Oral Answers to Questions

Lord Hammond of Runnymede Excerpts

Tuesday 19th July 2016 Commons Chamber

[Kevin Brennan (Cardiff West) (Lab)]

8. What recent assessment he has made of the economic effect of the outcome of the EU referendum.

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

While it is clear that the referendum decision represents a shock to the UK economy, thanks to the actions taken over the past six years by my predecessor, the economy is well placed to respond. I will work closely with the Bank of England to provide immediate stability and to maintain confidence in the fundamental health of the UK economy as we prepare for the autumn statement. As further post-referendum economic data are published, the economy’s short-term response to the Brexit decision will become clearer. If further measures are required, they will be announced in the autumn statement.

[Philip Boswell]

Given colleagues’ anecdotal evidence of capital flight, the recent vote to leave the EU has plunged the economy into volatility and uncertainty. The Conservative Government have been slow to act and have yet to provide an economic strategy, so will the Chancellor tell the people of the UK when they will get an insight into the scale of capital flight following the Brexit vote?

[Mr Hammond]

The hon. Gentleman is right to say that the shock of the exit vote at the referendum has created short-term turbulence in the UK economy, but we are well placed to manage it. In answer to his question about data, a series of data publications during the late summer and autumn will inform a proper response at the autumn statement.

[Owen Thompson]

The Conservative Government’s so-called long-term economic plan has resulted in their failing on key economic indicators and missing the targets that they set for themselves. Will the Chancellor tell the Chamber whether we will witness an end to this disastrous era of austerity?

[Mr Hammond]

The UK continues to run a very large fiscal deficit by international standards and we will have to address that deficit. We have already announced that we will no longer seek to bring the budget into balance by 2019-20, but that does not mean that we can go forward without a clear framework for achieving fiscal balance over an appropriate timeframe. We will address that issue in the autumn statement.

[Ian Blackford]

I welcome the new Chancellor to his place and wish him all good luck—for all our sakes, he is going to need it. A Deloitte survey of 132 FTSE 350 chief financial officers found that nearly two thirds of them expect revenues to fall. As the Financial Times puts it, business confidence is now lower than at the time of the collapse of Lehman, with 82% of companies expected to reduce capital spending. This crisis has been caused by Brexit. What tangible steps will the Chancellor take to restore confidence? Don’t just give us waffle—give us real plans.

[Mr Hammond]

The hon. Gentleman is right; the figures that he quotes are right. The evidence is anecdotal in the early stages, as he would expect. As he would also expect, the initial response to this kind of shock must be a monetary response delivered by the Bank of England. In announcing that interest rates were not to be lowered last week, the Governor made it clear that the Bank is developing a monetary package that will be announced in due course.

[Kevin Brennan]

The Chancellor’s certainty that the purchase of ARM by SoftBank is good for the UK following the EU referendum is not shared by its founder Hermann Hauser, who said it means that

“determination of what comes next for technology will not be decided in Britain any more, but in Japan”.

Why does the Chancellor think that the company’s founder is wrong?

[Mr Hammond]

I suspect that the founder of the company has not had the benefit of discussions with the acquiring company. I have met the leader of the current management team, who are wholeheartedly supporting the purchase by SoftBank. We have achieved some very hard guarantees—these were volunteered without our having to extract them—about the future autonomy of the company, headquartered in the UK, and about its commitment to double the number of UK employees over the next five years. What became very clear from a discussion with the founder and CEO of SoftBank is that it firmly believes Cambridge will be the global centre for developing the internet of things and ARM will play a key role in developing that industry.

[Mr Andrew Tyrie (Chichester) (Con)]

I warmly welcome the Chancellor to his new role. It is probably the job he always wanted—unless of course he wants eventually to move next door. I note that to most questions so far he has said he is going to wait until the autumn statement, so I am hoping I get an answer to this one a bit earlier. Sticking to the fiscal surplus rule has rightly been scrapped by the previous Chancellor, and the automatic stabilisers have been allowed to kick in. The higher deficit implied by that decision will have to be plugged sooner or later. From 2010, the Chancellor’s predecessor planned an 80% consolidation of that to come from spending, with only 20% coming from tax. [Interruption.] There is a question coming, if hon. Members can be patient. Does the Chancellor intend to stick to his predecessor’s target of 80:20 or is he going to vary it?

