Economy and Jobs

Lord Hammond of Runnymede Excerpts

Thursday 29th June 2017 Commons Chamber

[The Chancellor of the Exchequer (Mr Philip Hammond)]

Will the right hon. Gentleman just clarify for the House what the standard rate of capital gains tax was under the last Labour Government and what it is now?

[John McDonnell]

This is a Government who want to cut corporation tax from 28p—[Interruption.] I thought the right hon. Gentleman was referring to corporation tax. Remember who the capital gains tax cut is going to: the 60,000 wealthiest families in this country. That is what this cut is all about.

[Mr Hammond]

Will the right hon. Gentleman just tell the House what the rate was under the last Labour Government and what the basic rate is now?

[John McDonnell]

When it comes to—[Interruption.]

--- Later in debate ---

[The Chancellor of the Exchequer (Mr Philip Hammond)]

I welcome the opportunity to respond to this debate, to set out our economic record since 2010 and our plans for Britain’s future, and to comment on Labour’s plans for our economy.

This Government have a job to do, and a large part of that job over the next 18 months or so will be focused on securing a Brexit deal that is good for Britain and helps to deliver the strong economy that will underpin our public services, create jobs and support our living standards. Of course our country and our economy face some significant challenges. I shall set out today how we intend to address them. However, we also have within our grasp some significant prizes and we need to ensure that we are able to seize them.

I have listened for the past half hour, as have my right hon. and hon. Friends, to the right hon. Member for Hayes and Harlington (John McDonnell) talking Britain’s economy down. It is clear that he has, and Labour has, no credible plan for addressing the real challenges this country faces. His solutions, such as they are, would put most of those prizes beyond our reach.

[Alison McGovern]

With all due respect to my right hon. Friend the shadow Chancellor, does the Chancellor think it is more likely that the trouble we have in the British economy is due to the shadow Chancellor’s words or to the mess the Conservative party has made so far of the Brexit negotiations?

[Mr Hammond]

If the hon. Lady bears with me, she will hear how what we have done since 2010 has strengthened the fundamentals of the British economy. If she is asking me whether the decision the British people made last summer to leave the European Union—and the uncertainty that that has inevitably created as we negotiate our way out of the European Union—adds uncertainty to the economic equation, self-evidently it does. That is why we are seeking to progress the negotiations as rapidly as possible to restore certainty for business, investors and citizens as quickly as we possibly can.

Listening to the shadow Chancellor and the Leader of the Opposition reading their election manifesto, it is clear that the Labour party has given up any pretence of a claim to fiscal credibility. Just two years ago, in the 2015 general election, Labour at least pretended that its figures added up. It would pay for its giveaways, so that its plans would not bankrupt the country. Not any more. The current lot are clear that not only would they hike taxes, but they would embark on a massive expansion of borrowing and subject the country to a catastrophic programme of ideologically driven, productivity-sapping, investment-destroying nationalisation on a scale that the country has not seen since the 1970s.

[Wes Streeting (Ilford North) (Lab)]

If the Chancellor is so proud of his economic record, why did the Conservatives not discuss it during the course of the election campaign? Is it possibly because, after seven years of this Government, the Prime Minister stood before the electorate resembling that great baddie from “The Chronicles of Narnia” promising always winter but never Christmas?

[Mr Hammond]

I have not got to it yet, but the hon. Gentleman will hear an elaboration of our record since 2010 in just a moment.

I was talking about the 1970s, a decade when the lights literally went out, when inflation was in double digits, the country was crippled by strikes and bully-boy union power, and the Labour Government were forced to go cap-in-hand to the IMF for a bailout. The pretence of fiscal credibility is gone from Labour’s offer. The new pretence is that the cost of its spending spree would fall on someone else—the rich, corporates and foreign investors—but it would not. The cost would fall, as it always does when Labour gets its hands on the British economy, on ordinary people trying to get on with their lives.

If the Shadow Chancellor would put down “Das Kapital” for a few minutes and read an elementary economics textbook, he would understand why. Take Labour’s proposed corporation tax hike. The IFS analysis is pretty straightforward. The right hon. Gentleman quoted the IFS, but it said that

“much of the cost is likely to be passed to workers through lower wages or consumers through higher prices”.

The IFS is not alone. The shadow Chancellor’s predecessor, Mr Ed Balls, agrees. He says:

“The argument from this Labour manifesto that only the rich will pay, I don’t think it stacks up. From opposition, you can say, ‘Don’t worry, someone else will pay’–but you can’t do that in government.”

