of the Exchequer (Mr Philip Hammond)
We have committed to returning the public finances to balance as soon as possible in the next Parliament, and to reducing the structural deficit to below 2% of GDP by the end of this Parliament. As I have said, that strikes the right balance between restoring the public finances to health and giving ourselves enough flexibility to allow us, if necessary, to support the economy in the short term as we go through this period of greater uncertainty. We have also been able to commit an additional £23 billion to a national productivity investment fund to improve our economic productivity.
William Wragg
Does my right hon. Friend agree that the resilience of our economy is best served by what the Prime Minister has said today, which is that Britain will be leaving the single market with no ifs and no buts?
Mr Hammond
For six months, we have kept open as many options as possible while we review the way forward in this negotiation with the European Union. We have heard very clearly the views and the political red lines expressed by other European leaders. We want to work with those leaders and to recognise and respect their political red lines. That is why the Prime Minister is setting out right now a position on which we will go forward, understanding that we cannot be members of the single market because of the political red lines around the four freedoms that other European leaders have set. She is expressing an ambitious agenda for a comprehensive free trade arrangement with the European Union that will allow our companies to trade in Europe, and European companies to trade in Britain, while minimising disruption to business patterns and to pan-European supply chains.
Stephen Timms (East Ham) (Lab)
EU banks use passport arrangements to operate in the UK, and so provide us with jobs and the Exchequer with revenue. Given what the Prime Minister is saying at this moment, those arrangements are clearly at risk. How hopeful is the Chancellor that passporting will survive the exit from the European Union?
Mr Hammond
As the right hon. Gentleman says, EU banks use passporting to operate in the UK, and of course, vice versa: UK banks use passporting to operate in the European Union. It is important that EU banks are able to continue operating in the UK, and that UK banks are able to continue operating in the EU. He will know that City UK, the lead City pressure group on this issue, took the strategic decision last week to stop pushing for passporting rights and to focus instead on what I would describe as an enhanced equivalence regime. The important thing is not the mechanism, but the end result, and that is what the Prime Minister will set out today.
Mr Andrew Tyrie (Chichester) (Con)
The Treasury Committee has challenged whether the Office for Budget Responsibility’s sustainability reports—the latest such report was published just an hour ago—are worth the effort, given that they amount to 50-year forecasting. The OBR’s latest effort does not even try to take account of Brexit at all. It is required to do this work by statute. Does the Chancellor not think that it might be a good idea to revisit that commitment?
Mr Hammond
My right hon. Friend has a point in one sense, in that economic forecasters admit that even with a five-year forecast, there will be a high degree of uncertainty about accuracy. On a 50-year forecast, there will be a very high degree of uncertainty indeed, but we will see how the debate goes on the fiscal sustainability report that is published today. I suspect that it will act as a very useful catalyst for discussing some of the really important strategic issues that we face as a nation, not in the white heat of immediate political debate, but over a much longer term—over a 50-year period—so that we can think about where we go in the balance between public spending and taxation, and how we support our vital public services.
Kirsty Blackman (Aberdeen North) (SNP)
Mr Hammond
My assessment is that by setting out our agenda and by setting out clear objectives, as the Prime Minister is right now, we are meeting the first ask of our European partners, which is to be clear about what we want. We are recognising the political red lines they have set out and saying that we will respect them. That is the first step towards sensible engagement with our European Union partners to reach an outcome that is positive for the UK and for the European Union. That of course must include freedom for financial services firms to continue doing their business.
Mr Speaker
I was going to call the hon. Member for Coventry South (Mr Cunningham), but he does not seem to be standing—
Mr Cunningham
Mr Hammond
What we have said is that where EU funding is awarded to projects involving universities, businesses, external research institutes and farmers between now and the point of our departure from the European Union, provided those awards meet our value-for-money criteria and have the support of the UK or devolved Administration Department responsible, the Treasury will underwrite those awards. We expect that in any settlement with the European Union, the Commission will go on paying those awards after we have left, but if it does not we will stand behind them.
Mr Philip Hollobone (Kettering) (Con)
Many small businesses in Kettering are supplied by other British firms and sell their goods and services to British consumers, yet all are affected by often unnecessary EU regulation. Will the Chancellor join efforts post-Brexit to reduce this burden as quickly as possible?
Mr Hammond
The remedy to the problem my hon. Friend sets out will lie in the hands of this Parliament once we repatriate the acquis in the great repeal Bill.
Stewart Hosie (Dundee East) (SNP)
In the seven years to 2014, Scotland’s trade with the EU rose by 20%, twice the rate of growth in trade to the rest of the UK and vital for a resilient economy. Today’s hard Tory Brexit puts that at risk, but is this not also a kick in the teeth to many of those who voted leave believing that a European economic area/European Free Trade Association-type arrangement would be put in place to mitigate the damage done?
Mr Hammond
I reject the hon. Gentleman’s analysis. We are engaging constructively with the real world and recognising the political red lines of our European Union partners. If we do not recognise them, frankly, we are banging our heads against a brick wall. They have to recognise our political red lines, we have to recognise theirs, and then we need to work together to find a pragmatic solution that works for all the people of the UK within those red lines, and that is what we are doing.
Stewart Hosie
As we are looking for a pragmatic solution, Scotland’s trade with the rest of the world over the same timeframe grew by 50%, driven by EU trade agreements. Given that it takes an average of 28 months to conclude a single agreement, how many pragmatic decades does the Chancellor believe it will take to put in place the trade agreements that we need to mitigate the damage of a hard Tory Brexit?
Mr Hammond
I am disappointed to hear the hon. Gentleman resorting to the soundbite; he is normally better than that. The discussions I have had with third countries that have free trade agreements with the European Union suggest that there is a strong appetite for a quick and simple agreement with the UK so that, as we leave the European Union, we can immediately enter into a successor agreement with those countries—Korea, for example—that will allow us to continue trading with them on the same terms.
John McDonnell (Hayes and Harlington) (Lab)
At the weekend, the Chancellor told a German newspaper—not this House, you will notice, Mr Speaker—that he is prepared to turn this country into a tax haven. If that means competing with the likes of Ireland on a 12.5% corporation tax rate on top of existing Tory tax cuts it means, according to the House of Commons Library, giving away more than £100 billion to corporations over the next five. That is equivalent to almost 5p on the basic rate of income tax. How then does the Chancellor ever propose to solve the funding crisis in the NHS and social care, given that this morning the Office for Budget Responsibility thinks that public finances are on an unsustainable path?
Mr Hammond
Let us take that question apart. There are two points. First, the OBR’s 50-year forecast sets out a possible outcome if the Government take no action. As I made very clear in the autumn statement, we are acutely aware that action will be required in order to return the public finances to balance. Secondly, with regard to my interview with Welt am Sonntag, what I said very clearly—I am sorry if this did not come across in the UK reporting, but the right hon. Gentleman should read the original—was that Britain wants to remain in the European mainstream, with its economic and social model, but that can happen only if we get a sensible Brexit deal for continued access to the European market. If we do not, the people of this country will not simply lie down and accept that they will be poorer. We will do whatever it takes to maintain our competitiveness and protect our standard of living.
John McDonnell
The threat is there on the record: this country will be a tax haven, according to the threats the Chancellor has issued today. We know from what the Prime Minister is saying right now that she is intent on pulling up the drawbridge and leaving the single market, and possibly the customs union, cutting us off from one of the largest markets on the planet, threatening jobs and public finances. This is not a clean Brexit; it is an extremely messy Brexit. We can already see the consequences in the rise in the rate of inflation. With real living standards squeezed by this policy announcement, is it not time for the Chancellor—I appeal to him—to reconsider his cuts to in-work benefits and withdraw them in full in the Budget in March?
Mr Hammond
No. What the Prime Minister is setting out today is an ambitious agenda for a Britain engaged in the world, and a Britain engaged with the European Union. What she is setting out is a broad-based offer for future collaboration on trade, investment, security, education, technical and scientific areas, and many other matters. We want to remain engaged with the European Union, and I am confident that the approach the Prime Minister is setting out today will allow us successfully to negotiate a comprehensive future relationship with the European Union.
Several hon. Members rose—
Clive Efford (Eltham) (Lab)
The Chancellor of the Exchequer (Mr Philip Hammond)
Households’ financial positions have improved. Household debt has fallen from 160% of household income in quarter 1 2008 to 144% in Q3 2016. UK households have undertaken the second-largest amount of deleveraging in the G7. However, we should be alert to signs of a recent reduction in the level of household savings. The savings ratio is now—in Q3 2016—at 5.6%, which is down from 6.6% in Q3 2015.
Clive Efford
Notwithstanding that, household debt is very high, and housing costs are a big proportion of households’ expenditure. Has the Chancellor made an assessment of the impact of an interest rate increase on growth, given that that growth is driven by consumer spending?
Mr Hammond
Yes. The Bank of England makes regular assessments of the impact of changes in interest rates—that is a central part of the modelling work that it does. The hon. Gentleman is absolutely right that one of the drivers of the relatively high household debt levels in this country is our housing model, with relatively high percentages of home ownership.
Robert Jenrick (Newark) (Con)
The Governor of the Bank of England has identified that two of the most serious challenges to the economy today are levels of household debt and the falling pound. Both of those are made worse by the widespread belief among the general public that interest rates are not going to go up. What more can the Government and the Governor of the Bank of England do to signal to the public that interest rates will rise, and not fall, in the near future?
Mr Hammond
That is not a matter for the Government, because, as my hon. Friend knows very well, interest rates are a matter for the Monetary Policy Committee of the Bank of England, and it is up to the Governor and individual members of the Monetary Policy Committee to signal as they see fit.
Rebecca Long Bailey (Salford and Eccles) (Lab)
TUC analysis published last week showed that unsecured household debt is at a record high. Even the Bank of England voiced concern yesterday that the UK was relying on consumer spending rather than exports and investment to boost growth, which bodes poorly for the future. Does the Chancellor acknowledge that such high levels of household debt are indicative of the fact that the Government’s economic strategy simply is not working, especially for most families who are now struggling to get by on their incomes alone?
Mr Hammond
No, I do not accept that at all. What I do accept is that the extraordinary performance of the UK economy over the last six months, which has defied many predictions, has been largely driven by consumer behaviour. As I just set out in my response to the hon. Member for Eltham (Clive Efford), the savings ratio has declined, so consumers are feeling confident, and they have been spending money rather than saving it over the last six months.
Rebecca Long Bailey
I invite the Chancellor to meet struggling families in my constituency and, indeed, across the rest of Britain. Even the Office for National Statistics reported on 10 January that non-retired households have less money on average than before the economic crash. Chronic low pay, lack of opportunity and Government cuts to support mean that they are desperately trying to find ways to make ends meet on a monthly basis using debt. Will the Chancellor therefore confirm what protection he will offer these families should inflation rise significantly as a result of the pound’s weakness since Brexit and, indeed, in the light of the Bank of England’s suggestion yesterday that interest rates could go up?
Mr Hammond
The hon. Lady is right, of course, that the declining value of sterling will have an impact on inflation, and we have to take that into account as it feeds through the economy. The OBR signalled in its autumn statement report how it expects that to occur. At the time of the Budget on 8 March, we will get new reports from the OBR in the light of currency movements since the autumn statement, and I will report to the House again then.
Fiona Mactaggart (Slough) (Lab)
The Chancellor of the Exchequer (Mr Philip Hammond)
The Government do not comment on currency movements and we do not target an exchange rate, but I will tell the House that the pound has spiked in the last few minutes while the Prime Minister has been speaking. The vote to leave the EU has obviously caused some uncertainty in the movements of financial markets. More generally, the fundamentals of our economy over the last couple of years have been strong.
Mr Speaker
I think what the Chancellor means is that he does not comment on currency movements unless he does.
Fiona Mactaggart
But is it not the case that No. 10’s office briefed that the pound would fall as a result of the Prime Minister’s remarks today? Did it do that in a cynical attempt to get the soundbite that the Chancellor has just sought to achieve?
Mr Hammond
I draw a distinction between providing the House with information and commenting on that information—I would not dream of doing the latter. The other thing I would not dream of commenting on is any operations that No. 10 might undertake, which are well beyond my pay grade.
James Morris (Halesowen and Rowley Regis) (Con)
The depreciation of the pound during the past few months has been of significant benefit to west midlands exporters, particularly those exporting outside the European Union. Does the Chancellor agree that whatever arrangements we come to for access to the single market after we leave the European Union, they must not constrain west midlands exporters from growing their trade outside the European Union?
Mr Hammond
On the contrary, the arrangements must support west midlands exporters in that endeavour. We still have a very large current account external deficit, and we need to bring our trade into better balance. One of our objectives in concluding the exit arrangements from the European Union will be to support that.
Gerald Jones (Merthyr Tydfil and Rhymney) (Lab)
Carol Monaghan (Glasgow North West) (SNP)
The Chancellor of the Exchequer (Mr Philip Hammond)
My principal responsibility remains delivering near-term measures to ensure stability and resilience as the UK exits the EU, while also addressing the UK’s long-term productivity challenge. My immediate focus is on preparing the last ever spring Budget for delivery on 8 March.
Carol Monaghan
Many of my constituents are concerned about the future of the Green Investment Bank in relation to possible asset stripping, the worth of the golden share and the suitability of the buyer. What is the Department doing to ensure that the UK taxpayer is given a fair deal on the sale of the bank and the bank retains its green focus?
Mr Hammond
Those are two of the criteria that we have set: there should be value for money for the taxpayer; and the bank’s focus for future operations should be retained and protected. We are reviewing the sale process as it goes forward, and we will make sure that those outcomes are protected.
Victoria Atkins (Louth and Horncastle) (Con)
Mr Hammond
I am not only a quick reader, but able to read the report while also answering questions in the House.
The OBR’s report shows that, under certain circumstances, the UK public finances will come under increasing pressure over the next 50 years. As I said earlier, this creates a catalyst for a discussion, which we need to have, about how we maintain the sustainability of our crucial public services, given the pressures, including demographic pressures, that they will face. I believe that the report serves a useful purpose. Given that the point 50 years out is sufficiently far away, I hope that we will be able to have a mature, cross-party discussion about how we address these issues in the long term.
Steven Paterson (Stirling) (SNP)
Mr Hammond
The Office for Budget Responsibility set out its projections under different scenarios at the autumn statement. It is the OBR that makes the forecasts. It will, of course, produce a revised set of forecasts that will be published on 8 March—Budget day.
Derek Thomas (St Ives) (Con)
Mr Philip Hammond
As the hon. Gentleman knows, the 0.7% target is enshrined in primary legislation, and the Government have no intention of changing that.
Ben Howlett (Bath) (Con)
Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)
The International Monetary Fund yesterday highlighted widening inequality and stagnation as key drivers of social dislocation, while the Institute for Fiscal Studies has recently warned of the biggest pay squeeze in the UK for 70 years. What is the Chancellor’s strategy to ensure that growth in our economy benefits everybody?
Mr Philip Hammond
Income inequality has been falling, but of course we face challenges as the depreciation of sterling works its way into inflation in the economy. That is an issue on which we will remain very much focused, and I will address it in more detail in the Budget.
Jeremy Quin (Horsham) (Con)
Alongside other elements driving recent extremely successful purchasing managers’ index surveys were seven consecutive months of export growth. Does the Minister agree that this is a fine way to underpin our already record rates of employment?
Andrew Selous (South West Bedfordshire) (Con)
There are currently 87,000 ultra-low emission vehicles on our roads, but the Committee on Climate Change says that we need 1.7 million by 2020. What more can the Treasury do to help us to reach that challenging target?
Mr Philip Hammond
I recognise my hon. Friend’s concern. This matter was on my agenda when I was Transport Secretary in 2010. The roll-out of ultra-low emission vehicles has been disappointing—it has not been as fast as I would have hoped—and that will be one of the issues we consider as we try to respond to concerns about air quality, which have been reinforced by recent court decisions requiring the Government to review their approach on that.
Alan Brown (Kilmarnock and Loudoun) (SNP)
In his previous Budget, the Chancellor stuck in a £7 billion investment line for the year 2021-22, which is beyond the remit of this Parliament, so will he explain what that money is for?
Mr Hammond
It is customary to present forecasts for fiscal events over the forecast period which, as we progress through this Parliament, will stretch beyond its end. That is how it has always been done, and it would not be helpful to give the House only a shorter horizon.
James Berry
Thank you, Mr Speaker. This is a London-related question. Major infrastructure investment will form a vital part of our economy in post-Brexit Britain. Will my right hon. Friend confirm his support for London’s major infrastructure project—Crossrail 2?
Mr Hammond
The Government will, of course, consider all proposals for infrastructure investment on their merits. When the industrial strategy Green Paper is published, it will set out the Government’s approach to prioritising infrastructure to support the economy.
Bill Esterson (Sefton Central) (Lab)
When the Chancellor considers the effect of bringing in quarterly reporting, will he look at the figures showing that only 25% of our smaller businesses have maintained electronic accounting records and that 38% lack basic digital skills? Will he listen to what the Chair of the Treasury Committee said when he described this as a potential “disaster”?
Jake Berry
Thank you, Mr Speaker. On the subject of berries, does my right hon. Friend the Chancellor share my concern that too many JAMs are becoming jam tomorrow with the ballooning of household debt? What steps will he take to stop inappropriate and irresponsible lending by credit card companies and banks to low-income households?
Mr Philip Hammond
The Government and the regulatory authorities take appropriate measures to prevent inappropriate lending and to make sure that credit products are not mis-sold, and we will continue to do so.
Several hon. Members rose—
George Kerevan (East Lothian) (SNP)
Thank you, Mr Speaker; it is your presence that makes me happy.
While the Chancellor has been answering questions, the Prime Minister has said in her Lancaster House speech that the UK will most likely continue to pay into EU budgets. Will the Chancellor acquaint the House of that?
Mr Hammond
We have always said that if, as part of our future arrangements with our former European Union partners, we continue to collaborate in certain areas, such as scientific and technical research programmes, we will of course have to expect to contribute. All this is for the negotiations ahead. The Prime Minister has today set out a 12-point plan for Britain’s future relationship with the European Union, which is exactly what our partners have been demanding from us. I hope that this will now signal the beginning of serious engagement on Britain’s future relations.
Jeremy Lefroy (Stafford) (Con)
I heard this morning that an overseas insurance company had chosen Zurich over London as its European base because it felt that the Swiss authorities were much quicker to engage with it than the London authorities. Will the Chancellor ensure that we are the most competitive financial services market in the world and that we really take overseas investment seriously?
Mr Hammond
Of course. I thought that my hon. Friend was going to tell me that the company had chosen an EU location over London, so I am interested to hear him say that it has chosen Zurich—the only other possible non-EU location. I will look at the issue that he raises. It is our objective to have the most attractive location on this continent for inward investment and for foreign businesses to do their business.
Kelvin Hopkins (Luton North) (Lab)
Inflation is still below the Monetary Policy Committee’s official target, and the economy has long been at greater and more worrying risk of deflation than inflation. Will the Chancellor therefore be seeking to dissuade the Governor of the Bank of England from any thoughts of raising interest rates, which would simply inflict wholly unnecessary damage on the economy?
Mr Hammond
No. It is not for me to dissuade or persuade the Governor of the Bank of England in relation to interest rate policy. However, I will say this to reassure the hon. Gentleman: although this morning’s inflation figure—1.6%, as measured on the consumer prices index—is below the Bank of England’s target rate, the forecasts of the OBR and, indeed, the Bank suggest that the figure will meet and exceed the target rate later in the year.
Several hon. Members rose—
Economy
Lord Hammond of Runnymede Excerpts(7 years, 11 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Mr Philip Hammond)
Today I can inform the House that I will deliver my spring Budget statement on Wednesday 8 March 2017.
[HCWS394]
ECOFIN
Lord Hammond of Runnymede Excerpts(7 years, 11 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Mr Philip Hammond)
A meeting of The Economic and Financial Affairs Council (ECOFIN) was held in Brussels on 6 December 2016. EU Finance Ministers discussed the following items:
Early morning session
Ministers were briefed on the outcomes of the 5 December meeting of the Eurogroup and the European Commission presented an update on the current economic situation.
