Oral Answers to Questions
Stephen Hammond Excerpts(7 years, 10 months ago)
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Suella Fernandes (Fareham) (Con)
Stephen Hammond (Wimbledon) (Con)
The Chancellor of the Exchequer (Mr Philip Hammond)
We recognise that the need to increase public spending on infrastructure is at the heart of our productivity agenda. That is why, at autumn statement 2016, we committed £23 billion of additional capital to fund new productivity-enhancing economic infrastructure through the national productivity investment fund. Coupled with the commitments made at spending review 2015, that means that between 2016-17 and 2020-21 central Government investment in economic infrastructure will rise by almost 60%, from £14 billion to £22 billion.
Mr Hammond
I think the Stubbington bypass was well worth waiting for. It will indeed support growth and development by improving access to both the M27 and the A27, allowing much needed business investment, creating new jobs, but also enabling the development of 900 new homes. Where we can get transport infrastructure investment to perform its transport function but also to help to open up land for development for new homes, that is a double hit.
Stephen Hammond
My right hon. Friend will be aware of the appetite for non-Government sources to provide funding for UK infrastructure. Can he confirm whether the Government are considering regional, national or project-based infrastructure bonds? Will he agree to meet me and a group of funders to discuss the attractions of such bonds?
Mr Philip Hammond
The most economical way for the Government to fund infrastructure investment is through conventional gilts—that is the lowest cost to the public purse. However, the Treasury backs infrastructure bonds and loans issued by the private sector through the UK guarantees scheme. At autumn statement, I announced that that scheme would be extended until at least 2026. It has played a vital role not just in underwriting and guaranteeing finance for projects, but in allowing a large number of projects to go ahead without the Government guarantee, simply by having underwritten the financing during the programme phase.
London Stock Exchange
Stephen Hammond Excerpts(7 years, 11 months ago)
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Stephen Hammond (Wimbledon) (Con)
It is a pleasure to serve under your chairmanship, Mr Hollobone. I am glad: your stricture will cut down my 20 minutes of waffle to three minutes of pithiness. The London Stock Exchange is one of the world’s largest diversified international market infrastructure and capital markets businesses. However—my hon. Friend the Member for Stone (Sir William Cash) made this key point—it is no longer a social institution. It is a public company like any other. Its existence and ability to trade depends on its range and quality of products. It is not a members’ club or a public body.
Since its inception as a public company, it has changed dramatically, not only in the last 12 years but in the 40 years since we joined the European Union. As we leave the European Union, we need to recognise how much it has changed. It has sought opportunities to expand, and it has brought great success to the City of London, extending the range of products and activities. One therefore needs to see the merger with Deutsche Börse as the latest in a long list of opportunities and expansions that the London Stock Exchange has taken part in.
I do not have time to rehearse or go through my hon. Friend’s concerns. He was right to make a number of them—there clearly are some concerns—but he failed to talk about any of the significant advantages. First, the merger would create a European market infrastructure company to challenge other comparable companies in the world. It is simply not right to say that the efficiency savings or cost savings would be minimal. There would be considerable efficiency savings that would reduce the trading costs for market participants and, inevitably, for end users—the pension funds we are all in—and it would reduce the costs for capital raising.
One of the great advantages of this potential merger is that the UK’s high-growth businesses—they are the backbone of this country and, as we are now all Brexiteers, they want to go out into the world and compete—need to be able to get the capital that is so critical for growth and job creation in the United Kingdom. Highly innovative, high-growth companies in the UK need that access to non-bank finance and, in particular, equity. They also need the ability to access debt and debt instruments, which is one of the major opportunities that the merger will provide to both UK-based regional powerhouses and internationally-competing UK companies. We should not underestimate that benefit.
Charter for Budget Responsibility
Stephen Hammond Excerpts(8 years ago)
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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.
Autumn Statement
Stephen Hammond Excerpts(8 years, 2 months ago)
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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.
Leaving the EU: Financial Services
Stephen Hammond Excerpts(8 years, 2 months ago)
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Stephen Hammond (Wimbledon) (Con)
I should say at the outset that I am chairman of the all-party group on wholesale financial markets and services, and that I worked in the industry for a few years before I entered the House.
