Surplus Target and Corporation Tax

Debate between George Osborne and Stewart Hosie

Monday 4th July 2016 Commons Chamber

[Mr Osborne]

It is clearly likely that we will be impacted by a cyclical downturn in the public finances—we can already see the growth forecasts being adjusted. The OBR will help us to make an assessment of the referendum result’s structural impact on the public finances and our chances of hitting the target—as I say, it looks unlikely that we will hit it—and then, under the fiscal charter, it will be up to the Government to produce a plan that will be debated and voted on by the House. We have provided for this contingency, and now we need to let the OBR do its work.

[Stewart Hosie (Dundee East) (SNP)]

I welcome what the Chancellor said about possible monetary policy easing from the Bank, about the automatic stabilisers and, in particular, about export promotion—we hope that that will be matched by a U-turn on the cuts to the UK Trade & Investment’s export promotion budget.

In general terms, we welcome the U-turn on the arbitrary fiscal surplus rule, which, we should remember, planned to cut more than £40 billion a year and was required to run a balanced current account budget. While we support tax competition and recognise that corporation tax cuts might be a useful tool in the fight against capital flight in the aftermath of the appalling Brexit decision, it is also true if we look at the 2016 Red Book numbers as a guide, that a substantial cut in corporation tax—say, 5%—could, in the absence of behavioural change, lead to a reduction of revenue yield of about £2.5 billion a year. I ask the Chancellor one question in particular. Given that he has abandoned his fiscal rule, will he today rule out any plans to claw back potential losses in revenue yield from the cut in corporation tax, in the absence of behavioural change, through the mechanism of further attacks on the welfare budget?

[Mr Osborne]

First, as a result of the reforms we have made over the last six years, the Bank of England has many more tools at its disposal than it did in the financial crash. Obviously, it can act on monetary policy consistent with its inflation target. The Governor of the Bank of England, speaking in a personal capacity as a member of Monetary Policy Committee, said that easing was likely to be required. A number of other tools, including counter-cyclical financial tools, are available, which means that there is a range of options to deploy. Over the coming weeks, we will hear whether, how and why the Bank of England, which is independent in its decision making, needs to deploy those tools.

I am rather disappointed that the SNP spokesman has not reminded us that it was SNP policy to cut corporation tax. Indeed, that has been its policy for year after year. In the independence referendum, the SNP said that one of the benefits of independence was the ability to cut corporation tax. The great thing about being in the United Kingdom is that the SNP can get corporation tax cuts in any case.

Oral Answers to Questions

Debate between George Osborne and Stewart Hosie

Tuesday 7th June 2016 Commons Chamber

[Mr Osborne]

My hon. Friend is right to point out all the good things that are happening in Newark. Across the east midlands, we have seen the creation of 53,000 new small and medium-sized businesses since we came into Downing Street—a remarkable achievement. We have to ensure that we continue to move people up the job scale and that their wages continue to grow. The good news is that of the jobs being created at the moment 80% or so are full time and the majority are in skilled occupations.

[Stewart Hosie (Dundee East) (SNP)]

We all know the benefits of innovation to business and to the economy, so why does the Chancellor think his decision to change innovation support from grants to loans is anything other than a bad idea that will increase cost and risk to companies seeking to innovate?

[Mr Osborne]

I think the hon. Gentleman would accept, as I would, that it has been a challenge for the UK to turn good inventions in the laboratory into good inventions in the workplace that sell around the world. Our innovation support has had to be updated and modernised. The idea of loans is actually borrowed from a French initiative that has worked well in that economy, in terms of turning scientific invention into good products in the marketplace.

[Stewart Hosie]

That is a rather unconvincing answer. Of course it is not simply about innovation, but exports. We all understand the benefits to business and the economy of exporting more, so why does the Chancellor think it is a remotely good idea to take the decision to cut the UK Trade & Investment budget by £42 million over the next four years, making it more difficult to export and more difficult for him to meet his own target of doubling exports by the end of the decade?

[Mr Osborne]

Over the past five or six years, we have greatly increased the UKTI budget, but as with every Department, since it is paid for by the taxpayers that the hon. Gentleman and I represent, we need to make sure we get value for money. The new head of UKTI is ensuring that the money is going to the frontline to support small and medium-sized Scottish exporters and others in selling around the world. He should welcome the enormous success of many Scottish businesses, from the whisky business to agricultural industries and manufacturing, in exporting around the world, with the support of UKTI—the clue is in the first two letters.

Oral Answers to Questions

Debate between George Osborne and Stewart Hosie

Tuesday 19th April 2016 Commons Chamber

[Mr Osborne]

First, we are introducing a register of the beneficial ownership of companies and trusts that need to pay tax, and of course banks must therefore comply with it. Secondly, we are introducing—this will be in the Queen’s Speech—a new criminal offence of facilitating tax evasion, which will apply to the corporate sector in Britain as well. That is in addition to the criminal offence we have introduced that says ignorance is no defence when someone comes before the courts if it is found that they have been evading taxes.

[Stewart Hosie (Dundee East) (SNP)]

Tax havens lead to a loss of revenue here as individuals can hide through opaque structures and businesses simply do not pay UK tax in respect of where economic activity takes place. Given the revelations from Mossack Fonseca, has the Treasury carried out a new assessment to calculate the scale and size of the revenue lost to the UK?

[Mr Osborne]

There are already a large number of ongoing investigations in respect of Panama, which we hope will lead to prosecutions, and the Government already had data on Mossack Fonseca. If there is additional information available in the Panama papers—despite our requests, the media organisations have not yet handed all that information over to us—we will act on it.

[Stewart Hosie]

Can I ask the Chancellor to be more assertive and to go much further? Mossack Fonseca is the fourth biggest such firm in Panama, and I presume that there are dozens, scores or hundreds of smaller ones, and there will be many, many more in other countries. The scale and scope of this are likely to be astronomical. He and the Government need to go much further. We need to have a much clearer understanding of the scale of this. I ask him to make all the representations he can to the Panamanian authorities and other jurisdictions where similar activities are taking place.

[Mr Osborne]

To be frank, representations are not going to be enough with some of these jurisdictions. That is why we want international agreement to a blacklist that jurisdictions will go on if they do not comply with the norms that we are establishing on transparency, exchange of information and the like. Once they are on the blacklist, they are subject to penalties and punitive action—sanctions, if you like—so that it is clear that they cannot carry on doing business in the way they have been. If the whole world comes around on that—there was welcome support for this British-promoted concept at the G20 last week in Washington—so that we get that blacklist and that punitive action, I think that we will help to solve this problem.

Oral Answers to Questions

Debate between George Osborne and Stewart Hosie

Tuesday 1st March 2016 Commons Chamber

[Mr Osborne]

Our argument is that we will be stronger and better off inside the European Union. That is the positive choice that we face as a country. I, personally, do not think that we should leave the EU, but even those who contemplate doing so should think about this. With the economic situation that the world faces at the moment, and with the geopolitical situation that we face in Europe with Putin on our doorstep and the crisis in the middle east, is this the right moment to leave? My strong advice, the advice of the British Cabinet and the advice of the British Government is that we remain in this reformed EU.

[Stewart Hosie (Dundee East) (SNP)]

The Scottish First Minister Nicola Sturgeon was in London yesterday making the case for the UK to remain in the EU. She made the point that access to that market supports some 300,000 jobs in Scotland and some 3 million jobs in the UK. May I ask the Chancellor to agree with me—I am sure he will—that in terms of EU membership, trade deals are easier to agree as a bloc, harmonised regulation helps businesses to export and, notwithstanding the fact that improvements can always be made, being a member of the EU benefits consumers as well?

[Mr Osborne]

I agree that Scotland benefits from both being part of the United Kingdom and being part of the European Union. The hon. Gentleman is right to highlight the fact that EU agreements on things such as air travel and mobile phone charges have reduced costs for consumers. It is also the case that a depreciation in sterling leads to increased inflation.

[Stewart Hosie]

The extent to which the EU has succeeded is actually quite remarkable in terms of free trade, free movement—we think it is a boon—and, indeed, the commensurate protections for the environment, social protection and employment rights. These substantial achievements of the European Union are to be celebrated, not renounced. That is the positive case we are making. May I urge the Chancellor and his right hon. Friend the Prime Minister to make a positive case, because the in campaign does not have a 20-point lead to squander with a negative campaign?

[Mr Osborne]

I am making the positive case that we will be stronger, safer and better off, which are all positive outcomes for our country, and I am pointing out that there are question marks over the alternatives. It is perfectly reasonable to point out that we do not know what the leap in the dark would entail, but of course I want to do this in a positive way. There is a healthy debate across our political system as well as across our country, but I take the view of Ronald Reagan’s 11th commandment, which is that “I won’t speak ill of a Conservative.”

