Oral Answers to Questions

John McDonnell Excerpts

Tuesday 17th January 2017 Commons Chamber

[Mr Hammond]

I am disappointed to hear the hon. Gentleman resorting to the soundbite; he is normally better than that. The discussions I have had with third countries that have free trade agreements with the European Union suggest that there is a strong appetite for a quick and simple agreement with the UK so that, as we leave the European Union, we can immediately enter into a successor agreement with those countries—Korea, for example—that will allow us to continue trading with them on the same terms.

[John McDonnell (Hayes and Harlington) (Lab)]

At the weekend, the Chancellor told a German newspaper—not this House, you will notice, Mr Speaker—that he is prepared to turn this country into a tax haven. If that means competing with the likes of Ireland on a 12.5% corporation tax rate on top of existing Tory tax cuts it means, according to the House of Commons Library, giving away more than £100 billion to corporations over the next five. That is equivalent to almost 5p on the basic rate of income tax. How then does the Chancellor ever propose to solve the funding crisis in the NHS and social care, given that this morning the Office for Budget Responsibility thinks that public finances are on an unsustainable path?

[Mr Hammond]

Let us take that question apart. There are two points. First, the OBR’s 50-year forecast sets out a possible outcome if the Government take no action. As I made very clear in the autumn statement, we are acutely aware that action will be required in order to return the public finances to balance. Secondly, with regard to my interview with Welt am Sonntag, what I said very clearly—I am sorry if this did not come across in the UK reporting, but the right hon. Gentleman should read the original—was that Britain wants to remain in the European mainstream, with its economic and social model, but that can happen only if we get a sensible Brexit deal for continued access to the European market. If we do not, the people of this country will not simply lie down and accept that they will be poorer. We will do whatever it takes to maintain our competitiveness and protect our standard of living.

[John McDonnell]

The threat is there on the record: this country will be a tax haven, according to the threats the Chancellor has issued today. We know from what the Prime Minister is saying right now that she is intent on pulling up the drawbridge and leaving the single market, and possibly the customs union, cutting us off from one of the largest markets on the planet, threatening jobs and public finances. This is not a clean Brexit; it is an extremely messy Brexit. We can already see the consequences in the rise in the rate of inflation. With real living standards squeezed by this policy announcement, is it not time for the Chancellor—I appeal to him—to reconsider his cuts to in-work benefits and withdraw them in full in the Budget in March?

[Mr Hammond]

No. What the Prime Minister is setting out today is an ambitious agenda for a Britain engaged in the world, and a Britain engaged with the European Union. What she is setting out is a broad-based offer for future collaboration on trade, investment, security, education, technical and scientific areas, and many other matters. We want to remain engaged with the European Union, and I am confident that the approach the Prime Minister is setting out today will allow us successfully to negotiate a comprehensive future relationship with the European Union.

HMRC Estate

John McDonnell Excerpts

Tuesday 10th January 2017 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

(Urgent Question): To ask the Chancellor of the Exchequer to make a statement on the National Audit Office report, published today, on the Government’s management of the HMRC Estate.

[The Financial Secretary to the Treasury (Jane Ellison)]

HMRC’s transformation plans will allow it to become a more efficient and effective tax collector fit for the digital age. HMRC’s large estate is ageing and not delivering the best value for money for the taxpayer. The NAO has confirmed that savings of £80 million per year will be made by 2025.

The size of HMRC’s estate has been reducing since 2006, and the NAO report published today shows that HMRC has made some effective changes since 2010, while reducing staff numbers by a quarter and saving the taxpayer over £350 million pounds. However, HMRC wants to keep up the momentum to provide a better service at a reduced cost. As it announced in 2015, that means taking forward big reforms of how the estate works, which will see over 170 small offices consolidated into 13 larger regional offices, an approach which is used across government. This brings with it a whole range of advantages, from efficiently sharing resources and quality digital infrastructure to better support and career opportunities for the staff who can more effectively share expertise. For the public, what this really means is a better, more modern service run by fewer staff costing about £80 million a year less by the time the changes take effect.

The report out today suggests that the costs of bringing about this transformation are likely to be higher than was first forecast. Of course, certain aspects of the programme could not be definitively made at the start. There is a wide range of factors behind that, from rising property costs and changes to the programme, for example to help staff to adjust and to ensure a smooth transition for customers, so the programme costs are of course updated to reflect that. I therefore thank the NAO for its timely report.

The strategy to modernise the service that HMRC provides to taxpayers is the right approach and reflects the way taxpayers now interact with it. It is a plan to say goodbye to the days of the manual processing of tasks that can be done more easily with today’s technology. In short, we remain fully committed to taking forward the changes to the HMRC estate that will help us to bring a better tax service for the people of this country.

[John McDonnell]

In reality, the report is damning of the Government’s plans to close 170 offices. We on the Opposition Benches have warned consistently that the Government’s proposals will have a detrimental impact on HMRC’s ability to provide advice and to tackle tax evasion and tax avoidance.

The NAO report confirms our fears. First, it called the original office closure plan unrealistic. The estimates of the costs of the move increased by 22%, which is £600 million extra. It forecasts a further 5,000 job losses and finds that the costs of redundancy and travel have tripled from £17 million to £54 million. It also says that HMRC cannot demonstrate how its services can be improved and has not even produced a clear programme business case for the planned closures.

As we predicted, this is an emerging disaster. Even the Government now accept that there is a tax gap of at least £36 billion, yet these plans will do nothing but hinder the effort to tackle tax evasion and avoidance. Some 73% of the staff surveyed said that the plans would undermine their ability to provide tax collection services, while 50% said they would actually undermine their ability to clamp down on tax evasion and avoidance. Will the Minister now call a halt to the planned office closures, end the job cuts at HMRC and come back with a realistic plan to resource HMRC fully in its vital tax collection role?

[Jane Ellison]

The shadow Chancellor is right that HMRC’s tax collection role is vital. At the heart of many of the changes made since the original estimates and planning for this part of the transformation are measures to better support staff and put more things in place to support their move. It is interesting that he makes no mention of the potential benefit to staff of the move. Of course, some will not be able to make the move, but the vast majority will live within an hour’s journey and will be supported, including through the one-to-one conversations which happen with staff ahead of any move.

The shadow Chancellor’s comments do not accurately represent what the NAO said. It has actually recognised that HMRC’s move to regional centres is central to its strategic aim to increase tax revenue, improve customer service and make cost savings. The move to regional centres has never been just about cost savings or buildings; it is partly about how people work in those buildings. Ultimately, we will have an opportunity to change how we work. In 1982, my first job after leaving school was in an old tax office. Some of those offices are over 100 years old and some have not changed since I was working in one as a school leaver. It is absolutely right that we commit to making sure that staff can work in a modern environment.

All staff will be offered the chance to move, and for those who cannot, there will be one-to-one, bespoke support, and some of them will go to other Departments, so some of the comments we have heard are absolute nonsense. [Interruption.] There is a lot of chuntering from the Opposition Front-Bench team, but they are not listening to the facts and they have not read what the NAO actually said. This is a major programme, and it is right that the overall costs be periodically reviewed, but HMRC is not looking to make any significant changes to its overall strategy. We want its staff to work closer together in regional centres and specialist sites in a modern, flexible and high-quality working space.

Lastly, on tackling tax evasion and the tax gap, no Government have done more than this one. It is absolute nonsense to say that HMRC’s capacity to tackle those two issues is diminished; far from it—the UK’s tax gap is one of the smallest in the world and at its lowest ever level. In the summer Budget, we gave HMRC an extra £800 million to tackle tax evasion, and it has done that extremely well, such that once again we have reached record levels of compliance with regards to money from anti-tax evasion measures. I therefore rebut entirely the shadow Chancellor’s points in that regard.

Double Taxation Treaties (Developing Countries) Bill

John McDonnell Excerpts

2nd reading: House of Commons
Friday 16th December 2016 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I will be extremely brief because, as the hon. Member for Kirkcaldy and Cowdenbeath (Roger Mullin) has said, we want to hear the Minister’s response, which I hope will be constructive.

I congratulate the hon. Member for Kirkcaldy and Cowdenbeath and ActionAid on the campaign they have waged to bring the Bill to fruition. The thrust of the objectives he has set out is to ensure a fairer balance between wealthy countries and source countries in such negotiations, and we wholeheartedly support that. I regret the way in which the Bill is timetabled—unfortunately, it may fall—but I hope there will be an opportunity for it to be brought back. The Labour Opposition will support it if it is brought back.

I will sit down shortly, but we need to address a couple of issues. Concerns have been expressed about the drafting and development of such treaties. There is criticism of the lack of openness and transparency, and that almost follows from our parliamentary procedures. In the American system for scrutinising trade deals and agreements of this sort, there is an open committee process through which evidence is provided in advance of the legislation being agreed. In this House, the deal is brought before us following its agreement. I realise that there may well be issues about confidentiality in the negotiations, but when the Bill comes back or there is another Bill on the same subject we should reform the parliamentary procedure to make the process more open and transparent and to allow more engagement with interested parties.

The other issue on which we need to work on a cross-party basis is how to align our taxation policies with our development objectives. As we have heard in the discussions so far, there is a need for greater work with the Department for International Development and the Treasury to consider the development of tax policy in this country so that it is more in line with our development policies for tackling poverty across the world.