He might have added, “not if you seriously aspire to be in government”.

[John Mann (Bassetlaw) (Lab)]

Will the Chancellor give way?

[Mr Hammond]

I will in just a moment.

Here is the inconvenient truth for the Labour party about corporation tax. We cut corporation tax to the lowest rate of any large developed economy and two things happened. The private sector created 3.4 million new jobs—something, by the way, that the Labour party used to care about in the old days—and in the process we raised an additional £18 billion in corporation tax to fund our vital public services. That did not happen by magic. Lower corporate taxes attract more investment, more investment creates more jobs and more profits, and more profits deliver higher taxes. It is not very complicated.

[Helen Whately]

Is it not the case that if we are to have the public services that we want for our constituents, we have to have a strong and growing economy? It is very simple.

[Mr Hammond]

My hon. Friend is exactly right. There is no short cut and there is no free lunch. There is only the hard grind of improving the productivity and growth potential of our economy to build the sustainable public services that we want for the future.

[John Mann]

As the Office for Budget Responsibility confirmed to the Treasury Committee following the Chancellor’s recent Budget, all his tax projections are predicated on an extra 1 million new immigrants entering the country and working over the next five years. Can he confirm that that is still his plan?

[Mr Hammond]

It is the OBR that makes the projections and it has been quite transparent about what its assumptions are about both trade and immigration.

[Neil Gray (Airdrie and Shotts) (SNP)]

If I can bring the Chancellor back to pay and public services, yesterday his Department and Downing Street were briefing the press about the public sector pay cap. To what extent was he aware of that, did he sanction his officials to carry out those briefings, and does he now support an end to public sector pay constraint?

[Mr Hammond]

Just to be clear, there is no change in the Government’s position. Our pay policy has always been designed to strike the right balance between being fair to our public servants and being fair to those who pay for them. That approach has not changed and we continually assess that balance.

[Jack Dromey (Birmingham, Erdington) (Lab)]

Consider Wayne Marques, the hero police officer who fought off three terrorists, the firefighters who ran up burning stairwells to save frightened families, and the nurses and doctors who then battled to save lives: how can the Chancellor begin to justify holding their pay down, squeezing the living standards of Britain’s best?

[Mr Hammond]

As I am sure the hon. Gentleman knows, after the financial crisis, public sector pay ran substantially ahead of private sector pay, and we are only just moving back to the point where public and private sector pay have moved back into balance. [Interruption.] It is not rubbish, it is a fact, so the suggestion that there is a backlog problem for public sector workers is simply not true. As I have said, the Government’s policy remains unchanged.

[Several hon. Members rose—]

[Mr Hammond]

I will make a little progress and then I will give way to some more colleagues on both sides of the House.

On this side of the House at least, we continue to believe that the most effective way to protect and support ordinary families is to ensure that they have jobs, and that is what we have done, in spades. The flaw in Labour’s tax plan is not just that it will hit those whom Labour claims to support; it is that it will not raise anything like the revenue that it is claiming. Labour says it will raise taxes by £48.6 billion without anyone earning under £80,000 paying a penny more. The Institute for Fiscal Studies—which the right hon. Member for Hayes and Harlington quoted rather selectively—has examined the credibility of that plan. It found that Labour

“certainly shouldn’t plan on their stated tax increases raising more than £40 billion in the short run, and more likely than not they would raise less than that. They would certainly raise considerably less in the longer term.”

So before we even turn to Labour’s spending plans, there is already a black hole of £8.6 billion a year and rising on the taxation side alone.

[Stephen Hammond (Wimbledon) (Con)]

Is it not even worse than that, in that the IFS said that there were £58 billion of uncosted promises in Labour’s supposedly costed manifesto?

[Mr Hammond]

My hon. Friend is exactly right, and if he bears with me, I shall continue.

That black hole of £8.6 billion a year and rising in taxation will have to be filled by raising tax on ordinary people, and that was just the manifesto. Since the Leader of the Opposition got his new suit, he has been out and about, flinging spending commitments with gusto at anyone he comes into contact with—another £9.5 billion of unfunded commitments for each year of this Parliament. Added to the hole in Labour’s tax plans, that is an additional £90 billion over the course of the Parliament that has to be raised in taxation on ordinary working families.