Oral Answers to Questions

Debate between George Osborne and Stewart Hosie

Tuesday 19th January 2016 Commons Chamber

[Mr Osborne]

My hon. Friend is right, and the Help to Buy ISA has been a spectacular success. In the few weeks since its launch, 170,000 families have taken it up, and it is helping people to get on the property ladder and save for that deposit. We are doing everything that we can to support the aspirations of the families of Britain.

[Stewart Hosie (Dundee East) (SNP)]

The Government’s plan requires the doubling of exports by 2020 to £1 trillion —a promise repeated in “Fixing the Foundations”, which was published in this Parliament. Does the Chancellor still hold to the intention and promise to see UK exports rise by £100 billion a year every year for the next five years?

[Mr Osborne]

We hold to that target, but frankly it will be very challenging to meet. We have been improving exports, but many of our main export markets have been weak, and we would like further economic reform on the continent of Europe. Some of the big emerging markets are struggling at the moment, but a good economic dialogue is taking place today with India, and British exports to India are increasing. Only recently has the United States economy started to grow. There are many challenges, but I do not think we should duck those challenges or ditch the target. Increasing exports is a key priority for the UK.

[Stewart Hosie]

I agree that we should set ambitious targets, but they must be credible. Given that the British Chambers of Commerce states that the export target will be undershot, and the Office for Budget Responsibility states that it will fail to be met by some £350 billion, is it better to set a realistic and achievable target, rather than risk losing credibility as the Chancellor did when he failed on debt, deficit and borrowing targets in the previous Parliament?

[Mr Osborne]

It is right to set and to try to meet a stretching target, even if that will be challenging. The hon. Gentleman talks about realistic and credible numbers. If Scotland had listened to the Scottish nationalists, it would be separating from the United Kingdom in two months’ time. The Scottish Government based their claim for independence on an oil price of $115. Scotland would now be heading for economic catastrophe if it had listened to the hon. Gentleman and Scottish National party members. Before they talk about credible and realistic economic policies anywhere else in the United Kingdom, they should get one themselves.

Oral Answers to Questions

Debate between George Osborne and Stewart Hosie

Tuesday 1st December 2015 Commons Chamber

[Mr Osborne]

The fact that the apprenticeships levy is set up in such a way that a large company employing high-quality apprentices will be able to receive back from the Government more than it puts in sets it aside from classic payroll taxes. Indeed, it has been broadly welcomed by the business community, even though it accepts the additional burden it represents. That is going to be very important. We made the calculations for the impact on the public sector in our public finance projections, and I am happy to write to my right hon. Friend with the precise numbers.

[Stewart Hosie (Dundee East) (SNP)]

Will the Chancellor confirm that in addition to the 17% cut to the funding of the Department for Business, Innovation and Skills, the autumn statement did, as other Members have said, add £11 billion to the tax bill of businesses, in the area of business growth and skills, and mainly driven by the apprenticeship levy?

[Mr Osborne]

I would have thought and hoped that the Scottish National party supported an apprenticeships levy whereby we use the money to create 3 million apprenticeships in this part of the United Kingdom and make sure that there are arrangements to pass the money to the Scottish Government so that they can improve skills in Scotland. But of course if one looks closely at the record of the SNP Government, one sees that they have been cutting further education places in Scotland. As usual, the SNP says one thing here and does something different in Scotland.

[Stewart Hosie]

The question was of course about the £11 billion extra tax cost for business and the cut to the Department for Business, Innovation and Skills—something the Chancellor does not want to talk about. Given that there was no increase in retail sales in the last quarter, that the CBI industrial trends survey is down, that consumer confidence is down, that the deficit in the trade in goods is a colossal £134 billion and that manufacturing output is down, why does this political Chancellor think that cutting BIS by 17% and adding £11 billion to business costs over the spending review period is even remotely sensible?

[Mr Osborne]

Because we do not equate the health of the business sector with the size of the Business Department. We have increased the money going into innovation by raising the budget for the catapult centres, and we have boosted the budget for science, one of the great UK strengths, which would be undermined if Scotland became independent. I would make a further point. The hon. Gentleman asked about economic projections, but in the independent OBR forecast growth is up, jobs are up, living standards are up and wages are up. That is all part of a successful economic plan which is delivering the goods for the whole United Kingdom.

Spending Review and Autumn Statement

Debate between George Osborne and Stewart Hosie

Wednesday 25th November 2015 Commons Chamber

[Mr Osborne]

My right hon. Friend is absolutely right. As an economy, we have been growing faster than most of the advanced economies of the world. In that situation, not getting the deficit and the debt falling is really signalling to the world that we are never, ever going to try to bring public finances under control. As it is, we have debt falling in every year of this forecast, and it is lower than the forecast in the Budget. The deficit is also falling and overall borrowing is lower in this forecast than in the one I produced in the summer Budget. We take these steps to pay down our debts. Our national debt, at 80% of national income, is uncomfortably high. It does not necessarily, therefore, give us all the flexibility we would want if we were to be hit by some kind of external shock and is all the more reason for us to use the better times to pay down the debt.

[Stewart Hosie (Dundee East) (SNP)]

I was intrigued by Tory Back Benchers cheering the humiliating U-turn on tax credits. It seems barely three or four weeks ago that they were cheering on, and voting for, the implementation of the tax credit policy. But times move on and things change.

The genesis of today’s statement was the decision announced last year when the Chancellor stated that he wanted to reduce public spending to barely 35% of GDP by the end of this Parliament. That was adjusted up to just over 36% in the summer Budget, but the direction of travel—the shrinking of services provided by the state—was very clear. It was set in stone with the fiscal charter earlier this year, with the intention to run a current account surplus of £40 billion a year by 2019-20. Those numbers have changed slightly today. The Chancellor wants not only to shrink the size of the state to 36.5% of GDP but to run a current account surplus of £42 billion. Can we just be clear? The UK has not routinely seen spending at 36% or 37% of GDP since the 1930s and 1940s. The Chancellor’s ideology has not changed. In essence, he still intends to cut £40 billion a year more than he needs to, to run a current account budget in balance by the end of this Parliament.

Notwithstanding the humiliating U-turn on tax credits, the Government added £37 billion of cuts in tax rises in the summer Budget to the £121 billion of fiscal or discretionary consolidation in the previous Parliament. Announced in the Blue Book today is £18 billion of cuts and the Chancellor was very clear that the £12 billion of welfare cuts remain on the table. Even after today, the public are facing a decade of austerity. These decisions are political choices. The Government ignore the fiscally responsible alternative course of action, which, with a very modest increase in public expenditure, would ensure that no one is left behind.

The Government are not for working people. Nothing they say can camouflage the failure of the past five years, and the Chancellor’s statement merely confirms that they are making the same mistakes all over again. We saw the impact on GDP growth of rising inequality in the 20 years to 2010. The continuation of the austerity agenda represents a wilful disregard for and failure to learn the lessons of the recent past.

The Chancellor may not care about inequality, and the 1 million people receiving food parcels compared with barely 25,000 five or six years ago, but the Government should care about its impact on economic growth. Let me ask the Chancellor some specific questions. We have been concerned for some time about the failure to increase productivity. The Chancellor knows that the UK sits in the third quartile of advanced economies. How does a 17% cut to the Department for Business, Innovation and Skills help to support firms seeking to increase productivity?

We have been concerned about the negative impact of balance of trade, a situation that got worse between the spring and summer Budget forecasts. The impact for every year published today is still negative. How does the absence of a plan to encourage exports and a further cut to the UK Trade & Investment budget help to reverse the dire balance of trade position? We share the Chancellor’s concern to protect growth and tax yield, and to close the tax gap, but how does the closure of 137 HMRC offices possibly do anything other than weaken the ability of the Revenue to collect the tax that is due?

The Chancellor said that the UK would take the fight to its enemies, but he omitted to mention action in Syria. Should the Government get the vote they want in the next few weeks, will he tell us how much he plans to set aside for the reconstruction and stabilisation of Syria after any military intervention is over? We remain as concerned as he does about the failure to invest in capital, which is absolutely imperative to boost economic growth. We welcome the increase in capital spend announced today. I just say to him, however, that cuts last winter, increases in the spring, cuts in the summer and increases in the autumn represent a shambles of a way to plan long-term capital investment.

In Scotland, we saw cuts to revenue and capital over the previous Parliament. We have had confirmation today of further real-terms cuts to Scottish revenue funding over the spending review period. Instead of the Bullingdon sneering about oil, which the Chancellor did earlier, he would have been better recognising that the Scottish economy is now 2.5% larger than it was pre-crisis and productivity is 4% higher than in 2007. It is contributing to the UK recovery. Instead of hobbling and undermining the Scottish Government, he might consider it to be worthy of support.