Having made those few remarks, I thank the hon. Gentleman for introducing the Bill. He certainly has our support. If there is another parliamentary opportunity to enable the Bill to proceed, we will support it. If not, I hope another Member of the House will bring forward a Bill at some future date to achieve the objectives that he set out so eloquently.

Oral Answers to Questions

John McDonnell Excerpts

Tuesday 29th November 2016 Commons Chamber

[Simon Kirby]

We have legislated for corporation tax to be reduced to 17% by the end of this Parliament—one of the lowest rates in the G7—and we will do all we can to help businesses grow and thrive in this country.

[John McDonnell (Hayes and Harlington) (Lab)]

Last week’s autumn statement should have been about providing answers to meet the challenges of Brexit and at least information on the options available. Instead, it appears that the only information we can glean is from photos snatched of the notes of a senior Conservative official in Downing Street. We know now, in the light of that leak, that many of the Chancellor’s senior colleagues in the Government are reluctant to pursue the transitional deal being called for by businesses when we leave the EU. Will the Minister now provide some clarity by inviting the Treasury and the Office for Budget Responsibility to undertake a full assessment of the public finance implications of the range of policy options associated with Brexit, including access—or not—to the single market, being in or out of the customs union and the potential for transitional arrangements?

[Simon Kirby]

I have to tell the right hon. Gentleman that that is a normal part of what we do on a very regular basis, and he really should not believe all he reads in newspapers from researchers or Back Benchers—it is hardly Government policy.

[John McDonnell]

I take that as a no.

Last week, we learned in the OBR report that the OBR was denied any information in respect of assurances provided to Nissan. The OBR said:

“On this occasion we asked specifically whether any contingent liabilities had been created in respect of assurances provided to Nissan and the Treasury declined to say.”

This level of opaqueness on an existing deal undermines the certainty businesses need to invest in any future deals. Will the Chancellor now provide the OBR with the information it has requested, so that it can provide a more accurate forecast, rather than being left in the dark or, as it put it, “none the wiser”?

[Simon Kirby]

Perhaps we should welcome the jobs to start with. However, in answer to the right hon. Gentleman’s question, it was, unfortunately, not possible to confirm this to the OBR in time to feed into the drafting process. Her Majesty’s Treasury therefore provided the same answer as it would to any query on contingent liability.

Autumn Statement

John McDonnell Excerpts

Wednesday 23rd November 2016 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

This morning, we heard the verdict from the trial, following the tragic murder of Jo Cox. That murder robbed this House of a fierce advocate for social justice and a passionate campaigner. Her killing was an attack on democracy itself. Our thoughts are with her family.

Today’s statement places on record the abject failure of the last six wasted years, and offers no hope for the future. The figures speak for themselves. Growth is down; wage growth, down; business investment, down. [Hon. Members: “Sit down.”] The Government’s own deficit targets are failed; the debt target, failed; the welfare cap, failed.

[Mr Speaker]

Order. Let me say now that if Members from either side want to shout out, they should not bother to stand, because they will not be called. I say that to Members on both sides—stop it. It is juvenile, low grade and hugely deprecated by the public, whose support we should be seeking and whom we should try to impress, not to repel.

[John McDonnell]

Thank you, Mr Speaker.

We have heard today that there will be more taxes, more debt and more borrowing. The verdict could not be clearer. The so-called long-term economic plan has failed. As the Treasury’s own leaked paper reveals, the Government knew it had failed before the referendum result was announced. We now face Brexit—the greatest economic challenge of a generation—unprepared and ill equipped. The new Chancellor acknowledged the failure of the economic strategy in October when he promised a reset of economic policy.

Today, we expected a change of direction after those six wasted years. Instead, we have seen further cuts to earnings for those in work through cuts to universal credit, and a living wage increase that is lower than expected under the previous Chancellor. This is a new Conservative leadership with no answers to the challenges facing our country following Brexit, and no vision to secure our future prosperity.

Labour respects the decision of the British people to leave the European Union, but the chaotic Tory handling of Brexit threatens the future prosperity of this country. The Chancellor must now do the right thing for British workers and businesses. He must insist on full, tariff-free access to the single market. He and the Treasury know that that is what will get the best deal for jobs and prosperity here. It may not be in the Chancellor’s nature, but in the national interest I urge him to stand up to the Prime Minister and the extreme Brexit fanatics in her Cabinet. If he stands up for British businesses and jobs by fighting for single market access, he will have our full support.

After six wasted years, wages are still lower than they were in 2008. Self-employed people are, on average, paid less than they were a generation ago. Six million people are earning less than the living wage. Too many people are having to worry about buying school uniforms, affording a family holiday or even just paying the rent or mortgage.

We have had a month of briefing from the Conservative party on those people who are called “just about managing”—the JAMs. To the Conservative party, these people are just an electoral demographic. To us, they are our friends, our neighbours and the people we represent. Let me tell the House why those people are just managing. It is the result of Tories imposing austerity on an economy that could not bear the strain. We have seen productivity stagnate, but there is nothing in the autumn statement on the scale needed to overturn those six wasted years.

If the Chancellor really wants to make a fairer tax system as well, he can start by bringing back the 50p tax rate for the richest in our country. We have heard familiar hollow rhetoric from the Tories on tax avoidance, when they have cut the resources of Her Majesty’s Revenue and Customs—the very people who collect these taxes. The resources available to HMRC today are 40% less than they were in 2000.

The Chancellor has frozen in-work benefits at a time when food prices are rising and we do not expect wages to keep up. We need an economy that is fundamentally more prosperous and where prosperity is, yes, shared by all. The increases in the national living wage announced today are lower than expected and leave the poorest-paid workers still earning less than they need to live on. So I ask the Chancellor to adopt a real living wage level, as Labour has pledged, and abandon his predecessor’s empty rhetoric.

Regrettably, the Chancellor is still going ahead with some of the cuts to universal credit. Thanks to pressure—I pay tribute to Members of all parties who have campaigned on this issue—he is offering to soften the blow. We do not want the blow softened; we want it lifted altogether. Today’s changes will leave a single parent on average at least £2,300 worse off. These are the very people who are working hard to deliver for their families, and the Government are betraying them.

People with disabilities, who have been put through the ordeal of the discredited work capability assessment and are trying to get themselves ready to return to work—they are “just about managing”—still remain in the Chancellor’s firing line. He is cutting £30 a week from the support that these disabled people receive. In our society, that is scandalous.

Those who are “just about managing” also rely on our public services. They send their children to local schools; they depend on their local hospital; they rely on local council services to clean their streets, tend to their parks and playgrounds and open their libraries. The reality, however, after six wasted years is that our public services are just not managing. Today, the childcare that parents rely on remains underfunded, as the Public Accounts Committee has reported—and it will remain underfunded, even after today’s announcements.

I want to pay tribute to my hon. Friends the Members for Swansea East (Carolyn Harris) and for Erith and Thamesmead (Teresa Pearce) for the important work they did in bringing the issue of child burial fees to public attention. I ask the Government to do the right thing on child burial fees and reconsider making funding available for families in these desperate circumstances.

Councillors from all political parties are reporting that they are at a tipping point in the provision of social care. The previous Chancellor cut nearly £5 billion from social care, meaning that over 1 million people who need care are not getting it. They are not even “just about managing”, and they got little help today. We call for additional support for social care, because the funding being provided today is only a stop-gap measure. Our social care system will not be secure without long-term funding. Tonight, many elderly people will remain trapped in their homes, isolated and lonely, lacking the care they need because of continuing cuts to social care—and social care cannot be cut without also hitting the NHS.

The supposed £10 billion funding allocated to the NHS is a restatement of an earlier commitment, but the Health Committee described this £10 billion claim as “misleading and incorrect”. The real amount is less than half that claimed. As a result, we now have 3.9 million people on NHS waiting lists—more than ever—and many of those 3.9 million people are waiting in pain, and they got no relief today. Across the country, hospitals face losing their A&E units, their maternity units and their specialist units. This Tory Government are failing patients, as well as failing the dedicated NHS staff who serve us so well. This is the first time that healthcare spending per head has declined since the NHS was created, and I fear there will be a crisis in funding and care over this Christmas. The NHS cares for us, and we should care for the NHS.

Members of this Government have also overseen the biggest real-terms cuts in education for four decades. One pound in every seven has been cut from further education college budgets, and Conservative policy has saddled a generation of students with a lifetime of debt. How can a Government seriously talk about supporting a 21st-century economy when they are planning to pour tens of millions into the failed 20th-century policy of grammar schools, segregating our children at an early age?

As for housing, the Chancellor announced today that he was scrapping “pay to stay” proposals and letting agents’ fees—a U-turn that is a victory for Labour’s campaigns against both the “tenant tax” and letting fees. The Chancellor has spoken before about the dream of home ownership for the young. Nothing that he has announced today is of the scale that is needed to suggest that that will remain anything other than a dream. The hard facts are these. The Government of which the Chancellor was a member built fewer homes than had been built at any point since the 1920s, and there are now a third of a million fewer home owners under the age of 35. Today the Chancellor could have delivered the scale of investment that is required to build the homes that we need and to create a new generation of home ownership. He significantly failed to do so.