[Mr Hammond]

My right hon. Friend will know that the surplus rule always came with the caveat that if the Office for Budget Responsibility forecast four rolling consecutive quarters of less than 1% annualised growth, the target would be suspended. The consensus among pretty much all forecasters is that that is likely to be what they forecast this autumn statement, so my predecessor’s announcement was merely pre-empting something that almost everybody expects to happen. I am afraid to tell my right hon. Friend the Member for Chichester (Mr Tyrie) that how we are going to respond over the longer term to the resulting deficit will be set out at the autumn statement.

[Mr Speaker]

In the hope that the hon. Gentleman will provide a masterclass in the asking of a question, I call Mr Jacob Rees-Mogg.

[Mr Jacob Rees-Mogg (North East Somerset) (Con)]

Thank you, Mr Speaker. I congratulate my right hon. Friend on his appointment. I accept that that is not a question but a statement. May I go on to point out to him that Brexit provides a great opportunity? The £24 billion purchase of ARM by SoftBank is a sign of that. The trade deals that are being offered are a sign of that. Will he grasp this fantastic opportunity and lead us through to the “broad, sunlit uplands”?

[Mr Hammond]

My hon. Friend rightly points to the fundamental strengths of the UK economy. Britain is still one of the most attractive places in the world to do business, to start a business and to invest money, and it is right that we should focus on those positive aspects. But it is also right that we are conscious of the short-term turbulence that we will inevitably experience and of the need to manage that carefully over the next 18 months.

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

I, too, welcome the Chancellor to his place. As has been mentioned, SoftBank has made a huge investment in a fantastic Cambridgeshire business. It has done that because Cambridgeshire is at the forefront of technology and innovation. The company has said, as the Chancellor has mentioned, that it is going to double the workforce. Cambridgeshire can continue to attract investment such as this only if we have the infrastructure to support it, so will he confirm that he will be committed to infrastructure investment in roads such as the A10?

[Mr Hammond]

My hon. and learned Friend is absolutely right; raising the UK’s productivity is the long-term challenge of our economy, and infrastructure investment is one of the ways we do that. I draw attention to another point: the success of Cambridge today, not only as a centre of academic excellence but as an innovation hub of global importance, has arisen because of the very foresighted decision of Cambridge City Council many years ago to allow development around the city and the creation of the Cambridge business park, which is now a world magnet for investment.

[Kit Malthouse (North West Hampshire) (Con)]

I, too, congratulate the Chancellor on his ascension. One of the key flows of capital that is likely to increase post-Brexit is the £300 million or so that is invested every year in gilts by those seeking a UK investor visa. This is of little productive value to the UK economy. I wrote to the previous Treasury team suggesting that this money would be better invested in drug discovery but, amazingly, I got the brush-off. May I impose myself upon the Chancellor of the Exchequer and ask for a meeting to explain the merits of requiring these people to invest in the productive part of the UK economy?

[Mr Hammond]

I anticipate that there will be a need to fund UK Government gilt issuance for the foreseeable future, but I understand my hon. Friend’s point and I would be happy to discuss it with him.

[Mr Geoffrey Robinson (Coventry North West) (Lab)]

Mr Speaker, I am sure you will allow me to extend my congratulations to the Chancellor. He will remember that I welcomed him as a very fresh-faced Back Bencher to the 1997 Budget, when he already showed great promise, which he has more than fulfilled now. Does he agree that the major current threat—there are many—from Brexit is in fact the interruption to investment in British industry and in Britain, and therefore that the purchase by SoftBank of ARM is to be welcomed? In view of the undertakings that ARM has given, that is the best antidote to the prevailing doubts.

[Mr Hammond]

The hon. Gentleman is right and I thank him for his kind words. We need to remind ourselves that we are running a 6.9% of GDP external account deficit, and that has to be funded somehow. It has been funded by an extraordinarily successful run of foreign direct investment into the UK—more than into any other country in the European Union. That has slowed as uncertainty around the referendum has been created. We now need to generate the confidence to allow it to resume.

[Rebecca Long Bailey (Salford and Eccles) (Lab)]

I take this opportunity to welcome the Chancellor to his post, and also the Chief Secretary and other new Treasury Ministers. There is a real concern that the uncertainty surrounding Brexit is forcing many businesses and international banks to consider moving their core operations and the jobs that go with them overseas. Banks in particular make use of their EU banking passport arrangements to operate within the UK, so what measures will the Chancellor be taking to avoid the loss of those arrangements?

[Mr Hammond]

The hon. Lady is right to say that passporting is an important feature of the arrangements we have with the European Union. In the negotiations that we will have in the future with the European Union about Britain’s future relationship with it, protecting those rights for our very important financial services sector, which I should emphasise is not just about London—two thirds of financial services jobs in this country are outside London—will be a very important part of those negotiations.

