Oral Answers to Questions

Debate between Lord Hammond of Runnymede and George Kerevan

Tuesday 28th February 2017 Commons Chamber

[George Kerevan (East Lothian) (SNP)]

Unsecured consumer credit is rising at a level last seen before the banking crisis. Does the Chancellor accept that that is unsustainable?

[Mr Philip Hammond]

Clearly, it cannot go on forever, but households do have some capacity for debt, and consumer borrowing and consumer spending have been an important component of the robustness of the economy over the past few months. What I hope to see is business investment and exports providing a greater share of the growth during 2017.

Charter for Budget Responsibility

Debate between Lord Hammond of Runnymede and George Kerevan

Tuesday 24th January 2017 Commons Chamber

[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.

--- Later in debate ---

[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—

Oral Answers to Questions

Debate between Lord Hammond of Runnymede and George Kerevan

Tuesday 17th January 2017 Commons Chamber

[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.

Autumn Statement

Debate between Lord Hammond of Runnymede and George Kerevan

Wednesday 23rd November 2016 Commons Chamber

[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.