Investment plan for Europe
Ministers discussed proposals for the investment plan for Europe and reached a general approach on the Commission’s proposal to amend the European Fund for Strategic Investments (EFSI) legislation as part of the planned extension beyond its original 2015-2018 lifetime. Ministers also discussed draft council conclusions on measures to tackle bottlenecks to investment identified under the third pillar of the investment plan for Europe.
Anti-tax-avoidance directive 2
Ministers discussed the Commission’s proposals on the anti-tax avoidance directive (ATAD2).
Enhanced co-operation in the area of financial transaction tax
Ministers received an update on the proposal for a Council directive implementing enhanced co-operation in the area of financial transaction tax.
Banking union: risk-reduction measures
The Council presidency presented its new proposals, published on November 23, to revise the capital and resolution frameworks for banks and large investment firms, which was followed by an exchange of views.
Anti-money laundering directive
The Council presidency provided an update on the discussions for proposal for a directive on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.
Current financial service legislative proposals
The Council presidency provided an update on current legislative proposals in the field of financial services.
VAT digital package
The Commission presented on the digital single market VAT package.
Deepening the economic and monetary union: Follow-up on the 5 Presidents’ report
The Commission provided information on the 5 Presidents’ report: Completing Europe’s economic and monetary union.
Improving the predictability and transparency of the stability and growth pact
Ministers endorsed draft Council conclusions on improving the predictability and transparency of the stability and growth pact.
Report on strategic issues in the area of customs by the high level group of customs directors general
Ministers were informed about the outcome of the pilot meeting of the high level group of directors general for customs policy, taxation and customs co-operation on 25 October 2016.
European semester 2017
The Commission presented to Ministers on the publication of the 2017 annual growth survey (AGS) and alert mechanism report (AMR), which was followed by an exchange of views.
Implementation of the Banking Union
Ministers discussed the current state of play regarding implementation of banking union within the eurozone.
Fight against the financing of terrorism
The Commission gave a presentation on the fight against the financing of terrorism.
Capital Markets Union
The Commission provided information on the capital markets union.
[HCWS349]
ECOFIN: 6 December 2016
Lord Hammond of Runnymede Excerpts(7 years, 11 months ago)
Written StatementsRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Mr Philip Hammond)
A meeting of the Economic and Financial Affairs Council (ECOFIN) will be held in Brussels on 6 December 2016. EU Finance Ministers will discuss the following items:
Early morning session
Ministers will be briefed on the outcomes of the 5 December meeting of the Eurogroup and the Commission will present an update on the current economic situation.
Investment plan for Europe
Ministers will discuss proposals for the investment plan for Europe and be asked to reach a general approach on the Commission’s proposal to amend the European Fund for Strategic Investments (EFSI) legislation as part of the planned extension beyond its original 2015-18 lifetime. Ministers will also discuss draft Council conclusions on measures to tackle bottlenecks to investment identified under the third pillar of the investment plan for Europe.
Anti-tax avoidance directive 2
Ministers will be asked to agree a general approach to the EU Commission’s proposals on the anti-tax avoidance directive (ATAD2).
Enhanced co-operation in the area of financial transaction tax
Ministers will receive an update on the proposal for a council directive implementing enhanced co-operation in the area of financial transaction tax.
Banking union: risk reduction measures
The Council presidency will present its new proposals, published on November 23, to revise the capital and resolution frameworks for banks and large investment firms, which will be followed by an exchange of views.
Anti-money laundering directive
The Council presidency will provide an update on the discussions for proposal for a directive on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing.
Current financial service legislative proposals
The Council presidency will provide an update on current legislative proposals in the field of financial services.
VAT digital package
The Commission will present on the digital single market VAT package.
Deepening the economic and monetary union: follow-up on the 5 Presidents’ report
The Commission will provide information on the 5 Presidents’ report.
Improving the predictability and transparency of the stability and growth pact
Minister will endorse draft Council conclusions on improving the predictability and transparency of the stability and growth pact.
Report on strategic issues in the area of customs by the high level group of customs directors general
Ministers will be informed about the outcome of the pilot meeting of the high level group of directors general for customs policy, taxation and customs co-operation on 25 October 2016.
European semester 2017
The Commission will present to Ministers on the publication of the 2017 annual growth survey (AGS) and alert mechanism report (AMR), followed by an exchange of views.
Implementation of the banking union
Ministers discussed the current state of play regarding implementation of banking union within the eurozone.
Fight against the financing of terrorism
The Commission will give a presentation on the fight against the financing of terrorism.
Capital markets union
The Commission will provide information on the capital markets union.
[HCWS325]
Oral Answers to Questions
Lord Hammond of Runnymede Excerpts(7 years, 12 months ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
Mr Andrew Turner (Isle of Wight) (Con)
The Chancellor of the Exchequer (Mr Philip Hammond)
The Government are committed to helping coastal communities unlock barriers to economic growth. For example, we have invested more than £125 million in more than 200 projects across the United Kingdom through the coastal communities fund. That investment is forecast to deliver more than 18,000 jobs and help to attract more than £240 million of additional funds to coastal areas. Last week, in the autumn statement, I announced the allocation of £1.8 billion from the local growth fund to all regions in England.
Mr Turner
Coastal areas face specific challenges because they do not have 360° access to trade with neighbouring areas, and the Isle of Wight faces additional challenges because we have no physical link with the mainland. Does my right hon. Friend regard the Isle of Wight as a special case that deserves extra support from the Government?
Mr Hammond
I know that every single one of my right hon. and hon. Friends will regard his or her own constituency as a special case, but I can tell my hon. Friend that the Government recognise the specific barriers to economic growth experienced by coastal areas such as the Isle of Wight. That is why we are extending the coastal communities fund by at least a further £90 million across the United Kingdom over the current Parliament. In addition, as my hon. Friend will know, through the Solent growth deal the Isle of Wight has benefited from nearly £15 million of investment to expand the skills base, support business growth and improve transport links.
Alison McGovern (Wirral South) (Lab)
Coastal areas in the north of England have been left behind for too long. We now know that the cost of Brexit to our economy will be the best part of 60 billion quid. Will the Chancellor commit himself to replacing the EU structural funding that gives coastal areas such as New Ferry, in my constituency, half a chance to make economic progress?
Mr Hammond
We have already made announcements about EU funding during the transition period, giving a Treasury guarantee to underwrite funding that is allocated to projects in the UK, so that people who bid for that funding can do so with confidence. However, as the hon. Lady suggests, after we leave the European Union we will need to review for England, and discuss with the devolved Administrations for Scotland, Wales and Northern Ireland, how we are to replace the streams of EU funding to which many regions have become accustomed. We need to have a debate in the House to ensure that that funding is used in a way that reflects the UK’s priority in the future, not the priority of the wider European Union.
Mr Andrew Tyrie (Chichester) (Con)
Selsey Bill, in my constituency, is a special case, but the best thing that can be done for coastal areas is to secure stronger growth throughout the economy. Mario Draghi has suggested that UK growth would be lower if, as a consequence of Brexit, the UK economy were less open to trade and investment. Does the Chancellor agree that both the UK and the EU benefit from an open economy, and that, if the European Central Bank is worried about a Brexit shock to the eurozone, he can and should be lobbying EU leaders to press for a high degree of mutual market access in the Brexit negotiations?
Mr Hammond
Absolutely, Mr Speaker. I agree with Mario Draghi that a reduction in openness would be very bad for the economy of Selsey Bill, and my right hon. Friend is right to draw attention to that. I entirely agree that the best way for the Government to protect the UK’s economy is to argue for the most open possible trading relationship with the European Union after we leave.
Tim Farron (Westmorland and Lonsdale) (LD)
The coastal communities of Cumbria were deeply affected by Storm Desmond last December. The River Kent, which meets the sea at Morecambe bay, is one of Britain’s fastest-flowing and shortest rivers, and when it flooded last December, untold damage was caused to communities and the economy throughout the county. In last week’s autumn statement, the Government went back on their word from last December to fund the resilience of bridges to help prevent future flooding. Will the Chancellor apologise to the flood-hit communities of Cumbria for that betrayal, and, even at this late stage, will he change his mind?
Mr Hammond
We did announce funds for flood resilience in the autumn statement, distributed from money that had already been set aside for that purpose in the spending review. I did not mention Cumbria specifically in the autumn statement, but I will look at the case that the hon. Gentleman has raised, and will write to him.
Mr Julian Brazier (Canterbury) (Con)
I welcome my right hon. Friend’s announcements of the various sums, and may I suggest that the sums the Government have put aside for coastal defence are critical for places such as Whitstable, in my constituency, for generating economic as well as social confidence among the people who live there?
Mr Hammond
My hon. Friend is absolutely right and of course flood defences are categorised as economic infrastructure precisely because they are a critical enabler of business activity and are critical to protect transport, communications, infrastructure and so on, and we will continue to invest in them.
Bill Esterson (Sefton Central) (Lab)
It is about time we heard from this Government about support for our coastal economies because we have just seen, in last week’s autumn statement, a catalogue of six and a half years of abject failure, whether on infrastructure, skills or support for businesses. The coastal communities of Formby and Crosby in my constituency need to hear a lot more from the Chancellor. They need support now and in the future.
Mr Hammond
If the hon. Gentleman had been listening, what he would have heard last week was a catalogue of 2.7 million new jobs created over the last six and a half years, a deficit inherited from Labour at a peacetime record high slashed by two-thirds, a million new jobs created in the UK, record employment levels and 865,000 fewer workless households, all of which will have made an important contribution to improving living standards and prospects in coastal communities throughout the UK.
Mr David Burrowes (Enfield, Southgate) (Con)
Rebecca Pow (Taunton Deane) (Con)
The Chancellor of the Exchequer (Mr Philip Hammond)
Investment and skills are front and centre in our plans to raise productivity across the country, including in the south-west. The autumn statement announced a new £23 billion national productivity investment fund that will be targeted at four areas that are critical to improving productivity: housing; transport; digital communications; and research and development. We also announced in the autumn statement that the south-west will receive £191 million from the local growth fund to back local priorities and support new jobs and £19.5 million extra investment to bolster the area’s resilience to flooding.
Rebecca Pow
I welcome the Chancellor’s words and appreciate that he is keen for funding to be granted and attached to infrastructure projects that will bring a positive economic effect. With that in mind, will he consider supporting road improvements on the Toneway-Creech Castle corridor that leads into Somerset’s county town of Taunton, which will unlock 3,000 housing units?
Mr Hammond
I understand that the Heart of the South West local enterprise partnership bid for this scheme is part of its local growth fund submission; as I said, £191 million has been allocated to the south-west, and details of the individual LEP allocations will be announced in the near future. The Government are very supportive of using infrastructure to open up house building and employment opportunities, and from what she has said about this road, it sounds as though the project in question would fit very well with Government priorities.
Kerry McCarthy (Bristol East) (Lab)
As the Chancellor will know, Bristol is making a real contribution to productive growth, not just in the south-west, but across the country. But as the mayor of Bristol said in his response to the autumn statement,
“if the government wants a ‘watertight’ UK economy it needs to stop punching holes in local government’s hull.”
Will the Government commit to giving Bristol and cities like it the devolved powers, infrastructure investment and funding they need to deliver on productive growth locally?
Mr Hammond
The Government remain committed to the devolution agenda and, in particular, to supporting mayoral authorities, to ensure that economic growth and productivity are driven from the bottom up. We will continue to work with those authorities to make sure we deliver the funding available in the most effective way to get the result the national economy needs.
Neil Parish (Tiverton and Honiton) (Con)
I very much welcome the Chancellor’s commitment to road, rail and broadband. Openreach should be broken away from BT to deliver proper competition, because in the hardest-to-reach areas for broadband in my constituency and across the west country, we need some greater players and greater competition.
Mr Hammond
I appreciate what my hon. Friend is saying. He will know that there has been a long and heated debate about the best way of delivering our broadband infrastructure in the future, and Ofcom is at the heart of reviewing this issue. I shall continue to have meetings with Ofcom, and with representatives of BT and others, over the coming days, as will my right hon. Friend the Culture Secretary.
Peter Dowd (Bootle) (Lab)
The south-west’s productivity has drifted down since 2010 and, according to the House of Commons Library, the UK overall has seen the widest productivity gap with the G7 since 1991, when the data series began. What plans, if any, does the Chancellor have to pursue his predecessor’s so-called “Fixing the foundations” productivity plan? Or is that another failed policy that this Chancellor is trying quietly to jettison?
Mr Hammond
No, and if the hon. Gentleman looks at the document we published last Wednesday, he will see that it contained a specific reference to “Fixing the foundations”, which is the base document setting out the Government’s agenda for addressing productivity issues. Of course, the key announcement in last week’s autumn statement was an additional £23 billion of borrowing specifically targeted at the highest-return investment projects; this is designed to raise Britain’s productivity by raising the productivity performance of our regional cities, in particular, and our regions more generally, to that of London and the south-west.
Peter Dowd
It is six years late. The productivity gap has widened for both the south-west and the country, and so has the gap in earnings and wages. According to the Institute for Fiscal Studies, the outlook for wages is “dreadful”, with workers likely to earn less in real terms in 2021 than they did in 2008, and with the biggest losers being lower-income families, with the poorest third likely to see incomes drop. So in tandem with action on the productivity crisis, what are the Chancellor’s plans for action on the wages crisis?
Mr Hammond
First, if the hon. Gentleman that if he looks at real household disposable incomes, he will see that the picture is rather brighter, and they present a much more real picture of what people in the economy are experiencing. He is right to say that real wages are a reflection of productivity performance, and the only way sustainably to raise real wages is to raise the productivity performance of this economy. So rather than whinging about whether something was done this year, last year or six years ago, and perhaps with a careful eye on the performance of the previous Labour Government in this area, he might care to welcome the announcement made last week as an appropriate initiative to try to raise the UK’s productivity performance, and raise real wages and living standards over the long term.
Sir Henry Bellingham (North West Norfolk) (Con)
The Chancellor of the Exchequer (Mr Philip Hammond)
The Government are taking significant steps to encourage business investment in East Anglia and in all regions of the UK by cutting corporation tax to the lowest rate in the G20, delivering a £6.7 billion business rates package and allocating the £23 billion of public investment through the national productivity investment fund to ensure increasing and improved productivity. The autumn statement also announced £27 million for the Oxford to Cambridge expressway road link, as well as funding for the east-west rail link, and local enterprise partnerships in the east of England will also receive up to £151 million of local growth funding.
Sir Henry Bellingham
I welcome the Chancellor’s reply and the announcement of investment in the Oxford to Cambridge corridor and the transformational effect that that could have. Will he also ensure that other schemes to the east of Cambridge, such as the vital Ely North rail junction and improvements to the A47, also go ahead on time? He will be aware that they are crucial to the future economy of west Norfolk and other parts of Norfolk.
Mr Hammond
I will certainly pass on my hon. Friend’s comments about that particular rail scheme to my right hon. Friend the Transport Secretary. My hon. Friend will know that we have a large programme of rail infrastructure in place and that the additional funding for the east-west rail link that was announced last week was outside that core rail programme. I hope that he will agree that the Oxford to Cambridge corridor represents a real growth opportunity for the south and the east of England to exploit Britain’s two best known universities and their world-class research reputations to enhance the productive capacity of our economy.
Kelvin Hopkins (Luton North) (Lab)
Since 23 June, there has been a significant depreciation of sterling and two announcements of major investments in UK motor manufacturing. The prospects for investment in UK manufacturing more widely are now much improved. Will the Chancellor be seeking to ensure that the more sensible exchange rate welcomed by Lord Mervyn King, among others, is sustained?
Mr Hammond
No. It is not the Government’s business to sustain or manage the exchange rate in any way, as the hon. Gentleman very well knows. We have an inflation target, but exchange rates are set by markets and reflect market views about the economy and expectations of the trajectory of the economy in the future. He is absolutely right to observe that, over the past six months, we have seen some remarkable endorsements of the British economy through large inward investment decisions made by foreign inward investors.
Anna Soubry (Broxtowe) (Con)
May I congratulate the Chancellor on the £23 billion of extra money for this national productivity investment fund, which will confer huge benefits on the whole of the United Kingdom? Although I do not expect him to comment on the considerable merits of the A610 growth corridor and the improvements to the road at Giltbrook, I am very happy to meet him to persuade him of them. On a serious note, will he do everything he can to ensure that excellent schemes such as those are expedited and not caught up in what can sometimes be bureaucratic tangles?
Mr Hammond
It is an excellent scheme indeed. My right hon. Friend will know that it is not only the £23 billion of additional funding for economically productive infrastructure that was announced on Wednesday last week, but a core £150 billion of funding for the same defined purposes over the remainder of this Parliament and the Government’s commitment, repeated last Wednesday, to move to a roads fund from 2020, funded by the revenues from vehicle excise duty, all of which adds up to a sustained commitment to investment in our roads.
Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)
Brexit is putting business investment on hold at the expense of job losses. This comes after a long period of escalating debt and slumping growth. Furthermore, quantitative easing has failed to raise confidence and stimulate business investment in the real economy. The autumn statement measures announced are simply insufficient. What else will the Chancellor do?
Mr Hammond
I simply do not recognise the picture that the hon. Gentleman paints. The Bank of England’s monetary actions have undoubtedly had a positive effect in stimulating the economy. The performance of consumer demand over the past few weeks has demonstrated that very clearly. We have the key elements in place, both monetary and fiscal, for our current circumstance, which is the potential for a more difficult period ahead. We need to muster our resources, make sure that we are able to support the economy through this period, and, at the same time, address the fundamental challenges, such as the productivity problem, to ensure that Britain is match fit to meet the challenges that it will face as it leaves the European Union.
Roger Mullin
In that regard, I am sure that the Chancellor would agree that research and development investment is critical to obtaining a high skill, high wage economy and one that increases productivity, as he has recognised. It is therefore disappointing that the autumn statement has failed to match R and D investment as a percentage of GDP in line with other major economies. What will the Chancellor do to fill that gap?
Mr Hammond
What I will do over the medium to long term is get the British economy back on to a firm footing, so that we can fund all those investment needs—which we do have, as the hon. Gentleman points out. Let me turn the question around. Scotland will receive £800 million of additional capital funding through Barnett consequentials as a result of the announcement made last week. From the tone of the hon. Gentleman’s question, I feel sure that the Scottish National party will want to confirm that that money will be used in Scotland, as it will in England, to target productivity-raising capital investment, so that the Scottish economy can perform more strongly in the future.
Chris Elmore (Ogmore) (Lab/Co-op)
Kirsten Oswald (East Renfrewshire) (SNP)
The Chancellor of the Exchequer (Mr Philip Hammond)
In the autumn statement, as I have said already, I announced the creation of a new national productivity investment fund to provide £23 billion of additional investment. That is on top of the £150 billion that is already baked into the baseline, and it is focused on the key areas for boosting productivity—housing, infrastructure and research and development.
Kirsten Oswald
I welcome the £800 million in Barnett consequentials, which the Scottish Government will invest on top of the £100 million they have already announced for capital projects, but what further steps will the Chancellor take to address the almost 10% cut to the Scottish capital budget since the Tories came to office?
Mr Hammond
The Scottish Government will have a full share of infrastructure spending through the Barnett formula, and we will work with the Scottish Government and all other devolved Administrations and regional entities, as we work to raise the UK’s productivity game. That is about infrastructure investment—both public and private. It is about raising skills. It is about raising management capability, and we announced that we would fund the Charlie Mayfield initiative to disseminate best management practice across small and medium-sized enterprises. It is about doing all these things to ensure the UK is match fit to prosper in the global economy in the future.
Philip Davies (Shipley) (Con)
May I ask the Chancellor not to blindly hand over any extra infrastructure spending in West Yorkshire to the Labour-dominated West Yorkshire Combined Authority for it just to pump money into the Labour heartlands, and instead make sure that money can be spent in other parts of West Yorkshire, including on a Shipley eastern bypass, which would benefit the local economy and the economies of my hon. Friends the Members for Pudsey (Stuart Andrew) and for Keighley (Kris Hopkins), too?