[Rebecca Long Bailey]

Moving back to the issue of ARM, analysts this week have predicted a raft of foreign takeovers linked to the fall in the value of the pound following Brexit. The Chancellor stated this week that Britain is open to foreign investment, barely a week after the Prime Minister wanted to oppose such takeovers, so has the Government’s approach to securing new investment been reduced in the space of a week from an ambiguous industrial policy to merely slashing corporation tax and hoping for the best?

[Mr Hammond]

No. The UK remains very much open to foreign investment, but we are very clear that we want investors who will invest in British technology, British jobs and businesses headquartered, based and directed from the UK. We are not open to asset-strippers.

[Amanda Milling (Cannock Chase) (Con)]

3. What steps he is taking to support infrastructure development in the west midlands.

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[Maria Caulfield (Lewes) (Con)]

5. What fiscal steps he is taking to support businesses.

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

The Government are committed to ensuring that Britain has a competitive corporate tax system that encourages innovation and business investment. We have already announced a reduction in corporation tax to 17%—the lowest rate in the G20—and we are reducing the business rates burden by £6.7 billion. The Government have also increased the rate of research and development tax credits and set the annual investment allowance at its highest ever permanent level.

[Maria Caulfield]

I thank the Chancellor for his response and congratulate him on his new role. Many small businesses in my constituency face difficulties. The Costcutter on Claremont Road in Seaford employs four people, but the store is too large to benefit from the Government’s extension of small business rates relief to properties whose rateable value is less than £12,000. Will the Chancellor therefore consider reintroducing the retail rate relief, which last year helped such businesses with a £1,500 discount on their rates bill?

[Mr Hammond]

The retail scheme was a temporary arrangement until the current proposals were fleshed out fully, so I am afraid that we will not be able to reintroduce it. Many businesses that benefited under the old, temporary retail scheme will benefit from the permanent scheme that we have introduced to reduce the burden of business rates, but I am afraid that some may slip through the net.

[Danny Kinahan (South Antrim) (UUP)]

20. May I congratulate the Chancellor and his team on their appointment? On supporting businesses, PricewaterhouseCoopers yesterday said that growth in Northern Ireland is likely to remain at zero, the worst in the United Kingdom. Will the Chancellor put in place some mechanisms—he has already discussed enterprise zones such as Belfast international airport—to help us?

[Mr Hammond]

One of our priorities, in the interests both of social fairness and of improving the productivity of the economy, will be to address the huge—one might say almost grotesque—disparities between economic performance in the different regions and nations of the UK. That will be a central part of our productivity agenda, which will be a key cornerstone of our long-term economic plan.

[Helen Whately (Faversham and Mid Kent) (Con)]

Since the referendum, some businesses in my constituency have put investment and recruitment on hold due to uncertainty. They welcome the policies that my right hon. Friend has mentioned. I also welcome the indication that he will look at further fiscal stimulus in the autumn statement, but that is some time off. May I press him to reveal a bit more about the options that he might consider to support the economy and businesses?

[Mr Hammond]

I am afraid that I shall not be tempted by my hon. Friend to speculate on the content, or even the date, of the autumn statement. What I can say is that the Bank of England is well equipped with the tools necessary to deal with the short-term needs of the economy following the shock of the referendum, and the autumn statement is well placed, after the batch of economic data that will be published this autumn, to provide a longer-term response.

[Siobhain McDonagh (Mitcham and Morden) (Lab)]

I welcome the right hon. Gentleman to his new position. He may recall that his predecessor cut corporation tax for business to allow the living wage to be introduced. As we speak, Marks and Spencer is consulting on cutting overtime payments and Sunday and bank holiday pay, in order to do just that. What will the Chancellor do to ensure that my constituent, Mrs M, does not lose £2,000 a year because of the introduction of the living wage?

[Mr Hammond]

Very clearly, the intention of the introduction of the living wage was not to make people worse off; it was precisely to support the living standards of those on the lowest wages. I will look carefully at the case that the hon. Lady has drawn to my attention.

[Scott Mann (North Cornwall) (Con)]

I welcome the Chancellor to his post. A report published in March illustrated that someone who lives in a deprived area is 50% less likely to start a business on a self-employed basis, and it highlighted the barriers they face to starting such a business. Will my right hon. Friend consider the recommendations in the report and work with me to reverse that trend?

[Mr Hammond]

I am very happy to do that. One of the great strengths of the UK economy is our innate entrepreneurialism. We need to foster that, and we need to make sure that it works in all areas, regions and nations of the United Kingdom.