Let me say that again for the right hon. Member for Hayes and Harlington: £8.6 billion a year of under-recovered tax, according to the IFS, and another £9 billion-plus a year that his right hon. Friend the Leader of the Opposition added in additional unfunded commitments after the manifesto was published. In short, that is the Opposition’s approach to the type of tough decisions that have to be made every day in government about prioritising limited resources—“Should we do x or should we do y?” His answer is just yes: more everything for everyone, and all of it for free—a catastrophic recipe for economic and fiscal disaster.

[Sir Edward Leigh (Gainsborough) (Con)]

In the 10 minutes or so that my right hon. Friend has been speaking, our national debt has increased by nearly £900,000. Will the Chancellor continue to speak up for hard-pressed taxpayers and make the point that, for all this talk of austerity, the debt is still rising? We have to look after the pennies, otherwise we will be up Queer Street.

[Mr Hammond]

My hon. Friend is absolutely right. The debt is still rising, but next year, for the first time in 20 years, we expect to see it beginning to fall as a percentage of GDP—a remarkable achievement after the trashing of our economy by the Labour party in government.

[Chris Stephens]

On tax revenues, was it appropriate—during a general election in which four political parties represented in this House were campaigning against HMRC office closures—for Her Majesty’s Revenue and Customs to negotiate a contract during purdah for new regional centres?

[Mr Hammond]

If HMRC has negotiated a contract during purdah, it will have taken advice on whether that was compatible with purdah and will have received guidance from the Cabinet Secretary. It perhaps says something about the way that the purdah rules work that I was not aware of that until the hon. Gentleman just mentioned it, but I can assure him that HMRC will have taken proper advice.

--- Later in debate ---

[Madam Deputy Speaker (Mrs Eleanor Laing)]

The hon. Lady has cleverly used her point of order to make the political point that she wished to make. I think she knows, as the House knows, that it is not a point that I can answer from the Chair. If, however, she is endeavouring to bring the Chancellor to be held account to the House, then I can tell her that that is exactly the process that we are currently undertaking. The Chancellor of Exchequer is here, and I am sure that the hon. Lady will be able to make her point in debate later in the day.

[Mr Hammond]

I give way to the hon. Member for Bishop Auckland (Helen Goodman).

[Helen Goodman (Bishop Auckland) (Lab)]

I want to ask the Chancellor a question that I think he does know the answer to. Does he agree with the right hon. Member for West Dorset (Sir Oliver Letwin), who said yesterday that some tax rises will be needed in this Parliament to maintain the quality of public services, or will he stand at the Dispatch Box and rule out any tax rises?

[Mr Hammond]

I read the comments of my right hon. Friend the Member for West Dorset (Sir Oliver Letwin), and I am sure that what he said will prove to be a very important contribution to a debate that we will have, and should have, in the House. I welcome that.

[Several hon. Members rose—]

[Mr Hammond]

Let me make a little more progress.

All that is before we even get to the £500 billion borrowing splurge that Labour has promised us over the next 10 years—£250 billion over the course of a Parliament.

[Mark Pawsey (Rugby) (Con)]

Will my right hon. Friend give way?

[Mr Hammond]

I will in just a moment.

Then there is the nationalisation programme. Let me explain these plans, Madam Deputy Speaker, because they are important. The Labour party wants to nationalise gas and electricity, water and Royal Mail. They would borrow a fortune to do it, and it would deliver no economic benefit whatsoever.

First, a Labour Government would have to buy up the shares of publicly listed companies on the stock exchange. Taking over just the single largest company in each sector would cost close to £44 billion, and the Government would have to pay a market premium on top, because a programme to buy the shares would drive up the price. Moreover, the taxpayer would take on those companies’ debts; that is another £26 billion. So that is £70 billion of public debt. When the Labour Government were done with the publicly listed companies, they would have to strike deals with scores of private investors and funds to buy the rest. All told, we are looking at more than £120 billion. [Interruption.]

The right hon. Member for Hayes and Harlington says from a sedentary position, “You do not understand. It is a financial transaction, so it does not need any money, and it does not require us to go out and borrow any.” He is simply wrong. Financial transactions add to public debt—[Interruption]—and that is before we even get to the railways, which he has been chuntering about. I have deliberately left the railways out of my equation, because his proposals for those are more complex.