Mr Hammond
I am grateful to my hon. Friend. I did not know that Labour had any heartlands left, so that is an interesting comment. I will pass on his concerns to my right hon. Friend the Transport Secretary and ask him to take them into consideration when he makes his allocations.
Several hon. Members rose—
Mary Glindon (North Tyneside) (Lab)
The Chancellor of the Exchequer (Mr Philip Hammond)
My principal responsibility is to ensure the stability and prosperity of the economy. In the current circumstances, I judge that that requires a combination of near-term measures to ensure resilience and longer-term measures to manage the structural adjustment, as the UK transitions out of the EU, and to address the UK’s long-term productivity challenge. The package announced in the autumn statement last week delivered on both requirements.
Mary Glindon
So far the Chancellor has disregarded Members’ requests to give justice to the WASPI—Women Against State Pension Inequality Campaign—women. Will he now listen to bodies such as North Tyneside Council, which, under our elected mayor, Norma Redfearn, has written to the Government to ask for a fair transition of the state pension right for all these women?
Mr Hammond
I understand the concerns, but this issue was debated extensively during the passage of the Pensions Act 2011, when the Government made concessions to this group of individuals worth £1.1 billion.
Ben Howlett (Bath) (Con)
Mr Speaker
I am sure the hon. Gentleman will be wearing that excellent pullover as he does so.
Mr Hammond
This is year four of Small Business Saturday, and the campaign continues to get bigger each year. Small businesses and entrepreneurs are the backbone of the British economy. The Government will continue to support Small Business Saturday this year with events across the country. I encourage right hon. and hon. Members in all parts of the House to be in touch with their local enterprise partnerships and their local branch of the Federation of Small Businesses to find out what is going on locally and to get out there and support it.
Rebecca Long Bailey (Salford and Eccles) (Lab)
Last week, we saw the accumulation of six wasted years of failed economic policies supported by both the Chancellor and the Prime Minister. Following last week’s autumn statement and the publication of the Office for Budget Responsibility forecasts, can the Chancellor confirm how much worse off a pensioner on the state pension will be by 2019-20 as a result of the OBR’s downgrades to wage forecasts?
Mr Hammond
I am slightly mystified by the hon. Lady’s question, because the downgrades to wage forecasts will not be the driver of the circumstances of a pensioner on the state pension, given that we have introduced a triple lock that guarantees pensioners an increase in line with inflation, in line with earnings, or 2.5% as a minimum. However, I am happy to look at the specific question and to write to the hon. Lady with a calculation.
Rebecca Long Bailey
Let me inform the House that the forecast is this: a pensioner on the state pension will be £429 worse off by 2019-20, with only the triple lock preventing an even worse decline. After claiming in the autumn statement that the triple lock will now be subject to review, will the Chancellor end the uncertainty and worry he has caused older people and join me in committing to preserve the triple lock throughout the lifetime of the next Parliament?
Mr Hammond
Well, this was worth waiting for: we have a firm commitment by the Opposition to run the triple lock through the lifetime of the next Parliament. I wonder whether the hon. Lady knows how much money she has just spent, without knowing the fiscal circumstances the country will face. What we have said, and the only responsible thing to say, is that all the commitments we have made for the duration of this Parliament we will review at the spending review before the end of the Parliament, and we will decide then which ones we can afford to renew and which ones are appropriate to renew. I think this tells us everything we need to know about the Opposition: three and a half years out, they are willing to spray around commitments without any idea of what it is going to cost them.
Mr Steve Baker (Wycombe) (Con)
Suella Fernandes (Fareham) (Con)
I recently visited ASV Global in Portchester, an innovator in unmanned and autonomous marine technologies. In just six years, ASV has designed 70 new products, which it has delivered to 10 countries and 40 customers. What further support for research and development is available to companies such as ASV to boost job creation and wealth?
Mr Philip Hammond
We have done two things. Within the £23 billion that I announced last week to raise the UK’s productivity game is a significant increase in public R and D investment. We also said—we will do this before the Budget—that we would carry out a review of the way that tax support for privately funded R and D works, with the objective of ensuring that the UK is the most attractive place in Europe to do private R and D work. I will report at Budget 2017.
Patrick Grady (Glasgow North) (SNP)
Mr Hammond
No, not necessarily at all. We spend our ODA in different ways, and different Departments have relatively small pools of ODA. Of course, the great majority of it goes through DFID. Where GNI contracts and the ODA budget needs to be trimmed accordingly, we will look to take away the lowest-value ODA spending. I think that that is the way the taxpayer would expect it to be done.
Mrs Anne-Marie Trevelyan (Berwick-upon-Tweed) (Con)
Further to the Chancellor’s answer to my hon. Friend the Member for Fareham (Suella Fernandes), could he set out how QuestUAV in Amble, a manufacturer of mapping and survey drones, and other high-tech north-east businesses will be able to access the R and D funding that he talks about?
Mr Hammond
Public R and D funding will take two principal forms. There will be further funding to the science base in our universities, and there will be funding through Innovate UK, which is accessible by companies to support innovation. We already have an excellent base in basic science. What we need to do now is to up our game in innovation and the application of that science.
Fiona Mactaggart (Slough) (Lab)
Kevin Hollinrake (Thirsk and Malton) (Con)
According to the Library, infrastructure spending per head is 2.5 times greater in London and the south-east than in the regions. Does the Chancellor agree that now is the time for a fairer distribution of investment spending across the UK?
Mr Philip Hammond
The Government are committed to investment in all the regions of the UK. We have delivered more than 500 infrastructure schemes in the north since 2010, and more than £13 billion of spending is planned on transport in the north during this Parliament. In Yorkshire, this includes new trains on the east coast main line, the trans-Pennine railway upgrade and bringing the A1(M) up to motorway standard for its full length. I would just say to my hon. Friend that figures for London and the south-east are distorted by the effect of the strategic Crossrail project, with a cost of £14.8 billion.
Martyn Day (Linlithgow and East Falkirk) (SNP)
Mr Hammond
I cannot give the hon. Gentleman a precise date, but I have discussed this with the business managers. The rules of the House mean that 28 days must elapse before the charter is laid. I think that that will put it in the second half of January, but we will have the debate as soon as we can after the statutory period.
Kit Malthouse (North West Hampshire) (Con)
As other Members have mentioned, there is growing alarm about the impact of making tax digital on small business people, of whom I am one. Will the Chancellor confirm that, in time, quarterly tax returns will also apply to Members of Parliament?
Martin Vickers (Cleethorpes) (Con)
When I met the leader of North East Lincolnshire Council yesterday, he emphasised to me that one of the major challenges facing our coastal community is that many people retire there and put additional strains on the adult social care budget. Will Ministers assure me that that will be considered when allocating departmental budgets?
Mr Philip Hammond
Yes, demographic trends are of course at the heart of our considerations when budgets are allocated.
Marie Rimmer (St Helens South and Whiston) (Lab)
With just one in six people with autism in employment, would it not have been better to invest in improving the Work and Health programme, rather than cutting it, to assist people to gain employment and thereby save on benefits? They want to work.
Richard Fuller (Bedford) (Con)
The key insight of the Government’s productivity plan is that value can be unlocked through more timely implementation, so will the Chancellor have a word with the Transport Secretary to see how he can speed up the completion of the final part of the Oxford to Cambridge link from Bedford to Cambridge?
Mr Philip Hammond
I will certainly have a word with my right hon. Friend. This is partly about smart delivery, but it is also about having certainty and a pipeline that allows contractors in the supply chain to plan ahead.
Dame Rosie Winterton (Doncaster Central) (Lab)
Does the Chancellor realise that if he tries to push the funding gap in social care on to local councils, it will be grossly unfair for areas such as Doncaster, where a 1% increase in council tax would raise 21% less than it would for the council in the Prime Minister’s constituency? Will he commit to funding social care fully?
Mr Hammond
As I said on Wednesday, with the additional social care precept and the better care fund, we have measures in place that will make £3.5 billion of additional funding per annum available for social care by the end of this Parliament. But we recognise that local authorities have a challenge in the profiling of that money. My right hon. Friends the Health Secretary and the Communities Secretary are very much aware of that and are in discussions about it with health bodies and local authorities.
Scott Mann (North Cornwall) (Con)
I welcome my right hon. Friend’s announcement in the autumn statement of £1.7 million of LIBOR money going to Sea Sanctuary to help with mental health provision in Cornwall. Does he agree that that will be a huge help for people all over Cornwall who in the past have had to travel many hundreds of miles to access such services?
Mr Hammond
I am very pleased that the money will deliver that effect in Cornwall. It is always good to see fines levied on the appalling behaviour of the few making such a positive difference to the many.
Tulip Siddiq (Hampstead and Kilburn) (Lab)
To follow on from the question from my right hon. Friend the Member for Doncaster Central (Dame Rosie Winterton), the demand for social care services in my constituency is set to rise by 10% in just one year, so will the Chancellor take the opportunity today to commit to additional funding for social care?
Mr Hammond
No, these are not the occasions when we commit to additional funding. We have a funding settlement in place and substantial increases in social care funding will become available by the end of the Parliament. But as I have said, we recognise that some authorities are facing some challenges on the profiling of that funding, and my right hon. Friends the Health Secretary and Communities Secretary are discussing that issue with local authority leaders.
James Morris (Halesowen and Rowley Regis) (Con)
Does the Chancellor agree that one way to improve productivity in the west midlands economy is to agree a more ambitious second devolution settlement, building on the success of the devolved settlement agreed with the West Midlands Combined Authority?
Mr Hammond
I agree with my hon. Friend. As I said on Wednesday, the Government continue to discuss with west midlands authorities the possibilities for further devolution in the west midlands. The other way to get the west midlands economy motoring is to elect a mayor with genuine business experience, like Andy Street.
Ian Murray (Edinburgh South) (Lab)
The Scotch whisky industry is the largest net contributor to the UK’s balance of trade and goods. In the light of Brexit, what options is the Chancellor examining to make sure the industry can keep that privileged position of exporting?
Mr Hammond
We will have discussions with the Scotch Whisky Association, as we do with many trade associations. Without getting into a technical discussion, I should say that dutiable goods are less likely to be adversely affected by a change in the way we trade with our European neighbours than many other goods, because there is already a specific regime for dealing with them that is unlikely to have to change as a result of Brexit.
Several hon. Members rose—
Autumn Statement
Lord Hammond of Runnymede Excerpts(8 years ago)
Commons ChamberRead Full debate Read Hansard Text Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Mr Philip Hammond)
It is a privilege to report today on an economy that the International Monetary Fund predicts will be the fastest-growing major advanced economy in the world this year. It is an economy with employment at a record high and unemployment at an 11-year low; and an economy that, through the hard work of the British people, has bounced back from the depths of Labour’s recession. It is an economy that has confounded commentators at home and abroad with its strength and resilience since the British people decided, exactly five months ago today, to leave the European Union and chart a new future for our country.
That decision will change the course of Britain’s history. It has thrown into sharp relief the fundamental strengths of the British economy that will ensure our future success: the global reach of our services industries; the strength of our science and high-tech manufacturing base; and the cutting-edge British businesses that are leading the world in disruptive technologies. But it is a decision that also makes more urgent than ever the need to tackle our economy’s long-term weaknesses such as the productivity gap, the housing challenge, and the damaging imbalance in economic growth and prosperity across our country. We resolve today to confront those challenges head on, to prepare our country to seize the opportunities ahead, and, in doing so, to build an economy that works for everyone—an economy where every corner of this United Kingdom is part of our national success.
I want to pay tribute to my predecessor, my right hon. Friend the Member for Tatton (Mr Osborne). My style will, of course, be different from his. I suspect that I will prove no more adept at pulling rabbits from hats than my successor as Foreign Secretary has been at retrieving balls from the back of scrums, but my focus on building Britain’s long-term future will be the same. My right hon. Friend the Member for Tatton took over an economy on the brink of collapse, with the highest budget deficit in our post-war history, and brought that down by two thirds. That is a record of which he can be proud.
But times have moved on, and our task now is to prepare our economy to be resilient as we exit the EU and to be match-fit for the transition that will follow. So we will maintain our commitment to fiscal discipline while recognising the need for investment to drive productivity, and for fiscal headroom to support the economy through the transition.
Let me turn now to the forecasts. Since 2010, the Office for Budget Responsibility has provided an independent economic and fiscal forecast to which the Government must respond—gone are the days when the Chancellor could mark his own homework—and I thank Robert Chote and his team for their hard work. Today’s OBR forecast is for growth to be 2.1% in 2016—higher than forecast in March. In 2017, the OBR forecasts growth to slow to 1.4%, which it attributes to lower investment and weaker consumer demand driven, respectively, by greater uncertainty and by higher inflation resulting from sterling depreciation. That is slower, of course, than we would wish, but still equivalent to the IMF’s forecast for Germany, and higher than the forecast for growth in many of our European neighbours, including France and Italy. That fact will, no doubt, be a source of very considerable irritation to some.
As the effects of uncertainty diminish, the OBR forecasts growth recovering to 1.7% in 2018, 2.1% in 2019 and 2020, and 2% in 2021. While the OBR is clear that it cannot predict the deal the UK will strike with the EU, its current view is that the referendum decision means that potential growth over the forecast period is likely to be 2.4 percentage points lower than would otherwise have been the case. The OBR acknowledges that there is a higher degree of uncertainty around these figures than usual.
Despite slower growth, the UK labour market is forecast to remain robust. We have delivered over 2.7 million new jobs since 2010, and this forecast shows that number growing in every year—another 500,000 jobs created over the OBR forecast, providing security for working people across the length and breadth of Britain.
For those who claim that the recovery is just a south-east phenomenon, I have some news: over the past year employment grew fastest in the north-east, the claimant count fell fastest in Northern Ireland, pay grew most strongly in the west midlands, and every UK nation and region saw a record number of people in work. That is a labour market recovery that is working for everyone.
Monetary policy has played an important role in supporting growth since the referendum decision, but a credible fiscal policy remains essential for maintaining market confidence and restoring the economy to long-term health. In view of the uncertainty facing the economy, and in the face of slower growth forecasts, we no longer seek to deliver a surplus in 2019-20, but the Prime Minister and I remain firmly committed to seeing the public finances return to balance as soon as practicable, while leaving enough flexibility to support the economy in the near term.
Today I am publishing a new draft charter for budget responsibility with three fiscal rules: first, that the public finances should be returned to balance as early as possible in the next Parliament and, in the interim, cyclically adjusted borrowing should be below 2% by the end of this Parliament; secondly, that public sector net debt as a share of GDP must be falling by the end of this Parliament; and, thirdly, that welfare spending must be within a cap set by the Government and monitored by the OBR. In the absence of an effective framework, the welfare bill in our country spiralled out of control, with spending on working-age benefits trebling in real terms between 1980 and 2010. As a result of the action that we have taken since 2010, that spending has now stabilised. The cap I am announcing today takes into account the policy changes made since the last Budget, setting a realistic baseline reflecting all announced welfare policies. I confirm again today that the Government have no plans to introduce further welfare savings measures in this Parliament beyond those already announced.
I now turn to the OBR’s fiscal forecasts, but first I will set out the key drivers of changes since the Budget: the post-Budget changes that were made to welfare and housing policies cost the Exchequer £8.6 billion over the forecast period; expected Office for National Statistics classification changes have added £12 billion since the Budget; and tax receipts have been lower than expected this year, causing the OBR to revise down projected revenues in the future. Added to this is a structural effect of rapidly rising incorporation and self-employment, which further erodes revenues.
Combining those pressures with the impact of forecast weaker growth, and taking account of the measures I shall announce today, the OBR now forecasts that, in cash terms, borrowing is set to be £68.2 billion this year, falling to £59 billion next year and £46.5 billion in 2018-19, and then £21.9 billion, £20.7 billion, and finally £17.2 billion in 2021-22. Overall, public sector net borrowing as a percentage of GDP will fall from 4% last year to 3.5% this year, and it will continue to fall over the Parliament, reaching 0.7% in 2021-22. This will be the lowest deficit as a share of GDP in two decades. The OBR expects cyclically adjusted public sector net borrowing to be 0.8% of GDP in 2020-21, comfortably meeting our target to reduce it to less than 2% and, importantly, leaving significant flexibility to respond to any headwinds that the economy may encounter.
The OBR’s forecast of higher borrowing and slower asset sales, together with the temporary effect of the Bank of England’s action to stimulate growth, translates into an increased forecast for debt in the near term. The OBR forecasts that debt will rise from 84.2% of GDP last year to 87.3% this year, peaking at 90.2% in 2017-18 as the Bank of England’s monetary policy interventions approach their full effect. In 2018-19, debt is projected to fall to 89.7% of national income—the first fall in the national debt as a share of GDP since 2001-02—and it is forecast to continue falling thereafter. Members might be interested to know that after stripping out the effects of the Bank of England interventions, underlying debt peaks this year at 82.4% of GDP and falls thereafter to 77.7% by 2021-22.
It is customary in the run-up to the autumn statement to hear representations from the shadow Chancellor of the day, usually for untenable levels of spending and borrowing. Conservative Members used to think that Ed Balls’ demands were an extreme example, but I have to say that the current shadow Chancellor has outperformed him in the fiscal incontinence sweepstake. What we do not know, of course, is whether the shadow Chancellor can also dance—[Interruption.] He can. Good; a second career awaits him.
I have received some more measured representations from a range of external bodies. Some have called for fiscal expansion, while others have suggested that there is no need at all to respond to a changed economic outlook. That reflects, to be fair, the challenge that we face of resolving how best to protect the recovery and build on the economy’s manifest strengths, yet at the same time respond appropriately to the warnings of a more difficult period ahead.
But with our debt forecast to peak at over 90% next year, and a deficit this year of 3.5%, I have reached my own judgment. It is a judgment based on a sober analysis of our fiscal position, and also on a realistic appraisal of the weakness of UK productivity and the urgent need to address our fiscal challenge from both ends—continuing to control public expenditure, but also growing the potential of the economy and protecting the tax base. So we choose in this autumn statement to prioritise additional high-value investment, specifically in infrastructure and innovation, that will directly contribute to raising Britain’s productivity. The key judgment we make today is that our hard-won credibility on public spending means that we can fund this commitment in the short term from additional borrowing, while funding all other new policies announced in this autumn statement through additional tax and spending measures. That is the responsible way to secure our economy for the long term.
The productivity gap is well known to hon. and right hon. Members, but shocking none the less—it bears repeating. We lag the US and Germany by some 30 percentage points in productivity, but we also lag France by over 20 points and Italy by 8 points, which means, in the real world, that it takes a German worker four days to produce what we make in five. That means, in turn, that too many British workers work longer hours for lower pay than their counterparts, and that has to change if we are to build an economy that works for everyone. Raising productivity is essential for the high-wage, high-skill economy that will deliver higher living standards for working people across this country.
As a result of decisions taken by my predecessor, public investment is higher over this decade than it was over the whole of the period of the last Labour Government, but today I can go further. I can announce that we are forming a new national productivity investment fund of £23 billion to be spent on innovation and infrastructure over the next five years—investing today for the economy of the future.
Let me set out for the House how this money will be used. We do not invest enough in research, development and innovation. As the pace of technology advances and competition from the rest of the world increases, we must build on our strengths in science and tech innovation to ensure that the next generation of discoveries is not only made here, but developed and produced in Britain. So today I can confirm the additional investment in R and D, rising to an extra £2 billion per year by 2020-21, that was announced by my right hon. Friend the Prime Minister on Monday.
Economically productive infrastructure directly benefits businesses, but families, too, rely on roads, rail, telecoms and, especially, housing. We have made good progress, with the number of new homes being built last year hitting an eight-year high, but for too many the goal of home ownership remains out of reach. In October, my right hon. Friend the Communities and Local Government Secretary launched the £3 billion home building fund to unlock over 200,000 homes and up to £2 billion to accelerate construction on public sector land, but we must go further still. The challenge of delivering the housing we so desperately need in the places where it is currently least affordable is not, of course, a new one, but the effect of unaffordable housing on our nation’s productivity makes it an urgent one. My right hon. Friend will bring forward a housing White Paper in due course to address these long-term challenges but, in the meantime, we can take further steps.