I congratulate the hon. Members for Leicester West (Liz Kendall) and for Nottingham East (Chris Leslie) on securing this incredibly important debate. We are concentrating on an industry in which we have the greatest comparative advantage. It is important for the economy not just because it means that we can help public services, but because, as the hon. Lady pointed out, it is the lifeblood of many other industries. She has set out the facts about how many people it employs. It is the largest taxpaying sector and the largest exporting sector.
The sector is also the one with the largest trade surplus with the European Union. It is absolutely clear that one reason for that is that we have had access to and membership of the single market. London was always a financial centre, but membership of the single market has allowed it to become the undoubted capital for financial services not just in Europe, but arguably in the world. We have had a common set of regulations, we have broken down barriers, we have attracted huge investments, and global operations have moved to Britain. Leaving the single market or losing access to it would be calamitous for the financial services sector.
Some colleagues have argued that immigration was a key reason why we voted to leave the EU on 23 June, and that freedom of movement must therefore be at the forefront of our thoughts. I have heard colleagues argue that we should say to the EU 27, “Trade on these terms or we will leave on WTO terms.” Such an outcome would make access to the single market impossible. That would be hopeless for financial services, because we are already seeing, in both analysis and actuality, the impact of what has happened. The hon. Member for Streatham (Mr Umunna), who is no longer in the Chamber, mentioned euro clearing. We have already seen euro clearing for currency dealing leaving London, and euro clearing for securities would leave as well. As the hon. Member for Leicester West pointed out, many institutions are drawing up contingency plans for that.
Last night, I attended a meeting of the National Institute of Economic and Social Research. Its most recent analysis shows that if we leave the EU on just WTO terms, which exclude most financial services, London would lose 60% of financial services business with the EU. I do not think that anyone, whatever their view, would regard that as anything other than a calamitous result.
The hon. Lady was right to concentrate on passporting. Passporting is necessary. It is not just a case of putting up a brass plaque on a door somewhere else in Europe; since the change in financial regulations, there is much more to it than that. It would be much more difficult to establish trade functions across Europe if we gave up passporting. The Chancellor told the Treasury Committee two weeks ago that he accepted the importance of passporting, and I hope the Economic Secretary will assure us that the Government recognise that.
Passporting is not only important for the banking industry. The Association of British Insurers put out a brief this week—I also met its representatives this week—about the ability of businesses throughout the UK to carry out insurance business across the world, and how they will be unable to do that if we lose passporting.
Sir William Cash (Stone) (Con)
I am sure my hon. Friend is aware that there is not a single market in insurance, and that 87% of all insurers operate through subsidiaries in the EU, rather than in branches dependent on passporting?
Stephen Hammond
My hon. Friend would be right to claim that about asset management, but I think he is confusing the two industries. The London Market Group said this week that although the number is not as high as that for banking, the amount of business done in the EU is substantially higher than the number my hon. Friend cites. I am happy to ask the LMG to come and discuss that with him.
If the Government are prepared to be rational, a solution can be negotiated, and that is what many people will want to get out of this debate. We might be able to have cross-industry work visas that would involve some limit on access—that would fulfil the requirement of those who want to control freedom of movement—but would also allow us some access to the single market.
As the hon. Member for Leicester West pointed out, an equivalence regime would need to be established, but such regimes are fraught with difficulty. The issue is whether we could establish a bilateral equivalence regime similar to what we have with America. A regime dominated by the European Court of Justice would not be satisfactory for the financial services industry and would wind back our prospects substantially. I would have liked to have said more about that, but I will heed the strictures of the Chair.
It is absolutely clear that the Government must give some guidance on transitional arrangements. The industry cannot wait for the end of the article 50 process. This is a bridge: the Government might not be able to set out exactly where we are going, but they must show that they understand the importance of financial services to this country and our position globally by giving the sector some certainty that after the article 50 period—it is unlikely we will be able to do a deal within two years—they will have transitional arrangements in place. That would mean that wherever we end up, the financial services sector can start its journey over the bridge.
I have no doubt that the Prime Minister and the Economic Secretary understand the importance of this industry to our country. I also have no doubt that we can negotiate a hybrid deal through which we can retain jobs and maintain London as Europe’s financial centre.