[Stewart Hosie (Dundee East) (SNP)]

May I congratulate the Chancellor and the Chief Secretary to the Treasury on their new roles? The problem we have seen over many years is that fiscal policy occasionally works against the interests of business. Innovation funding has been converted from grants to loans, and there has been a cut during this Parliament to the UK Trade & Investment budget. I ask the Chancellor, who is new and fresh to the job, to look again at those policies, in particular, to make sure that innovation and export support funding is aligned with innovating and exporting businesses.

[Mr Hammond]

I assure the hon. Gentleman that I will be looking comprehensively at all areas of the portfolio as I prepare for the autumn statement, in the context of the economic situation that we face post this shock.

[Stewart Hosie]

I welcome that, and I ask the Chancellor to look again at one other thing. One of the problems that business and the economy face is a lack of demand. May I ask the Chancellor to look again not just at headline corporation tax cuts, but at an intelligent use of allowances—for example, the reintroduction of industrial buildings allowance—to build demand for construction now and long-term supply side capacity to boost what we do, particularly in terms of exporting, in the future?

[Mr Hammond]

I assure the hon. Gentleman that when we look at the corporate tax environment, we will not just be looking at headline rates. We will be looking at the marginal effective rates of corporate tax for investors in the UK, because that is what we want to target—more investment, more jobs and the creation of more wealth in the UK.

[Michelle Donelan (Chippenham) (Con)]

6. What steps the Government are taking to reform the business rates system.

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[Alberto Costa (South Leicestershire) (Con)]

T1. If he will make a statement on his departmental responsibilities.

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

My priority is to ensure the stability and prosperity of the UK economy. That means a combination of near-term measures to respond to the shock that the economy has received, and longer-term measures to manage the impact of transition out of the EU and to reposition the UK economy to maximise its potential in the new circumstances we will then face.

[Alberto Costa]

I add my congratulations to the new Front-Bench team. Leicestershire County Council is one of the lowest funded local authorities in the country. The council is reaching the point where it may not be able to meet all its statutory obligations. Given that, will my right hon. Friend help to arrange an urgent meeting between his counterparts in the Department for Communities and Local Government and council officials to discuss this matter?

[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?

[Mr Hammond]

Since this is our first outing together, let me take the opportunity to make it clear to the hon. Gentleman that I do not believe in the money tree; I am clear that we have to pay our way in the world. We have a very large fiscal deficit that we have to address, but while doing that we also have to ensure we maximise the productive capability of the UK economy. That means targeting our investment into skills—that does largely mean young people—and infrastructure, and encouraging capital formation in private businesses.

[Huw Merriman (Bexhill and Battle) (Con)]

T2. Last year, the former Chancellor came to Hastings and committed to extending high-speed rail from Ashford to Hastings and Bexhill. This investment is the key to delivering local housing, a labour market and business expansion. I welcome the Chancellor to his position and ask for his commitment to this vital project.

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[Patricia Gibson (North Ayrshire and Arran) (SNP)]

T6. Even excluding cuts to welfare and capital spending, the Office for Budget Responsibility forecasts that funding for day-to-day public services will fall between 2009-10 and 2019-20 by the equivalent of about £1,800 per head, while between 2014-15 and 2019-20, day-to-day spending per head is forecast to fall by £1,000 per head. What plans does the Chancellor have to reverse this dangerous trend?

[Mr Hammond]

I have no plans at the moment to reverse the spending plans set out by my predecessor. Any such plans will be announced in the autumn statement. I would say to the hon. Lady, however, that Scotland now has devolved taxation and spending powers and can consider addressing the balance within its own competence.

[Robert Jenrick (Newark) (Con)]

T5. The Chancellor got his first job in my constituency, so it is a pleasure to welcome him to his latest job. The borough of Rushcliffe has now produced two excellent Chancellors of the Exchequer. In truth, however, Britain has not had a Chancellor since Nigel Lawson who has taken tax simplification seriously. As we prepare the economy for Brexit, will my right hon. Friend make it one of his priorities and consider, in the eight months before the next Budget, creating a commission on tax simplification?

[Tulip Siddiq (Hampstead and Kilburn) (Lab)]

T7. As a proud Londoner, I believe that we must have greater control over taxes and public services, especially in the light of Brexit. I know that my friend Sadiq Khan has ambitious plans for London. Will the Chancellor commit to an initial devolution deal for London in his first autumn statement?

[Mr Hammond]

I am afraid that I will have to disappoint the hon. Lady, as I cannot commit to anything in the autumn statement at this stage, but I am meeting the Mayor of London later this week and look forward to a constructive discussion with him.