One of the biggest objections to housing development, as hon. and right hon. Members will know from their constituencies, is often the impact on local infrastructure, so we will focus Government infrastructure investment to unlock land for housing with a new £2.3 billion housing infrastructure fund to deliver infrastructure for up to 100,000 new homes in areas of high demand. To provide affordable housing that supports a wide range of need, we will invest a further £1.4 billion to deliver 40,000 additional affordable homes. I will also relax restrictions on Government grant to allow providers to deliver a wider range of housing types. I can also announce a large-scale regional pilot of right to buy for housing association tenants, and continued support for home ownership through the Help to Buy equity loan scheme and the Help to Buy ISA.
This package means that over the course of this Parliament, the Government expect to more than double, in real terms, annual capital spending on housing. Coupled with our resolve to tackle the long-term challenges of land supply, this commitment to housing delivery represents a step change in our ambition to increase the supply of homes for sale and for rent to deliver a housing market that works for everyone.
Reliable transport networks are essential to growth and productivity, so this autumn statement commits significant additional funding to help to keep Britain moving now, and to invest in the transport networks and vehicles of the future. I will commit: an additional £1.1 billion of investment in English local transport networks, where small investments can often offer big wins; £220 million additionally to address traffic pinch points on strategic roads; £450 million to trial digital signalling on our railways to achieve a step change in reliability and to squeeze more capacity out of our existing rail infrastructure—I know the Leader of the Opposition will welcome that—and, finally, £390 million to build on our competitive advantage in low-emission vehicles and the development of connected autonomous vehicles, plus a 100% first year capital allowance for the installation of electric vehicle charging infrastructure.
The Department for Transport will continue to work with Transport for the North to develop detailed options for northern powerhouse rail. My right hon. Friend the Transport Secretary will set out more details of specific projects and priorities over the coming weeks.
Our future transport, business and lifestyle needs will require world-class digital infrastructure to underpin them, so my ambition—
Mr Hammond
Yes—it says here because I wrote it here.
My ambition is for the UK to be a world leader in 5G. That means a full-fibre network; a step change in speed, security and reliability. So we will invest over £1 billion in our digital infrastructure to catalyse private investment in fibre networks and to support 5G trials. From April, we will introduce 100% business rates relief for a five-year period on new fibre infrastructure, supporting further roll-out of fibre to homes and businesses.
We have chosen to borrow to kick-start a transformation in infrastructure and innovation investment, but we must sustain this effort over the long term if we are to make a lasting difference to the UK’s productivity performance, so today I have written to the National Infrastructure Commission to ask it to make its recommendations on the future infrastructure needs of the country, using the assumption that the Government will invest between 1% and 1.2% of GDP every year from 2020 in economic infrastructure covered by the commission. To put that in context, we will spend around 0.8% of GDP on the same definition this year.
I am also backing the commission’s interim recommendations on the Oxford-Cambridge growth corridor, published last week, with £110 million of funding for east-west rail and a commitment to deliver the new Oxford-Cambridge expressway. That project can be more than just a transport link. It can become a transformational tech corridor, drawing on the world-class research strengths of our two best-known universities. I welcome the commission’s continuing work on delivery model options. We will carefully consider its final recommendations in due course.
The major increase in infrastructure spending I have announced today will represent a significant increase in funding through the Barnett formula, of more than £250 million to the Northern Ireland Executive, £400 million to the Welsh Government and £800 million to the Scottish Government.
Public investment is only part of the picture, however. About half of our economic infrastructure is financed by the private sector, and we will continue to support that investment through the UK guarantee scheme, which I am today extending until at least 2026. The new capital investment I have announced will provide the financial backbone for the Government’s industrial strategy that the Prime Minister spoke about on Monday, a firm foundation upon which my right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy will work with industry to build our ambition of an economy that works for all.
I can announce four further measures to back business. I am doubling the UK export finance capacity to make it easier for British businesses to export. I am funding Charlie Mayfield’s business-led initiative to boost management skills across British businesses. I am taking a first step to tackle the long-standing problem of our fastest growing start-up tech firms being snapped up by bigger companies, rather than growing to scale, by injecting an additional £400 million into venture capital funds through the British Business Bank, unlocking £1 billion of new finance for growing firms. I am also launching today a Treasury-led review of the barriers to accessing patient capital in the UK, so that we can take further action to address them.
This Government recognise that, for too long, economic growth in our country has been too concentrated in London and the south-east. That is not just a social problem but an economic problem. London is one of the highest-productivity cities in the world and we should celebrate that fact. But no other major developed economy has such a gap between the productivity of its capital city and its second and third cities, so we must drive up the performance of our regional cities. Today we publish our strategy for addressing productivity barriers in the northern powerhouse, and give the go ahead to a programme of major roads schemes in the north. Our midlands engine strategy will follow shortly, but I am today providing funding so that the evaluation study for the midlands rail hub can go ahead.
In addition, we are investing in local infrastructure in every region of England. I can announce the allocation of £1.8 billion from the local growth fund to the English regions: £556 million to local enterprise partnerships in the north of England, £542 million to the midlands and east of England, and £683 million to LEPs in the south-west, south-east and London. We will announce the detailed breakdown of allocations to individual LEPs shortly.
Devolution remains at the heart of this Government’s approach to supporting local growth, and we recommit today to our city deals with Swansea, Edinburgh, north Wales and Tay cities. I can also announce today we are beginning negotiations on a city deal for Stirling so that every single city in Scotland will be on course to have a city deal. To support new mayoral combined authorities in England, I can announce that we will grant them new borrowing powers to reflect their new responsibilities.
While we continue discussions with London and the west midlands on possible devolution of further powers I can announce today that London will receive £3.15 billion as its share of national affordable housing funding, to deliver a commitment of more than 90,000 affordable homes. I can also announce that we are devolving to London the adult education budget, and giving London greater control over the delivery of employment support services for the hardest to help.
I have deliberately avoided making this statement into a long list of individual projects being supported, but I am going to make one exception. I will act today, with just seven days to spare, to save one of the UK’s most important historic houses, Wentworth Woodhouse near Rotherham. It is said to be the inspiration for Pemberley in Jane Austen’s “Pride and Prejudice”. But in 1946, in an extraordinary act of cultural vandalism, the then Labour Government authorised extensive opencast coal mining virtually up to the front door of this precious property. Perhaps that is Labour’s idea of a northern powerhouse. Wentworth Woodhouse is now—[Interruption.]
Mr Speaker
Order. I want to hear about this house. It sounds very interesting indeed.
Mr Hammond
Wentworth Woodhouse is now at critical risk of being lost to future generations. A local effort has been hugely successful in securing millions in funding from various foundations and charities, subject to the balance required being found by 30 November. We will today provide a £7.6 million grant towards urgent repairs to safeguard this key piece of northern heritage—all but destroyed by a Labour Government, and saved by a Conservative one.
I can also confirm distribution of a further £102 million of LIBOR bank fines to armed forces and emergency services charities, including, my hon. Friends will be pleased to hear, £20 million to support the Defence and National Rehabilitation Centre at Stanford Hall in Nottinghamshire, as well as £3 million from the tampon tax fund for Comic Relief to distribute to a range of women’s charities.
We choose to invest in our economic infrastructure because it can transform the growth potential of our economy, as well as improving the quality of people’s lives. That investment is possible only because the Government are prepared to take the tough decisions—every one of them opposed by the Labour party—to maintain control of current spending. When we took office in 2010, public spending was 45% of GDP; this year, it is set to be 40%. During those six years, we have seen crime fall by more than a quarter, the highest proportion ever of good or outstanding schools, the number of doctors in our NHS increasing by 10,000, pensioner poverty at its lowest level ever, the lowest ever number of children being raised in workless households and the highest ever number of young people going on to study full time at university.
We have demonstrated beyond doubt that controlling public spending is compatible with world-class public services and social improvement. But, as the OBR’s debt projections demonstrate, we have more work to do to eliminate the deficit. Departmental spending plans set out in the spending review last autumn will therefore remain in place, and departmental expenditure in 2021-22 will grow in line with inflation. The £3.5 billion of savings to be delivered through the efficiency review, announced at the Budget and led by my right hon. Friend the Chief Secretary to the Treasury, must be delivered in full. I have, however, exceptionally agreed to provide additional funding to the Ministry of Justice to tackle urgent prison safety issues by increasing the number of prison officers by 2,500.
Having run two large spending Departments in previous roles, I came to this job with some very clear views about the relationship between the Treasury and spending Departments. I want Departments to be incentivised to drive efficiencies, and I want the Treasury to be an enabler for good, effective spending across government. To kick-start this new approach, I will allow up to £1 billion of the savings found by the efficiency review to be reinvested in 2019-20 in priority areas and I have budgeted today accordingly.
We manage public spending so that we can invest in the public’s priorities. The Government have underlined those priorities with a series of commitments and protections for the duration of this Parliament. I can confirm today that, despite the fiscal pressures, we will meet our commitments to protect the budgets of key public services and defence; keep our promise to the world’s poorest through our overseas aid budget; and meet our pledge to our country’s pensioners through the triple lock. But as we look ahead to the next Parliament, we will need to ensure that we tackle the challenges of rising longevity and fiscal sustainability, so the Government will review public spending priorities and other commitments for the next Parliament in the light of the evolving fiscal position at the next spending review.
I now turn to taxation. Since 2010, the Government have put a business-led recovery at the heart of our plan. We have cut corporation tax from 28% to 20%, sending the message that Britain is open for business. The additional investment in productivity and infrastructure that I have announced today underscores that message, and the raft of investments in the UK announced since the referendum—by SoftBank, Glaxo, Nissan, Google and Apple among others—confirms it. My priority as Chancellor is to ensure that Britain remains the No. 1 destination for business, creating the investment, the jobs and the prosperity to protect our long-term future. I know how much business values certainty and stability, so I confirm today that we will stick to the business tax road map we set out in March. Corporation tax will fall to 17%, by far the lowest overall rate of corporate tax in the G20. We will deliver the commitments we have made to the oil and gas sector. The carbon price support will continue to be capped out to 2020, and we will implement the business rates reduction package worth £6.7 billion. I can also confirm today that, having consulted further, my right hon. Friend the Communities Secretary will lower the transitional relief cap from 45% next year to 43%, and from 50% to 32% the year after. That’s complicated, but it’s good news—just in case anybody wasn’t sure, Mr Speaker. I will also increase the rural rate relief to 100%, giving small businesses in rural areas a tax break worth up to £2,900 a year.
In return for these highly competitive tax rates, the tax base must be sustainable. From April 2017, we will align the employee and employer national insurance thresholds at £157 a week. There will be no cost to employees, and the maximum cost to business will be an annual £7.18 per employee. Insurance premium tax in this country is lower than in many other European countries, and half the rate of VAT. In order to raise revenue, which is required to fund the spending commitments I am making today, it will rise from 10% currently, to 12% from next June. At the same time, I can confirm the Government’s commitment to legislate next year to end the compensation culture surrounding whiplash claims, a major area of insurance fraud. That will save drivers an average of £40 on their annual premiums.
Technological progress is changing the way people live and work, and the tax system needs to keep pace. For example, the OBR has today highlighted the growing cost to the Exchequer of incorporation. So the Government will consider how we can ensure that the taxation of different ways of working is fair between different individuals doing essentially the same work, and sustains the tax base as the economy undergoes rapid change. We will consult in due course on any proposed changes. In the meantime, the Government will take action now to reduce the difference between the treatment of cash earnings and benefits. The majority of employees pay tax on a cash salary, but some are able to sacrifice salary by agreement with their employer and pay much lower tax on benefits in kind. That is unfair, so from April 2017 employers and employees who use these schemes will pay the same taxes as everyone else. Following consultation with stakeholders, ultra-low emission cars, pension savings, childcare and the cycle-to-work scheme will be excluded from this change, and certain long-term arrangements will be protected until April 2021. For pensions that have been drawn down, I will also reduce to £4,000 the money purchase annual allowance, to prevent inappropriate double tax relief being gained.
This Government have done more than any other to tackle tax evasion, avoidance and aggressive tax planning. The UK tax gap, it may surprise some Opposition Members to hear, is now one of the lowest in the world. But we must constantly be alert to new threats to our tax base and be willing to move swiftly to counter them. At the Budget, we committed to removing the tax benefits of disguised earnings for employees, and I am now going to do the same for the self-employed and employers, raising a further £630 million over the forecast period. We will shut down inappropriate use of the VAT flat rate scheme that was put in place to help small businesses. We will abolish the tax advantages linked to employee shareholder status, in response to growing evidence that it is primarily being used for tax-planning purposes by high-earning individuals. We will introduce a new penalty for those who enable the use of a tax avoidance scheme that HMRC later challenges and defeats. These measures, and others set out in the autumn statement document, raise about £2 billion over the forecast period.
There is understandable public concern that the pitch is tilted in favour of large multinational groups, which are able to use cross-border structures to manage their tax liabilities. Following detailed consultation, I can confirm that we will implement our new restriction on tax relief for corporate interest expenses and reform the way relief is provided for historic losses. These measures, scored at Budget 2016, will help to ensure that large businesses will always pay tax in years where they make substantial profits. They will also mean that businesses cannot avoid tax by borrowing excessively in the UK to fund their overseas activities. They take effect in April, and will raise over £5 billion from the largest businesses in the UK.
I said that the tax system must be fair, and that means rewarding those who work hard by helping them to keep more of what they earn. There is one tax reform the Government have pursued since 2010 that has done more than any other to improve the lot of working people: raising the tax-free personal allowance. When we entered Government in 2010, it was £6,475. After six years, it is now £11,000, and will rise to £11,500 in April. As a result, we have more than halved the tax bill of someone with a salary of £15,000 to just £800. That is a massive boost to the incomes of low and middle earners. Since 2010, we have cut income tax for 28 million people and taken 4 million people out of income tax altogether. I can confirm today that, despite the challenging fiscal forecasts, we will deliver on our commitment to raise the allowance to £12,500, and the higher rate threshold to £50,000, by the end of this Parliament. Once that £12,500 has been reached, the personal allowance will rise automatically during the 2020s in line with inflation, rather than the national minimum wage, as currently planned. It will be for the Chancellor to decide from year to year whether more is affordable.
As well as taking millions of ordinary people out of tax, we are the Government who introduced the national living wage and gave a pay rise to over 1 million workers. [Interruption.] Labour Members don’t like it—a Tory Government gave a pay rise to over 1 million of the lowest-paid workers. We are the Government who introduced 15 hours a week of free childcare for all three and four-year-olds, and we will double that for working families from September. We are the Government whose education reforms have raised standards and expanded opportunity, with 1.4 million more children now in “good” or “outstanding” schools, while the new capital funding I have provided today for grammar schools will help to continue that trend. We are the Government who pledged to invest in our NHS, and we are delivering on that promise by backing the NHS’s “Five Year Forward View” plan for the future with £10 billion of additional funding by the end of 2020-21. But we recognise that more needs to be done to help families make ends meet and to ensure that every household has opportunities to prosper. So today I can announce that the national living wage will increase from £7.20 to £7.50 next April. That is a pay rise worth over £500 a year to a full-time worker.
Creating jobs, lowering taxes and raising wages address directly the concerns of ordinary families, and the revenue-raising measures that I have announced today enable me to go further to help families on low wages. Universal credit is an important reform to our benefits system and is designed to make sure that work always pays. We want to reinforce that position. I have considered very carefully the arguments made by my right hon. Friend the Member for Chingford and Woodford Green (Mr Duncan Smith), my hon. Friend the Member for Enfield, Southgate (Mr Burrowes) and others, and weighed them carefully against the fiscal constraints, and I have concluded that from April we can reduce the universal credit taper rate from 65% to 63%. This is effectively a targeted tax cut that will be worth £700 million a year by 2021-22 for those in work on low incomes. It will increase the incentive to work and encourage progression in work, and it will help 3 million households across our country.
We believe that a market economy is the best way of delivering sustained prosperity for the British people. We will always support a market-led approach, but we will not be afraid to intervene where there is evidence of market failure. We will look carefully over the coming months at the functioning of key markets, including the retail energy market, to make sure they are functioning fairly for all consumers. In the private rental market, letting agents are currently able to charge unregulated fees to tenants. We have seen these fees spiral, despite attempts to regulate them, often to hundreds of pounds. This is wrong. Landlords appoint letting agents and landlords should meet their fees. So I can announce today that we will ban fees to tenants as soon as possible. We will also consult on how best to ban pension cold calling and a wider range of pension scams.
We can also help today those who rely on the income from modest savings to get by. Low interest rates have helped our economy to recover, but they have significantly reduced the interest people can earn on their cash savings, so we will launch a new, market-leading savings bond through NS&I. The detail will be announced at the Budget, but we expect our new investment bond will have an interest rate of around 2.2% gross and a term of three years. Savers will be able to deposit up to £3,000, and we expect around 2 million people to benefit.
The announcements I have made today lower taxes on working people, boost wages, back savers and bear down on bills. In early 2017, we will begin the roll-out of tax-free childcare across Britain, providing a saving of up to £2,000 per child. Once it is rolled out, we pledge to keep it under review to ensure that it is indeed delivering the support that working families need.
There is one further area of household expenditure where the Government can help. The oil price has risen by over 60% since January, and sterling has declined by 15% against the dollar. That means, of course, significant pressure on prices at the pump here in Britain, so today we stand on the side of millions of hard-working people in our country by cancelling the fuel duty rise for the seventh successive year. In total, this saves the average car driver £130 a year and the average van driver £350 a year. This is a tax cut worth £850 million next year and means that the current fuel duty freeze is the longest for 40 years.
I have one further announcement to make. This is my first autumn statement as Chancellor. After careful consideration and detailed discussion with the Prime Minister, I have decided that it will also be my last. I am abolishing the autumn statement. [Hon. Members: “Hear, hear.”] No other major economy makes hundreds of tax changes twice a year, and neither should we, so the spring Budget in a few months will be the final spring Budget. Starting in autumn 2017, Britain will have an autumn Budget announcing tax changes well in advance of the start of the tax year. From 2018, there will be a spring statement responding to the forecast—[Laughter.]
Mr Speaker
Order. The House is in a great state of emotion. Some people are very easily humoured. I am glad they are so humoured, but we must hear the Chancellor.
Mr Hammond
Perhaps they should have read their briefing, Mr Speaker, because they might then have remembered that Parliament has mandated the OBR to produce a report to Parliament twice a year and has mandated the Government to reply. From 2018, therefore, there will be a spring statement responding to the forecast from the OBR but no major fiscal event. If unexpected changes in the economy require it, I will of course reserve the right to announce actions at the spring statement, but I will not make significant changes twice a year just for the sake of it. This change will allow for greater parliamentary scrutiny of Budget measures ahead of their implementation. It is a long-overdue reform to our tax policy-making process and brings the UK into line with best practice recommended by the IMF, the Institute for Fiscal Studies, the Institute for Government and many others.
The OBR report today confirms the underlying strength and resilience of the British economy. This autumn statement responds to the challenge of building on that strength, while also heeding the warnings in the OBR’s figures, as we begin writing this new chapter in our country’s history. It re-states our commitment to living within our means and sets out our choice to invest in our future. It sends a clear message to the world that Britain is open for business and it provides help to those who need it now. We have made our choices and set our course. We are a great nation, bold in our vision, confident in our strengths and determined in our ambition to build a country that works for everyone. I commend this statement to the House.
John McDonnell
Thank you, Mr Speaker.
We have heard today that there will be more taxes, more debt and more borrowing. The verdict could not be clearer. The so-called long-term economic plan has failed. As the Treasury’s own leaked paper reveals, the Government knew it had failed before the referendum result was announced. We now face Brexit—the greatest economic challenge of a generation—unprepared and ill equipped. The new Chancellor acknowledged the failure of the economic strategy in October when he promised a reset of economic policy.