Oral Answers to Questions
Stephen Hammond Excerpts(8 years, 9 months ago)
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The Economic Secretary to the Treasury (Harriett Baldwin)
The analysis by the House of Commons Library is fundamentally flawed. First, it assumes that every pound of Government borrowing benefits people. It also does not highlight the fact that it is higher rate taxpaying women such as me, whose child benefit has been ended, who form the largest part of that group. Is the hon. Lady saying that her party wants to reinstate child benefit for higher rate taxpayers?
Stephen Hammond (Wimbledon) (Con)
Budget Changes
Stephen Hammond Excerpts(8 years, 10 months ago)
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Urgent Questions are proposed each morning by backbench MPs, and up to two may be selected each day by the Speaker. Chosen Urgent Questions are announced 30 minutes before Parliament sits each day.
Each Urgent Question requires a Government Minister to give a response on the debate topic.
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Stephen Hammond (Wimbledon) (Con)
The role of the Budget is surely to promote growth and create employment. Has the Minister noticed that the small business rate relief measures have been widely welcomed by the Federation of Small Businesses because they will promote growth and employment across all strata of society?
Mr Gauke
Yes; my hon. Friend is absolutely right. There has been strong support from small businesses for the contents of this Budget. This is a Government who are backing small businesses and ensuring that they can provide the growth and employment opportunities that the British people need.
Protection of the EU’s Financial Interests
Stephen Hammond Excerpts(8 years, 11 months ago)
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Mr Gauke
There is a general view that the UK is strongly determined to address fraud. We have a strong record of budgetary discipline in the EU and with multinational projects, and we have demonstrated that we take fraud very seriously.
From the documents before us, it is hard to draw comparisons between the UK and other member states. There is no directly comparable error rate for the UK’s management of EU funds against which the ECA’s error rate for the EU budget can be measured. To our knowledge, there are no national accounts of major economies, including the UK’s, that can be meaningfully compared with the ECA’s audit of EU accounts. Only a few countries—the UK is one—produce whole of Government accounts. It is hard to compare precisely our record with those of other member states or countries outside the EU. The UK remains determined to root out fraud, wherever it might be.
Stephen Hammond (Wimbledon) (Con)
Like so many others, I want to say that it is a pleasure to serve under your chairmanship, Sir Edward. I confess to my right hon. and hon. Friends on the Front Bench that I have not read these documents cover to cover.
Stephen Hammond
It is indeed shocking, although I thought it would be more useful to spend my weekend trying to ensure that my hon. Friend the Member for Richmond Park (Zac Goldsmith) is elected in May.
I agree with my right hon. Friend the Member for Ashford that it is shocking that this is the 21st year in which the accounts have not been properly audited and signed off. That would not be acceptable in the financial world. With my financial hat on, I read three of the chapters, and I would like to test something with the Financial Secretary. Chapter 3 is about getting results from the EU budget. The common themes include poor performance setting, poor planning and objectives that are not fit for management purposes. My hon. Friend will have noticed that it states that budgetary strategy is not aligned with political strategy, which is an explicit criticism of the inability to make proper financial judgments.
Hidden in the documents—the Commission did not even bother to reply—is paragraph 3.79, which gets to the heart of the lack of results in partnership arrangements. I would like to hear from my hon. Friend exactly how the Government will put pressure on the Commission to respond with more a bit more force than its bland statements.
Mr Gauke
My hon. Friend raises an important point. It is traditional in these debates that we focus on error and specifically on fraud, but as I touched upon in my opening remarks the focus on performance should not be forgotten. We welcome the ECA’s increased focus on performance while retaining its valuable role on compliance. That shows there is recognition that compliance without performance will achieve little. Strengthening the ECA’s work on performance could help to maximise the efficiency, economy and effectiveness of EU spending.
It is also in line with Vice-President Georgieva’s budget for results initiative, which aims to develop a more performance-orientated budget that delivers tangible results for EU citizens. We see this as an important opportunity to help to improve the transparency of EU spending to taxpayers, and its value and efficiency. My right hon. Friend the Chancellor made our position clear at ECOFIN last year.