The Government received barely a third of the vote of those who voted and the Conservative party achieved its worst result in Scotland since 1865. Let us be clear. I do not expect the Chancellor to change his mind, but the public in Scotland and in the UK did not vote for a decade of austerity.

[Mr Osborne]

This spending review delivers economic and national security for the people of Scotland. It funds a £1.9 billion increase to their capital budget and the block grant goes up by £1 billion. There is a 14% capital boost from the United Kingdom Government. Instead of complaining, the hon. Gentleman might, on behalf of the Scottish Government, have welcomed that and set out any plans he might have for how to spend it. I suspect we will hear a lot from the Scottish nationalists in this Parliament about process, constitutional issues and all that, but they will not tell us what they are actually going to do to improve the lives of people in Scotland. He talks about productivity. If we look at the Scottish Government’s record, we see that they have cut 140,000 further education college places in Scotland. They have used the money they have taken from the university sector for free prescriptions for millionaires, as if that is a good use of Scottish taxpayers’ money. Health spending in Scotland is rising more slowly than it is in England, where the Conservative Government are in charge of the English national health service.

In the spending review, there is extra capital for Scotland so it can invest in its long-term future. There is a huge commitment to the defence estate in Scotland, with new planes based at RAF Lossiemouth and a massive investment in shipbuilding on the Clyde for many years to come. By the way, I know that the SNP is keen to court the unions in Scotland. The GMB said that the news about the frigates

“should be welcomed and not used for political mischief”.

That is another sensible thing the GMB has said. And there is the huge investment at the base at Faslane, where 8,000 people work. The Scottish National party pretends it would get rid of the nuclear deterrent and somehow give all those 8,000 people jobs in our defence establishment—the SNP is not being straight with the people who work on the Clyde or in Scotland’s defence industries.

We are also working on implementing the Glasgow city deal, and on a city deal for Inverness and for Aberdeen, and we are ready to sit down with John Swinney to negotiate a fiscal framework. We have now the Scotland Bill, which Lord Smith says “delivers the legislation required” to deliver the agreement. For months, SNP Members have been telling us that we were not doing what the Smith commission said, but now Lord Smith says that we are. To make these powers work, we need agreement on a fiscal framework. Let us sit down—we can sit down tomorrow, next week or whenever—to agree a fair fiscal funding framework.

The truth is that SNP Members complain about decisions on public expenditure, but if Scotland had voted to be independent, its public finances would be in complete tatters. The OBR forecast today is that oil revenues are down 94% in the North sea because of the fall in the world oil price. That is a £20 billion hole in the financial programme that the SNP Government tried to foist on the people of Scotland. The whole thing can be summed up by the words of Mr Alex Bell, who was the former First Minister’s head of policy. He said this week:

“The SNP’s model of independence is broken beyond repair…the campaign towards the 2014 vote, and the economic information since, has kicked the old model to death. The idea that you could have a Scotland with high public spending, low taxes, a stable economy and reasonable government debt was wishful a year ago—now it is deluded.”

That is the SNP verdict on the SNP plans.

Oral Answers to Questions

Debate between George Osborne and Stewart Hosie

Tuesday 27th October 2015 Commons Chamber

[Mr Osborne]

My hon. Friend makes a very important point. The savings we make in welfare are part of a package that includes a national living wage. Although the national living wage starts to come in next year, over 200 major companies—such as Sainsbury’s, Morrisons, Costa Coffee and many others—have already, since the Budget, introduced wage increases that match what we are proposing to do by statute, so we are already seeing the benefits of the national living wage coming into effect before it is even introduced.

[Stewart Hosie (Dundee East) (SNP)]

We know that there are 500,000 more children in poverty since 2010—[Hon. Members: “No.”] There are 500,000 more children in poverty since 2010, and there will potentially be 4 million children in poverty by the end of this Parliament. If the Chancellor is in listening mode, knowing that he does not need to make these cuts to balance the budget, why does he not listen to those who say, “Stop now with the policy of tax credit cuts”?

[Mr Osborne]

I am afraid that the hon. Gentleman is just not correct on the numbers. Child poverty is down by 300,000 since 2010, and the number of children in workless households is now 500,000 fewer than it was when the Government came to office. The truth is it is difficult to take any lectures from Scottish National party Members about balancing the books. They made forecasts for their oil revenues that would have left Scotland with a £30 billion black hole if they had ever got their way. We will go on delivering economic security for the people of Scotland, and indeed the rest of the United Kingdom, by taking the difficult decisions that his party ducks.

[Stewart Hosie]

The Chancellor is in denial—absolute denial. Did not yesterday, 26 October, demonstrate two things—the Chancellor has lost his political touch, and his chance of being Prime Minister has just gone up in a puff of ermine-clad smoke?

[Mr Osborne]

As ever, when pressed, all that SNP Members want to talk about is party political gains, rather than sorting out the mess that this country was in six or seven years ago. As a result of the changes we have made, there are hundreds of thousands more people in Scotland with jobs, businesses are investing in Scotland, as they are across the United Kingdom, and we will go on making those changes. The hon. Gentleman can go on praying in aid a House of Lords that he has spent his whole life campaigning to abolish. I will go on delivering the reforms to our economy that are needed to help Scotland to continue to grow.

Oral Answers to Questions

Debate between George Osborne and Stewart Hosie

Tuesday 21st July 2015 Commons Chamber

[Mr Osborne]

I pay tribute to the work that was done during the last Parliament by the Treasury Committee, some of whose members are still in their posts, and I again congratulate my right hon. Friend on remaining Chair of that Committee. Today we are publishing the consultation document on the new Bank of England Bill, which will come before Parliament in due course. The Bill follows the reforms announced by the Governor of the Bank, which built on the work done by the Treasury Committee and others. It will ensure that a modern Bank of England is able to exercise the leadership that is required for the delivery of economic and financial stability. Moreover, for the first time—this is crucial, and I think that Parliament will appreciate it—the Bank will be open to the advice of the National Audit Office, and the value for money that that can deliver.

[Stewart Hosie (Dundee East) (SNP)]

The success of the economic plan, long-term or otherwise, and the potential to improve productivity must be driven in part by sustained infrastructure capital investment, so can the Chancellor confirm that, instead of doing that, the plans he laid out in the summer Budget show total capital expenditure down every single year between 2015 and 2019-20 compared with the March Budget?

[Mr Osborne]

We made some in-year savings in this financial year in capital budgets that were not going to be well spent. We want to deliver value for money for Scottish taxpayers, as well as for taxpayers across the United Kingdom, but we will be spending more as a percentage of national income on capital investment in this decade than occurred under the last Labour Government.

[Stewart Hosie]

That is a fascinating answer, because of course the real answer is that in cash terms the spending is down—from 2015-16 onwards down £1.2 billion, £0.8 billion, £0.9 billion, £0.7 billion, and £1.3 billion by the time we get to 2019-20. So we know the forecasts are reduced, we know the Chancellor is cutting more than he needs in order to run a balanced budget, and we know he is undermining the potential for long-term growth, so why did he ignore all the advice, particularly from the OECD who told him two days before the Budget that “gross investment is low” and

“Transport infrastructure investment is poor”?

Does he really expect us to believe every—

[Mr Speaker]

Order. Questions are too long. We have got the general drift of the argument; let’s hear the answer.

Greece

Debate between George Osborne and Stewart Hosie

Monday 6th July 2015 Commons Chamber

[Mr Osborne]

Just as when people try to tell us what currency we should adopt we do not take too kindly to it, we should respect the decision of the Greek Government and people about the currency that they want to use. Clearly the Greek Government are saying that they want to remain in the euro. The tension, which has been there all along, is between that desire to remain in the euro and the conditions of membership that the other members of the eurozone are placing on them. That is the dilemma that has not yet been resolved.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Chancellor for his statement and for early sight of it. The Scottish National party agrees with much of what he said.

Most people recognised last week that, irrespective of the outcome of the referendum, negotiations and difficult decisions would still have to be undertaken by both Greece and its creditors. The Chancellor observed last week that senior eurozone figures had said that had Greece voted yes, then negotiations would begin to try to find a satisfactory outcome. Given that Greece voted no to the troika conditions, but voted to remain part of the EU and the eurozone, will the Chancellor try to persuade his Finance Minister counterparts in the EU and colleagues in the ECB and IMF that they, too, should respect the outcome of the referendum, stay calm and return to the negotiating table to find a long-term sustainable solution to Greece’s problems? That is in all our best interests.