Today, we expected a change of direction after those six wasted years. Instead, we have seen further cuts to earnings for those in work through cuts to universal credit, and a living wage increase that is lower than expected under the previous Chancellor. This is a new Conservative leadership with no answers to the challenges facing our country following Brexit, and no vision to secure our future prosperity.
Labour respects the decision of the British people to leave the European Union, but the chaotic Tory handling of Brexit threatens the future prosperity of this country. The Chancellor must now do the right thing for British workers and businesses. He must insist on full, tariff-free access to the single market. He and the Treasury know that that is what will get the best deal for jobs and prosperity here. It may not be in the Chancellor’s nature, but in the national interest I urge him to stand up to the Prime Minister and the extreme Brexit fanatics in her Cabinet. If he stands up for British businesses and jobs by fighting for single market access, he will have our full support.
After six wasted years, wages are still lower than they were in 2008. Self-employed people are, on average, paid less than they were a generation ago. Six million people are earning less than the living wage. Too many people are having to worry about buying school uniforms, affording a family holiday or even just paying the rent or mortgage.
We have had a month of briefing from the Conservative party on those people who are called “just about managing”—the JAMs. To the Conservative party, these people are just an electoral demographic. To us, they are our friends, our neighbours and the people we represent. Let me tell the House why those people are just managing. It is the result of Tories imposing austerity on an economy that could not bear the strain. We have seen productivity stagnate, but there is nothing in the autumn statement on the scale needed to overturn those six wasted years.
If the Chancellor really wants to make a fairer tax system as well, he can start by bringing back the 50p tax rate for the richest in our country. We have heard familiar hollow rhetoric from the Tories on tax avoidance, when they have cut the resources of Her Majesty’s Revenue and Customs—the very people who collect these taxes. The resources available to HMRC today are 40% less than they were in 2000.
The Chancellor has frozen in-work benefits at a time when food prices are rising and we do not expect wages to keep up. We need an economy that is fundamentally more prosperous and where prosperity is, yes, shared by all. The increases in the national living wage announced today are lower than expected and leave the poorest-paid workers still earning less than they need to live on. So I ask the Chancellor to adopt a real living wage level, as Labour has pledged, and abandon his predecessor’s empty rhetoric.
Regrettably, the Chancellor is still going ahead with some of the cuts to universal credit. Thanks to pressure—I pay tribute to Members of all parties who have campaigned on this issue—he is offering to soften the blow. We do not want the blow softened; we want it lifted altogether. Today’s changes will leave a single parent on average at least £2,300 worse off. These are the very people who are working hard to deliver for their families, and the Government are betraying them.
People with disabilities, who have been put through the ordeal of the discredited work capability assessment and are trying to get themselves ready to return to work—they are “just about managing”—still remain in the Chancellor’s firing line. He is cutting £30 a week from the support that these disabled people receive. In our society, that is scandalous.
Those who are “just about managing” also rely on our public services. They send their children to local schools; they depend on their local hospital; they rely on local council services to clean their streets, tend to their parks and playgrounds and open their libraries. The reality, however, after six wasted years is that our public services are just not managing. Today, the childcare that parents rely on remains underfunded, as the Public Accounts Committee has reported—and it will remain underfunded, even after today’s announcements.
I want to pay tribute to my hon. Friends the Members for Swansea East (Carolyn Harris) and for Erith and Thamesmead (Teresa Pearce) for the important work they did in bringing the issue of child burial fees to public attention. I ask the Government to do the right thing on child burial fees and reconsider making funding available for families in these desperate circumstances.
Councillors from all political parties are reporting that they are at a tipping point in the provision of social care. The previous Chancellor cut nearly £5 billion from social care, meaning that over 1 million people who need care are not getting it. They are not even “just about managing”, and they got little help today. We call for additional support for social care, because the funding being provided today is only a stop-gap measure. Our social care system will not be secure without long-term funding. Tonight, many elderly people will remain trapped in their homes, isolated and lonely, lacking the care they need because of continuing cuts to social care—and social care cannot be cut without also hitting the NHS.
The supposed £10 billion funding allocated to the NHS is a restatement of an earlier commitment, but the Health Committee described this £10 billion claim as “misleading and incorrect”. The real amount is less than half that claimed. As a result, we now have 3.9 million people on NHS waiting lists—more than ever—and many of those 3.9 million people are waiting in pain, and they got no relief today. Across the country, hospitals face losing their A&E units, their maternity units and their specialist units. This Tory Government are failing patients, as well as failing the dedicated NHS staff who serve us so well. This is the first time that healthcare spending per head has declined since the NHS was created, and I fear there will be a crisis in funding and care over this Christmas. The NHS cares for us, and we should care for the NHS.
Members of this Government have also overseen the biggest real-terms cuts in education for four decades. One pound in every seven has been cut from further education college budgets, and Conservative policy has saddled a generation of students with a lifetime of debt. How can a Government seriously talk about supporting a 21st-century economy when they are planning to pour tens of millions into the failed 20th-century policy of grammar schools, segregating our children at an early age?
As for housing, the Chancellor announced today that he was scrapping “pay to stay” proposals and letting agents’ fees—a U-turn that is a victory for Labour’s campaigns against both the “tenant tax” and letting fees. The Chancellor has spoken before about the dream of home ownership for the young. Nothing that he has announced today is of the scale that is needed to suggest that that will remain anything other than a dream. The hard facts are these. The Government of which the Chancellor was a member built fewer homes than had been built at any point since the 1920s, and there are now a third of a million fewer home owners under the age of 35. Today the Chancellor could have delivered the scale of investment that is required to build the homes that we need and to create a new generation of home ownership. He significantly failed to do so.
Thanks to campaigning by my right hon. Friend the Member for Wentworth and Dearne (John Healey), the Wentworth Woodhouse building will be saved. I am grateful for that. The accusation was that a Labour Government had sited an opencast mine near the building and threatened it. That, I believe, was in 1947. I only wish that some of the policies pursued by Tory Governments since the 1950s could be reversed so easily.
The Government’s biggest investment failure is this: the Chancellor has failed to address properly the Government’s most consistent shortcoming. His predecessor cut public investment to the lowest that it had been since the 1990s. Instead of delivering the ambitious investment that our economy needs throughout the country, the Chancellor has failed to recognise the scale of the challenge. He also risks repeating the mistakes from last year, with the national flood resilience plan failing to provide the protection that our communities need.
Just one in five of the projects in the investment pipeline is under construction, and shovel-ready projects worth £82 billion are still being delayed. The infrastructure gap between London and the rest of the country remains unbridged. London was scheduled to receive 12 times as much public investment per head as the north-east of England. The announcement of a £1.1 billion investment in transport is a reannouncement. The Oxford-Cambridge rail link is significantly delayed against Network Rail’s original planned completion date of March 2019. There are no new ideas here, just a promise to deliver what the Government have previously failed to deliver. This is press-release policy-making, not provision. All that we need now is the return of the high-vis jacket.
The “fourth industrial revolution” will not be delivered on delays, old news and reannouncements. The Government have, at last, realised their mistake, and now talk about an industrial strategy—words that Ministers refused even to refer to in the past—but it is not enough to change a few ministerial titles. The Government and the Chancellor need to deliver. We have yet to see the proposed Green Paper on industrial strategy that was promised over the summer.
The same Government who now talk up high-tech investment oversaw a real-terms cut of £1 billion in science funding during the last Parliament. The OECD recommends that developed countries should be spending 3% of GDP on science. On the basis of what we have heard today, the new spending will lift our expenditure from 1.7% of GDP to a mere 1.8%.
It is the same familiar story for business. The Chancellor is continuing the race to the bottom on corporation tax, and, while continuing the cuts in public services, he is cutting taxes for big business. We know that it is not headline tax rates that encourage long-term investment by businesses. Business investment has been revised down every year under this Government. What encourages businesses to invest is the knowledge that they have access to skilled workers, world-class infrastructure and major markets.
Today’s grim economic forecasts reveal the challenge that lies ahead. The Chancellor admitted over the summer that it was time for a change of course. He has now had to abandon the Government’s fiscal charter, with its failed hard surplus target. Labour warned that a hard surplus target lacked the flexibility to adapt to economic circumstances and the capacity to allow investment. The Chancellor’s U-turn today demonstrates just how right we have been over the past year.
Only weeks ago, the Prime Minister offered the hope of change and the Chancellor offered to “reset” economic policy. Today, we have seen the very people whom the Prime Minister promised to champion betrayed. The Chancellor has failed to break with the economic strategy of austerity. The country remains unprepared and ill-equipped to meet the challenges of Brexit and secure Britain’s future as a world-leading economy. I fear that, after all the sacrifices that people have made over the last six years, today’s statement has laid the foundations for more wasted years. Only a Labour Government will deliver on the ambition and vision to rebuild and transform our economy so that no one and no community is left behind.
Mr Hammond
Let me begin by associating myself with the right hon. Gentleman’s remarks about the Jo Cox trial and sending my deepest condolences to her family and friends, who will be suffering again today.
I congratulate the right hon. Gentleman on his appointment to the Privy Council. I only wish that I could have been present at the investiture. I remember the procedure quite well: they give you a little red book to hold. [Laughter.]
I listened carefully to the right hon. Gentleman’s response to my statement. His central argument appears to be that the deficit is too high and borrowing is too high. That is a bit of a problem, because, as I have understood it, his central proposal for our economy is to borrow more and spend more. Under his rule, Labour would always be borrowing, in good times as well as bad. His analysis of the problem of the last Labour Government is not that they spent too much money, but that they spent too little. Indeed, his rule has remarkable similarities to Gordon Brown’s “golden rule”, and we all know where that got us. His big idea is to spend an extra £500 billion, without any notion of how he would pay for it.
The right hon. Gentleman welcomed the industrial strategy. I am not sure that I welcome his welcome, but I warn him not to welcome it too quickly, because it will not look anything like an industrial strategy that would come out of his office. What he has heard about today is a responsible set of decisions, such as the decision to borrow £23 billion of tightly targeted investment while paying for every single penny of every other commitment that has been made.
The right hon. Gentleman talked about Brexit, and attacked us over the way in which we are handling the Brexit process. I honestly do not know whether he has ever been involved in a negotiation—I suspect not—but I invite him to look across the continent for a moment and note the admirable discipline that our negotiating counterparts are displaying in their messages, revealing nothing as they prepare to go into this negotiation with us. My advice is this: if we want to secure the best possible deal for Britain, we must keep our cards appropriately close to our chest.
The right hon. Gentleman may have heard “cuts in people’s incomes” in my announcement about universal credit. Let me explain to him how this works. When we cut the taper from 65% to 63%, we allow people to keep an extra 2% of the income they are earning. I would have thought he welcomed that.
This is all about making tough decisions, and I am very happy to debate with the right hon. Gentleman, but I just wish he would be honest enough to accept that we cannot shower money everywhere, proposing to spend money on everything, without having to raise that money, either by taxes on ordinary people or by cutting spending elsewhere. It is simply no good to keep on pretending that we can do that just by taxing the rich. The top 1% of people in this country already contribute 27% of income tax paid, and unfortunately there are just not enough of them to be able to finance all the right hon. Gentleman’s ambitions.
The right hon. Gentleman said he was disappointed by the announcement on the national living wage. I do not remember—perhaps one of my hon. Friends can remind me—the level of the national living wage during the 13 years of Labour’s Government. He might note that the level I have announced today is precisely the level recommended by the Low Pay Commission, the body set up to pronounce on these things.
I wish the right hon. Gentleman would also be honest when he talks about the work-related activity group in the employment and support arrangements. This applies to new claims only, as he very well knows, so nobody is going to have £29 a week taken away from them however many times he says it. He also knows that it is not a stand-alone measure; it is part of a package. The money saved is being reinvested in a £330 million package to get these people into work, with targeted support to help them to be ready for work.
The right hon. Gentleman talks about house building starts. House building starts were 45% down under the last Labour Government.
The right hon. Gentleman and the Leader of the Opposition have spread division and disunity through the Labour party, and that is exactly what they would spread through the country if they ever—God forbid—got into government. The right hon. Gentleman says there are no new ideas; I have to say that he needs to check the opinion polling, because that is not quite what public opinion believes. Instead of carping and opposing every measure we propose, why doesn’t he roll up his sleeves and support us in the hard work of building an economy that works for everyone?
Mr Kenneth Clarke (Rushcliffe) (Con)
I congratulate the Chancellor on reverting to the extremely sensible practice of having only one Budget a year, which Gordon Brown abandoned in order to try to buy votes twice a year, with disastrous consequences. I also congratulate him on easing the taper on tax credit, because it is having distorting effects on the labour market at the moment, for example by discouraging part-time workers from working extra hours. I particularly thank him for the money he has spent on the very valuable work rehabilitating the disabled at Stanford Hall in my constituency.
With those notable exceptions, will the Chancellor reassure me he will resist political pressures of all kinds over the coming years to move away from the very sensible fiscal discipline he has set out, because the major risk to his period of office would come—and it would affect every section of our society, including the JAMs that the media have discovered—if he were unable to avoid or mitigate the risk of recession, which global uncertainty undoubtedly poses to us in the real world?
Finally, will he confirm that, wherever he holds his cards, he will continue, inside the Government if necessary, to spell out economic reality and the long-term benefits to this country, if he wants to develop a modern, competitive economy, of retaining access to our most important market, in Europe, by retaining the benefits of the single market and the customs union, and that no amount of short-term political pressure will allow him to be deflected from that?
Mr Hammond
I am grateful to my right hon. and learned Friend. I am delighted that we have been able to lower the taper rate of universal credit, because of course it is absolutely in line with our principle that we should be supporting and encouraging people into work. He says the taper rate discourages people, but it is of course a much lower rate of withdrawal than under the old tax credit system it replaces.
Let me reassure my right hon. and learned Friend that I and my right hon. Friend the Prime Minister remain absolutely committed to the sound Tory principle that a country has to live within its means. Of course we have to deal with the realities the world throws at us, and that is why today I have adopted, as an interim measure for the remainder of this Parliament, a cyclically adjusted target which will always allow us to respond to any downturn that occurs. However, I certainly understand the importance of economic reality, and I also understand, as does my right hon. Friend the Prime Minister, the extreme desirability of achieving the very best access to markets in Europe for those who produce our goods and services.
Stewart Hosie (Dundee East) (SNP)
First, may I associate myself with the words of the shadow Chancellor and the Chancellor on the late Jo Cox? May I also thank the Chancellor for what he said about the Tay cities deal? I note that what he said was slightly different from the words in the Red Book, so we will take him at face value from the Dispatch Box. In his attempt to clamp down on evasion, it was disappointing that no reference was made to Scottish limited partnerships. One would have thought that there would be more, too, in terms of fairness overall, and a reference to the Women Against State Pension Inequality campaign and the unfairness for those women.
The Chancellor gave us plenty of information today, but with no more than a glib reference to being match fit at the beginning and a bit of deflection there was very little on the elephant in the room, which is Brexit. It is not as if the Treasury does not know what the consequences of it will be; its own assessment tells us that tax yields could be down by £66 billion a year after 15 years and GDP down perhaps by 9.5% —a figure confirmed by the London School of Economics—as a result of reduced trade lowering productivity. That amounts to some £6,500 per year per household. So where was the plan to ensure that there is no hard Brexit and to maintain access to the single market? Where was the plan to mitigate the losses in tax yield and GDP? Although the Chancellor said a considerable amount about capital investment and research and development—and I welcome some of it up to a point—where was the fully developed scheme actually to boost productivity?
We do not go into this next period from a position of strength. As the Chancellor knows, UK GDP is already nearly 20% lower than it would have been had we achieved even a 2% trend growth rate since 2008. Our argument is that the austerity of this Government and the previous Government sucked consumption out of the economy, weakening recovery. This Government are set to repeat the error. Growth barely reaches 2% for the forecast period, and although the Chancellor sensibly did not put a date on it, he is still targeting a surplus in the economy, perhaps again before recovery has been secured.
I am glad the Chancellor has changed the fiscal charter, because the previous permanent surplus rule, taking £10 billion a year more out than required to run a balanced economy and cutting £50 billion a year more than required to run a balanced current budget, left us with some terrible consequences. As discretionary consolidation, cuts and tax rises took place, the ratio of cuts to tax rises also increased, placing the burden of austerity and an arbitrary fiscal target on the back of the poor. That has made the poorest decile 5% worse off and the richest 10% almost entirely better off. The Government have clearly worked out something, and I welcome the move on the taper, but let us be clear: at 2p in the pound, on the minimum wage that is 14p an hour.
It is not a king’s ransom and it will not cure poverty. The squeeze has not been lifted from the poor, and the screw of the welfare cap has not been turned off; this has simply made a brutal regime slightly less brutal.
I am glad that the Chancellor mentioned the actions of the Bank of England. Our party very much welcomes what the Governor has done. He has introduced an increase in quantitative easing and £60 billion of extra Government bond purchases, made £10 billion available for corporate bond purchases, set a 0.25% base rate and enabled additional term funding to encourage more and cheaper long-term lending from the banks. However, there has been a more or less complete absence of a fiscal policy stimulus to match the incredible monetary policy activism of the central bank.
The key part of today’s autumn statement—I am pleased to hear that this is the last one; it is my 25th Budget, autumn statement or pre-Budget statement—was the increase in total managed expenditure, but like, for like, it amounts to 1.5% of total managed expenditure over the forecast period from 2015-16 to 2020-21. It is to be welcomed, and it certainly represents a break from the recent past, but it can in no way be described as the sort of fiscal stimulus required to match the monetary policy discipline of the central bank.
The Chancellor talked about an increase in capital investment, which I very much welcome. He also talked about an increase in funding for research and development. However, given the fact that the description of research and development has changed in the Green Book, as has the description of the UK Trade & Investment funding—he said that there would be a doubling of some aspects of export support—it is hard to tell precisely what the impact of some of those measures will be. Will he tell us what the total increase in cash and percentage terms of this vital export support will be? Will he also tell us what the overall increase in research and development funding will be across the piece? How does he intend to deploy the £23 billion of what he described as capital investment?
Mr Hammond
I am not sure whether that was a “thank you” or not. I might have to consult my hon. Friends about that. I think it might have been—
Mr Hammond
Oh, it was not. What we have announced today is a significant increase in capital investment, which includes research and development under the Office for National Statistics definition, and Scotland will get £800 million of that. Research and development is not Barnettised, so the increase will be spread across the whole of the UK, but the infrastructure element will be Barnettised and Scotland will get £800 million. I would point out to the hon. Member for Dundee East (Stewart Hosie) that Scotland’s economic performance needs attention, and that its productivity needs addressing. I am sure that families and businesses across Scotland will hope that he or one of his colleagues can confirm that the Scottish Government will use this additional funding—in the spirit in which it is being raised for the rest of the United Kingdom—to invest in raising the productivity performance of the Scottish economy. I would very much welcome that.
The hon. Gentleman asked about details of the productivity message. I can assure him that there is no lack of enthusiasm in this Government for tackling the productivity challenge. My right hon. Friend the Business Secretary, the Treasury and other Departments are involved in a process that will lead to a Green Paper that will allow us to consult extensively with business and other outside bodies before we firm up exactly how to deliver the strategy. What the House has seen today is £23 billion of additional investment, alongside the £150 billion that we have already committed to investing in economic infrastructure over the period, which will form the backbone for that policy and its delivery.
The hon. Gentleman knows very well—although he probably would not admit it—that survey after survey has shown that the biggest drag on growth and business investment in Scotland is the continuing threat of a second referendum.
Mr Hammond
The right hon. Gentleman needs to go back and look at the polling data. The concern about a second Scottish independence referendum is bigger than any concerns about possible Brexit arrangements.
In response to the specific points raised by the hon. Member for Dundee East, I am publishing a distributional analysis—I believe that it is available in the Vote Office now—of the measures that have been announced today and, cumulatively, of the measures that have been announced throughout this Parliament. It will not show the outcome that he suggested, so perhaps he would like to look at it and we can no doubt have another exchange on this at Treasury questions.