[John McDonnell]

The right hon. Gentleman fails to understand that we will gain an asset when we take over the railways. It will give us an income that will cover any borrowing costs, and as the franchises drop out, it will be cost-free.

[Mr Hammond]

So the proposition is this: would I entrust an asset to the right hon. Gentleman? Would I lend him the money to buy that asset, on the assumption that he would be able to produce an economic return by operating it? Let me ponder on that one, Madam Deputy Speaker.

[John McDonnell]

It will be managed by the people of this country, in whom I have confidence, not by the profiteers whom the right hon. Gentleman represents.

[Mr Hammond]

Let us test that proposition. When these industries were last in public ownership, who were they managed by? They were managed by intervening, interfering politicians and their buddies in the trade unions.

[Sir Peter Bottomley (Worthing West) (Con)]

My right hon. Friend has dealt with amendment (l). Let me now turn to a non-party-political initiative, led by the hon. Member for Walthamstow (Stella Creasy) and me, and by most other Members on both sides of the House, and the discussions that we have been having with the Government about the question of the women in Northern Ireland and whether only the poor should be denied lawful abortions. Is there anything that the Government can say about that?

[Mr Hammond]

That takes me slightly away from my line of attack, but I know that the issue is of great importance to Members on both sides of the House, and that my colleagues on the Treasury Bench have been seeking a solution. I understand that my right hon. Friend the Minister for Women and Equalities either has made or is about to make an announcement in the form of a letter to Members explaining that she intends to intervene to fund abortions in England for women arriving here from Northern Ireland. I hope that the House will consider that to be a sensible way of dealing with the challenge.

[Stephen Timms]

rose—

[Mr Hammond]

That was a very neat move by the right hon. Gentleman. I cannot resist giving way to him.

[Stephen Timms]

I am very grateful. This time, I want to raise the subject of amendment (g). I commend the Chancellor for his efforts to explain to Cabinet colleagues that having your cake and eating it is not an option available on the Brexit negotiating table. Very hard choices will have to be made. Does the Chancellor agree that, given the scale of what is at stake in Brexit, the option of remaining in the single market must at least stay on the table?

[Mr Hammond]

I think that there is a genuine misunderstanding in some of the debate. When we leave the European Union, we will leave the single market and the customs union. That is not a matter of choice, but a matter of legal necessity. The question is not whether we would be in the single market or in the customs union; the question is what kind of arrangements we could negotiate as part of a close partnership with the European Union that would allow our businesses to continue to trade with the EU and the EU’s businesses to continue to trade with us, so that the prosperity benefits of close trade with our European Union neighbours could continue. I am committed to trying to find a deal that will allow that to happen.

[Several hon. Members rose—]

[Mr Hammond]

The hon. Member for Livingston (Hannah Bardell) was first, so I will give way to her.

[Hannah Bardell]

I thank the Chancellor for giving way. I hope that he will be able to follow up my point of order and the point made by my hon. Friend the Member for Glasgow South West (Chris Stephens) about HMRC contracts, because the issue is very important to our constituents.

Is it not the case that we have a Prime Minister who disagrees with herself about Brexit, and that—as we now know from the “six jobs” former Chancellor—the whole Cabinet disagrees with the Prime Minister about the status of EU nationals? How on earth can we trust the Tories to run the country, let alone negotiate Brexit? This madness must end.

[Mr Hammond]

I will come back to the hon. Lady on the subject of her point of order, and to the hon. Member for Glasgow South West (Chris Stephens). My understanding is that an issue arose during purdah which involved the risk of immediate financial loss to HMRC, and that under the purdah rules it was able to engage in a negotiation to try to prevent that loss to the public purse. I will, however, write to the hon. Lady, and to the hon. Gentleman, setting out exactly what happened, and I will put a copy of the letter in the Library of the House.

[Several hon. Members rose—]

[Mr Hammond]

Let me just finish answering the hon. Lady’s question.

I wake up every morning and read the newspapers—[Interruption.] Don’t count your chickens. Let me say to the hon. Lady that I do not always recognise the debate that is raging in the media as an accurate characterisation of what is really going on. The media are desperate to create conflict where there is not necessarily any at all.

[Several hon. Members rose—]

[Mr Hammond]

I will give way to the hon. Member for Ilford North (Wes Streeting), and then I must make some progress.