It is worth noting that, as the Chancellor said, the markets have barely moved since the referendum result. They, at least, clearly discounted the possibility of a no vote, even if others did not. Peripheral country 10-year bond yields, in particular in Spain and Italy, have barely moved and are at about 2.3%. The FTSE Eurofirst 300 index is off by about 1.2% as of earlier this afternoon, although bank stocks are down a little more. However, market sentiment may change and bond yields and European banking stocks in particular may yet come under further pressure. May I ask what are the contingency plans for that eventuality; not the detail—I understand the sensitivity—but perhaps the degree of liaison between the Greek central bank, the ECB and the Fed? What plans are there, in addition to what he has laid out, to support businesses that export to Greece, particularly in the light of capital controls, to ensure cash-flow problems do not damage perfectly viable businesses here?

The Greek people have voted against further austerity, which they argue—many would agree—has failed so far. The Greek Government have a clear mandate to negotiate on that basis. I very much welcome what the Chancellor said about respecting the decision of the Greek people. I hope he and his Government will continue to respect that decision. As he said, this situation risks going from bad to worse. Even if the immediate crisis passes, the risks that do exist may do so for some considerable time.

[Mr Osborne]

The hon. Gentleman is right in his assessment of the current state of the markets. There has been a muted reaction, although Greek bond spreads have increased. I think that is in part because eurozone leaders and Finance Ministers have acted with some restraint post the result. Some of the language we heard on all sides before the referendum has been toned down, which is very sensible. I think people are now looking at the crucial meetings that will take place tonight and tomorrow to see whether they will get around the table and try one final time to reach a way forward.

On the hon. Gentleman’s specific point about export businesses, we are in contact with the various business representative bodies. We have the helpline available and HMRC is able to help with cash-flow problems. I repeat the point I made earlier: if Members of Parliament have specific cases, they should bring them to us and we will make sure that the businesses in their constituencies get specific advice. The hon. Gentleman can have my assurance that we remain in regular contact with the European authorities. The Governor of the Bank of England remains in very close contact with the head of the European Central Bank. We are prepared for what happens. I note again that there is a very fast timetable happening in the financial system in Greece. We have to make sure that the political timetable keeps pace with it.

Greece

Debate between George Osborne and Stewart Hosie

Monday 29th June 2015 Commons Chamber

[Mr Osborne]

My right hon. and learned Friend is right to remind us that the people of Greece have paid a very high price for the mismanagement of their economy by previous Greek politicians and Greek Governments. Of course it is now a matter for the Greek people to decide their future, and we should respect that. I made it clear in my statement that most people now consider this referendum as one on whether Greece leaves the euro. Of course there are considerable consequences of taking that step, but I do not think we should be telling the people of Greece how to vote. It is for the people of Greece to make that decision, but they should be aware of the consequences. That is the broad approach that we shall take. The discussion of what would happen if Greece were to leave the euro should probably happen at a later date, but there will clearly be issues over the support that the family of western nations can provide to that country.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Chancellor for his statement and for early sight of it. I welcome what he said about private sector exposures to Greece being substantially lower than they were some years ago. Exposure to the banks is around £5.3 billion, down from £9 billion some years before. That would tell us that the risk of direct contamination is relatively low, but as we have seen today there is a risk to the banking sector across the EU, and the fall in bank stocks throughout Europe is witness to that. I welcome what the Chancellor said about the Government and the central bank being ready to ensure the financial stability of the UK, but it might be helpful if he said a little more about confidence today.

In terms of other exposure, we have rather modest exports to Greece, worth about £2.82 billion, or 1.2% of EU exports and 0.5% of UK global exports. That figure is modest but nevertheless important to the people whose jobs depend on those exports. Will the Chancellor say a little more about that? Perhaps export promotion could be stepped up to help find new markets for businesses that might find the Greek export market more difficult; or, as the hon. Member for Nottingham East (Chris Leslie) mentioned, export credit guarantees and other short-term cash flow help, should they be required, could be used.

Finally, notwithstanding what the Chancellor said about negotiations being at an end, will he confirm that the IMF has some leeway in when it declares that a repayment has been missed, in that the IMF’s managing director has up to 30 days to notify the board if a country does not make a repayment deadline? Does that not provide some flexibility to ensure that a deal can be reached and provide a strong incentive for discussions continuing beyond Tuesday, notwithstanding the forthcoming Greek referendum?

[Mr Osborne]

I thank the hon. Gentleman for his questions. I should say that this afternoon we have been in touch with the devolved Administrations in the United Kingdom to ensure that they are aware of the plans and to work with them on any issues faced by them and by citizens and businesses in Scotland, Wales and Northern Ireland.

The Bank of England and the Prudential Regulation Authority are, of course, monitoring extremely closely the situation with the four Greek branches in the UK and the subsidiary, although, as I have said, the subsidiary is protected by our compensation scheme and supervised by the Bank of England. There is, of course, advice available to businesses with export links to Greece, but there are capital controls in place so there are restrictions on the settlement of payments being transferred out of the Greek banking system. Businesses should be aware of that. Cash flow problems can be addressed by contacting HMRC.

As for the IMF, I do not want to prejudge the decisions of the managing director or the board. We will just have to wait and see what unfolds in the coming days. It is fair to say that the space for substantive negotiations before the referendum is pretty limited. Of course, we shall see what the outcome of the referendum is. I would merely observe that many of the senior figures in the eurozone have said that if Greece were to vote yes, negotiations would begin to try to find a satisfactory outcome for the Greek financial situation.

Oral Answers to Questions

Debate between George Osborne and Stewart Hosie

Tuesday 16th June 2015 Commons Chamber

[Mr Osborne]

I certainly commend my hon. Friend for his consistency. I remember that in his maiden speech he made the case for Britain leaving the European Union, and he will of course have his opportunity in the referendum. I would say that this is precisely the judgment that the British people and this Parliament have to make: what are the economic benefits of our European Union membership, such as the single market, and what would be the alternative? That will be part of the lively debate, and as I say, the Treasury will be fully involved in that debate.

[Stewart Hosie (Dundee East) (SNP)]

There have already been a number of serious interventions in this debate suggesting that the in/out referendum will be disruptive for inward investment. At the very least, businesses seeking to invest need the certainty of knowing what the Chancellor believes success will be in the Prime Minister’s negotiations. Will he tell the House today what he considers success in terms of the outcome of the Prime Minister’s negotiations?

[Mr Osborne]

There are, of course, a number of things that we want to achieve. Speaking as the Chancellor of the Exchequer, I want to ensure that the European Union works for the citizens of the European Union and of the United Kingdom. That means that it must be a place where businesses want to grow, where jobs are created and that attracts investment from around the world. I do not want Europe to be the place that used to be the dynamic centre of the world, but is not any longer. That is what we are fighting for, and if we achieve it, it will be a success.

[Stewart Hosie]

We all want to see a dynamic EU, but there were no specifics in that answer. Is it not the case that however bad the negotiations, the Chancellor will declare them a success, and however good the negotiations, the out-at-any-cost brigade will declare them an unmitigated disaster? Instead of pandering to the UKIP agenda, should the Government not pull the whole idea of this daft referendum?

[Mr Osborne]

I do not want to say this to the SNP spokesman, but I am not sure that he is speaking for Scotland, because 58% of Scots want a referendum and 63% of SNP supporters want a referendum. He needs to get in touch with his grassroots.

The Economy

Debate between George Osborne and Stewart Hosie

Thursday 4th June 2015 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

It is a pleasure to propose the amendment in my name and those of my right hon. and hon. Friends. It is also a great pleasure to follow the right hon. and learned Member for Rushcliffe (Mr Clarke). He talked earlier in his contribution about the bizarre events in Scotland. We tend to call it democracy. In the same way as the Chancellor spoke about the good sense of the British people, I might say that, with 56 out of 59 MPs and half the vote, we celebrate very much the good sense of the Scottish people—a true one nation in every sense.

The Chancellor spoke about the challenges the Scottish economy may face. He spoke about fiscal autonomy and what he called a massive hole. I just say gently to him that any challenges on the Scottish current account are as nothing compared with a £1.6 trillion UK national debt built up by Labour and Tory alike.

The Chancellor laid out his plans today. For our part, the last thing that the country needs, that the economy can afford and that those who have suffered most over the past five years should be expected to bear is another austerity Government. Yet that is exactly the direction of travel laid out today: a continuation of vague talk about a long-term economic plan, where none really exists; hubris about so-called economic success, most of which is contradicted by fact and a litany of broken promises; and a complete disregard of the impact his policies have had, are having and will have over the next five years on people through the UK—and that is before we even start to talk about the impact on investment for growth and on our vital public services.

We know the impact those policies have had throughout the UK. We know what has happened in Scotland specifically since 2010. We have seen the budget cut by about 11% in real terms and capital expenditure down by 34%. As a result of decisions taken by this Chancellor, the budget in Scotland has been cut by a staggering £3.5 billion in real terms. The plans announced throughout the election and reiterated today—before the bombshell of in-year cuts, which we will analyse further later—will result in a cumulative share of cuts to day-to-day spending over the next five years for Scotland worth about £12 billion at today’s levels. Those cuts to Scotland and elsewhere are the consequence of the Chancellor’s economic failure.