The overall package of measures announced today represents a fiscal loosening of around £23 billion. I acknowledge that that is a reduction of a planned fiscal tightening, but of course there has to be a fiscal tightening over time because we are moving towards living within our means, with a balanced budget in the next Parliament, and we are not going to be deflected from that intention. Finally, just to clear up the confusion, UKTI’s budget is now rolled into the budget of the Department for International Trade. What I announced in my statement was that the risk capacity of UK Export Finance will be doubled so that it can provide finance to enable exporters from all over the UK to sell their goods abroad on credit.
Mr George Osborne (Tatton) (Con)
I warmly congratulate my right hon. Friend and successor on his strong statement and assured delivery. I particularly welcome the additional support for the northern powerhouse. The independent Office for Budget Responsibility has given us a sober assessment of the economic and borrowing challenges that Britain faces, and the Chancellor is right to keep his powder dry. However, he is also right to adhere to the principles that we control current spending, that we ensure that work pays and make the welfare and tax reforms necessary to deliver that, that we make Britain the best place to attract business and that we have the freest possible trade with our key export markets. I support all the things that he is doing to deliver on those principles.
Mr Hammond
I am extremely grateful to my right hon. Friend. He is absolutely right to say that those principles will guide the actions of this Government—as they should guide the actions of any sensible Government —as we try to future-proof our economy in a time of extraordinary political and technological change. We are facing a period of 20 or 30 years in which the way we work, the way we live and the way we do business will change fundamentally, and unless we invest now in our infrastructure, our science and technology base and our innovation capability, we risk being left behind. That would not deliver the economy and the country that works for everyone that we are committed to.
Edward Miliband (Doncaster North) (Lab)
I welcome the fact that the Chancellor of the Exchequer has adopted the fiscal rules that his predecessor described as the single biggest risk to economic recovery. They are the ones that we proposed in 2015. I want to ask him about Brexit. He said at the Tory party conference that the British people did not vote to become poorer. However, on page 19 of the Office for Budget Responsibility’s report, we see that £58 billion of the worsening in the public finances is due to the Brexit decision. Is this not a salutary warning to us about the decisions that we will take over the coming months and years? Is it not also a strong argument for us to remain as close as possible to our largest trading area, the single market, and inside rather than outside the customs union?
Mr Hammond
The Prime Minister has said many times—I shall undoubtedly repeat this many times today—that it remains our objective to try to get the closest possible trading arrangement with the European Union and the greatest possible access for our goods and services to be sold into European markets after we leave the European Union. In response to the right hon. Gentleman’s question, I think we have to disaggregate two effects. There is of course going to be a period of uncertainty as we go through the process of exiting the European Union, and that has had a dampening effect on business investment, as the OBR has identified. However, we have to rise to the challenge of getting ourselves match-fit to seize the opportunities that this country will have after we complete that process, and I would urge him to think about that longer-term challenge as well as the short-term issues.
Mr Andrew Tyrie (Chichester) (Con)
I congratulate the Chancellor on delivering a crucial statement for the country. It was a Budget in all but name, and I strongly support his decision to make it the first of many autumn Budgets, for which a number of us on the Treasury Committee have been pressing for a while.
The statement will provide reassurance and certainty for the whole country. Given that the education sector creates export earnings of £20 billion—about the same as the car manufacturing sector—will the Chancellor soon be able to provide our colleges and universities with the certainty and reassurance they need that foreign students will not be caught by the 100,000 migration target?
Mr Hammond
I am grateful to the Chairman of the Treasury Committee for his remarks and for the Committee’s work on a single fiscal event—it is much appreciated and the right way for us to go. On his specific question, students are included, as he knows, in the 100,000 or tens of thousands target, and my right hon. Friend the Home Secretary is looking at how best to manage student flows in the interests of what, as he says, is an important industry in this country.
Chris Leslie (Nottingham East) (Lab/Co-op)
A few months ago, the Foreign Secretary promised the general public that we would by now have an extra £350 million a week for the national health service. Strangely, however, the Chancellor has just announced that growth is falling and business investment is collapsing and that there will be an extra £110 billion of borrowing over the forecast period when compared with March. I do not see any of his leave-campaigner colleagues on the Front Bench, but has he received an apology yet from the Foreign Secretary or any of them?
Mr Hammond
I am not responsible for remarks that may or may not have been made during political campaigns. The British people made a decision to leave the European Union, and we must respect that decision. If we are to make a success of this process and if we are going to ensure the success of the British economy in the future, we must move on and not repeat this sterile debate over and over again. We must focus our attention on building an economy that is match-fit for the future and that will enable us to deliver high living standards as we make our way in the world.
John Redwood (Wokingham) (Con)
As someone who is much more optimistic about the UK economy’s prospects under the Chancellor’s stewardship than the OBR usually is, I welcome the increased OBR forecast for this year—a faster rate of growth than in its pre-vote forecast. I also welcome its recognition that there will be no post-vote winter recession, as was forecast by some. Does the Chancellor agree that the OBR is probably still quite wrong about 2017? Its forecast is too low, its borrowing forecast is far too high, and we will get good access to the single market once we are out of the EU.
Mr Hammond
I hope that my right hon. Friend is right on that last point, which will of course be our objective. I am grateful to him for his implicit confidence in my stewardship. I am well aware of his views, which are, as always, long standing and utterly consistent. However, it is not my job to opine on the report that the OBR has made by statute to Parliament; it is my job to respond to it. That is what I have done today. Obviously, economic forecasting is not a precise science, and I absolutely recognise, as would the OBR, that individual Members will have their own views on the likely future trajectory of our economy. It is probably worth mentioning that the OBR specifically says in its report that there is an unusually high degree of uncertainty in its forecasts because of the unusual circumstances.
Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
In a long statement, we had no mention of the national health service. After the first six months of this year, the deficit is £648 million for trusts alone, with a year-end deficit forecast of £669 million. Given the extraordinary measures to which the Department of Health had to go to balance its budget in the last financial year and given those projections, what is the Chancellor doing to ensure that our national health service has a sustainable future?
Mr Hammond
I might be a novice at autumn statements, but I am not such a rookie that I did not mention the NHS, so I suggest that the hon. Lady checks Hansard, where she will find that I definitely did. She talks about an aggregate trust deficit of £648 million that was projected at a point that is four months out from the end of the fiscal year. That is in the context of a budget of £110 billion in an NHS that holds a contingency reserve at the centre. My right hon. Friend the Health Secretary is well aware of such pressures, which are not particularly unusual. They are being managed inside the NHS, and I am of course keeping and will continue to keep a close eye on them with the Health Secretary.
Anna Soubry (Broxtowe) (Con)
I congratulate my right hon. Friend on a wide range of measures—short term, medium term and long term—that will undoubtedly turbocharge our economy and give it the boost it needs as we face the realities of Brexit. Does he agree that it has never been more important for British business to be at the heart of local enterprise partnerships, great ideas such as the midlands engine, and all the infrastructure plans? Such projects should be driven by British business, not politicians.
Mr Hammond
I absolutely agree with my right hon. Friend and I am grateful for her comments. I passionately believe that business should be engaged at the heart of this process—that is the right way to do it—and local enterprise partnerships and area-specific project organisations are a good innovation for delivering it. However, this is also part of meeting the challenge of regional imbalance, which as I said earlier is not just a social problem, but an economic problem. When we look at our productivity gap when compared with other advanced economies, we should logically look for the things in our country that are different from those in our comparators. The gap between our capital city and our other cities and regions is one of the defining features of the UK economy. By working with businesses from across the country and the regions, in particular by promoting our regional cities, we can at last start to address the problem.
Andy Burnham (Leigh) (Lab)
The north of England is crying out for a plan for investment in rail, and people will be left asking today, “Where is it?” It is also crying out for investment in social care. It is quite frankly unbelievable that the Chancellor could find no place to mention it today. Six years of cuts to social care have left a record number of older people trapped in hospital and the NHS on the brink. With a dangerous winter now facing us, can he say a little more about how he came to the judgment that new grammar schools are a higher spending priority than the funding of care for older people?
Mr Hammond
I am a little surprised that the right hon. Gentleman—a former Chief Secretary to the Treasury—is not actually able to distinguish between capital and resource, because the funding that we are talking about for grammar schools is capital spending. I said in the course of my statement that the Department for Transport will continue the discussions on northern powerhouse rail with Transport for the North and will make announcements in due course.
The right hon. Gentleman also asked specifically about social care. Opposition Members are fond of talking about cuts to social care budgets, but local authorities have to manage their budgets as they think best. They have to manage the envelope of resource that they are given. We have created a better care fund that will be delivering £1.5 billion a year into social care by the end of this Parliament. We have allowed local authorities to raise a social care precept, which will be delivering another £2 billion a year by the end of this Parliament. That is £3.5 billion a year of additional funding into the social care system. I accept that there is an issue that local authorities are raising—we have heard what they are saying—about profiling and how this large amount of additional money ramps up. My right hon. Friends the Health Secretary and the Communities and Local Government Secretary are extremely aware of the issue and I am discussing it with them.
Dr Sarah Wollaston (Totnes) (Con)
The Care Quality Commission has warned that social care is at a tipping point and vulnerable people across the country are being left without the care and support that they need, which is adding hugely to costs for the NHS. I am disappointed that the better care fund has not yet been brought forward, but encouraged to hear that that is actively under discussion. Will the Chancellor confirm that we should try to get away from this divisive debate in the House about how we are going to fund our health and social care, and that all parties should work together for a new, sustainable, long-term settlement?
Mr Hammond
I am all in favour of discussing these big strategic questions in a grown-up way, trying to build a consensus across the House, but I see little interest from Opposition Members in doing that. We have made a commitment of £10 billion of additional funding for the NHS over this Parliament—[Interruption.] Yes, we have. It is £10 billion of additional funding by the end of this Parliament. A senior management team in the NHS has drawn up a plan, set the budget and asked for the money. It has been given the money and I think we should allow it to show what it can do.
Mr Douglas Carswell (Clacton) (UKIP)
The Chancellor’s autumn statement suggests yet more public borrowing, with total public debt due to increase to £1.6 trillion in the new year and £1.9 trillion by 2020, when it will be four times what it was in 2005. Rather than being a reflection on Brexit, is not the accumulation of these unsustainable levels of public debt due to his predecessor’s failure to match words with deeds and get a grip on public spending?
Mr Hammond
No. I appreciate that the hon. Gentleman will not have had a chance to read the report, but when he does so, he will see that the big drivers of debt are: the deteriorating forecast for growth, which of course has a big impact; the structural change that appears to be taking place in the relationship between a given level of GDP and tax receipts—I mentioned in my statement that we will have to address that—and the measures that the Bank of England took, which have a direct impact on public debt, but only in the short term, because they do unwind over the course of a few years.
Kit Malthouse (North West Hampshire) (Con)
I warmly welcome the Chancellor’s significant commitment to British science today, regarding both research and commercialisation. As he moves towards his next Budget, may I urge him to look carefully at removing many of the regulatory barriers and at providing greater tax incentives for individuals to invest in science and technology start-ups so that we can start to build a true enterprise culture in which everybody participates?
Mr Hammond
My hon. Friend has been kind enough to come to see me over the past few weeks to make some suggestions in this area. I did announce in my statement that the Treasury will conduct a review of the availability of patient capital in this country, and I include in that genuine individual investment in start-up businesses and how we make sure that that is incentivised to stay in for the long haul. I thank him for his input and we will look at this further.
Rachel Reeves (Leeds West) (Lab)
May I start by associating myself with the comments made by the Chancellor and the shadow Chancellor about the verdict in the Jo Cox trial? I hope that the whole-life sentence for Jo’s murderer can at least give some comfort to her family at this incredibly difficult time, and will also enable us to remember Jo for the way she lived, rather than the way she was murdered.
May I ask the Chancellor about the changes to universal credit that he announced today? The taper rate will now be 63p in the pound, which means that for every additional pound earned, the recipient of universal credit will lose 63p. That marginal tax rate is three times higher than the basic tax rate. Does he honestly think that sufficiently rewards work and encourages people to take on those extra hours that we all want them to do?
Mr Hammond
Again, I associate myself with the hon. Lady’s remarks. I am sure that she is right that the entirely sensible sentence that has been handed down will be a source of some comfort to the family.
The hon. Lady asks whether the taper rate is a disincentive or an incentive to work. Of course the lower the taper rate, the greater the incentive to work—I readily recognise that. I said in my statement that I had listened carefully to representations about doing something in this area and balanced those against my judgment about our fiscal capacity. I have funded every single spending commitment made today. If we had gone further than 63%, we would have had to raise more money somewhere else, and I judged that at the present time that was not the right thing to do. I also gently remind her that 65%, never mind 63%, is a lot lower than a marginal withdrawal rate of 90%, which was what many people were facing under the tax credits system.
Antoinette Sandbach (Eddisbury) (Con)
May I welcome the steps that the Chancellor has taken to tackle some of the issues facing rural businesses, particularly the extension of rural rate relief and of fibre broadband? I particularly thank him for the £1.4 million that will be going to the Alder centre, which will help to build a new building for the provision of counselling services across the north-west to bereaved parents. I know that the trustees are absolutely delighted.
Mr Hammond
I am grateful to my hon. Friend for that, and I am delighted that, even in these difficult fiscal times, we are able to make these investments, which can be life-changing in local areas.
Sammy Wilson (East Antrim) (DUP)
So that there can be no doubt, may I welcome the fact that the Northern Ireland Executive will have £250 million of additional capital spending, as well as the commitment to reduce corporation tax, which should lower the bill for the devolution of corporation tax to Northern Ireland without damaging our ability to compete with the Republic? The Chancellor says that growth is still damagingly imbalanced across the United Kingdom. If the Northern Ireland Executive make sensible proposals of further measures to address that issue, will he pay attention and respond to those? Does he agree that his acceptance of the lower forecast of growth for the UK in the long term, despite the fact that it contradicts totally the short-term forecasts, can be self-fulfilling and can damage places such as Northern Ireland disproportionately when compared with other parts of the UK?
Mr Hammond
I am not sure that receiving the OBR report constitutes an acceptance of anything; the report is the report and we have to respond to it. The hon. Gentleman asks about the imbalance in growth; of course that is a problem, and increasing economic growth in Northern Ireland is a high priority. Wages and living standards are lower in Northern Ireland than we would like, and the only way to address that is to improve productivity, increase the size of the private sector and get more investment into Northern Ireland so that growth rates are increased. Obviously I will respond to any proposals that come from the Northern Ireland Executive. I cannot promise him how I will respond to them, but I can promise him that I will respond.
John Penrose (Weston-super-Mare) (Con)
The extra investment in building affordable homes and infrastructure is excellent news. Does the Chancellor agree that cheaper homes are one of the most important ways of raising living standards for everyone and improving economic productivity? Will he therefore also support reported moves to increase the supply of urban house-building sites by allowing owners to build up, not out, to the height of other buildings in the same block without planning permission?
Mr Hammond
My hon. Friend is right to say that making sure that housing is affordable is not only a key social priority, but a key economic priority. As I said in my statement, it is clear that the unaffordability of housing, certainly in many areas of the country, has become a drag on productivity, economic growth and investment. Investment in housing not only advantages the economy, but directly helps families, so I am pleased that we have been able to do something on that front today. As I said, my right hon. Friend the Communities Secretary will be bringing forward a housing White Paper in due course and he will address the longer-term strategic problems, one of which is the subject of the point that my hon. Friend has made.
Luciana Berger (Liverpool, Wavertree) (Lab/Co-op)
Further to the questions asked by my right hon. Friend the Member for Leigh (Andy Burnham), my hon. Friend the Member for Hackney South and Shoreditch (Meg Hillier) and the hon. Member for Totnes (Dr Wollaston), may I point out that there is not one mention in the 72-page autumn statement document of the words “NHS”, “social care”, “mental health” and “public health”? The Chancellor cannot ignore the fact that our health and social care services are in crisis and face massive deficits. Surely the many economists in his Department will have told him that it is economically illiterate to ignore the massive decrease in people receiving social care in the community, and the cuts to public health and NHS staff training. Why was the NHS missing from his autumn statement?
Mr Hammond
We have been round this loop before. We are putting £10 billion a year more into the national health service by the end of this Parliament. We are delivering exactly what the senior management of the national health service asked for, and we will work with them to ensure that it is effective, because the money has to be spent and delivered effectively. I keep in close contact with my right hon. Friend the Secretary of State for Health. He is working very closely with NHS management. I know that it is tempting for Opposition Members to paint everything as a crisis or to talk of looming chaos, but that is not the case. We have a programme for investment in the NHS. It is being delivered and we will keep a close eye on the way it is being delivered.
David Rutley (Macclesfield) (Con)
I welcome today’s announcement and the autumn statement. I am particularly pleased to welcome the extra £2 billion for research and development that was announced earlier this week—it is absolutely pivotal. Does my right hon. Friend agree that it will help to underpin our leadership in life sciences, which is a key sector for success in the northern powerhouse?
Mr Hammond
I completely agree. To be clear, by the end of the Parliament, an additional £2 billion a year will go into research and development. My hon. Friend is right that life sciences and synthetic biology are an area in which the UK has gained a really significant lead in a disruptive area of technology that will shape the future of our economy and the economy of the world. There are three or four such areas in which we really have to invest now to ensure that we get the critical footprint that will allow us to be leaders in this fourth industrial revolution, just as we were in the first industrial revolution.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
May I welcome those elements of this statement that are positive? I am talking about the spending for infrastructure, especially in broadband and mobile phone signals, the reduction in fuel duty and the changes to universal credit. They are all steps in the right direction, but we wanted extra cash to be given to the NHS and social care, where it is needed, because as winter comes on we risk the problems becoming acute. I understand the difficulties that face the Chancellor today. He has a £122 billion black hole as a result of Brexit. As the hon. Member for Totnes (Dr Wollaston) said, instead of using the NHS as a political football, will he work with people of all parties and none to identify where that money can be found because, frankly, the NHS is too important to be treated like this?
Mr Hammond
First, I urge the right hon. Gentleman to look at the figures in a little more detail. The £122 billion that he quotes runs over a fifth year. It includes the £23 billion of discretionary additional commitments that I have made today, as well as more than £20 billion of baseline adjustments due to previous policy changes around welfare benefits and classification changes made by the ONS. He therefore really needs to look at the figures.
On the NHS, as I have said already, there are trust deficits building up across the country. At the moment, they are manageable within the context of the NHS’s own internal cash management system, but we will of course keep a close eye on them. We take the view that the NHS has asked for financing of a specific and defined plan. We have provided that financing. We now need to challenge NHS managers who have asked for that money to deliver the outcomes that they promised. We will watch very closely and stick close by as they do.
Stephen Hammond (Wimbledon) (Con)
I congratulate my right hon. Friend on his first and last autumn statement. In particular, I warmly welcome the support for infrastructure. With regard to the investment for 140,000 new houses, may I ask him to consider the suggestion from the National Housing Federation that those affordable houses are built tenure-free so that they might be delivered more quickly?
Mr Philip Hammond
I did say in the statement—my hon. Friend might have missed it—that we will relax the restrictions on tenure that are normally attached to affordable housing grant funding so that affordable housing providers can build with the mix of tenures that is right for the particular market in which they are operating. That will allow housing to be built more quickly, and housing need to be met more quickly.
Caroline Flint (Don Valley) (Lab)
The Prime Minister expressed outrage in her conference speech at the fact that two thirds of energy bill payers are paying over the odds on the standard variable tariff. That percentage has been confirmed by the Competition and Markets Authority. I first spoke about this five years ago, so it was disappointing that the problem was not mentioned in the Chancellor’s speech today. We should have a protective tariff and a cap for those on the standard variable rate. I understand that there are meetings across Whitehall to discuss that idea. Will he confirm or deny the rumours that a protective tariff, or a default tariff, is under discussion?