[Wes Streeting]

I am grateful to the Chancellor for giving way to me a second time. I think he has presented a range of procedural barriers that could be overcome in a negotiation to ensure that Britain remains in the single market and the customs union, as other non-EU members do. Does he accept that anything less than membership of the single market and the customs union will not give Britain as good a deal as the one that we currently have? He knows that that poses a risk to our economy, and one that none of us in the House should entertain.

[Mr Hammond]

No, I do not agree with that. I think it is perfectly clear that it should be possible to negotiate an agreement with the European Union that provides for mutual, reciprocal access to each other’s marketplaces, and for frictionless arrangements for goods crossing the borders. That would not be membership of the single market or membership of the customs union, for all sorts of legal reasons, but it could have, to a very large extent, the same effect over a transitional period. I think that that is possible to achieve.

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

rose—

[Charlie Elphicke]

rose—

[Mr Hammond]

I will give way one more time, to the hon. Member for Na h-Eileanan an Iar (Angus Brendan MacNeil)—and then I will give way to a couple of my hon. Friends.

[Angus Brendan MacNeil]

I am grateful to the Prime—to the Chancellor. In fact, he is indeed a probable future Prime Minister, given that his is one of the serious voices in the current Cabinet. If his wish does not come true in relation to the single market, when does he think the UK Government will U-turn on the issue? Economic gravity is going to take the UK Government in that direction, whether they like it or not at the moment.

[Mr Hammond]

I have just explained to the House—and I am sure that the hon. Gentleman heard—that it would not be legally possible for us to leave the EU and stay in the single market. It is simply not an option.

[Jeremy Quin]

rose—

[Charlie Elphicke]

rose—

[Mr Hammond]

I am happy to give way to my hon. Friend the Member for Horsham (Jeremy Quin).

[Jeremy Quin]

rose—

--- Later in debate ---

[Madam Deputy Speaker]

I should say to the House, for the benefit of new Members, that there is a difference between an intervention in a debate and a point of order. The hon. Lady is being clever in using her wisdom about how the House works, but she knows that that was not a point of order, and that it is not something that I can answer. What she really wants to do is intervene on the Chancellor of the Exchequer.

For the benefit of new Members of the House, let me make it clear that a point of order should not be used to make an intervention that the Chancellor has not taken. The Chancellor is perfectly capable of choosing the interventions that he wishes to take. He has taken many, and I am sure that he will take many more.

[Mr Hammond]

Thank you, Madam Deputy Speaker. I give way to my hon. Friend the Member for Horsham.

[Jeremy Quin]

I am most grateful that the Chancellor is now taking my intervention. May I take him back to the discussion on amendment (l)? About six interventions ago, he was patiently explaining to the shadow Chancellor the risks to cashflows of nationalising all these wonderful businesses and the huge cost to the taxpayer that would result. I hope that the shadow Chancellor has been suitably educated. Will my right hon. Friend also educate the shadow Chancellor on the point that the total amount of our debt will have an impact on our borrowing costs? They are high enough already, but they could get a lot worse. The shadow Chancellor’s friends who run the Greek and Portuguese economies know about high borrowing costs.

[Mr Hammond]

My hon. Friend makes an important point. The shadow Chancellor often talks about borrowing costs being low and about this being an ideal time to borrow more, but if he ever got his hands anywhere near the levers of power, with his programme of massively increased borrowing, we would soon see our debt interest costs soaring. That would mean yet more of our hard-earned taxpayers’ money being paid to the lenders.

Let me summarise where I have got to on Labour’s programme. The shadow Chancellor has a small problem with arithmetic. The Institute for Fiscal Studies found a £2.2 billion arithmetical error in his manifesto costings. We have identified a £90 billion black hole in Labour’s spending plans that would have to be funded by higher taxation on ordinary families, £250 billion of planned borrowing, and £120 billion—and some—for the nationalisation, which would all be added to our debt. So, just as our national debt is about to start falling as a share of GDP, the Labour party wants to add at least £370 billion to the pile.

[Rachel Reeves]

The Chancellor seems to be more interested in talking about what is in the Labour manifesto than about what is in his own Government’s Queen’s Speech. Is that because there is so little about the economy in the Queen’s Speech, or is it because he does not believe in it?

[Mr Hammond]

No; it is because I am about to come to it. The shadow Chancellor talked about his programme, and I wanted to make the simple point that, for all the rhetoric about somebody else paying, it is always the same with a Labour Government: it is always ordinary working people who pay, through higher taxes, higher prices and fewer jobs.