We are working closely with the Commission on this issue, offering our expertise in areas such as transparency and value for money. The Commission is keen to drive this agenda forward. In particular, it is our priority to ensure that this work feeds into the mid-term review of the multi-annual financial framework this year. It is important that the work in this area is joined up with other related initiatives to improve budgetary management, such as proposals for simplification of the common agricultural policy and structural funds, which were launched earlier this year by the Commission, and the wider mid-term review this year.
My hon. Friend the Member for Wimbledon raises an important point. Having heard Vice-President Georgieva discuss these matters on a number of occasions, I know that she is clearly very personally committed to a move towards ensuring that performance is at the forefront of how EU money is spent, and that is an initiative that we support and welcome.
Stephen Hammond
I am grateful for that response and I am sure that many in this Committee will hope that Vice-President Georgieva’s performance will show the result of that next year.
The one other issue that I just wanted to raise with my hon. Friend is the contentious nature of state aid rules and infringements, because obviously that goes quite far towards the heart of trade. Paragraph 6.39 indicates that there were 14 projects that infringed state aid rules and the Commission’s response is, “We’ll deem whatever action’s necessary.” Given that these projects are obviously usually highly controversial and get to the source of quite a lot of disagreements, can he assure the Committee that we will be pushing the Commission to act where deemed necessary so that action is taken?
Mr Gauke
In terms of UK infringement of state aid rules, the mandate of the relevant audit authorities for structural funds in the UK includes checks on compliance with state aid rules. The UK project reference here is not identified by the ECA, so it is not possible to comment on the nature of the errors. However, if my hon. Friend’s concern is about ensuring that state aid rules are properly enforced, I say to him that we will continue to push the Commission to focus on the areas of greatest error, and we think that that would be beneficial in ensuring that the EU state aid regime works as effectively for Europe as it can.
Oral Answers to Questions
Stephen Hammond Excerpts(9 years, 1 month ago)
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Mr Gauke
The devolution of business rates will retain the system of top-ups and tariffs that currently exist, so there will be no immediate loss to any local authority as a consequence of devolution. The point is that it devolves power to local authorities so that they have stronger incentives to boost growth. Local authorities that grasp that opportunity will see their business rates revenue increase.
Stephen Hammond (Wimbledon) (Con)
Does my hon. Friend agree that the point about last week’s announcement was that it was a defining moment for local authorities? Those local authorities that accept the principle of devolution of business rates can incentivise strong local business growth, and secure a local economy that is strong and that has jobs for its constituents. That is the key point.
Spending Review and Autumn Statement
Stephen Hammond Excerpts(9 years, 1 month ago)
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Mr Osborne
First, the welfare cap I set at the summer Budget, which of course was reduced from the welfare cap in the March Budget, was made lower by the tax credit changes that were put forward. Now that we are not going ahead with those tax credit changes, clearly welfare spending—spending on tax credits— is going to be higher in the first couple of years. That is why the welfare cap is exceeded in those years, but then, as the hon. Gentleman can see in the table on that page, the spending comes below the welfare cap and we achieve the £12 billion of welfare savings on which we fought the general election. He opposed those but in the end did not carry the day with the British public. The long-term savings we have made today to housing benefit are less than £1 billion but they continue into the future, and because of the phasing out in respect of tax credits, by the time we get to 2019-20 those tax credit changes were saving only about £1 billion. That is why that is the case, and I think it is part of a sensible plan to help families in the transition, which is what I was asked to consider. I have been able to use the improvement in the public finances to achieve that.
Stephen Hammond (Wimbledon) (Con)
We have heard a lot about political careers today. I am sure the Chancellor is on a very different trajectory from the shadow Chancellor. I am not entirely sure that the next minute will help my own, but in the spirt of the Leader of the Opposition, let me read out what David from Wimbledon, who emailed me many times about tax credits over the past month, has just emailed me again to say:
“Can’t fault it so thanks for listening!”
Thank you, Chancellor.
Mr Osborne
Obviously, I thank my hon. Friend’s constituent for that comment. If we have improvements in the public finances, we can help families, we can reduce the deficit, as we have done, and we can make the investments in the long-term capital of the country. That is the advantage of having an economic plan that actually produces better results than were forecast, rather than worse results, which is what was happening when Labour Chancellors were giving autumn statements.