Mr Hammond
I will not confirm or deny what discussions are going on across Whitehall. I did say—I fully understand that the right hon. Lady might have missed it in the depths of the statement—that we are setting up a review of markets, including the retail energy market, to ensure that they are operating fairly for consumers. Where we find that they are not, we will make proposals and take action.
Mr Nigel Evans (Ribble Valley) (Con)
I welcome the autumn statement. There is always a question on the beer industry, and here it is. Beer is taxed at three different levels depending on its alcohol by volume. The lowest rate is for beers with an ABV of 1.2% to 2.8% to try to attract consumers to less alcoholic beers. Will the Chancellor meet me, as president of the all-party beer group, to discuss the upper level, and perhaps raising it to 3.5%, with a view to attracting people away from those heavier alcoholic beers to lower-alcohol beers?
Mr Speaker
That was a splendidly pithy answer, but questions are becoming rather long. There are still nearly 50 Members seeking to contribute, and I am keen to accommodate them, but I can do so only if people can—to put it bluntly—abandon the preamble and get on with the pithy, preferably single-sentence, inquiry. I am sure that we can led in this by Caroline Lucas.
Mr Hammond
If the hon. Lady looks carefully at the statement, she will see that I did announce significant additional funding to pursue ultra-low emission vehicles. That is an area in which the UK is already a technology leader. I have also announced today that, from next April, there will be 100% first-year allowances on all electric charging infrastructure. We know that the biggest deterrent to moving to electric vehicles is the fear of being unable to charge them. Getting a widespread charging network rolled out will allow us to meet our ambition to electrify the fleet.
Mr Stewart Jackson (Peterborough) (Con)
Innovation and the condition of working people have always been priorities of the Conservative party. In that vein, I particularly welcome the fiscal changes in the autumn statement, especially regarding fuel duty, tax allowances and the national living wage, for which I campaigned for many years. May I just take the Chancellor back to the question from my hon. Friend the Member for Wimbledon (Stephen Hammond)? Through the dispersal of public money for affordable housing, would it be possible to break the monopoly of housing associations and local authorities? In mixed tenure sites, could we bring in local providers of affordable housing to deliver the homes that we all need?
Mr Hammond
This is not absolutely my area of expertise, but my understanding was that there already are opportunities for other providers to deliver affordable housing and to receive grant support to do so. I will look into that matter and, if I am wrong, I will write to my hon. Friend accordingly.
Jess Phillips (Birmingham, Yardley) (Lab)
Like many Members, I welcome the £23 billion of infrastructure spending. Some 1% of people who currently work in the construction industry are women. Can the Chancellor tell me how many women’s jobs will be created by the £23 billion? Does he think that the tax that we women pay should sometimes pay for our own prosperity?
Mr Hammond
I am afraid to tell the hon. Lady that I do not have a ready answer for her on precisely how many women’s jobs will be created, but I do know that we have more women in work than ever before in this country and that our female participation rates are approaching the levels of the very highest rates in Scandinavian countries. I also know, because it is an area of interest to me, that more women are going into what one might describe as traditionally male preserves—engineering and construction—than ever before. That is a trend we should welcome enormously and encourage further.
Heidi Allen (South Cambridgeshire) (Con)
I just want to say, “Thank you.” An awful lot of R and D funding will help my constituency. Scientific businesses in South Cambridgeshire have been worried since Brexit, so I thank my right hon. Friend for that. East-west rail links and road links will help us to spread that prosperity. Overall, I thank him for the money on universal credit. That was a difficult decision. It is not everything that we wanted, but I very much welcome the money that he put aside for universal credit, and I thank him.
Jonathan Edwards (Carmarthen East and Dinefwr) (PC)
The Chancellor quite rightly noted at the beginning of his statement that one of the big challenges that he faces is the gross wealth inequality in the British state—a task that will be made harder with the loss of EU structural funds—so is it his intention in future statements to announce a UK convergence fund to replace the lost EU regional money?
Mr Hammond
I recognise the hon. Gentleman’s concern. He will know that I have made two statements since becoming Chancellor seeking to reassure businesses, universities and others who apply for EU grant funding that, where they are successful in such applications, however long the funding runs on, we will underwrite it, so if Brussels does not foot the bill, the Treasury will. But he is absolutely right: we will have to put in place alternative arrangements for the period after we leave the EU. We will have to have a discussion with the devolved Administrations about how that works—between Whitehall and the devolved administrations—and once we get into the negotiation with the EU, we can start to see the direction of travel. I think that it will then be appropriate to have this discussion, but I do recognise the concern.
Jeremy Quin (Horsham) (Con)
As the Chancellor pointed out, we have a major productivity issue to address. I look forward to the Green Paper and the benefits of the £23 billion of targeted investment, but may I congratulate him on making that £23 billion-worth of investment within a fiscal framework that is reliable, sustainable and will continue to bring down the record deficit that this Government inherited from Labour?
Mr Hammond
I am grateful to my hon. Friend, and we have embarked on the right course of action to protect our economy for the future and to ensure that it can take full advantage of the opportunities that will be available to it.
Mrs Louise Ellman (Liverpool, Riverside) (Lab/Co-op)
I welcome the reference to the northern powerhouse and Transport for the North—with details to follow—but will the Chancellor tell us whether there is any more funding, so that we can invest in better transport across the north?
Mr Hammond
I welcome the question from a former Transport Committee Chairman—[Hon. Members: “She still is!”] All right. I welcome the question even more. If I remember rightly, she was the Chairman when I was a member of the Select Committee, so she probably gets the prize for longevity.
I have deliberately chosen not to read out great, long lists of specific projects and allocations of funding, but rather to create a framework, and what I said in the statement—I will repeat it now—is that my right hon. Friend the Transport Secretary will make a series of announcements about the detailed allocations over the coming weeks.
Maggie Throup (Erewash) (Con)
May I ask the Chancellor to urge the Transport Secretary to spend some of the £1.1 billion on a new motorway junction between junctions 25 and 26 on the M1, which would undoubtedly improve growth and productivity in my constituency?
Mr Hammond
One of my thoughts in deciding not to announce all the allocations personally was that I would avoid the lobbying for individual projects. I had not realised that I would be invited to act as a conduit to the Transport Secretary, but in this case and because it is my hon. Friend, I will pass on her request.
Several hon. Members rose—
Dr Rosena Allin-Khan (Tooting) (Lab)
Affordable house building last year fell to its lowest level since 1991. In my borough, Wandsworth, the Conservative council approved the building of over 10,000 homes at Battersea power station and Nine Elms, 13% of which were deemed affordable. However, the cheapest home there is a studio flat costing £400,000. These are not genuinely affordable homes for local residents; they are used as gold bricks for overseas developers. Can the Chancellor tell me today what is an affordable home?
Mr Hammond
There are two points here. We have, of course, a definition of affordable housing, which we use in statutory terms, but there is a much broader consensus in the House that we need to make all housing across the UK more affordable, including housing that people buy in the marketplace. To do that, we have to address fundamentally some of the challenges with land supply, particularly in London and other high-demand areas. As I said earlier, my right hon. Friend the Communities and Local Government Secretary will introduce a housing White Paper, which will address these more strategic issues.
Stephen Metcalfe (South Basildon and East Thurrock) (Con)
There is much to be welcomed in the Chancellor’s statement, particularly the warm words about the strength of our science and technology endeavours, especially in the light of the recent Science and Technology Committee report that called for a rise in spending on R and D to 3% of GDP. Obviously, the extra £2 billion is a helpful step in that direction, but to realise the potential and deliver on those ambitions, we need to attract the best talents here to the UK. Will my right hon. Friend work with colleagues across the Government not only to reassure scientists and researchers who are already here, but to come up with a system as soon as possible to attract the best people into the UK?
Mr Hammond
I welcome my hon. Friend’s comments as Chairman of the Science and Technology Committee. Of course, the £2 billion a year referred to is just public investment in R and D. Most investment in R and D in this country is done by the private sector. As the Prime Minister said in her speech to the CBI on Monday, we are committed to looking at the R and D tax credit system to make sure that the UK is the most attractive place for an innovative company to do its research, development and innovation.
On immigration, I absolutely recognise the points that my hon. Friend makes. Many companies that choose to locate in the UK depend on being able to bring people with high skills into the UK to work in their businesses. I have said before and I am happy to say again today that, although it is our clear intention to introduce controls on migration into the UK from the European Union, I cannot conceive of any circumstances where we would use those controls to strangle investment in our businesses by not allowing high-skilled, high-paid individuals to be transferred here to work in them.
Helen Goodman (Bishop Auckland) (Lab)
The most alarming number in the OBR forecast is the 13% drop in forecast business investment, and the Chancellor said it himself: the big problem is uncertainty. The OBR says rather plaintively:
“we asked the Government for ‘a formal statement of policy as regard its desired trade regime…as a basis for our projections’”
but they left us
“little the wiser.”
The Chancellor had a real opportunity today to tackle this uncertainty, which is the basic problem, by setting out the objectives for the Brexit negotiations to keep us with access to the single market and in the customs union. Why did he not do so?
Mr Hammond
I did not, because to do so would be to give away our negotiating cards in what will be a very complex negotiation. With respect to the hon. Lady, even if I or the Prime Minister set out precisely our objectives, our tactics and our strategy for the negotiations, that will not remove the uncertainty because the outcome will depend on the negotiation itself. As the Prime Minister has said, a negotiation is a process of give and take between the parties to get to a mutually acceptable outcome, and that is what will be embarked upon.
Mr Jacob Rees-Mogg (North East Somerset) (Con)
May I congratulate the Chancellor on his excellent statement? I draw his attention to page 96 of the OBR report, which sets out the assumptions in relation to Brexit. It seems to me that there are two problems with those assumptions. First, they assume that we will apply tariffs on the same basis as we do inside the European Union, which the Chancellor will know he will be able to remove. Secondly, they are particularly gloomy on the prospects for financial services. Might we be able to take a slightly more optimistic tone and, with the freedoms that we have outside the customs union and the single market, be able to solve the productivity problem?
Mr Hammond
As my hon. Friend will know, the OBR is mandated to report by Parliament and I am mandated to respond on behalf of the Government to the OBR’s findings. It is an independent body. It does receive representations, and I suggest that my hon. Friend makes his concerns known to the OBR.
Several hon. Members rose—
George Kerevan (East Lothian) (SNP)
I congratulate the Chancellor on abolishing the autumn statement and the spring Budget, and introducing a spring statement and an autumn Budget. I trust that that is not his definition of productivity. The OBR central forecast suggests that after 2019 there will be a precipitate fall in the contribution by business investment to GDP growth. In addition, there will be a negative contribution from trade. Does that not suggest that when Britain leaves the single market—if we are taken out of the single market—the only thing between a recession and growth will be public expenditure and an overheated housing market?
Mr Hammond
On the hon. Gentleman’s first point, I recognise that the fact that we have to respond to the OBR report in the spring can easily be caricatured as swapping an autumn statement and a spring Budget for a spring statement and an autumn Budget. All I can say is that I promise it will not be like that. The intention is clearly to move to a single event each year when, in normal times, we will make tax changes, but it is prudent, especially in these times, to reserve the right in extremis to announce tax measures at the secondary event, if absolutely necessary. The hon. Gentleman poses a perfectly sensible question. My interpretation of the figures in the table is not the same as his, but I would be very happy to engage in a discussion with him offline.
James Cartlidge (South Suffolk) (Con)
Although my right hon. Friend has made it clear that he is not a conduit for the Transport Secretary, may I nevertheless welcome the £80 million for smart ticketing included in his statement? He is interested in productivity and our flexible labour market. Is he aware that we have many constituents who commute three or four days a week at most and are forced to pay for a full-time travelcard? In his programme of smart ticketing, will he look at that?
Mr Hammond
I am aware because I was once upon a time the Transport Secretary. I am convinced that smart ticketing is the future for us. Smart ticketing allows us not only to deal with those commuters who do not travel every day, but to explore options where people might wish to travel in the peak period on some days but are able to travel off-peak on other days. If we could shift just 10% or 15% of commuters from the peak to the off-peak, we would change dramatically the pressure on rail infrastructure around London and other major cities, so that is definitely the future.
Alison McGovern (Wirral South) (Lab)
May I return the Chancellor to the OBR’s statement that the Government’s reply on their Brexit position left the OBR “little the wiser”? The OBR has assumed that the Government will fail to meet their target of reducing immigration to tens of thousands. Given the Prime Minister’s recent statements on immigration being her priority, has the Chancellor gone back to the OBR and asked it to adjust that forecast?
Mr Hammond
No. The Prime Minister has been very clear that it remains her target to reduce immigration to the tens of thousands, but she has also been clear that it will take time to achieve. The OBR forecast stretches over a period of five years, and the Prime Minister is absolutely clear that this is a target that will be achieved over a longer timeframe in order to manage the impact on the economy.
Charlie Elphicke (Dover) (Con)
I congratulate the Chancellor on an excellent first and last autumn statement. May I draw his attention to page 40 of the Green Book at paragraph 4.35, which I welcome? It states:
“The fuel duty rate will remain frozen for the seventh successive year, saving motorists around £130 a year compared to what they would have been paying under the pre-2010 escalator.”
This is a good autumn statement for drivers.
Mr Hammond
I am grateful for my hon. Friend’s comments and I am glad he is pleased with the statement. I know that he takes a great interest in matters related to fuel duty and vehicle taxation, and I look forward to continuing to engage with him on those issues in the future.
Mrs Emma Lewell-Buck (South Shields) (Lab)
I remind the Chancellor that the labour market is not working for everyone. Every single year since 2014 I have asked why this Government are allowing the continued exploitation of workers under sham umbrella companies and false self-employment. Every single year I am told that the matter is under review. As the GMB’s recent success in the court shows, these workers are fed up with waiting. Why is it that under this Government a fair day’s work never really translates into a fair day’s pay?
Mr Hammond
First, the hon. Lady will find if she looks in the autumn statement document that we are moving to shut down an abuse of the VAT flat rate scheme that has been used by employment agencies to disguise employment remuneration. But she is right about self-employment, and I also mentioned specifically the increasing challenge of incorporation—the increasing number of single-person, zero-employee, single-director companies. The Prime Minister has asked Matthew Taylor to undertake a review of ways of working—
Mr Hammond
No, it has not been going on for two years. Let me tell the hon. Lady what happened. The Prime Minister took office in July, so it definitely has not been going on for two years. She asked Matthew Taylor to undertake that review, which is now under way. It is a very important review, looking at how employment rights more generally are being affected by this transition in our economy. That is being driven by technology, as much as anything, and I have said today that we also have to look at this issue from the point of view of the tax base, because the tax base is also under threat from these changes.
Mr David Burrowes (Enfield, Southgate) (Con)
I thank the Chancellor for helping low-income families today and, for helping to make work pay for those on universal credit. I thank him, too, for the London devolution deal for housing, which will increase the number of affordable homes to rent and to buy. Can he reassure me, though, that this is not a destination but a direction of travel and that, whether it be spring, autumn or any season, we will continue to stand up for working families and for the weak?
Mr Hammond
Absolutely. My hon. Friend knows very well that our stated ambition and the driver in everything we do is to build an economy that works for everyone, but we are realists, unlike the fantasists on the Opposition Front Bench. We know that we can build an economy that works for everyone only if it is a strong economy with strong investment and good, strong British companies exporting their products around the world.
Ms Margaret Ritchie (South Down) (SDLP)
Although I regret that there is no help for those WASPI women who need transitional protection, I welcome the investment in broadband infrastructure. Can the Chancellor assure the House that that will be fairly spread across rural communities and throughout all devolved and non-devolved jurisdictions to prevent further broadband inequalities opening up across Northern Ireland and Britain?
Mr Hammond
The money that we are investing will be used partly to fund pilots, particularly to cement our lead in 5G, and partly to catalyse private sector investment. Our telecoms infrastructure is primarily funded by private investment, but I can assure the hon. Lady that this funding will be spread across the United Kingdom. We want to spread the benefits of 5G and superfast broadband as widely as we possibly can.
Ben Howlett (Bath) (Con)
I thank my right hon. Friend for listening to colleagues on our side of the House who have long campaigned hard for more investment in regional infrastructure, R and D, and innovation. The £683 million towards south-west regional local growth funding and the £1.1 billion English transport fund will make a big difference to constituencies such as mine. Will my right hon. Friend commit to working with the west of England devolved authority and the new mayor to ensure that we better unlock productivity, more growth and the jobs that we require in the west of England?
Mr Hammond
As far as we are concerned, that is the principal purpose of the mayoral combined authorities: yet another lever to drive productivity in the English regions. I am sure that my right hon. Friend the Secretary of State for Communities and Local Government will be happy to work with my hon. Friend on that project.
Stewart Malcolm McDonald (Glasgow South) (SNP)
I am always shining on you, Mr Speaker.
The Chancellor is no philistine, so he will know that Lloyd George, a predecessor of his, visited Holmwood House in my constituency in 1928. Although the right hon. Gentleman appears to have dismissed my appeal for restorative funding for the building next year as we approach the bicentenary of its architect, will he assure me that this is not quite the end of the road? Will he commit, as the Scottish Secretary has done, to engaging positively on the matter in future?
Mr Hammond
The danger, of course, of having indulged myself with one specific announcement is that hon. Members are bound to assume that that means bad news for other projects. The bulk of the funding available for that kind of work will be held and distributed by the Department for Culture, Media and Sport; my right hon. Friend the Secretary of State for Culture, Media and Sport will make announcements as appropriate.
Mims Davies (Eastleigh) (Con)
The gross value added of my constituency, like that of many constituencies in Hampshire, is affected by missing junctions on the M27, the queues on the M3 and poor east-west connectivity. Chickenhall link road in my constituency is vital to facilitate a longer runway at Southampton airport. It will tackle air pollution and unlock potential housing. Will the Chancellor make a statement about the local majors fund and how that will play into this autumn statement?
Mr Hammond
No; I am sorry to say that to my hon. Friend. What I have done today is added £23 billion-worth of infrastructure and R and D expenditure to existing very significant budgets. Part of that will go to transport and some of that will go to road schemes, but it will be for my right hon. Friend the Secretary of State for Transport to listen to the representations that my hon. Friend and others are making and to allocate the fund, according to the appropriate principles, to maximise productivity growth in our economy. I am sure that he will be delighted to talk to her.
Seema Malhotra (Feltham and Heston) (Lab/Co-op)
Schools in my constituency are not alone in stepping in to fill the welfare gap, as parents on the breadline hit by Government cuts struggle to buy their children’s school uniforms, shoes and stationery. The situation is getting worse—in the 21st century. What impact does the Chancellor believe his projected 8% per-pupil spending cuts, as estimated by the Institute for Fiscal Studies, will have on the social mobility of a generation of children? How can it be right that instead of softening the cuts, for which he voted, he has instead chosen to spend £60 million a year on expanding grammar schools? What I have raised should have been part of his plan for productivity.
Mr Hammond
I do not agree with the hon. Lady; she needs to look at these things in the round. I know that Labour Members like to take a single example and exaggerate it, but they need to look at the package in the round: what we are doing with raising personal allowances for taxation for people in work, dramatically reducing the tax that they pay; taking millions of people out of taxation; and a pay rise for millions of people from the national living wage. The hon. Lady should look at it in the round.
Justin Tomlinson (North Swindon) (Con)
I welcome the news on universal credit, but support is also vital. I urge the Chancellor to support the extension of the DWP’s excellent small employer pilot, which is already helping those with disabilities and long-term health conditions.
Mr Hammond
The Department for Work and Pensions has some excellent programmes and my right hon. Friend the Secretary of State for Work and Pensions confirms to me that he has adequate funding for all those programmes.
Kirsty Blackman (Aberdeen North) (SNP)
The oil and gas industry has a bright future. When will the Chancellor implement the tangible changes that his predecessor committed to on both decommissioning tax relief and loan guarantees? The industry needs those measures to secure current investment and so secure increased future productivity.
Mr Hammond
Yes; I have confirmed again today that we will proceed with those measures. We will proceed with them as quickly as we possibly can.