[Several hon. Members rose—]

[Mr Hammond]

I am going to make a little progress.

The truth is that the shadow Chancellor sees failure everywhere, while I see a fundamentally robust economy rebuilt from the ruins of Labour’s great recession. It is an economy that now needs to navigate successful transition out of the EU and into a deep and special partnership with our EU neighbours, and to realise the great potential of a technological revolution ahead, in which British universities and British companies will play a leading role.

I see a country that has achieved great things together since the last time Labour had its hands on the levers of power. In Labour’s last year in office, our economy shrank by 4.3%. In 2016, it grew faster than any major advanced economy bar Germany. Back in 2009, millions feared for their jobs and their futures. At that time, the right hon. Member for Hayes and Harlington predicted that under our plan—[Interruption.] He should listen to this. He predicted that under our plan unemployment would rise by 1.2 million as we suffered a double-dip recession and a decade-long depression. Since then, 2.9 million net new jobs have been created, our employment rate is the highest on record and our unemployment rate is at a 40-year low. In 2009, our deficit was at a post-war high. Since then, we have got it down by three quarters, while also taking 4 million people out of income tax in the last Parliament and cutting income tax for 30 million taxpayers, with the typical basic rate taxpayer paying £1,000 a year less income tax as a result.

[James Duddridge]

May I echo my right hon. Friend’s comments and relate them to Southend? Business in Southend is booming. Businesses are being created, particularly alongside Southend airport in the new business park that the Government have part-funded. We have a success in Southend—this is working there. Would he like to come back to Southend, as he did a number of years ago, to see how business is booming and the impact of his positive policies?

[Mr Hammond]

I am always happy to go to Southend, but the story that my hon. Friend tells is being repeated up and down the country in constituencies represented by Members on both sides of the House.

The shadow Chancellor complains that growth has not benefited the less well-off. That was at the core of his argument today, but he is wrong. The basic state pension is up by £1,250 a year. Under a Conservative Government, income inequality is at a 30-year low. The poorest households in the UK have seen their wages rise more since 2010 than in any other country in the G7 and, thanks to the Conservative national living wage, those in full-time work on the minimum wage have seen their pay boosted by £1,400 a year. He presents our economic success as a bubble that benefits only London and the south-east, but he is wrong again. Today the economy is growing fastest in the north-west, wages are rising fastest in the west midlands, productivity is growing fastest in Northern Ireland, and unemployment is falling fastest in Scotland. That is a good news story across the length and breadth of our United Kingdom, benefiting all the regions and all the nations.

[Stella Creasy (Walthamstow) (Lab/Co-op)]

The figure of £1,400 is what Northern Irish women were having to spend to get an abortion here in England, so it is welcome that the Government are now saying that they will correct this injustice. However, the Chancellor will know, as everyone knows, that the devil will be in the detail. Will he therefore make a commitment on behalf of the Government to meet me and representatives of organisations such as Marie Stopes, the British Pregnancy Advisory Service and the London Irish Abortion Campaign to look at how we can turn this into a reality, so that those women in Northern Ireland who have finally had their voices heard today can use these services as soon as possible?

[Mr Hammond]

I say to the hon. Lady: please read the letter that my right hon. Friend the Minister for Women and Equalities has sent out. We will be giving additional funding to her Department so that she can make a grant to the external organisations that will provide those services. I think that the hon. Lady will be satisfied when she has read the letter and understood the details. If she is not, I will be happy to meet her.

[Robert Jenrick (Newark) (Con)]

Will the Chancellor make one further clarification, because there seemed to be some misinformation during the general election campaign? On tax avoidance, which Government have passed more than 50 measures, taken the base erosion and profit shifting process forward, published one of the world’s first public registers of beneficial ownership and reduced the tax gap to the lowest level in living memory? And which previous Government did precisely nothing?

[Mr Hammond]

My hon. Friend makes a good point. The shadow Chancellor likes to talk about tax avoidance, but the Labour Government did nothing to deal with it—[Interruption.] Well, let me phrase it differently for the right hon. Member for East Ham (Stephen Timms), who takes offence at that. He was a member of that Government, and they left £150 billion on the table. That is how much we have taken through clamping down on tax avoidance and evasion—[Interruption.] And before the shadow Chancellor stands up, I will tell him—he did not know the answer—that under the last Labour Government, the main rate of capital gains tax was 18%. Under this Conservative Government, it is 20%, with a 28% rate on residential property and hedge fund managers.

