Oral Answers to Questions

Debate between Lord Hammond of Runnymede and Michael Fabricant

Tuesday 22nd May 2018 Commons Chamber

[Michael Fabricant (Lichfield) (Con)]

Manufacturing accounts for 24% of the west midlands economy but, as others pointed out earlier, there are skills shortages. Will the Chancellor therefore support any bid from the Mayor of the West Midlands for a devolution deal to take over responsibility for skills from the Department for Education?

[Mr Philip Hammond]

I am tempted to wonder whether my hon. Friend might have discussed that question with the Mayor of the West Midlands before asking it. It would be remiss of me to stand at the Dispatch Box and say that I would accept any bid, but I am certainly willing to consider any proposals from the Mayor of the West Midlands, or from any other elected mayor, to address the skills challenge that we face across the country.

Class 4 National Insurance Contributions

Debate between Lord Hammond of Runnymede and Michael Fabricant

Wednesday 15th March 2017 Commons Chamber

[Mr Hammond]

Yes, the decision was made by me and the Prime Minister this morning.

[Michael Fabricant (Lichfield) (Con)]

I thank my right hon. Friend for reacting so quickly to the representations made to him by colleagues and, indeed, by Laura Kuenssberg. But I ask him in all seriousness to listen on occasion to the Labour party, because there are lessons to be learned. Labour would have leaked this statement out at a weekend, not immediately prior to Prime Minister’s questions. It would not have come to the House and made an oral statement; there would have been a written statement. I say to my right hon. Friend that he is really far too open.

[Mr Hammond]

As you would expect, Mr Speaker, we try, if it is at all possible, to ensure that the House is always informed first of these matters. After my right hon. Friend the Prime Minister and I met this morning, I wrote to the Chairman of the Treasury Committee and placed a copy of that letter in the Library of the House, and I have made this statement at the earliest opportunity available to me.

Oral Answers to Questions

Debate between Lord Hammond of Runnymede and Michael Fabricant

Tuesday 28th February 2017 Commons Chamber

[Michael Fabricant (Lichfield) (Con)]

Absolutely, Mr Speaker. By the way, I would love to visit that restaurant.

My right hon. Friend will know that Boeing is a major employer in the United Kingdom. The opening of Boeing Sheffield, as it will be known, means that a major manufacturing plant—the only one of its type—will be introduced into Europe. Is that not a major endorsement by Boeing of post-Brexit Britain?

[Mr Hammond]

Yes, that is two things: it is a major endorsement by a global company and a major vote of confidence in the British economy. It is also a reflection of this Government’s policy that where we place large contracts for military equipment, as we have done with Boeing, we insist on some compensating investment in our economy, so that the investment in our military capability pays for jobs, skills and technology in the UK.

Charter for Budget Responsibility

Debate between Lord Hammond of Runnymede and Michael Fabricant

Tuesday 24th January 2017 Commons Chamber

[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.

--- Later in debate ---

[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.

Oral Answers to Questions

Debate between Lord Hammond of Runnymede and Michael Fabricant

Tuesday 12th January 2016 Commons Chamber

[Mr Philip Hammond]

That model has never seemed very attractive to me. Some people have talked about the Norwegian model in the domestic debate here, but perhaps they have failed to understand how it works. As the hon. Lady has just said, it involves accepting all the rules and paying all the subs but getting no vote and no seat at the table. That does not look like a good plan to me.

[Michael Fabricant (Lichfield) (Con)]

Birmingham airport has recently initiated regular flights to China, but France, Holland and Germany all have more such flights than the United Kingdom. What can the Secretary of State do with the Department for Business, Innovation and Skills and the Department for Transport to encourage more regular flights to China in order to promote trade and tourism?

[Mr Hammond]

My hon. Friend did not mention airport capacity in the south-east, but it is of course intimately linked with his question. As he will know, the Government are now urgently carrying out further studies around the Davies report on airport capacity in the south-east and we will make a decision as soon as possible on that matter.

Oral Answers to Questions

Debate between Lord Hammond of Runnymede and Michael Fabricant

Tuesday 3rd March 2015 Commons Chamber

[Mr Hammond]

If I may say so, I think that the hon. Gentleman is getting a little bit ahead of himself there.

We have a good track record on the delivery of our aid pledges in respect of Gaza. A number of other countries have made very forward-leaning aid pledges but they have not yet been followed through. So there is a problem with money, but there is also a physical problem of being able to get materials into Gaza and get works progressed. That is caused partly by the security situation in Sinai and the Egyptian response to that, and partly by the situation between Israel and the Palestinians in Gaza. I do not think, honestly, that we are going to get much progress before the Israeli general election, but as soon as that election is out of the way, this has to be a major priority.

[Michael Fabricant (Lichfield) (Con)]

4. Whether he has had discussions with the Argentinian Government on the future of the Falkland Islands; and if he will make a statement.