It is worth reminding ourselves what the Chancellor said when he took office: debt would begin to fall as a share of GDP by last year; the current account should be in balance this year; and public sector net borrowing would fall to £20 billion in the same year. Debt did not fall as a share of GDP in 2014-15, the current account will not be back in the black until 2017-18, and public sector net borrowing—the Chancellor can smirk all he likes—was not the barely £20 billion he promised: it was almost four times that at £75 billion. The Chancellor failed to meet every one of the key targets he set himself. Tory policy stifled recovery from 2010 for years into the previous Parliament. With a cumulative £146 billion of cuts still to come, we are all on track for a decade of austerity.

We know where the pain of this has been felt and we know where the pain of it will be felt. In Scotland, 145,000 households affected by changes to incapacity benefit will lose about £2,000 each.

[Mr Osborne]

If the hon. Gentleman, who speaks for the Scottish nationalists, opposes these spending cuts, why does he not increase taxes and use the powers available to the Scottish Government? He could then spend more money.

[Stewart Hosie]

We do not need to increase taxes in the way the Chancellor describes. He knows perfectly well, and I will come on to it shortly, that there is a way of managing the economy in a fiscally responsible way that allows an increase in spending while the debt and the deficit continue to fall. He may disagree with me—I respect that—but he had better respect that this is a genuine alternative vision to the cuts coming from his party.

The pain will be felt by the 145,000 households affected by changes to incapacity benefit, the 370,000 who have seen tax credits reduced, and the 620,000 families hit by child benefit freezes. It will be felt by the 120,000 people who have lost an average of £2,600 as disability living allowance was removed. I am glad the Secretary of State for Work and Pensions is here to hear this. He can perhaps begin to understand that this is not a theoretical cut in a back office, but a real cut to real people’s living standards throughout the UK. It will be felt by the 835,000 households hit by the increase in the benefit cap. Why are these decisions wrong? There is now a substantial growing body of opinion, as the right hon. Member for Doncaster North (Edward Miliband) said, that we do not simply need a growing economy to fund our welfare provision; we need to squeeze inequality out of the system to provide a solid platform to grow the economy.

Oral Answers to Questions

Debate between George Osborne and Stewart Hosie

Tuesday 27th January 2015 Commons Chamber

[Mr Osborne]

My hon. Friend has been a champion for his constituents and for all the 1.5 million people who are off the grid and rely on heating oil to warm their homes. That price has fallen by 20%, so people are seeing the benefit of the falling oil price, but we continue to put pressure on the heating oil companies, and we have met them in the Treasury to continue to reinforce the argument that those prices must be passed on and must continue to be passed on.

[Stewart Hosie (Dundee East) (SNP)]

The oil industry has told us that the softening in the oil price has highlighted the underlying problem in the North sea, which is the high cost of doing business there, driven by an up to 81% tax on production. Instead of waiting till the Budget, will the Chancellor take urgent action on investment allowances and on a cut to the supplementary charge?

Autumn Statement

Debate between George Osborne and Stewart Hosie

Wednesday 3rd December 2014 Commons Chamber

[Mr Osborne]

My right hon. Friend is absolutely right. I commend him and the community leaders in Bicester for working with us to secure this extra investment in the town, to create the vision of a garden town, and to make sure that there are housing and jobs for the town’s population while preserving its beautiful character.

[Stewart Hosie (Dundee East) (SNP)]

I welcome some of the individual measures announced today, but they do not amount to a long-term economic plan. At its heart, what the Chancellor said was that the target to see debt fall as a share of GDP this year has not been met; that the current account will not be in the black next year, as he promised; and that borrowing then, far from being £20 billion, will be almost four times that, at £75 billion. Why should the public believe that if the Government do the same things over the next two or three years, that will be any different from their failure in doing them first time round?

[Mr Osborne]

At the moment, we see Britain as the fastest growing major economy in the world. We also see a record fall in unemployment, and the highest rate of job creation occurring in Scotland. That is the United Kingdom delivering for the people of Scotland. Now we have proposals from the Smith commission, jointly agreed between the different parties, whereby the Scottish Government, and the Scottish Parliament, can take more responsibility for raising their own taxes to pay for their own expenditure. Then we will have an even better debate in Scotland on how things are paid for.

EU Budget (Surcharge)

Debate between George Osborne and Stewart Hosie

Monday 10th November 2014 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

The rules that determined this payment were agreed in May, without discussion. The UK participated fully in those discussions, and had two formal opportunities to respond but did not do so—indeed, there was not a single signal from the UK that there was a problem until late October. Is the truth not that this performance by the UK Government has less to do with payments to Europe and more about pandering to the open wound of anti-Europeanism from the Members who sit behind the Chancellor?

[Mr Osborne]

If the separatists had had their way, Scotland would not be in the European Union. But I make this point: Commission Vice-President Georgieva confirmed in the press conference afterwards that there was no way that member states could have known the net figure until 17 October, which was when the official meeting took place in Brussels. That has also been confirmed by the Dutch Prime Minister and the President of the European Commission. Again, this is one of those examples in which the shadow Chancellor says that he knew better than the rest of us, but those Heads of Government confirm that Britain could have known only in late October.

Autumn Statement

Debate between George Osborne and Stewart Hosie

Thursday 5th December 2013 Commons Chamber

[Mr Osborne]

I agree with the right hon. Gentleman. In 2010, there was a hung Parliament and the potential for political paralysis in this country, but two political parties from different political traditions came together. It is a remarkable testament to the strength of this Government and the leadership of the Prime Minister and the Deputy Prime Minister that we can put together these complicated, difficult autumn statements, with difficult decisions being taken on things such as the pension age, public expenditure in Whitehall and tax avoidance. We can do that together; of course, I would rather do it alone, but that is up to the British people in the next election.

[Stewart Hosie (Dundee East) (SNP)]

There was such hubris from this Chancellor that he pointed to a 1% rise in GDP this year, when GDP will still be 2.5% smaller than before the crisis; that he pointed to recent falls in unemployment, when there are still 1 million more unemployed than before the crisis; and that he said borrowing would fall to £111 billion, when that is £55 billion more than he promised for this year in 2010. That was before the body blow of increasing the retiral age, so that youngsters leaving school this year will have to work for 50 years and will be older than their grandparents are now before they can draw their pension. Given that this Chancellor has failed on every target he has set himself, how can we possibly trust him on anything he has said today, including on oil forecasts?

[Mr Osborne]

The central point that Scotland might want to focus on today is that the oil forecasts are independently produced by the Office for Budget Responsibility, so either the SNP believes that Robert Chote has somehow fiddled the numbers to stack the campaign against independence, or the truth is that it is making a false promise to the Scottish people. The SNP is not being straight with people about the public finance position of an independent Scotland, and it is Scottish people who would pay the price if there was such an outcome, but I think that they are beginning to have serious doubts about the claims that the SNP is making.

Spending Review

Debate between George Osborne and Stewart Hosie

Wednesday 26th June 2013 Commons Chamber

[Mr Osborne]

The Education Secretary and the Minister for Schools, the right hon. Member for Yeovil (Mr Laws), will set out details of how the formula will work. It is certainly our intention to introduce it in this Parliament, but we shall consult on it. Obviously it is a complex reform, but we have set out the ambition and the principles today, and the Department for Education will now take it forward.

[Stewart Hosie (Dundee East) (SNP)]

The Budget previously told us that discretionary consolidation for 2015-16 would be £130 billion rising to £155 billion. The Chancellor announced another £11.5 billion today and the pace of the cuts will go on until 2018. That still represents stripping consumption out of the economy equivalent to 8% of GDP, so why does he think that will deliver growth? He has told us previously that the ratio of cuts to tax rises would be 4:1, and nothing today changes that. He is still planning to balance the books on the back of the poor.

On the funding for Departments and, in this case, for Scotland, we face another £40 million revenue cut, on top of the £103 million revenue cut announced in the Budget and the 6.5% cut in the last comprehensive spending review, combined with a 25% cut to capital in the last CSR. This plan A has failed. What makes the Chancellor think that making the same mistakes all over again will deliver a different result this time around?

[Mr Osborne]

First, all parts of the United Kingdom have to make savings, but because of the application of the Barnett formula the savings in Scotland are 2%. I am not saying that will be easy, but it is not as difficult as the tasks that some English Departments face. We are also providing more borrowing powers for the Scottish Parliament to make its own decisions. We believe that is the right approach—devolution, with Scotland not only having the benefit of being in the United Kingdom and able to make its own decisions about the investments it makes, but benefiting from the very low interest rates that our credible fiscal policy delivers for all parts of the Union. It is pretty clear that if Scotland were independent, borrowing would be more expensive for the Scottish people.

