Charter for Budget Responsibility

Debate between Lord Hammond of Runnymede and Jeremy Quin

Tuesday 24th January 2017 Commons Chamber

[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.

Oral Answers to Questions

Debate between Lord Hammond of Runnymede and Jeremy Quin

Tuesday 17th January 2017 Commons Chamber

[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?

Autumn Statement

Debate between Lord Hammond of Runnymede and Jeremy Quin

Wednesday 23rd November 2016 Commons Chamber

[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.

Oral Answers to Questions

Debate between Lord Hammond of Runnymede and Jeremy Quin

Tuesday 24th November 2015 Commons Chamber

[Jeremy Quin (Horsham) (Con)]

2. What steps his Department is taking to support political stability in Tunisia, Libya and the surrounding region.

[The Secretary of State for Foreign and Commonwealth Affairs (Mr Philip Hammond)]

The UK is actively supporting UN efforts, led by the Secretary-General’s new special representative, Martin Kobler, to reach a lasting political agreement in Libya. We are helping Tunisia and other north African countries to build legitimate, inclusive institutions and develop their economies, as well as strengthening their counter-terrorism capabilities. I will visit Tunisia soon to discuss the effectiveness of UK political and security co-operation with that country, and I plan to meet UN Special Representative Kobler later this week.

[Jeremy Quin]

Does the Foreign Secretary agree it is in our interests for countries at risk of extremist infiltration, including those in north Africa, to receive advice, assistance and support in monitoring their borders, thereby helping to control them?

[Mr Hammond]

Yes, I agree. Since the Sousse attacks in Tunisia, we recognise that we need to focus a bit more attention on those countries that are, let us say, one step away from the chaos that is going on in Libya—countries that are making a success of things, but which still have some vulnerabilities and are being targeted by the extremists. We need to help them to build resilience against extremism.