Mr Ranil Jayawardena (North East Hampshire) (Con)
There has been a lot of negativity from some Opposition Members, but more people are in jobs than ever before and that means that in North East Hampshire more people are in good jobs, with average earnings of more than £47,000. May I congratulate my right hon. Friend not only on committing to increasing the tax-free allowance but on raising the threshold for the higher rate? Clearly, many hard-working families are being hit by a tax that was never intended for them.
Mr Hammond
That is absolutely right. We made that commitment in our election manifesto; it was a commitment on which we were elected. Despite the difficult fiscal circumstances, we will deliver on that commitment.
Wes Streeting (Ilford North) (Lab)
I thank the Chancellor for agreeing to the request made by me and my hon. Friend the Member for Leeds West (Rachel Reeves) to reintroduce the distributional analysis of the Budget. I have looked at that analysis and, in spite of a bit of tinkering with the methodology, it is clear that, as a result of the tax and welfare changes in this autumn statement, the bottom three deciles—the lowest-income households—will be left worse off than the highest earning group of households. How can he possibly justify that? As well as helping the “just about managing”, will he commit to helping the people who are barely managing or cannot manage at all?
Mr Hammond
Our intention will be to try to ensure the fairest distribution possible. I welcome the debate that the hon. Gentleman and others have stimulated on the appropriate way to present distributional analysis—the issue is not completely cut and dried or straightforward—but I say this to him: we were elected on a manifesto commitment to get welfare under control. Working-age welfare had spun out of control between 1980 and 2010. We have now got it back under control, which implies that we have had to take some tough decisions. We have taken them. I will accept and explain the consequences of those.
Mark Pawsey (Rugby) (Con)
To support those who are just about managing, there need to be more affordable houses. Is the Chancellor pleased to see the welcome from the chief executive of the National Housing Federation for today’s measures that will enable an additional 40,000 such houses to be provided? With planning consents running at the highest level for years, does my right hon. Friend look forward to the sector getting spades into the ground very quickly?
Mr Hammond
Yes. One of the attractions of funding affordable housing is that it is a tried and tested and generally pretty efficient delivery method. I am afraid that while I stand at the Dispatch Box, I am not digitally enabled, as they say: I was not aware of the welcome that my hon. Friend refers to. However, I am delighted that this has gone down as I hoped it would with the relevant people.
Alison Thewliss (Glasgow Central) (SNP)
I am disappointed, but not entirely surprised, that there has been no reversal from the Government on the two-child policy and the rape clause, which will mean that people cannot possibly work their way out of the situation they are in. May I ask about another group of people who cannot work their way out of the situation they are in? I am talking about the new “pretendy living wage” rate. That will leave 16 and 17-year-olds £3.45 worse off than someone of 25 doing the same job. Why is the labour of 16 and 17-year-olds worth less to the Chancellor than that of those aged 25?
Mr Hammond
We judge that getting people into the workforce, even at entry-level jobs, is critically important. There is abundant evidence that if people get into a culture of worklessness at a young age, that will blight their lives for ever.
Mr Hammond
I am sorry to have to tell the hon. Lady this, but we live in the real world, where people will be employed only if employers can afford to take them on at the wage rates they have to pay them. Getting these young people into the culture of work is the most important thing we can do for them, for the rest of their lives.
Huw Merriman (Bexhill and Battle) (Con)
In East Sussex, we have the challenge of a large social care bill for an ageing population and low business rate returns to pay for that. I am aware that the Chancellor will not be allocating county money, but may I ask that his £23 billion investment fund is allocated with East Sussex’s financial and demographic challenge in mind?
Mr Hammond
I am afraid I may have to disappoint my hon. Friend, because the £23 billion is specifically targeted at productivity-enhancing investment in R and D and infrastructure. That is because we judge that, with our level of debt, to be credible in the markets, we have to borrow only for that kind of additional productivity-enhancing investment, and it will go into network investment, R and D and innovation.
Angela Smith (Penistone and Stocksbridge) (Lab)
The statement about Wentworth Woodhouse is very welcome economic news for South Yorkshire, but it failed the graciousness test, because it omitted to pay tribute to the campaign led by the formidable Julie Kenny to save the house. However, South Yorkshire needs much better transport links if it is to succeed economically. On that basis, why has only one of the five strategic road projects—the Oxford to Cambridge expressway—been given the go-ahead today? Is South Yorkshire going to get its trans-Pennine tunnel link or not?
Mr Hammond
As I tried to make abundantly clear, I am intending to move away from a micromanagement approach to the budgets of my right hon. Friends, who are perfectly capable of evaluating the arguments, making the decisions and announcing them themselves, and that is what will happen in future. What I will say to the hon. Lady is that I did have the pleasure of meeting Julie, who explained to me the very considerable efforts that have been made so far, and I am delighted that we have been able to support that project.
Richard Drax (South Dorset) (Con)
I warmly welcome the announcement by my right hon. Friend of increased infrastructure spending, but I would be failing in my duty if I did not plug the rail connection—not least at Yeovil junction—that will take faster trains to my constituency, where roads are at a premium and we cannot, because we have beautiful countryside, have more tarmac. Can I just tell him that we shall be coming to seek his help with that?
Mr Hammond
To be consistent, I would have to direct my hon. Friend to my right hon. Friend the Transport Secretary, who, I am sure, will be delighted to hear his representation.
Jack Dromey (Birmingham, Erdington) (Lab)
Why should anyone believe the promises being made by a Conservative Government pretending to be the friend of working people and the party of the working class, when but six weeks ago workers were promised a seat on the board of the companies that employ them and a voice in their own future, only for that promise to be broken six weeks later, on Monday of this week, by the Prime Minister?
Mr Hammond
That is not what happened. I am afraid I am not responsible, and neither is my right hon. Friend the Prime Minister, for what newspapers choose to write in their headlines. What she said, what she believes and what she is committed to is ensuring that there are proper channels for the voices of consumers and workers to be heard at board level in companies, so that those voices can be taken into account in a proper way in decision-making processes—and that is what will happen.
Chris Philp (Croydon South) (Con)
I join colleagues in welcoming the £1.1 billion infrastructure spending, particularly as the Brighton main line is falling apart and needs fixing if we are to enhance the productivity of Croydon constituents and others. What reassurance can the Chancellor give the hundreds of thousands of people using this line that the Transport Secretary will look at upgrading and fixing that infrastructure?
Mr Hammond
I can certainly guarantee that the Transport Secretary will look at it. What I am afraid I cannot guarantee for my hon. Friend is where it will be prioritised in the rail investment programme—as he knows, it is a very long-term programme. What I have done today is announce specific funding for piloting and trials of digital railways. This is another transformative area, because if we can get trains on main line railways running at the kind of headways we are used to on the London underground, for example, we will not need to build expensive additional infrastructure; we will be able to squeeze a lot more juice out of the infrastructure we have, and that is my preferred route forward.
Patrick Grady (Glasgow North) (SNP)
In the light of the move to an autumn Budget, will the Chancellor listen carefully to any recommendations from the Procedure Committee about reform of the estimates process, particularly in terms of opportunities for us on Scotland’s Benches to scrutinise Barnett consequentials, which we were told we would be able to do through estimates as a result of the English votes for English laws process that was introduced?
Mr Hammond
I will certainly look at the point the hon. Gentleman raises. I do hope he welcomes the move to an autumn Budget. Certainly, one of the considerations when we were looking at this was the way it will interact with the Scottish Government’s Budget, and I hope it will be helpful.
Iain Stewart (Milton Keynes South) (Con)
I warmly welcome the investment in rail and road links from Oxford to Cambridge through Milton Keynes, delivering on the infrastructure commission’s recommendations. I have been campaigning for east-west rail for many years. Will my right hon. Friend confirm that that investment will accelerate delivery of the project?
Mr Hammond
Yes, it will accelerate delivery of the project. As I said in my statement, and I cannot emphasise enough, I think this has the potential to be so much more than just a transport link. We have many world-famous universities, but we have two there that, more than any others, are world-famous, recognised research names. Linking them together over a 60-mile stretch of road and rail unleashes enormous possibilities for creating a new tech corridor, building on the huge success of the Cambridge science park.
Chris Stephens (Glasgow South West) (SNP)
In his statement, the Chancellor correctly mentioned the scourge of tax avoidance. Has he seen the report published last week by the Public and Commercial Services union and the Tax Justice Network, which warns that Her Majesty’s Revenue and Customs staff believe that its office closure programme
“will negatively affect its staff and its ability to collect tax and enforce tax compliance”?
Will he review the HMRC office closure programme as a result of those concerns?
Mr Hammond
We have put £800 million of additional resource into HMRC. If the hon. Gentleman looks at the statement today, he will see that we have put some more money in today. But much of the way in which HMRC operates is about having specialist units, which often have to be concentrated; it is not about the old local office structure that has traditionally been in place. If we want effective action against the most complex forms of tax avoidance and evasion, we have to be prepared to go with the recommendations of the experts.
Kevin Foster (Torbay) (Con)
I listened carefully to the Chancellor’s autumn statement, and I then carefully read the Green Book to find the reference to the resilience of the Dawlish coastal railway on page 29. I know he is not doing individual schemes, but am I right in assuming that the inclusion of this £10 million preparation project and work is an indication that the massive infrastructure investment that has been talked about is likely to include the nearly £300 million project to secure that line, which this work is the preparation for?
Mr Hammond
My hon. Friend can take this as a clear indication that this is a high priority in terms of rail resilience. We are all acutely aware of the vulnerability of the rail system in the south-west as a result of flood risk, and this is the first step to resolving that.
Nick Smith (Blaenau Gwent) (Lab)
Given the decline in the value of sterling, how much will we have to pay for the F-35 fighters to go on our aircraft carriers? The present going rate is $100 million a time. Has the Chancellor increased his estimate of the cost of these fighters and other defence kit imports for future years?
Mr Hammond
It is a fair question, and the answer is that the Ministry of Defence, unusually among Government Departments, has the ability, and does in practice use the ability, to hedge currency risk, because so much of its capital expenditure programme is denominated in US dollars. So it does have a degree of protection over the coming years; that protection will not last forever, and if sterling’s current relative weakness against the US dollar persists, we will have to revisit this. But I would hope and expect that, as the cloud of uncertainty around the British economy disperses in due course, and people are able to see the strong prospects for this economy in the future, we will see sterling gradually finding its feet again.
Owen Thompson (Midlothian) (SNP)
I welcome the fact that the Edinburgh south-east Scotland city deal is still in today’s autumn statement, but the local authorities involved in this process have been making plans for it for more than two years. In June, they were expecting sign-off by December, but we have not seen anything come forward yet. Can the Chancellor confirm when the city deal will finally get sign-off?
Mr Hammond
No, I cannot. We are committed to, and engaged in, the process, and I have just confirmed that today, but, obviously, there are things that have to be agreed between the parties. I am not into the details of the negotiation on Edinburgh, but we clearly have to get to a conclusion as quickly as possible to see that the benefits are delivered to the people of Edinburgh. I hope the hon. Gentleman will urge the city council to engage enthusiastically in getting this done.
Simon Danczuk (Rochdale) (Ind)
I am interested in the National Infrastructure Commission investment and the money that is going to LEPs in the north of England—that is to be welcomed. I accept that the Chancellor has said that the Transport Secretary will be making an announcement very soon, but does the Chancellor not agree that money for the electrification of the Calder Valley rail line would help improve productivity in the area and redress the imbalance in the country?
Mr Hammond
I am not going to be tempted, as a former Transport Secretary, to get into the weeds of my right hon. Friend’s portfolio and talk about specifics of individual projects on the rail network, but, as I said, he will be making a statement in the near future.
Roger Mullin (Kirkcaldy and Cowdenbeath) (SNP)
Will the Chancellor confirm that the assumption on pages 241 to 248 of the OBR’s “Economic and fiscal outlook” not only means that all forecast numbers will be subject to high margins of error but implies that the Government will fail to achieve single market membership?
Mr Hammond
No, it does not imply that. However, it is the case, as I have said, that the OBR has acknowledged specifically that there is a higher degree of uncertainty around its forecasts this autumn than there is usually, for reasons that are obvious.
Mark Durkan (Foyle) (SDLP)
Having opposed the welfare cap as a search engine for cuts, may I at least acknowledge in passing the projected increases that are allowed in the statement? On devolution, the Chancellor rightly waxed positive about city deals in Scotland and in Wales, as he has on those in England. Will he be more than passive in his encouragement to the Northern Ireland Executive, who have been persistently derelict on these prospects?
Mr Hammond
Yes. I am not sure how much influence I will have over the Northern Ireland Executive, but next time I bump into a Member of it, I shall make that very point.
Stuart C. McDonald (Cumbernauld, Kilsyth and Kirkintilloch East) (SNP)
According to the OBR, the fall in immigration following the referendum will cost the Chancellor £16 billion over five years. Surely he should be a brave and enthusiastic champion of free movement of people, with his next-door neighbour.
Mr Hammond
The Prime Minister has made it clear that we have to accept not only the decision of the British people to leave the European Union, but that clearly implied in that decision is a desire for control over movement across our borders. That is not the same as cutting ourselves off from Europe, or turning our backs on Europe, but there has to be control of the flow of people into the United Kingdom. The challenge, therefore, is to get a deal that effectively allows our businesses and workers to sell their products into Europe, and European businesses and workers to sell their products into the UK, while still meeting the political mandate that we have received from the British people.
Greg Mulholland (Leeds North West) (LD)
Leeds remains the biggest city in Europe without a light rail or an underground scheme. I welcome the announcement on transport infrastructure to tackle congestion. Can some of that money go towards the existing £250 million that could be used on a ground-breaking light rail scheme connecting with Leeds Bradford airport, which does not have any fixed rail link?
Mr Hammond
I am afraid I am just going to repeat that I am not going to get into the weeds of trying to allocate every pound of funding that I announce in these statements to specific projects. This must be an issue for my right hon. Friend the Transport Secretary.
Alan Brown (Kilmarnock and Loudoun) (SNP)
The Green Book confirms a £1 billion shale wealth fund, but after more than four decades we are still awaiting an oil fund in Scotland. However, the big ask is on loan guarantees. Given that the Thames tideway project got a £4.2 billion loan guarantee, can the Chancellor confirm the value of loan guarantees for oil and gas as soon as possible?
Mr Hammond
I have announced today that the UK loan guarantee scheme will be extended until at least 2016. It has a very significant amount of headroom; I think the cap on it at the moment is £40 billion, and we are nowhere near using up that capacity. The important thing about the UK loan guarantee scheme is that it underpins projects at an early stage. Many projects have gone ahead without loan guarantees, but because they had a commitment on the loan guarantee they were able to proceed and then eventually were able to get funding without it. It is playing a very important role that is understated by the measure of guarantees actually issued.
Tom Elliott (Fermanagh and South Tyrone) (UUP)
On the shale wealth fund, is the £1 billion totally Treasury money or is some of it coming from the companies that will be developing the shale gas project?
Autumn Statement
Lord Hammond of Runnymede Excerpts(8 years ago)
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The Chancellor of the Exchequer (Mr Philip Hammond)
Today I have published a draft updated Charter for Budget Responsibility, a copy of which has been deposited in the Libraries of both Houses. Copies are also available in the Vote Office and Printed Paper Office. The draft sets out the new fiscal framework and changes to the operation of the welfare cap.
The draft Charter includes modified guidance to the Office for Budget Responsibility and has been published in line with Section 6(4) of the Budget Responsibility and National Audit Act. This requires that if the Treasury proposes to modify the guidance to the Office for Budget Responsibility included in the Charter, a draft of the modified guidance must be published at least 28 days before the modified Charter is laid before Parliament. The updated Charter will be laid before Parliament, and a debate and vote scheduled, after the Christmas recess.
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Panama Papers Taskforce
Lord Hammond of Runnymede Excerpts(8 years ago)
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The Chancellor of the Exchequer (Mr Philip Hammond)
In his statement to the House on 11 April 2016, the former Prime Minister David Cameron announced the creation of a cross-agency taskforce to analyse all the information that had been made available from the International Consortium of Investigative Journalists (ICIJ)’s Panama papers data leak. My right hon. Friend the Home Secretary and I now wish to update the House on the work of the taskforce.
In its short existence, the taskforce has added greatly to the UK’s understanding of the evermore complex and contrived structures that are being developed to mask offshore tax evasion and economic crime. This intelligence will ensure that the UK remains uniquely placed to contribute to the international effort to uncover, and take action, on wrongdoing, regardless of how deeply hidden the arrangements are, as well as identify those jurisdictions where regulatory oversight requires improvement.
We can today report that the taskforce has:
opened civil and criminal investigations into 22 individuals for suspected tax evasion
led the international acquisition of high-quality, significant and credible data on offshore activity in Panama—ensuring the important work of the taskforce was not delayed by the ICIJ’s refusal to release all of the information that it holds to any tax authority or law enforcement agency
identified a number of leads relevant to a major insider-trading operation led by the Financial Conduct Authority and supported by the National Crime Agency
identified nine potential professional enablers of economic crime—all of whom have links with known criminals
placed 43 high net worth individuals under special review while their links to Panama are further investigated
identified two new UK properties and a number of companies relevant to a National Crime Agency financial sanctions enquiry
established links to eight active Serious Fraud Office investigations
identified 26 offshore companies whose beneficial ownership of UK property was previously concealed, and whose financial activity has been identified to the National Crime Agency as potentially suspicious
contacted 64 firms to determine their links with Mossack Fonseca to establish potential further avenues for investigation by the taskforce
seen individuals coming forward to settle their affairs in advance of taskforce partners taking action.
The taskforce’s respective partners will engage the relevant prosecuting authorities to bring any identified wrongdoing before the courts.
The Government have also invested to develop their expertise in data and intelligence exploitation. This has ensured that Departments and agencies are well placed to forensically analyse massive-scale data of this kind, which are becoming ever-more frequently available.
The taskforce has established a Joint Financial Analysis Centre (JFAC). Using the data and intelligence gathered from across the taskforce, the JFAC has developed cutting-edge software tools and techniques, ensuring the taskforce has access to the very best information from which to work.
The proactive acquisition of data, alongside the establishment of the JFAC, has enabled the taskforce to identify a number of areas for further investigation across the full range of tax and economic crime, as well as links to organised crime, which will be the focus of its work over the coming months.
Taskforce members are present in Panama, using established relationships with the Panamanian authorities, and working with diplomatic colleagues, to offer support to analyse all the available data. Taskforce members have also worked with international partners as part of the Joint International Tax Shelter Information Centre to exchange information and intelligence as part of the wider international effort.
More generally, the Government have introduced tough new powers, increased penalties and game-changing measures to tackle offshore and onshore tax evasion. In the summer 2015 Budget, the Government gave HMRC an additional £800 million to invest in compliance and tax evasion work. This is expected to recover £7.2 billion in tax by the end of 2020-21. This includes tripling the number of criminal investigations that it undertakes into serious and complex tax crime, focusing particularly on wealthy individuals and companies. The aim is to increase prosecutions in this area to 100 a year, by the end of this Parliament.
The Government have also been pivotal in increasing global financial transparency in more than 100 countries, including British overseas territories and crown dependencies, by automatically sharing offshore account data. This additional data will help identify and pursue the tiny minority of tax evaders still hiding their money offshore.
The Government aim to make the UK a more hostile place for those seeking to move, hide or use the proceeds of crime or corruption. In October 2015, the Government published the national risk assessment for money laundering and terrorist financing to better understand the risks and vulnerabilities for the UK. The action plan, published in April 2016, and the Criminal Finances Bill, introduced to Parliament in September, will significantly improve our capabilities to tackle money laundering and recover the proceeds of crime, including proceeds of corruption.
The London anti-corruption summit earlier this year brought more than 40 countries together and resulted in a commitment to more than 600 actions. Since then, the UK has made real progress on its own commitments —our public register of beneficial ownership information is now live, the first G20 country to do so; and the National Crime Agency is working to get the new international anti-corruption co-ordination centre operational by next April.
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