[John McDonnell]

It was increased under George Osborne and then cut back again. Let me remind the Chancellor of the Financial Times survey that found that the measures on tax evasion and avoidance introduced by Gordon Brown were 10 times more effective than anything that this Government have done.

[Mr Hammond]

Let me do the maths. Hmm, it would be £1.5 trillion that they raise. Perhaps one of my hon. Friends will check down the back of the Treasury Bench in case the previous Chancellor hid that away down there. As usual, the right hon. Gentleman is talking absolute nonsense.

[Jonathan Edwards (Carmarthen East and Dinefwr) (PC)]

Will the Chancellor give way?

[Mr Hammond]

I want to make a little progress, but I will give way in a moment.

I have set out our record, but the British people did not get where they are today by admiring their achievements. We have work to do: we have to negotiate our future relationship with the EU; we have to enhance our global competitiveness through raising our productivity; we have to rise to the challenge of sustaining our public services in the face of demographic pressure; we have to address the needs of our population for affordable routes into home ownership; and we have to show the courage and vision to grasp the opportunities ahead. We will meet those challenges head on, as we have always done, with a plan that builds on the strengths of our economy, not one that denigrates them.

Let me say something about our public services and their funding. We all value our public services and the people who provide them to us. Health and social care, education, roads, local authority services, police, fire and rescue, defence and the many, many other services we enjoy all form part of the vital fabric of our society and contribute to the vibrancy of our communities. The challenge of funding those public services is accentuated by the changing age profile of the population, which necessitates a proper debate about how to make the funding of public services sustainable not just next year, but over the decades of demographic change to come. We have to be clear about the choices and what they mean because there are no free lunches or money trees in the real world, and all decisions have consequences.

There are three ways for the Government to increase spending on public services: higher taxes, higher borrowing or higher growth. Higher taxes have a cost in terms of business investment, economic growth and take-home pay. Conservatives are instinctively in favour of keeping taxes as low as possible so that business can continue to create high-quality jobs and hard-working people can keep more of the money that they earn. That is why we reject Labour’s manifesto plan, which would, according to the IFS, take taxation to its highest ever peacetime level. The right hon. Member for Hayes and Harlington is not listening, but—[Interruption.] Pay attention. If he wants to make the case for higher taxation to fund public services, will he at least make this a grown-up debate? Will he at least ask voters whether they want to pay higher taxes to fund public services, not whether they would like someone else to pay higher taxes? As Ed Balls reminds us, in the real world, it is ordinary people who pay.

When we already have an eye-watering amount of debt, higher borrowing makes our economy vulnerable to future shocks. With £1.7 trillion of national debt outstanding and an annual interest bill of £50 billion, even at the current low rates, we should be reducing debt, not increasing it. However, borrowing means something else, too. It means that we are asking the next generations—our children and our grandchildren—to consume less in their lifetimes to pay for our consumption today. That is simply not fair; it is the opposite of sustainable.

[Mark Pawsey]

The Chancellor rightly mentions the interest bill. Will he tell us what would happen to interest rates if the Opposition’s policies were introduced? What would be the impact on the average family’s income?

[Mr Hammond]

As I have already said, if it were ever to look like the shadow Chancellor was anywhere near having his hand on the lever of power, I suspect that his programme, given what we know about his values and principles around the management of the economy, would lead to a pretty sharp rise in interest rates.

We must continue the job of getting our public finances back in order, over a sensible period of time, so that we are living within our means. The shadow Chancellor referred to the decision in my first autumn statement to push back the date on which we will reach fiscal balance. I made that decision to protect our economy during a period of uncertainty due to our exit negotiations from the European Union, therefore giving ourselves a little more headroom to respond should the economy need support. I would have thought that the right hon. Gentleman welcomed that measure.

The only fair and sustainable way to fund better public services, higher real wages, and increased living standards—[Interruption.] I say to the Opposition Front-Bench team that that is absolutely not the way to do it. The only fair and sustainable approach is to increase economic growth through higher productivity. Our plan will support our public services and living standards.

[Jonathan Edwards]

Based on the rosy picture that the Chancellor has been endeavouring to portray this afternoon, will he explain why Britain has the worst-performing economy in the G7 under his watch?

[Mr Hammond]

The hon. Gentleman is wrong. Last year, the British economy was the second-fastest growing in the G7 after Germany. In the year before that, our economy was the second-fasting growing after the United States.