Thanks to campaigning by my right hon. Friend the Member for Wentworth and Dearne (John Healey), the Wentworth Woodhouse building will be saved. I am grateful for that. The accusation was that a Labour Government had sited an opencast mine near the building and threatened it. That, I believe, was in 1947. I only wish that some of the policies pursued by Tory Governments since the 1950s could be reversed so easily.

The Government’s biggest investment failure is this: the Chancellor has failed to address properly the Government’s most consistent shortcoming. His predecessor cut public investment to the lowest that it had been since the 1990s. Instead of delivering the ambitious investment that our economy needs throughout the country, the Chancellor has failed to recognise the scale of the challenge. He also risks repeating the mistakes from last year, with the national flood resilience plan failing to provide the protection that our communities need.

Just one in five of the projects in the investment pipeline is under construction, and shovel-ready projects worth £82 billion are still being delayed. The infrastructure gap between London and the rest of the country remains unbridged. London was scheduled to receive 12 times as much public investment per head as the north-east of England. The announcement of a £1.1 billion investment in transport is a reannouncement. The Oxford-Cambridge rail link is significantly delayed against Network Rail’s original planned completion date of March 2019. There are no new ideas here, just a promise to deliver what the Government have previously failed to deliver. This is press-release policy-making, not provision. All that we need now is the return of the high-vis jacket.

The “fourth industrial revolution” will not be delivered on delays, old news and reannouncements. The Government have, at last, realised their mistake, and now talk about an industrial strategy—words that Ministers refused even to refer to in the past—but it is not enough to change a few ministerial titles. The Government and the Chancellor need to deliver. We have yet to see the proposed Green Paper on industrial strategy that was promised over the summer.

The same Government who now talk up high-tech investment oversaw a real-terms cut of £1 billion in science funding during the last Parliament. The OECD recommends that developed countries should be spending 3% of GDP on science. On the basis of what we have heard today, the new spending will lift our expenditure from 1.7% of GDP to a mere 1.8%.

It is the same familiar story for business. The Chancellor is continuing the race to the bottom on corporation tax, and, while continuing the cuts in public services, he is cutting taxes for big business. We know that it is not headline tax rates that encourage long-term investment by businesses. Business investment has been revised down every year under this Government. What encourages businesses to invest is the knowledge that they have access to skilled workers, world-class infrastructure and major markets.

Today’s grim economic forecasts reveal the challenge that lies ahead. The Chancellor admitted over the summer that it was time for a change of course. He has now had to abandon the Government’s fiscal charter, with its failed hard surplus target. Labour warned that a hard surplus target lacked the flexibility to adapt to economic circumstances and the capacity to allow investment. The Chancellor’s U-turn today demonstrates just how right we have been over the past year.

Only weeks ago, the Prime Minister offered the hope of change and the Chancellor offered to “reset” economic policy. Today, we have seen the very people whom the Prime Minister promised to champion betrayed. The Chancellor has failed to break with the economic strategy of austerity. The country remains unprepared and ill-equipped to meet the challenges of Brexit and secure Britain’s future as a world-leading economy. I fear that, after all the sacrifices that people have made over the last six years, today’s statement has laid the foundations for more wasted years. Only a Labour Government will deliver on the ambition and vision to rebuild and transform our economy so that no one and no community is left behind.

[Mr Hammond]

Let me begin by associating myself with the right hon. Gentleman’s remarks about the Jo Cox trial and sending my deepest condolences to her family and friends, who will be suffering again today.

I congratulate the right hon. Gentleman on his appointment to the Privy Council. I only wish that I could have been present at the investiture. I remember the procedure quite well: they give you a little red book to hold. [Laughter.]

I listened carefully to the right hon. Gentleman’s response to my statement. His central argument appears to be that the deficit is too high and borrowing is too high. That is a bit of a problem, because, as I have understood it, his central proposal for our economy is to borrow more and spend more. Under his rule, Labour would always be borrowing, in good times as well as bad. His analysis of the problem of the last Labour Government is not that they spent too much money, but that they spent too little. Indeed, his rule has remarkable similarities to Gordon Brown’s “golden rule”, and we all know where that got us. His big idea is to spend an extra £500 billion, without any notion of how he would pay for it.

The right hon. Gentleman welcomed the industrial strategy. I am not sure that I welcome his welcome, but I warn him not to welcome it too quickly, because it will not look anything like an industrial strategy that would come out of his office. What he has heard about today is a responsible set of decisions, such as the decision to borrow £23 billion of tightly targeted investment while paying for every single penny of every other commitment that has been made.

The right hon. Gentleman talked about Brexit, and attacked us over the way in which we are handling the Brexit process. I honestly do not know whether he has ever been involved in a negotiation—I suspect not—but I invite him to look across the continent for a moment and note the admirable discipline that our negotiating counterparts are displaying in their messages, revealing nothing as they prepare to go into this negotiation with us. My advice is this: if we want to secure the best possible deal for Britain, we must keep our cards appropriately close to our chest.

The right hon. Gentleman may have heard “cuts in people’s incomes” in my announcement about universal credit. Let me explain to him how this works. When we cut the taper from 65% to 63%, we allow people to keep an extra 2% of the income they are earning. I would have thought he welcomed that.

This is all about making tough decisions, and I am very happy to debate with the right hon. Gentleman, but I just wish he would be honest enough to accept that we cannot shower money everywhere, proposing to spend money on everything, without having to raise that money, either by taxes on ordinary people or by cutting spending elsewhere. It is simply no good to keep on pretending that we can do that just by taxing the rich. The top 1% of people in this country already contribute 27% of income tax paid, and unfortunately there are just not enough of them to be able to finance all the right hon. Gentleman’s ambitions.

The right hon. Gentleman said he was disappointed by the announcement on the national living wage. I do not remember—perhaps one of my hon. Friends can remind me—the level of the national living wage during the 13 years of Labour’s Government. He might note that the level I have announced today is precisely the level recommended by the Low Pay Commission, the body set up to pronounce on these things.

I wish the right hon. Gentleman would also be honest when he talks about the work-related activity group in the employment and support arrangements. This applies to new claims only, as he very well knows, so nobody is going to have £29 a week taken away from them however many times he says it. He also knows that it is not a stand-alone measure; it is part of a package. The money saved is being reinvested in a £330 million package to get these people into work, with targeted support to help them to be ready for work.

The right hon. Gentleman talks about house building starts. House building starts were 45% down under the last Labour Government.

The right hon. Gentleman and the Leader of the Opposition have spread division and disunity through the Labour party, and that is exactly what they would spread through the country if they ever—God forbid—got into government. The right hon. Gentleman says there are no new ideas; I have to say that he needs to check the opinion polling, because that is not quite what public opinion believes. Instead of carping and opposing every measure we propose, why doesn’t he roll up his sleeves and support us in the hard work of building an economy that works for everyone?

Oral Answers to Questions

John McDonnell Excerpts

Tuesday 25th October 2016 Commons Chamber

[Mr Hammond]

I certainly join in wishing my hon. Friend and his wife a very happy 30th anniversary. Taking my queue from last week, I probably will not suggest how Mrs Double might commemorate the event.

My hon. Friend is quite right to highlight the value of marriage in society. I hope that I can reassure him that the Government remain firmly committed to supporting this important institution through the marriage allowance. Eligible couples could benefit by up to £432 this year, and we have just passed the landmark of 1 million families who have made successful applications. I agree with my hon. Friend that take-up of the marriage allowance is not high enough, but HMRC will launch a new campaign early next month to increase awareness and take-up.

[John McDonnell (Hayes and Harlington) (Lab)]

Bringing the Chancellor back to Brexit and the role of his Department—happy anniversary, by the way, to the hon. Member for St Austell and Newquay (Steve Double)—before the referendum, as the hon. Member for Dundee East (Stewart Hosie) said, the Treasury published a paper warning that the impact on Government receipts of leaving the single market would be a loss of up to £66 billion. Last week, Tom Scholar, the permanent secretary to the Treasury, told the Treasury Committee that the figures were “not directly applicable”. The Chancellor then questioned his own Department’s calculations by referring to mitigating factors that were not taken into account. There is fumbling chaos about Brexit not just in the Cabinet, but in the Treasury as well. Will the Chancellor clarify his Department’s exact calculation of the outlook for public finances if access to the single market is not achieved?

[Mr Hammond]

The right hon. Gentleman can characterise it however he likes, but the simple fact is that all economic modelling must make assumptions. The model that the Treasury produced in April assumed no policy response by Government—we know that there has been a monetary response in the form of the monetary expansion delivered by the Bank of England on 2 August—and that an article 50 notice would be served immediately after the referendum, which we know was not the case.

As for the ongoing work, the right hon. Gentleman will have to wait until 23 November when the Office for Budget Responsibility will publish its forecast.

[John McDonnell]

No figure is attached to anything that the Chancellor has said, which again confirms the chaos in Cabinet and in his Department. Can I ask the Chancellor to pass on my thanks to the officials who helpfully published on the Treasury’s website a document labelled

“Public Sector Finances Briefing – Official: Sensitive for internal use only”?

The document at least gives us some reliable information in that it confirms that the Government are failing to meet predictions on tax receipts and deficit reduction. It also reveals that that data are based on

“activity from before the referendum so any post referendum downturn will exacerbate this.”