Oral Answers to Questions

Debate between George Osborne and Stewart Hosie

Tuesday 25th June 2013 Commons Chamber

[Mr Osborne]

The arrangements for quantitative easing are well established, and the decisions on whether to increase asset purchases are within the envelope that I set for the independent Monetary Policy Committee. I think that an active monetary policy has helped sustain demand over the past few years. It is anchored in a credible fiscal policy, the next stage of which we will set out tomorrow.

[Stewart Hosie (Dundee East) (SNP)]

It is six months since the Banking Commission’s first report warned against a delay in ring-fencing, so it is disappointing that the ring-fencing of the banks might not be fully implemented until 2019. Can the Chancellor give one guarantee today—that the markets division of RBS, and comparable departments in other large banks, will be outside the retail ring fence and not liable to taxpayer assistance when the new rules are in place?

[Mr Osborne]

First, the timetable is one that John Vickers and his commission themselves proposed. Secondly, it is not for me to make individual decisions about individual banks; that is for the boards of those banks and, of course, the regulator. But the whole purpose is to insulate the retail bank from things that go wrong in the investment bank and, above all, to make it possible for the person doing my job to be able to resolve the retail bank and keep the retail operations going without having to bail out the investment banking arm. Indeed, that whole problem of “too big to fail” is something we need to deal with.

Oral Answers to Questions

Debate between George Osborne and Stewart Hosie

Tuesday 11th September 2012 Commons Chamber

[Mr Osborne]

Yes, I agree that that is of course the best approach, but in the tax code of a western democracy there will inevitably be opportunities for abuse and avoidance, which we need to deal with. When it comes to retrospection, I say to my hon. Friend, the Chair of the Treasury Committee, that I think the House of Commons should sanction retrospective taxation only when it is very clear that the explicit wishes of Parliament have been abused and avoided. For example, in the case of a particular UK bank that his Committee and I have corresponded about, we acted retrospectively because there was a clear breach of what Parliament had expressed, and I am very pleased to note that the bank’s new chief executive has today said that the bank will be scaling down its tax structuring activities.

[Stewart Hosie (Dundee East) (SNP)]

A year ago the Chief Secretary to the Treasury made a speech in which he said he would employ 2,000 more tax inspectors, but in March this year it transpired that there were almost 1,300 fewer people in compliance than there had been when the Government came to power. Can the Chancellor tell us when we will see any of those 2,000 new inspectors, or are we to take it that that was simply a conference flourish speech and that there is no real determination to clamp down on tax avoidance as the Chancellor has said?

[Mr Osborne]

The number of specialist tax people at HMRC dealing with compliance is going up over this Parliament. We are also committing an extra £900 million to the organisation specifically for that activity. As I have just explained to the House, we are collecting £3 billion more in tax as a result of compliance over this Parliament and, as we will confirm later this week, we are collecting £500 million more from high net worth individuals because of the high net worth unit and its better than expected performance over the past two years.

LIBOR (FSA Investigation)

Debate between George Osborne and Stewart Hosie

Monday 2nd July 2012 Commons Chamber

[Mr Osborne]

My hon. Friend will know, as we discussed this in the Treasury Committee, that the Vickers commission specifically recommended—indeed, insisted on—the ability to change bank account easily, and that from 2013, the banks should have in place a mechanism that enables people to do that within a week. As Vickers said—I agree with him—let us see that that happens; if it does not, we can take alternative measures, but we have in place plans to make it much easier to switch bank accounts from next year.

[Stewart Hosie (Dundee East) (SNP)]

I welcome what the Chancellor said about the Serious Fraud Office and the responsibility that he has given Martin Wheatley in relation to governance and the setting of LIBOR, and what he said about potentially putting criminal sanctions in the banking reform Bill. I am disappointed that he has not ordered a full public inquiry, but I wish the investigation that he has set up well. Will he confirm to the House that the hon. Member for Chichester (Mr Tyrie) will not be restricted in any way in calling for evidence, under oath, from witnesses from the commercial banks, the central Bank, the regulators, or Ministers at the Treasury at the time of the LIBOR rigging scandal?

[Mr Osborne]

I can confirm to the hon. Gentleman that the Committee will not be restricted in any way. It will call whomever it wants. I suggested—but this, of course, will be a matter for the House—that it should call people to give evidence under oath. [Interruption.] As we are getting a question from an Opposition Front Bencher, let me say that the Committee will also be able to call former Government Ministers.

LIBOR (FSA Investigation)

Debate between George Osborne and Stewart Hosie

Thursday 28th June 2012 Commons Chamber

[Mr Osborne]

I agree with my hon. Friend that we should separate retail banking from investment banking, but the best way to do that is through the ring-fence as proposed by John Vickers. We asked him and his distinguished commission to look at the structure of banks, and explicitly to consider the option that some had proposed of completely separating retail and investment banking. The commission considered and rejected that option, and instead proposed an approach that it thought would be stronger for financial stability, and particularly for the stability of retail banking. That is the ring-fence approach, for which we will now legislate.

[Stewart Hosie (Dundee East) (SNP)]

Notwithstanding that Barclays has been hit with a very large fine, it is truly shocking that market manipulation of this sort is not a criminal offence, particularly as the FSA final notice tells us that the abuses went on for three and a half years. I echo the comment made by the Chair of the Treasury Committee and others: we should look again at legislating now, in the Financial Services Bill, particularly as regards the powers of the Financial Conduct Authority—the conduct-of-business authority that will be responsible for this matter—to make sure that it has the powers and the sanctions it needs to deal with this sort of problem.

[Mr Osborne]

I agree with the hon. Gentleman. Of course the Financial Services Bill is before Parliament and there is still some time to go before it completes its passage, so it is a readily available vehicle, but we want to make sure that we get this right, given what went so badly wrong with the previous attempt to regulate the financial services industry.

IMF

Debate between George Osborne and Stewart Hosie

Monday 23rd April 2012 Commons Chamber

[Mr Osborne]

I thank my hon. Friend for his support, which is very welcome. As the representative in this Parliament of Europe’s largest financial centre, he completely understands our huge national interest in a stable world economy and in institutions that can try to bring stability to that world. I will give thought to his suggestion of a statement on the broader eurozone problems and will come back to him.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Chancellor for his statement and for allowing me early sight of it, and I agree with his welcome for the European Central Bank’s commencement of the long-term liquidity operation. There are concerns about the size of the firewall and, still, about the scale of support being offered by the ECB, but notwithstanding that and irrespective of the final balance of support to the euro from the ECB and to individual countries from the IMF, will he continue to agree that the best hope we all have for an export-led recovery is a strong, stable and growing eurozone economy with no threat to that currency?

[Mr Osborne]

I find myself in agreement with the hon. Gentleman who speaks for the Scottish National party. One of the consequences of what has happened over the past year or two in the eurozone is that countries that want to join the eurozone now need to ante-up a huge sum of money into the bail-out fund. No doubt that is something he will be explaining to Scottish voters as we discuss whether Scotland should ditch the pound and join the euro.

Banking Commission Report

Debate between George Osborne and Stewart Hosie

Monday 19th December 2011 Commons Chamber

[Mr Osborne]

Getting a lecture on “splitism” from the shadow Chancellor, who has been the biggest source of division in the House over the 10 years that I have been in Parliament, adds to his lessons on how to regulate banks properly as something to treasure, but this document is a very good advertisement for the coalition Government and the work that we have done with the Business Secretary.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Chancellor for the statement, and for much of what was in it on Lloyds divestment, competition, account switching, retail ring-fencing and the final 2019 implementation date. I hope that that implementation will do nothing to weaken small and medium-sized enterprise lending, but what in particular did he mean by “RBS will make further significant reductions in the investment bank”? Can he put a cash figure on that? How much deleveraging does he see taking place? What does he envisage being sold off? Will it be in the UK or overseas? We need certainty about RBS’s future, so can we have some detail today, and will he confirm that he does not intend to undermine the independence of the board, notwithstanding the fact that the Government are the major shareholder?

[Mr Osborne]

The hon. Gentleman asks me not to undermine the independence of the board and, then, to provide all sorts of detail on exactly what the board should now do, so let me say this. I know that the Royal Bank of Scotland is a very important employer in Scotland and a very important part of the Scottish economy. We want to see it focused on its UK businesses, on UK corporate and individual customers, and its investment bank should support that service. The Royal Bank of Scotland management have also come to that conclusion, and in the coming months they will set out further details on how they are going to do that work, but it is a significant change of direction for the bank.

