Surplus Target: Corporation Tax

Lord Davies of Stamford Excerpts

Monday 4th July 2016 Lords Chamber

[Lord O'Neill of Gatley]

My Lords, in response to my noble friend’s question, let me repeat that the fiscal charter, including all its rules, allowed specifically that if an external shock—in this case one that we essentially brought upon ourselves—would result in a four-quarter basis GDP forecast of less than 1% the framework could be adjusted. That is the environment in which the Chancellor made his comments in the other place, and that is what I am repeating here. With respect to the comments on corporation tax that are receiving so much attention, the Treasury will—as it always does—indicate what any cost or benefits revenue-wise or otherwise might be as and when a specific policy proposal is brought to Parliament.

[Lord Davies of Stamford (Lab)]

May I correct the noble Lord? Brexit was not an external shock. It was an internal shock. It was a policy shock. Does the noble Lord think it is serious that we have lost our AAA credit rating? What is his estimate of the increase in borrowing costs we will face as a result of that?

[Lord O'Neill of Gatley]

My Lords, I notice to my right some noble Lords with strong views on and experience of these kinds of events. Let me just reflect on my own judgments, including some from my past life. Let me also quickly state that in the last week our long-term borrowing costs have gone down. It is the job in terms of policy to focus on doing what is right in the circumstances. I do not believe that we should react to or be excessively focused on what a rating agency may say one way or another. It is important that we do the right thing.