Does that not prove once and for all that far from fixing the roof while the sun shone, this country was scandalously economically ill-prepared and politically totally unprepared for the Brexit decision?

[Mr Hammond]

Just so that the right hon. Gentleman is absolutely clear, it is quite wrong to suggest that my Department does not have any figures—it does, but I am just not giving them to him.

As for the document that the right hon. Gentleman spent such a lot of time yesterday rather unsuccessfully trying to tout around the media, it was published by mistake, but all the figures in the document have already been published elsewhere. All of them are in the public domain.

Charter for Budget Responsibility

John McDonnell Excerpts

Wednesday 20th July 2016 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I beg to move,

That this House calls on the Government to withdraw the Charter for Budget Responsibility: Autumn 2015 update, which was laid before this House on 12 October 2015, and to lay before the House at the earliest opportunity an alternative update which provides the basis for stabilising the UK economy and providing long-term investment for growth.

I see that the Chancellor has not joined us today. I was hoping he was going to improve on the record of his predecessor for attendance, but it is good to see the Chief Secretary on every occasion.

What the leave vote said to many was that a new economic approach is needed. Too many of our country’s places and people feel they have been left behind, and this Government’s current fiscal rules are clearly exposed as inappropriate for an economy facing this kind of shock. So we need a new framework for fiscal policy that will support the investment this country desperately needs, yet all of us have been left without any clarity from the Government over their future direction. Business groups today report they are increasingly concerned about the Government’s current lack of direction and their lack of interaction with the Government. The lack of a clear plan is already harming investment.

The Prime Minister indicated in her initial speech that she was looking to set a new direction for Government economic policy. We agree that a change of course is needed, including more investment and an industrial strategy.

[Mr Angus Brendan MacNeil (Na h-Eileanan an Iar) (SNP)]

The hon. Gentleman is hinting at what we hope will be a change of direction for the Government. For far too long, the Government have concentrated more on achieving a balanced budget than on managing the economy. They have not been creating demand. They should have been listening to the likes of Paul Krugman, Joseph Stiglitz and Richard Murphy, all of whom have been giving the Government a map to follow for years. The fact that they have failed to follow it explains why we are in this situation today.

[John McDonnell]

I will come on to the way in which the fiscal rule implementation has harmed the economy and prevented economic growth, resulting in the slowest recovery from recession in our history, but I shall now press on. I listened—

[Jeremy Quin (Horsham) (Con)]

Will the hon. Gentleman give way?

[John McDonnell]

It would be helpful if I could just finish this sentence.

I listened to the Prime Minister’s answers at questions today, which unfortunately suggested that she will largely be sticking to the fiscal approach that has failed so badly. So the uncertainty continues, and until this Government make their plans clear, Britain will be on hold.

[Jeremy Quin]

On the speed of the recovery, we are coming out of the deepest recession that we have perhaps ever known, and I am sure that the hon. Gentleman would recognise the fact that we have recovered far faster than many of our major industrial competitors.

[John McDonnell]

This is the slowest recovery in our history. The last time a date was put on it was 1066. The way in which we are recovering is on the basis of increased household debt, low incomes and insecure jobs. I do not think that any Government should be proud of that record.

[Mr Alan Mak (Havant) (Con)]

Will the hon. Gentleman give way?

[John McDonnell]

Let me just finish another paragraph before I give way again.

A new set of rules for fiscal policy is needed. I know that some Members have questioned the need for fiscal rules at all. During the discussions on the Fiscal Responsibility Bill in early 2010, I recall the right hon. Member for Tatton (Mr Osborne), who was then shadow Chancellor, saying that the Bill was a “completely feeble stunt” and the

“biggest load of nonsense that this Government have had the audacity to bring to Parliament in this Session”.—[Official Report, 5 January 2010; Vol. 503, c. 72.]

That was the then shadow Chancellor condemning Gordon Brown for having a fiscal rule. A short while later, when he became Chancellor of the Exchequer, he produced his own fiscal rule: the fiscal responsibility charter. He missed every target in his first charter, so he brought in a second one. He was on course to miss the targets in his second one, so he brought in a third.

[Chris Philp (Croydon South) (Con)]

The shadow Chancellor has just questioned the performance of the economy under the fiscal rule, but is it not the case that the deficit fell from 11% to 4% of GDP, that the economy created 2.6 million jobs—more than in the rest of Europe put together—and that the employment rate increased by 4% and now stands at the highest level in our country’s history? Is not that evidence that the approach of the last Government worked and should be continued?

[John McDonnell]

I remind the hon. Gentleman that under his own Government’s fiscal rule, the deficit should have been completely eliminated last year, and debt should have dropped but it has increased. I will send him a reading list.

[Mr Jim Cunningham (Coventry South) (Lab)]

When the Prime Minister was first elected last week, she said that she would govern for the many and not for the few. However, in response to questions today about the fact that poverty is affecting many people in this country, she gave the usual answer, which was that we have to have a strong economy. That suggests that she is departing from what she said in Downing Street a few days ago. Does my hon. Friend agree that this has been the longest recession resulting from punitive measures since the second world war? The second world war lasted for six years; this has lasted longer. It is brutal and it is punishing the needy in society.

[John McDonnell]

I was trying to take heart from the fact that when she spoke in Downing Street, the Prime Minister recognised just how divided Britain is between the wealthy and those at the sharpest end of the austerity measures. I was hoping that that would be translated into an acknowledgement today that the fiscal rule must go.

[Several hon. Members rose—]

[John McDonnell]

Can I just press on a bit further before I give way again? I am sure there will be plenty of time, Madam Deputy Speaker.

As I was saying, the former Chancellor missed every target in his first charter, so he brought in a second. He was on course to miss the targets in that second one, so he then brought in a third. In September last year, he presented his 2015 update. The current charter for budget responsibility sets targets for an overall balance on Government spending inside five years, with debt falling in each year of the Parliament. However, the Government knew last summer that the vast majority of economists who were asked had criticised the approach, as had the Treasury Committee. Almost without exception, the Labour party agreed with the macroeconomic profession that the approach was likely to prove misguided. We were defeated in the Lobbies that day, but our warnings have been proved prescient.

[Mr Stewart Jackson (Peterborough) (Con)]

The shadow Chancellor will know that any critique of the Government should be accompanied by a coherent alternative strategy. On that basis, is he embarrassed that the Leader of the Opposition’s economic adviser Richard Murphy described the Labour party’s approach as having

“no policy direction, no messaging, no direction, no co-ordination, no nothing”?

[John McDonnell]

He is not the economic adviser and never has been, because we doubted his judgment, unfortunately. He is a tax accountant, not an adviser. He is actually excellent on tax evasion and tax avoidance, but he leaves a lot to be desired on macroeconomic policy.

Turning to the Government’s performance, their charter for budget responsibility lacked credibility from the moment it passed into law and has now lost what shreds it retained this year. Since last September’s debate, every target in the charter that could have been missed has been missed. By the time of the March Budget, the OBR announced that the Government were on track to miss their target for the welfare cap for every year of this Parliament. The charter also insisted that the debt to GDP ratio would fall in each year of this Parliament, but the OBR said in March:

“We now expect the debt-to-GDP ratio to rise between 2014-15 and 2015-16”.

The Government managed to stay on target for its 2020 surplus only through some accountancy that might best be described as imaginative. The writing was already on the wall and then in June the then Chancellor used the backdrop of his fiscal charter as the pretext for threatening British people with a further austerity Budget should they vote to leave the EU.

[Alex Cunningham (Stockton North) (Lab)]

This is all very technical, but politics is about people. I was told today that unemployment in my constituency is higher than it was this time last year and remains more than double the UK average. Stockton Council, the Tees Valley local enterprise partnership and local companies are doing their bit, but our people are suffering more under the Government’s austerity measures. Is it not time that the Government looked again at council and development budgets and based them on the real needs of our communities?

[John McDonnell]

Saying that the fiscal charter is a technical matter is a good point, but it is the foundation upon which these poor—to say the least—decisions are being made, and a lack of investment is the result.

Following the vote to leave the EU, despite the threat of a punishment Budget we have seen an entirely predictable U-turn. No punishment Budget is scheduled and we have been told by both the old and new Chancellors that one will not happen and that, on the contrary, we must be realistic and accept that the deficit will not be gone by 2020, as predicted by the charter. From the responses at Prime Minister’s questions, it seems as though the surplus target for 2019-20 has now been dropped or has at least slipped to some unknown date in the future. Let us be clear: the Conservatives claimed that their approach would eliminate the deficit in five years, but it will not have happened after 10 years. Three targets set—every target missed. The 2015 charter appears to be dead in the water.

[Lucy Frazer (South East Cambridgeshire) (Con)]

The hon. Gentleman is being generous with his time. Does he agree that it is appropriate to have a fiscal charter as a matter of principle? Strong economies, such as those of Germany, Austria and Switzerland, all have such a rule.

[John McDonnell]

Of course. That is why we support a fiscal charter approach and have produced a realistic one—fiscal charters must be realistic. If the Government set targets and then miss the three that they set themselves, that undermines the credibility of the Government’s economic policy making.