Autumn Statement

Debate between George Osborne and Stewart Hosie

Tuesday 29th November 2011 Commons Chamber

[Mr Osborne]

Not only was the future jobs fund primarily aimed at the Government employing people in the public sector, which of course was unsustainable with the very large deficit that Labour was running, but actually it did not work on its own terms, because 50% of the people who used the fund were unemployed within 12 weeks. The youth contract that the Deputy Prime Minister has worked on, which he presented last week, will make a real difference.

[Stewart Hosie (Dundee East) (SNP)]

There were two key announcements today. One was the national loan guarantee scheme and the £20 billion of credit easing, and the second was the investment in infrastructure of perhaps £30 billion. When does the Chancellor expect the business finance backed by the scheme to start flowing, and how much infrastructure spend does he expect this year and next, when it will have the biggest effect?

[Mr Osborne]

We are undertaking an ambitious programme of credit easing, and I hope to get it running in the next couple of months. We have to clear the state aid hurdles, and we are working flat out to do that, but I am confident that because we are partly following the European Investment Bank’s scheme in the UK, a lot of the work has already been done. The precise numbers on infrastructure in the next two years are set out in the book.

Jobs and Growth

Debate between George Osborne and Stewart Hosie

Wednesday 12th October 2011 Commons Chamber

[Mr Osborne]

As I have said, the British structural deficit is coming down because of the measures that we are taking, but the proposal put to the House today would push the budget deficit this year into double figures. No country in the world would consider that a sensible approach at a time such as this for a country such as Britain. It is economic nonsense, and I suspect that the hon. Gentleman knows it.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Minister for giving way. He is being very generous. May I take him back to his exchange with the shadow Chancellor on IMF quotes? On 20 September, Monsieur Decressin, the senior adviser to the IMF research department, said that the IMF view was that

“policies in…the UK should only be loosened if growth really threatens to slow down substantially, relative to what we are forecasting. For so long as the forecast seems to pan out, there is no reason to change fiscal plans.”

The IMF has set down a marker for growth and, in effect, said that if it falls substantially, as it is doing, it would accept fiscal loosening. Does the Chancellor recognise that if growth continues to flatline or fall, there is at least an argument for fiscal loosening?

[Mr Osborne]

The IMF is clear that on its forecasts, which are some of the more pessimistic forecasts for the UK at the moment, it is not recommending a change in policy stance. That is what it says. It is what the managing director has said; what the article 4 report on the UK said; what the OECD is saying; and what all the business organisations in Britain are saying. That is why the path that the shadow Chancellor has laid out for the country is so incredible and does nothing to deal with the problems that he left to the country.

Eurozone

Debate between George Osborne and Stewart Hosie

Monday 10th October 2011 Commons Chamber

[Mr Osborne]

My hon. Friend makes a very good point. We repeatedly argued that the stress tests should be tougher and more credible, but there were strong vested interests that did not want to see that happen and did not want to confront some of the problems in their own banking system. They are now having to confront those problems, however. The fact that Dexia passed the test, and that when it identified a capital shortfall it was in the low billions of euros across the entire European continent—given that tens of billions of euros were required to deal with the Irish problems that occurred around Christmas—demonstrates that those tests were not credible enough. To be fair, I do not think this is an EBA problem; it is more a problem with the membership of the EBA, but the association is now, with our support and encouragement, finally conducting what I think will be a much more credible set of assumptions for the European banking system.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Chancellor for his statement and for giving me early sight of it. He said that the eurozone countries needed to undertake structural reform and to move towards greater fiscal integration—he later mentioned fiscal union—and that that would form part of a comprehensive package that he had been urging. He has not, however, described what he means by fiscal integration or fiscal union. Would they involve the European Union controlling 2% or 3% of countries’ gross domestic product, or 20% or 30%? Would they involve a counter-cyclical stability mechanism, or an enhanced European stability fund? Would the measures be applied uniformly, irrespective of debt ratios or savings ratios? It is important that we hear publicly what the Chancellor is saying in private, if we are to avoid speculation and confusion over the UK’s position when none need exist.

[Mr Osborne]

The debate on how that fiscal union should take shape is just starting in the eurozone, and we can contribute to that debate while ensuring that Britain is not part of it and that Britain’s important national interests are protected in regard to the single market, competition policy and financial services. Key components of the measures will include some transfer of resources: in effect, the European financial stability fund is becoming a sort of central resourcing fund. The measures will also mean greater surveillance and mutual vetoes and the like over each other’s budget policies. I have raised the issue of eurobonds, as have the Italian Finance Minister and the chair of ECOFIN. I think there will be a number of components. In the end, it has to be, in part, a decision for the eurozone itself to take the lead, provided that our interests are protected.

I cannot help but make the observation that one of the things we are learning about the eurozone is that if we have a single currency, we need much greater co-ordination of economic policy. That is rather contrary to the Scottish National party’s approach, which is to maintain a single currency but to have a dis-integration of fiscal co-ordination.

Independent Banking Commission Report

Debate between George Osborne and Stewart Hosie

Monday 12th September 2011 Commons Chamber

[Mr Osborne]

Well, it was not much of a golden egg, unfortunately, in recent years. It is important for this country that London, Edinburgh and other centres remain globally competitive and that London remains the pre-eminent global centre for finance. Some of the changes taking place in the City, such as the one I mentioned, involving trying to develop an offshore renminbi market, are all part of London being a competitive place to do business. However, being a competitive place in which to do financial services does not mean that there has to be a huge taxpayer subsidy for universal banks and their retail banking arms in the UK. John Vickers explicitly deals with the competition issue. People might have expected him to come to a different conclusion on this, but one of the interesting things he said was that we should not impose additional capital-to-equity ratios on investment banks, precisely because he does not want us to make them internationally uncompetitive.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Chancellor for his statement, and for giving me early sight of it. I congratulate the commission on the report, and particularly on the report’s dealing with the resilience in the banks and its rejection of splitting up the universal banks in favour of flexible ring-fencing. However, the timetable for this is eight years from today until the final implementation. That is necessary because of the complexity and the potential cost to the banks of implementation, but will the Chancellor ensure that the banks do not consider the next eight years to be a hiatus during which they can return to business, and bonuses, as usual? Will he also ensure that he drives forward as many of these recommendations as he can as quickly as possible before the 2019 backstop?

[Mr Osborne]

I will not repeat what I have said about the timetable. Suffice it to say that it is what John Vickers recommended, having really thought about it. This involves a combination of getting the detail right and ensuring that the changes do not unduly damage credit supply in the short term. That is why he has recommended a longer timetable. As he pointed out at his press conference this morning, once we propose such changes and start to legislate for them, some of them will start to happen anyway as banks try to get ahead of the curve—that is certainly what happened with Basel, although they were arguably too quick to get ahead of the curve in that instance—and that is what he anticipates happening when the changes are introduced.

Global Economy

Debate between George Osborne and Stewart Hosie

Thursday 11th August 2011 Commons Chamber

[Mr Osborne]

The challenge that we and many developed countries face is that banks are shrinking their balance sheets, because they got too big and they lent too much money. They are also hoarding capital because of the current market turbulence. What we are trying to do as a Government is to ensure that, in that process, lending to small and medium businesses is protected and indeed increased. We signed the Merlin agreement with the banks at the beginning of the year to see an increase of 15% in small business lending. The Bank of England will publish the figures tomorrow, so I cannot give them today, but the banks have already indicated that they are on track to meet that 15% increase in small business lending over this year and I am confident that the figures tomorrow will show that that is the case.

[Stewart Hosie (Dundee East) (SNP)]

The June 2010 Budget described the deficit reduction plan as adding £8 billion of tax rises a year from 2014-15 and £32 billion of cuts from 2014-15 every year on top of the £73 billion or so fiscal consolidation that Labour had in mind. It also forecast growth from this year of 2.3%, 2.8%, 2.9%, 2.7% and 2.7%. Those growth figures are now shredded. What will the Chancellor do? Will he increase taxes or cut public spending further, or did he mean by saying that we had to adjust our expectations accordingly that he would change his deficit reduction target?

[Mr Osborne]

We are not proposing for a second to change our deficit reduction target. The target is a structural budget deficit target and was deliberately set as such. The reason we set out those plans in the emergency Budget and went beyond the previous Government’s mantra of halving the budget deficit in four years—not that they had actually written in the proposals to do that—was because on the day we came into office our country’s credit rating was on a negative outlook for a downgrade. Our market interest rates were tracking Spain’s and everyone from the Governor of the Bank of England to the IMF and the CBI was saying that the previous Government’s budget deficit plan was not credible. If we had stuck with that plan and even filled in the blank spaces, we would now be part of the sovereign debt crisis whirlwind that is engulfing other countries.