[Kirsty Blackman (Aberdeen North) (SNP)]

And this year it is at the bottom.

[Mr Hammond]

Well, we are only one quarter into this year. I do not want to get techy, but the first quarter data are always subject to the largest revision, so let us wait and see. The OBR maintains its forecast for economic growth of 2% this year.

[Alex Burghart (Brentwood and Ongar) (Con)]

rose—

--- Later in debate ---

[Mr Hammond]

I will give way to my hon. Friend the Member for Brentwood and Ongar (Alex Burghart) and then to my hon. Friend the Member for Dover (Charlie Elphicke). I will then make a bit of progress.

[Alex Burghart]

The Chancellor went to school in my constituency and will be aware that my constituents are concerned that we maintain our excellent record on job creation. What would be the impact on job creation of a sizeable hike in corporation tax—say to 26%?

[Mr Hammond]

As I have already said, it is clear that reducing the corporation tax rate has led to a flow of investment and the creation of millions of new jobs, which I welcome. That is the way forward for this country, not the obsolete 1970s policies of the Labour party.

[Charlie Elphicke]

The Chancellor is being incredibly generous in taking interventions. Obviously we will be leaving the European Union in two years’ time. He hopes for a transitional deal, and we all hope that it goes smoothly and well, most of all on the Dover frontline. Does he agree that it is important that Her Majesty’s Revenue and Customs and the Government are ready on day one for the challenge and for every eventuality?

[Mr Hammond]

My hon. Friend is absolutely right. We do not know what the outcome of our negotiations with the European Union will be, but we have to be prepared for every possible eventuality, particularly at the port of Dover. I hope that when hon. Members across the House look at the great repeal Bill, which will prepare us to deal with whatever situation we find ourselves in in March 2019, they will think carefully about that situation.

[Several hon. Members rose—]

[Mr Hammond]

I have given way a great deal and I need to make some progress.

Our plan will build an economy that shares prosperity and opportunity across all parts of the United Kingdom. It will do that through a Brexit deal for jobs and prosperity that creates a platform for growth, and by tackling our long-standing weaknesses of underinvestment, inadequate skills and regional disparities. Our national productivity investment fund is part of a commitment of nearly half a trillion pounds of public investment over the next five years. T-levels and extended tuition hours will overhaul our provision of technical education. Our modern industrial strategy will tackle deep-rooted regional disparities in productivity, which is key to our economy’s future success. Higher productivity raises incomes and living standards. Higher productivity will allow us to go out and compete in the world. Higher productivity assures the sustainability of our public services. It was what I promised to focus on when I became Chancellor. It was at the heart of my autumn statement and my spring Budget, and it will be there again when I deliver my autumn Budget.

Our plan for Britain’s economy is a measured and practical plan to restore our public finances to balance over a timescale in which we have the flexibility to support the economy and invest in our future, to negotiate a Brexit deal that supports British business to go on creating jobs and prosperity as we leave the European Union, and to drive productivity to fuel economic growth that supports quality public services and rising living standards. We will do that through investment in infrastructure and skills, by ensuring the flow of capital to growth sectors, by promoting R and D in our businesses and our universities, and through an industrial strategy that will at last begin to tackle the blight of regional disparity. We are a Government committed to delivering that plan, doing the hard miles, negotiating the right deal, taking the tough choices, eschewing the easy answers favoured by the Opposition, and taking the hard decisions that will set Britain on course to seize the prizes and achieve a brighter, global future. I commend the Queen’s Speech to the House.

[Several hon. Members rose—]

--- Later in debate ---

[Kirsty Blackman]

The national living wage that has been put in place by the Conservatives does not provide enough to live on. It does not matter how generous it is compared with other places; what matters is whether people can live on it.

[Mr Philip Hammond]

The hon. Lady says that she wants to see a targeted increase in spending. Can she confirm that the Scottish Government will use their powers under the Scotland Act 1998 to raise taxes in Scotland to increase spending in Scotland?

[Kirsty Blackman]

We have already done so.

In this time of mass instability, we need the UK Government to support a monetary policy that encourages investment in places that will create direct growth, and quantitative easing has not achieved that since the first wave was put in place. That matter needs to be considered as a matter of urgency.

We need a UK Government who will fight for single market membership to ensure that all companies in the UK have the potential to grow, export and create skilled jobs.