The only hope of rescuing the existing charter is by activating its knockout clause, which the Chancellor referred to in an earlier speech. To remind hon. Members, if growth has been below 1%, is below 1% or is forecast by the OBR to be below 1% on a rolling four-quarter by four-quarter basis, the charter’s targets can be suspended. The problem is that the OBR recently announced that it will not release new projections until later this year, so we remain in the dark about whether the charter targets are still in operation. In the absence of evidence to the contrary, we can only assume that the charter still holds. That means Departments and other public agencies are operating under the old rules; they are still implementing planned spending cuts and still holding back investment decisions. It is essential for the wellbeing of this country that the House repeals the updated charter, because as it stands the charter still requires achieving a surplus, which we all know is impossible to achieve, as I believe the Prime Minister admitted today.

[Andrew Gwynne (Denton and Reddish) (Lab)]

One flaw in the current charter is that it is all about the supply side—reducing welfare costs, reducing debt and eliminating the deficit. What this economy needs at this moment in time is investment. We need investment in infrastructure and in skills, and we need investment in the future.

[John McDonnell]

As always, my hon. Friend is spot on. We are on the same page as almost every organisation that has an interest in the economy in this country: the CBI; the Federation of Small Businesses; the British Chambers of Commerce; and the TUC. All of them are saying exactly as he has said.

[Mr Mak]

Controlling welfare spending has been a key element of this Government’s economic plan and has helped to make the fiscal charter a reality. How would the hon. Gentleman plug the black hole? Would he raise taxes, raid pensions or print more money?

[John McDonnell]

The problem with the hon. Gentleman’s contention is that we were told the way to control welfare spending was to introduce a welfare cap, and this was part of the charter. The Government have now breached that charter consistently and are forecast to breach it in every year throughout their Administration. The point I am making is that the fiscal charter is almost redundant now, because it is so ineffective. Housing benefit did rocket, but the way to control welfare is by building council homes again, so we are not pouring money into the pockets of private rented landlords.

[David Rutley (Macclesfield) (Con)]

rose—

[John McDonnell]

Let me just press on; I commit to coming back to the hon. Gentleman. Madam Deputy Speaker might get a bit hot if I continue to take too many interventions.

Households and businesses up and down the country need clarity and guidance, and it would be irresponsible to leave them without guidance as to the Government’s actions until the autumn. Waiting until October is a luxury this economy cannot afford, and Britain is on hold until the Chancellor makes his plans clear. Unfortunately, this is only the latest consequence of a shocking lack of planning by the Government for the eventuality of a leave vote. The then Chancellor said back in March that a credible blueprint was completely missing from the leave campaign, but a blueprint of any kind seemed to be missing from the entirety of the Government. The Chancellor must now take the necessary steps to give himself the freedom to invest in the economy, without being bound by a surplus rule he has conceded is likely to be ditched in the autumn in any case.

[David Rutley]

I very much hope that Madam Deputy Speaker is not too hot at this point in time. The hon. Gentleman is trying his best to put forward his arguments, but his approach completely lacks credibility—he has not even brought any Labour Members in to support him today. Is the truth not that even two Eds were better than none?

[John McDonnell]

I will have to watch my language, Madam Deputy Speaker. Let me say to the hon. Gentleman that when someone is going to crack a joke in this place—I know this because I have failed so often—it is best that they get the script right. As for Labour Members, the message has come across in every debate we have had, consistently since September, including today, that this is about the difference between having a fiscal charter that allows us to invest and one that does not. It is as simple as that. I respect his views and I have listened to his contributions in the past, but on this issue I believe that even those on his own side are beginning to move.

Britain is on hold until the Chancellor makes his plans, because, unfortunately, as I said, this is not the only consequence of the lack of planning. I say to Conservative Members that it is important now that we recognise the decisions that have to be made as soon as possible, particularly on the surplus rule. We already know about the black hole in March’s Budget brought about by the Government’s U-turn on personal independence payments, but following the leave vote, the former Chancellor also announced plans to reduce corporation tax to below 15%. That is a significant fiscal announcement. According to the ready reckoner of Her Majesty’s Revenue and Customs, by the time it takes full effect it could mean an enormous additional £4 billion giveaway by the Treasury. This is money that could otherwise be spent on public services. It would be useful to know today whether the successor Chancellor is planning to be similarly generous to large corporations and whether the reduction to 15% is still part of the Government’s plans.

[Lucy Frazer]

I thank the hon. Gentleman for giving way yet again. He has mentioned a couple of times that Britain is on hold, but just this week SoftBank bought ARM Holdings, a company in Cambridgeshire that spans my constituency, for £24 billion, which shows that Britain is still open for business. People still very much want to invest here, and there is nothing in the economy on hold.

[John McDonnell]

I will come on to that, but I have to say that there are some concerns about the sale of British assets, and I am simply echoing what the Prime Minister herself said only a few weeks ago.

[Alex Cunningham]

Energy-intensive industries are also concerned about the lack of planning in the country. They are extremely anxious about the future of emissions trading schemes inside and outside the EU, and many are desperate for British Government action to ensure that they can stay in business in the longer term. They want action on crippling carbon taxes now, and after we leave the EU. Does my hon. Friend agree that the Government must address these issues, and that it is time the Chancellor made a commitment to champion and help to finance carbon capture and storage?

[John McDonnell]

I am sure that those on the Treasury Bench were listening to that. The Chancellor has a long list of issues that he needs to address to give some certainty, certainly if we are to see long-term investment in such things. I share my hon. Friend’s views: there is too much uncertainty with regard to a whole range of taxation and support initiatives from the Government. To be frank, it is jeopardising jobs as well as the future of our planet.

[Mr MacNeil]

We have been hearing this refrain that Britain is not on hold and that things are happening, but they are not. Britain is very much on hold. It is actually worse than that, as we see if we look at our neighbours. The hon. Gentleman might remember how, a number of years ago, this House mocked both Iceland and Ireland. It does not say much about them now when Ireland has treble the growth of the United Kingdom and Iceland double the growth. On a recent visit to the Central Bank of Iceland, I was told that the economy had grown so fast that it needed to be slowed down, and that it needed migrants to fill its jobs. These are economies that were once mocked in the United Kingdom and that are now very much laughing quietly to themselves as they speed into the sunset.

[John McDonnell]

I think the argument is sound. Until we obtain a fiscal rule that reflects the reality of our economy and our future, we will not return to the dynamism that is needed to restore growth and to ensure that we have wages and jobs that are beneficial to the community overall rather than the low paid and insecure work that we have at the moment.

Let me press on, because I do not want to strain your patience, Madam Deputy Speaker. It is not just Members on these Benches who believe that the fiscal rules adopted by the Government are not fit for purpose. The former Secretary of State for Work and Pensions, the right hon. Member for Preseli Pembrokeshire (Stephen Crabb), called for a £100 billion infrastructure fund to invest in schools and housing. The Secretary of State for Communities and Local Government called for tax cuts across the board and spoke about a Growing Britain fund, funded by more borrowing. The new Prime Minister repeated today the need to abandon the surplus target—perhaps to let it slip. The Secretary of State for Environment, Food and Rural Affairs spoke about the need for “prosperity, not austerity”. We welcome all those conversions to our line of argument, but none of this can be achieved within the confines of the charter as it now stands until the Office for Budget Responsibility advises otherwise.

We saw the consequences of the policies based on the old fiscal framework yesterday in a report from the independent Institute for Fiscal Studies. Let me just remind Members what the report said: the incomes of young people are still 7% below where they were before the financial crisis, and the incomes of those in their 30s, 40s and 50s have remained stagnant. Andy Haldane, the chief economist at the Bank of England, has spoken about a “lost decade” for earnings. McKinsey reports that four fifths of households have seen either no improvement or falling earnings. That is what we have to show for the year of fiscal rules from the former Chancellor. There is a consensus now across the country, from the TUC to the CBI, that investment is needed. Earlier this year the IMF told the Government that it had no objections on the grounds of fiscal responsibility to the Government undertaking more investment. The OECD agrees, but until the OBR gives permission to suspend the surplus rule, the Chancellor is constrained by his own rules.

The Government’s current plans for public sector net investment for the rest of this Parliament are for it to fall in each year, from £36.4 billion this year to £32.1 billion in 2019-20. Of course, we do not expect a full Budget now, but the least we need is a commitment to recognise the changed times that we are living in. The uncertainty about public investment comes on top of uncertainty about the structural funds for regions—which are set to lose up to £10 billion if we leave the EU—and further uncertainty for those reliant on projects funded by the European Investment Bank. I repeat that it is essential that, as a minimum, there is a guarantee from the Government soon to protect these funds in some form on an equivalent level.

There is an alternative; there has always been an alternative. Members of the Government Front-Bench team now see it, in part. Opposition Members have said so for some time. There is an alternative based upon investing in the future, growing the economy and allowing fiscal policy to work hand in hand with monetary policy. Professor Mariana Mazzucato has argued for the need for long-term, patient investment. We support that. It is true that the sale of ARM Holdings to SoftBank indicates that there is potential for new industries and innovation, but that potential needs long-term financing, which includes Government investment in infrastructure and research.

After the leave vote, more forecasters have cut their growth forecast. The IMF has joined them. Yesterday it revised down its prognosis for next year from 2.1% to 0.8%. With the current account deficit having hit record highs in the past year—in the most recent figures, it stands at 6.5%—our plan for the future cannot just be to fund that indefinitely with more overseas sales, such as that of ARM. We hope that the Chancellor will heed those who are calling for a much needed and eminently affordable change of direction.