Oral Answers to Questions

Debate between George Osborne and Stewart Hosie

Tuesday 10th May 2011 Commons Chamber

[Mr Osborne]

I know that my hon. Friend is a trenchant supporter of his constituency and a promoter of green industry there. He has raised the issue with me on a number of occasions. I know that Plymouth has put forward a bid for the second round of enterprise zones. An announcement will be made later this summer, in July, and I am afraid he will just have to wait until then, but as I say, he has certainly brought to my attention the potential for the green economy in the city that he represents.

[Stewart Hosie (Dundee East) (SNP)]

May I offer my condolences to the friends, family and colleagues of David Cairns? He was a man who always argued his corner with intelligence and humour, and carried the rare gift of being liked and respected across the Scottish political divide. We will all miss him.

I am sure the House is pleased that both Santander and RBS have access to European Investment Bank funds to issue discounted loans into the economy—£150 million in the case of Santander, and a third tranche of £300 million in the case of RBS. Can the Chancellor confirm that this is new, additional money, or will it be rolled into the gross lending figures already agreed?

[Mr Osborne]

Let me write to the hon. Gentleman on the specific issue of the Santander loan and the application to the European funds. I take this opportunity to congratulate the Scottish National party on its victory in the Scottish parliamentary elections and say that we respect their outcome. As he knows, my right hon. Friend the Prime Minister contacted the Scottish First Minister to congratulate him personally. I hope that we can work together in the next few months and years to deliver what we both want to see, which is jobs and prosperity in Scotland.

Oral Answers to Questions

Debate between George Osborne and Stewart Hosie

Tuesday 22nd March 2011 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

The Chancellor knows that the long-term solution to the spikes in fuel prices is a stabiliser or a regulator, and hopefully we will hear about that tomorrow. However, is he aware that the price rises in fuel over the past four of five weeks equate to an additional £1,000 a year for running every truck in the country? Does he not agree that that is hugely inflationary and utterly unsustainable?

[Mr Osborne]

Of course, the very sharp rise in the world oil price has posed a challenge to lots of economies—all but the oil-exporting economies. That is one of the headwinds currently facing the global economy. Specifically on fuel duty and other issues, the hon. Gentleman will have to wait for the Budget.

Banking

Debate between George Osborne and Stewart Hosie

Wednesday 9th February 2011 Commons Chamber

[Mr Osborne]

My hon. Friend makes the very good point that we need to see more support for small and medium-sized businesses in our constituencies and in our economy. The regional business fund that I talked about, to which the banks have today made a commitment of an additional £1 billion, is very important because it addresses one of the weaknesses in the British economy—the absence of support, particularly equity support, for small, expanding businesses. I think that this will make a significant contribution to that.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Chancellor for his statement and for the early advance sight of it. I agree with what he said about the public’s response to the high levels of pay, which are not fair and reasonable and are not seen to be so. I welcome the very low cash bonuses for RBS and Lloyds staff and the decision for executive bonuses to be paid in shares only. May I suggest that that should rolled out to every bank every year as a matter of course? On the new bank lending, will he confirm that it will really be new, that it will go to the businesses that need it most, and that we will not be locked into excessive fees and charges?

Oral Answers to Questions

Debate between George Osborne and Stewart Hosie

Tuesday 8th February 2011 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

It is understood that the new Prudential Regulation Authority intends to do less than the Financial Services Authority did to reduce the probability of bank failure. Given that the failure of any bank, even with a proper resolution regime, could contribute to a systemic crisis in confidence, can I have the Chancellor’s assurance that he will put all the pressure he can on the PRA to ensure that it continues with active supervision to minimise the probability of bank failure at any level?

[Mr Osborne]

The hon. Gentleman can rest assured that I will certainly do that. I do not think that he has given a fair representation of the role that we expect the prudential regulator to fulfil. What I will say about the prudential regulator and the fact that it will come under the aegis of the Bank of England is this: I hope that it will exercise discretion and judgment as well as simply making sure that boxes are ticked. The decision to allow Royal Bank of Scotland to buy ABN AMRO in 2007 might have ticked the various boxes in the regulations at the time, but it was clearly the wrong judgment. I expect and hope that in future our new regulator would be able to step in at that point.

Bank Bonuses

Debate between George Osborne and Stewart Hosie

Tuesday 11th January 2011 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

In the real world, jobs are being lost, wages squeezed, and taxes are rising, while businesses cannot get the credit they need and home buyers cannot get the mortgages they want. Does the Chancellor not recognise that that austere backdrop makes the very idea of a £7 billion bonus-pot toxic in the real world? Does he not regret washing his hands of this last night, and, effectively, giving the green light to a return to the bad old days of big bonuses?

[Mr Osborne]

It is precisely the real-world situation—where businesses need more lending, communities need support and we need more investment in our regional economies—that I am seeking to address. As the hon. Gentleman well knows, as a Member from Scotland, we need a successful, properly regulated financial services sector that employs tens of thousands of people in Scotland and, indeed, hundreds of thousands of people across the United Kingdom. That is what we are seeking to agree with the banking system. The fantasy world is the one that the Labour party occupies, where it bears no responsibility for the mess in which it has left this country.

Loans to Ireland Bill

Debate between George Osborne and Stewart Hosie

Wednesday 15th December 2010 Commons Chamber

[Stewart Hosie (Dundee East) (SNP)]

May I confirm what the Chancellor has just said? The UK contribution to the entire package will be about 5% of the non-Irish contribution—about £3.5 billion—and that stands in comparison with some £12 billion of exports to Ireland, and, as he said, the Irish banks holding some quarter of the deposits in Northern Ireland. Is that the broad summary of where we are?

[Mr Osborne]

It is a reasonable summary. Of course we stand behind the International Monetary Fund as a shareholder of it, as are most countries in the world. I shall come on to the European financial stability mechanism, which I have already talked to the House about on a number of occasions. Like other contributors to the EU budget, we stand behind it. In a sense, the loan that we are proposing today is the direct British taxpayer contribution—or rather, the money that is borrowed on behalf of the British taxpayer. I shall come to the terms of the loan, but of course we expect to be repaid, and repaid with interest. We are doing this because we think it is absolutely in our national interest, for some of the reasons that have been set out.

Comprehensive Spending Review

Debate between George Osborne and Stewart Hosie

Wednesday 20th October 2010 Commons Chamber

[Mr Osborne]

But it was the stated policy of the previous Government to increase social rents over time to approach the level of market rents—[Interruption.] That was the policy of the previous Government. As I have said, we have tried to do this in a way that protects existing social tenants. It will help to build more social housing, and in the end the Opposition have to ask themselves why they failed so miserably on building social housing.

[Stewart Hosie (Dundee East) (SNP)]

The Chancellor has announced 500,000 job losses and cuts of £81 billion—that is just the cuts, not the tax increases—while giving no detail of how that will be achieved. This will cause huge anxiety among those in the public sector and those who depend on their services, and in the private sector firms that are dependent on public sector contracts. I believe that this is reckless: it cuts too fast and too deep. I have one question today: how can the Chancellor possibly imagine that, after his statement, a real-terms, direct cut to the Scottish block of around £4 billion can do anything other than weaken the ability of Scotland to recover in these difficult economic times?

[Mr Osborne]

First, we have preserved the Barnett funding arrangements. Secondly, the decisions that we have taken on the national health service and schools budgets in England will help the funding settlement for Scotland. What we are seeking to do, north and south of the border, is to put the United Kingdom’s economy on a strong and sustainable footing so that there can be growth in Scotland and in the rest of the country. My final observation is that people are pretty clear, in the House and in Scotland, that if Scotland had been independent over the past three years, given the scale of the banking crisis, it would now look like Iceland.

Office for Budget Responsibility

Debate between George Osborne and Stewart Hosie

Monday 14th June 2010 Commons Chamber

[Mr Osborne]

My hon. Friend is absolutely right to be concerned about the lending figures out there in the economy, and I hope to have more to say on that in the Budget.

[Stewart Hosie (Dundee East) (SNP)]

I thank the Chancellor for his statement and the early advance sight of it. That is different from what happened under the previous Government, when such statements tended to come in very late indeed.

There is no doubt that the OBR forecasts show that the previous growth forecasts were too high and the deficit forecast, which is now £155 billion, was also too high. Will the Chancellor reflect that that is not simply a green light to tax and cut more, but that it demonstrates the imperative for sustained and sustainable above-trend growth, which is the real solution to tackling the structural deficit?

[Mr Osborne]

I thank the hon. Gentleman for thanking me for the early sight of the statement—we are trying to improve on things in the Chancellor’s office.

My point to the hon. Gentleman is that the threat to the United Kingdom at the moment is, in part, our very large budget deficit. Indeed, the Governor of the Bank of England identified it as the single greatest economic challenge that we face. Whether we are Scots or English, and wherever we live in the UK, we must deal with that deficit. I would welcome engagement with the Scottish Government in moving forward and identifying sensible savings, so that we can reduce the budget deficit and give our country and future generations a bright future.