It is a tragedy for this country that the Conservatives have only noticed that there is an alternative as a result of the leave vote, which I fear they helped to bring about. I announced on Monday that the Labour party supports a large programme of investment and will support the Government in a large programme of investment.

[Philip Boswell (Coatbridge, Chryston and Bellshill) (SNP)]

It was only a year ago that the hon. Gentleman was telling the media that he supported George Osborne’s austerity charter. He has changed his mind and I welcome that U-turn, but more than 20 Labour MPs voted for the charter. Not a single SNP MP has voted for austerity. When will the people of the UK see a unified position against austerity across the Labour Benches, or can we in the SNP expect to continue ad infinitum as the only credible opposition to Tory austerity?

[John McDonnell]

Good try. Initially last year I thought the fiscal charter was so ludicrous that I was just going to rubbish it or ignore it. Then, as people remember, I made a U-turn because I thought we could defeat it, because we had virtually all the Labour party and others demonstrating that it was ludicrous. We predicted that every target set in the fiscal charter would be missed, and we were right. The Labour party is an anti-austerity party. We will campaign against austerity, but more importantly now, we are campaigning for a long-term future plan of investment.

I think we are winning the argument right across the piece. As I said, from partners in industry and across the political parties—even in the Conservative party now, as we saw in the leadership campaign—there are voices calling for hundreds of billions of pounds of investment. We are winning that argument. The problem is now that we need decisive change from Government with regard to the fiscal rule; otherwise Britain will remain on hold.

[Mr Jim Cunningham]

I am sure that one of the things that my hon. Friend learned, as I did, during the referendum was that, as I mentioned, the British people have had enough of austerity. They want politics to change. They want investment. Some of my hon. Friends have mentioned the areas of investment. It is important that we learn the lesson of the referendum—that people have had enough of austerity.

[John McDonnell]

Many voted to leave on the basis that they and their towns and regions felt left behind as a result of seven years of austerity, which have brought about high levels of poverty, lack of investment, and low-paid jobs and insecure jobs. As a result, I think there was an expression of anger in the referendum about a whole range of issues. People were saying to the Government, “We’re not satisfied with your performance, we’re not satisfied with the way we are being governed and we want change.”

[James Cartlidge (South Suffolk) (Con)]

There is something in what the hon. Gentleman says, and there are parts of the country that clearly felt angry and left out, but I found that, overwhelmingly, the reason why people were going to vote to leave was their concern about immigration. My understanding is that he supports limitless immigration—not putting controls on it—and that matters if he is going to bring the Brexit debate up in his speech.

[John McDonnell]

Let us be clear, because it is best not to exaggerate people’s positions. I think the response on immigration was a response to the concerns people had about the undercutting of wages, the pressure on public services and so on. That is why, on the development of the free movement of people, we have always argued—particularly from the Opposition side—that we should ensure there are sufficient controls, but also mechanisms to prevent the undermining of wages. That is why the last Labour Government—I praise them for this—set up a fund to alleviate the pressure on public services. I think a whole batch of grievances was wrapped up in the vote, and we have to learn from that.

One of the key grievances, as my hon. Friend the Member for Coventry South (Mr Cunningham) said, was the impact of austerity on people’s daily lives, which is caused by the adherence to a fiscal rule that we now know is virtually bankrupt and having counter- productive implications for our economy by holding back the investment that many people—even on the Government side—now feel is needed.

[Lucy Frazer]

Will the hon. Gentleman give way?

[John McDonnell]

Would the hon. and learned Lady allow me to finish? I have taken several interventions, and she will be able to speak. [Interruption.] Oh, go on.

[Lucy Frazer]

I am very grateful to the hon. Gentleman for giving way—he is being very generous. He said there are a number of alternatives to the position the Conservative Government put forward. He also said in answer to an earlier intervention that he accepts there should be some sort of fiscal rule. Will he tell the House when Labour would return our budget to a surplus?

[John McDonnell]

Let me outline Labour’s fiscal credibility rule, which we set out a number of months ago. We said that we would have a forward-looking target to achieve a cyclically adjusted current balance by the end of a rolling five-year forecast period. Why? Because that gives us the flexibility to adjust to shocks such as the one we have seen. Capital expenditure would be excluded from the deficit target in order that the Government can invest for higher growth. The contentious issue last September was that the then Chancellor included capital investment in the overall fiscal rule, which held back investment, and that is why we have seen the figures for Government investment falling. Debt as a proportion of potential GDP would be lower at the end of each five-year Parliament than at the start. Again, that gives an element of discipline.

However, we also make the point that when conventional monetary policy is hampered by the lower bound to interest rates, the rules will be suspended in order that fiscal policy can then work, but we have suggested that the Monetary Policy Committee should be the determinant of that. Why is that more flexible than the existing rule? It is because, as we have seen, the Office for Budget Responsibility, for example, is not going to report until the autumn, but the Monetary Policy Committee meets monthly, so that will give us more flexibility. In our credibility rule, we also said that the OBR would be responsible to Parliament, with a clear mandate to blow the whistle on any Government breaching those rules, so that gives an element of independence. It is a fiscal rule, but a credible one. If it was operating now, we would be abiding by it, and we would be investing for the future.

Let me press on to the end. We hope the Chancellor will heed those who call for a much needed and eminently affordable change in direction. It is a tragedy for this country that the Conservative party has come to notice that alternative only as a result of the leave vote. As I said, I announced on Monday that we would support a large programme of investment to help to ensure that the potential of our economy is met. We proposed a national investment bank, which would help to boost investment across the country, ensuring that no community is left behind.

In conclusion, Labour will do all it can to ensure that the price of any negative shocks from the leave vote will not be paid by working people in any part of the country. In March, we saw the fastest unravelling of a Budget almost in living history. Now, the entire fiscal approach, as underpinned by the current charter, has collapsed in almost a year. The Government’s economic credibility faces nothing less than a catastrophe unless they rise to the challenge.

We cannot wait for the OBR to report in due course that there has been a negative shock and that the targets are suspended. To be frank, the mandate as it stands is shredded and must go. There is no credible option left to the Chancellor but to undo what should never have been done, to put right his predecessor’s mistakes, to repeal the charter and to support this motion, bringing forward an alternative that provides the basis for the stabilisation of the UK economy and the provision, above all else, for long-term investment in growth.

--- Later in debate ---

[Mr Gauke]

I completely agree with my hon. Friend. Our record on corporation tax—we cut it from 28% in 2010, it is now 20%, and we have legislated to reduce it to 17%—has made the UK much more attractive. The likes of the OECD have made it clear that corporation tax is one of the most distorting and, therefore, least growth-friendly taxes. The fact that we have moved so dramatically in this era—during which we have also put the public finances on a sounder footing—to make our business taxes much stronger puts us in a much stronger position than we would otherwise be. It is striking that, in survey after survey of international businesses, the position of the UK has improved in terms of our reputation as a place to do business. In particular, our tax reforms have helped attract investment here. I know from the meetings that I have had with international businesses when they are choosing where to locate activity that the fact that our corporation tax regime is more competitive is a factor that helps to drive investment to the UK.

Alongside that, we have taken significant steps to ensure that the international tax system is such that businesses pay the taxes that are due, but it is absolutely right that the UK positions itself as a more competitive place, and that is what we have done.

[John McDonnell]

For clarification—I raised this in my speech—is it still Government policy and in their plans to move towards 15%?

[Mr Gauke]

The Chancellor has made it clear that he will look at all the options when it comes to the autumn statement. It is the case that we have legislated to move to 17%, and it continues to be the case that we want to send out a signal that the UK is open for business and that we will still have a competitive tax system. My hon. Friend the Member for Horsham (Jeremy Quin) has already raised that important point. The precise policies we will follow at the autumn statement are a matter for the Chancellor to announce then, but Government Members are united in our belief that the steps we have taken on corporation tax have made us much better prepared for the uncertainties of the future.

--- Later in debate ---

[James Cartlidge]

I agree with my hon. Friend, but I would make one point about shovel-ready projects. We have quite an advanced business plan for a Sudbury bypass. If the Government decide to go down the Keynesian route of looking for shovel-ready schemes, we are ready in South Suffolk, and we are waiting for the bypass for which we have been campaigning for many decades.

There is an aspect of the charter for budget responsibility that has not yet been mentioned during today’s timely debate. The charter states:

“The Treasury’s objectives for fiscal policy are to: ensure sustainable public finances that support confidence in the economy, promote intergenerational fairness, and ensure the effectiveness of wider Government policy”.

The phrase “promote intergenerational fairness” strikes me as incredibly important. I hope that my Whip will show me some intergenerational fairness, and allow me a couple more minutes. I will not be long.

We have had a Conservative leadership election, and we are still having a Labour leadership election, but, as far as I am aware, no one has debated the following facts. Our national debt stands at £1.65 trillion; according to the Institute of Economic Affairs, our liabilities amount to £5 trillion; and it is estimated that, by 2062, all pensioner benefits will cost £491 billion. I was going to say a lot more about that, and there is a lot more that needs to be debated, but I am getting the hint.

[John McDonnell]

More!

[James Cartlidge]

I will end with this point, which I think will interest the shadow Chancellor. In March 1997, two months before what was a considerable low for our party, my right hon. Friend the Member for Hitchin and Harpenden (Mr Lilley) came up with a policy called Basic Pension Plus, and I still believe passionately that that is the direction in which our country should go. The cost of the state pension—which, after all, is only £119 a week—is crippling, and the cost of pensioner benefits is enormous.

We need to debate those matters. I simply make this appeal: I hope that when I have a chance to speak again—when we all do—we shall be able to talk openly about the huge liabilities and costs that we face. As it is, the charter is there, we have been debating it, and, as I have said, monetary policy is at the forefront.

Oral Answers to Questions

John McDonnell Excerpts

Tuesday 19th July 2016 Commons Chamber

[Mr Gauke]

I note that my prediction that I would receive further representations and diary request appears to be holding true. I am happy also to meet my hon. Friend to discuss the project that he mentioned.

[John McDonnell (Hayes and Harlington) (Lab)]

I, too, welcome the Chancellor to his position, and I welcome his whole team. It is a deserved promotion for the Chief Secretary, whom I believe I promoted only a month ago in a speech to the House.

EU funding for the regions comes to £10 billion a year. At the recent Local Government Association conference, councillors from all parties expressed their concern over the potential loss of these structural funds. Will the Chief Secretary clarify whether he plans to make funding provision equivalent to that received through the EU structural funds in the event of the UK leaving the EU?

[Mr Gauke]

First, I thank the shadow Chancellor for his kind words. Yes, his description of me as Chief Secretary last month proved to be ahead of its time. That is not a phrase I often use about the shadow Chancellor, but he was right on this occasion.

On the structural funds, of course we need to make an assessment of value for money and so on. We will make announcements in due course. I recognise the case for wanting to address uncertainty, but it is right that we follow due process before we make any announcements.

[John McDonnell]

I am grateful for that, but may I ask the Chief Secretary that, in the interests of local government stability, that statement is made sooner rather than later?

The vote to leave also affects the UK’s access to European Investment Bank funds, which last year came to £6.5 billion across the country. With business investment falling even before the vote to leave, and with Government investment scheduled to fall until the end of this Parliament, what action is the Chancellor taking to ensure that Britain retains its stake in the European Investment Bank?

[Mr Gauke]

First, on the general point, I recognise what the hon. Gentleman is driving at in terms of uncertainty and the desirability to resolve the issue sooner rather than later.

It is the case that the UK did very well from the European Investment Bank in recent months in terms of attracting investment. There is no evidence as yet that the UK will be discriminated against during the period that we remain members of the EU, but the hon. Gentleman is right to raise the issue. We will continue to monitor the situation and we want to ensure that we continue to do well from the EIB.

--- Later in debate ---

[Mr Hammond]

As my hon. Friend notes, that is a CLG lead, but I am very happy to facilitate such a meeting for him.

[John McDonnell (Hayes and Harlington) (Lab)]

The Chancellor will, I hope, have seen the research published by the Institute for Fiscal Studies this morning. It shows that young people in work are still earning 7% less than before the crisis, while older workers have seen no improvement in their earnings for seven years. Will the Chancellor take this opportunity to put an end to what is becoming a lost decade of austerity, deliver the public investment that can provide well-paid, secure jobs across the country and scrap the anachronistic fiscal rule?

Surplus Target and Corporation Tax

John McDonnell Excerpts

Monday 4th July 2016 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

(Urgent Question): To ask the Chancellor of the Exchequer if he will make a statement on proposals regarding the Government’s surplus target and plans to further cut corporation tax.

[The First Secretary of State and Chancellor of the Exchequer (Mr George Osborne)]

In the past week, I have sought to be realistic with the British people about the economic challenges we now face but to mix that realism with reassurance that we can rise to those challenges. The financial contingency plans that the Governor of the Bank of England and I put in place have proved effective to date. Financial markets have adjusted, but I can report today that, although we remain vigilant, they have shown no signs of disorder. We must now respond to developments in the real economy, which will require a supreme national effort.

First, we must look to support demand and ensure that credit flows freely in our economy. The Governor of the Bank of England said on Friday that

“some monetary policy easing will likely be required over the summer”.

Thanks to the reforms that I introduced, the independent Bank of England has the tools that it needs to act against the cycle and support lending in the economy. The Financial Policy Committee will publish its decisions tomorrow, and we stand ready in the Treasury to act in concert with the Bank of England should more need to be done to support funding for lending.

The second part of our national effort must be to maintain Britain’s fiscal credibility. Eight years ago, people questioned Britain’s ability to pay its way in the world; eight years later, British gilts are seen as a safe haven and funding costs have fallen to record lows. We should maintain the fiscal consolidation measures that we have announced. However, our rules were always explicit that, in the face of what the fiscal charter calls a “significant negative shock”, we should allow the automatic stabilisers to operate, and with the consensus of economic forecasters now lowering the forecast growth for the UK next year—from close to 2% before the referendum to 0.4% now—that is what we will do. We must be realistic that the target for a surplus is unlikely to be achieved in 2019-20. The Office for Budget Responsibility will conduct a formal assessment when it produces a new independent forecast in the autumn, and then we will have a clear idea of what additional measures are required to maintain fiscal credibility.

Thirdly, we need to broadcast loud and clear the message that Britain remains the best place in the world to do business. In the past six years, we have reduced Britain’s corporation tax rate from 28% to 20% today, and 17% in the future. I did that at the same time as taking difficult decisions elsewhere to balance the books. In my view, the strongest signal we could send to the world that Britain, after the referendum, is open to the world and ready to do business would be to cut corporation tax still further. We should aim for a rate of 15% and preferably lower, because if we are pro-business, we are pro-jobs, pro-living standards and pro-working people.

Fourthly, the referendum result revealed a deep-seated feeling of disfranchisement in too many of our communities, especially in the midlands and the north of England. As I said in Manchester on Friday, the northern powerhouse is the right response and we need to redouble our efforts with elected mayors and new transport infrastructure. In my view, once both parties have determined who their leader should be, we should then get on and build a new runway in the south-east of England, because we cannot be open to the world if we cannot fly there.

Fifthly and finally, while we must seek with our European neighbours the best possible terms of trade in goods and services, including financial services, now is the time also to redouble our efforts to promote trade with the rest of the world. I have spoken to my US counterparts. Later this month, I will be travelling to China to build on that important new partnership.

To conclude, this is a blueprint to meet our economic challenge. Nothing positive will come from looking back in anger. We must lift our eyes to the horizon ahead and make the best of what is to come.

[John McDonnell]

I would like to thank the Chancellor for his response. I think it is important that, as in the Opposition day debate last week, we set the tone of our response at the level of the national interest and take care to avoid making any statements that would adversely impact on fragile markets.

I have to say, however, that a lack of planning for a leave vote is becoming evident across all policy areas. Instead of a clear plan of action, we have so far had a series of ad hoc statements and announcements, including the grateful abandonment of the “Brexit Budget”, which was to increase the sharply the level of austerity being applied. The fiscal surplus target has been abandoned and today the Chancellor has announced planned reductions in the headline rate of corporation tax.

Rather than ad hoc announcements, we need a framework for economic decision making. Previously, the Government sought to do that with the fiscal charter, which was passed into law last autumn despite Labour opposition. May I ask the Chancellor now, since he is no longer pursuing the fiscal surplus target, if the charter is also to be abandoned? Will he be putting a motion to repeal the law before this House? Will he be seeking to place a new fiscal rule on a similar basis in legislation?

The Chancellor has announced today that he will redouble his efforts to invest in the northern powerhouse. Of course the details of that are to be decided, but will he tell the House when he expects to have a detailed programme of investment? What scale of investment should we expect? What areas, and how focused will that investment be? Does he now agree with Labour Members, and the Secretary of State for Work and Pensions, that a major programme of Government investment is urgently needed? Does he agree with the Home Secretary’s decision not to give a guarantee to existing EU nationals living and working in this country? What will be the economic effects of that? Will he therefore give a more detailed statement to the House on the economic consequences of this decision?

The Chancellor has promised that, while seeking to boost investment, he will be maintaining

“the consolidation that we put in place last year.”

May I ask him for some clarification on this point? Is he now ruling out any further or additional consolidation in light of the leave vote? Regarding the planned cuts to the headline rate of corporation tax, the news has not been well-received by our international partners. Pascal Lamy of the World Trade Organisation has accused the Chancellor of “tax dumping”. He also highlights the risk to future negotiations with the EU.

I want to raise three critical questions on this issue. The Chancellor’s Budget this year suggested that his one percentage point reduction in the headline corporation tax rate will reduce expected revenues by about £1 billion. Does the Chancellor still hold to that estimate? How will the Chancellor pay for any losses in tax revenues from the proposed corporation tax cuts? Who will pay? The evidence from existing cuts to corporation tax is not favourable. Despite year-on-year reductions in the headline rate to the lowest rate in the G7, business investment remains low by G7 standards and has now fallen for two consecutive quarters.

Businesses are sitting on a cash pile of at least £500 billion yet are failing to invest. What assessment has the Chancellor made that a dramatic reduction in the corporation tax rate will have the desired effect on business investment, given the absence of evidence so far?

Finally, we know that the circumstances after the leave vote will be trying and that major forecasters now anticipate the UK possibly entering a recession over the next year. The Chancellor’s fiscal approach has failed and has been steadily abandoned. In the interests of the country, will he now commit to adopting a fiscal approach that allows the flexibility to invest while maintaining fiscal discipline, as the Opposition and now some on his own side are urging?

[Mr Osborne]

When I became Chancellor, there was a question mark over Britain’s ability to pay its way in the world, and that was reflected in our bond yields, but because of our determined effort over the last six years, when we have hit an economic shock, as we have done in the last two weeks, the response has been a fall in bond yields—because people have confidence in the UK.

First on planning, extensive contingency plans were in place to deal with financial market disorder as a result of a leave vote, and the fact that we are not debating that today shows that those plans have been effective—we remain vigilant, but those plans were in place. Secondly, we must now decide on the new model of our relationship with the EU. That was not on the ballot paper and has to be a decision for Parliament. We set out the options for the country in advance of the referendum debate, and now we must have that discussion.

Thirdly on planning, the fiscal charter specifically provides for the impact of a negative shock, which is what we have had, and as a result the rules of the charter apply. As I say, it is unlikely that the surplus will be achieved in 2019-20—although that will be for the OBR formally to assess—and it will then be up to the Chancellor to produce new plans to restore the public finances to surplus and for Parliament to vote on them. We thought about that in advance: it is in the charter that the House voted on.

The hon. Gentleman talked about investment. On Friday, I met the Labour leader of Manchester City Council, Richard Leese. We talked about how we could redouble our efforts to invest in transport across the Pennines and about devolved powers for mayors and the like. That will be part of our response to the disfranchisement that too many of our citizens in the midlands and the north of England have clearly felt.

Finally, the hon. Gentleman also asked about business confidence and the corporation tax cuts. Not only have our corporation tax cuts given us the lowest corporation tax rate of all the advanced economies of the world, but we have seen a 20% increase in receipts from corporation tax—because businesses are coming to this country, growing their businesses in this country and employing 2 million people. The best response we can send to the world to show that we are open for business is to go on reducing business tax.

Bank Branch Closures

John McDonnell Excerpts

Thursday 30th June 2016 Commons Chamber

[John McDonnell (Hayes and Harlington) (Lab)]

I have taken a personal interest in the closure of banks over the years, so I thank the Backbench Business Committee for allocating time for this debate. I also congratulate my hon. Friend the Member for City of Chester (Christian Matheson) and the hon. Members for Wells (James Heappey) and for Ceredigion (Mr Williams) on securing it.

The closure of bank branches and the accessibility of banking are issues of cross-party concern, because local banks play a vital role in our communities, both in large cities and in rural areas. This is a question of access to banking and financial inclusion. Bank branch closures inevitably cut that access and cause financial exclusion. As constituency MPs, we want to know that in our local communities, individuals and businesses can access the personal finance or business banking services that they require. From today’s exceedingly interesting debate, we have discovered that people and businesses increasingly cannot access those services.

My hon. Friend the Member for City of Chester explained that banking is changing—the use of apps and so on can be more convenient—but that the closures are restricting access to banking facilities for individuals and communities. He emphasised that, as the Reuters report states, these closures are hitting hard in low-income areas, and that the cutting is going too fast and too far. I agree with him, and I welcome his creative proposal for local banking hubs. He has thrown down the gauntlet for a pilot in his constituency, as have other hon. Friends; they are clearly bidding for the process. That is a creative way forward. I agree that until banks respond in some way, they should stop advertising themselves as some sort of local friend.

The hon. Member for Wells made an interesting speech. May I ask him to pass on my congratulations to the residents of Glastonbury on their creative demonstration of the black horse funeral? I thought that it was an extremely effective way of highlighting what has happened in the area, whether it affects the sale of crystals, joss sticks or anything else.

It was very helpful that the hon. Gentleman raised the issue of the protocols not actually working or doing what they are supposed to do. It would be interesting to look at Congress’s Community Reinvestment Act because it includes the safety net that many hon. Members have suggested as a possible future solution. He emphasised the issue for small businesses, and highlighted the work done by one of the most effective lobbying organisations in this country, the Federation of Small Businesses. I have to say that I agree with him that if there is a transfer of services to the post office, banks must surrender full functionality if post offices are to be effective. As he said, it is a case of “Either stay or go, but pass on that facility.”

Understandably, my right hon. Friend the Member for Tottenham (Mr Lammy) is not in his place at the moment. I know that he is busy on other matters—as are many others. He highlighted the fact that even the bank he bought his first suit to get a job in has been closed. Interestingly, he emphasised the situation in his constituency, where the riots took place. I know the sterling work he has done to try to regenerate the high street and get businesses and shops back to the area—only to have some of that work undermined by the closure of the local bank. He also emphasised the issue of how footfall is calculated, which was highlighted by several hon. Members.

The hon. Member for Brecon and Radnorshire (Chris Davies) emphasised this issue with regard to rural services, and identified the fact that mobile services can prove effective as a solution in some areas. He also drew attention to what happens, as many of us have experienced, when a bank pulls out—the empty shopfronts and the degeneration of the high street overall. As he said, the post office is an alternative, but interestingly enough, the post office has also closed in his area, as it has in many others.

My hon. Friend the Member for Clwyd South (Susan Elan Jones) proposed the introduction of a novel piece of legislation. I found that fascinating, and we must come back to it another time. She, too, made a bid for a community banking hub. She spoke about the role of mobile banks, but emphasised that they are effective only if they visit frequently and are open for long enough.

My hon. Friend the Member for Harrow West (Mr Thomas) has done sterling work over the years in arguing for the development of co-operative banking and credit unions. He drew attention to the lack of affordable credit overall and to the role of the responsible finance movement, which has done excellent work. Credit unions are critical to our society now, particularly in areas that are experiencing deprivation. He also argued for co-operation, and gave the example of how back-room facilities could be co-ordinated to support the development of credit unions. He commended the 2015 Demos report—I urge hon. Members to read it—which looked at the case for a network of local independent banks across the UK, particularly in relation to their role in lending to SMEs.

The hon. Member for Inverclyde (Ronnie Cowan) drew attention to the issue of mobile banks, but also to their drawbacks: they are not very accessible for some people, and are not the ideal solution. He emphasised the impact that the withdrawal of local bank services can have on the local economy.

In his usual eloquent way, my hon. Friend the Member for Ynys Môn (Albert Owen) demonstrated the unfairness of the situation. The national banks have received significant sums of taxpayers’ money to support them, but by carrying out such closures, they are not acting responsibly.

The hon. Member for Ceredigion drew attention to what it is like to live in a rural area when a bank closes, given the impact that that can have, and to the issue of physical access. As he said, there are cashpoints, but what happens when they dry up and what impact does that have on the local economy? He also gave the example of New Quay to show how local businesses can be hampered. Like many hon. Members, he called for fair play in this matter.

The hon. Member for East Lothian (George Kerevan) demonstrated that, as several hon. Members have said, there is a lack of consultation when there is a closure. He emphasised the RBS case, and described the “arrogance” of the banks. I agree with that description, which many of us have experienced. It looks as though RBS is funding its £1.2 billion computer system by closing local banks. I agree that we now need to explore the idea of a universal banking obligation, so that we can address those issues. I am sure that Mr Ross McEwan has heard about the need for an urgent meeting.

My hon. Friend the Member for Islwyn (Chris Evans) comes from the banking industry himself and knows what it is like. He emphasised a key issue that we are all experiencing now, which is just how vulnerable people are to loan sharks and doorstep lenders when a local bank closes, and the danger that poses. He quite passionately described his campaign on HSBC, the petition he launched and the bungled way in which banks handle closures, by not listening to people. He also called for the next step to be taken for credit unions. I agree with his call for Government assistance to help credit unions take that step up to become local community banks; they have great potential for that.

The hon. Member for Paisley and Renfrewshire North (Gavin Newlands) again described his local campaign and how it was ignored by the bank. The hon. Member for East Renfrewshire (Kirsten Oswald) gave examples of the wave of closures that are taking place. As she said, the challenger banks have been identified as a solution, but are no real solution, with few results in many areas. Her example of the Airdrie Savings bank shows us how banks can be stable and provide a service over generations.

We have heard a lot today about the protocol designed to protect local banking provision. It clearly is not working effectively. Advocates from Move Your Money have urged improvements to the protocol, including forcing banks to have transparent data on branch closure locations and dates, to allow greater scrutiny of their impact. Move Your Money also wants rigorous public interest assessments before the closure of a branch, so that closure decisions are genuinely influenced by community need and likely impact, and a requirement for banks meaningfully to consult local communities in advance of closures rather than simply informing them of the decision after it has been taken. I would welcome the Minister’s views on those ideas, as I know she has taken a personal interest in the matter for some time.

What role is the Competition and Markets Authority playing in addressing the lack of competition as bank branches close? The retail banking review is meant to be addressing that issue. The Federation of Small Businesses has said that it expects

“the publication of the CMA’s final report to include specific remedies for the problems caused by bank branch closures.”

I welcome that intervention by the FSB and hope the Minister will say something about the role of the CMA’s review in addressing the issue.

I thank all Members for their contributions. This is an urgent matter that needs addressing in many of our constituencies. I look forward to the publication of the review and hope to hear the Government commit to taking serious steps to address the decline in bank branch numbers and in access to banking overall.