[Mrs Theresa Villiers (Chipping Barnet) (Con)]

I congratulate the Chancellor and his new team. Do they agree that we need a broad coalition of countries around the world if we are to ensure that big businesses start to pay their taxes? Will he give his full support to the work in the OECD, the G20 and the G7 that started at the G8 summit at Fermanagh in 2013?

[Mr Hammond]

Yes, as one of my colleagues has already said, if we are to tackle the issue of profit shifting by global corporations, we have to do it on a global basis. This is an important topic on the agenda of the G20 Finance Ministers meeting this weekend in Chengdu, China, in which I intend to take a full part.

[Ms Margaret Ritchie (South Down) (SDLP)]

T8. What positive consideration will the new Treasury team give to the implementation of fiscal flexibilities to assist and underpin our tourism industry?

[Mr Hammond]

We will look in the autumn statement at all sectors of the economy, and where we believe that additional fiscal support is necessary, we will announce appropriate measures.

[Charlie Elphicke (Dover) (Con)]

I welcome the Chancellor to his place. Does he agree that big business needs to change and that large multinational companies, including Amazon, Google and Starbucks, have a duty to put something back and pay off a debt to their fellow citizens, and a responsibility to pay their taxes?

[Mr Hammond]

Yes.

[Kerry McCarthy (Bristol East) (Lab)]

T9. In a new report on living standards, poverty and inequality in the UK, the IFS finds that young people in their twenties are still earning 7% less than before the financial crisis, yet we know that the pressures on their incomes, particularly housing costs and student fees, are higher than ever before. What are the Government going to do to help this generation that is being left behind?

[Mr Hammond]

We have already had this question from the shadow Chancellor. Of course, we have introduced the national living wage, which will make a difference to people on low earnings at the bottom of the income scale. Interestingly, the hon. Lady perhaps hints at something else—questions of inter-generational fairness. The Prime Minister signalled early on in her tenure of office that that is one of the areas that she wishes to address.

[Craig Mackinlay (South Thanet) (Con)]

I congratulate my right hon. Friends and indeed the entire new Treasury team.

With some softening of the market in house sales, will my right hon. Friend commit to looking at the data and consider whether the 3% additional stamp duty on second property purchases is necessary, desirable or indeed raises any additional revenue at all?

[Mr Hammond]

I can certainly commit to looking at the data, and I can tell my hon. Friend that my approach to taxation is that it is there for a simple purpose: to raise revenue for the Exchequer. I expect the taxes we put in place to achieve that.

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

T10. In the Queen’s Speech, the Government said that they will continue to support the northern powerhouse. Why, then, of the 15 infrastructure projects with the most public funding is only one in the north?

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[Ben Howlett (Bath) (Con)]

As part of the west of England devolution deal, business rates will be devolved to a combined authority. Will my right hon. Friend commit to full implementation of the previous deal on business rates and recognise the importance of this deal to the regional economy?

[Mr Hammond]

We have no plans to announce any changes to the business rate plans that are already in place.

[Rachel Reeves (Leeds West) (Lab)]

The Government have announced that they are going to give £375,000-worth of banking fines to the Jo Cox fund that was set up by her family and friends to support charities that mattered to her. That fund has already raised £1.5 million in just a month. May I welcome the Government’s decision to allocate banking fines to support that fund? Will the Chancellor join me in encouraging people to give to the fund, which supports the White Helmets, Hope Not Hate and the Royal Voluntary Service?

[Mr Hammond]

I am delighted to join the hon. Lady in making such an appeal. I am glad that the Government have been able to support this very valuable fund in memory of Jo Cox, and I am sure that members of the public, seeing the Government contribution, will now want to redouble their efforts to support it.

[Rebecca Pow (Taunton Deane) (Con)]

I add my welcome to the Chancellor and the new Treasury team.

There is a great need in the south-west to provide more high-skilled jobs to boost productivity. In order to do that, we need to attract the right businesses. In this post-EU world, could the Chancellor kindly give his commitment, much praised so far, to the A358 upgrade for those in Somerset?

[Hannah Bardell (Livingston) (SNP)]

Given the Supreme Court’s ruling earlier this year, does the Chancellor have plans to review the Financial Conduct Authority’s failure to enforce the prospectus rules in the Lloyd’s enhanced capital notes case? One of my constituents has been fighting hard for pensioners, who have lost over £3.3 billion.

[Mr Hammond]

As indeed have constituents of mine, so I am familiar with this case from the point of view of a constituency MP. I have not yet had a chance to look at it from the point of view of a Treasury Minister, but I promise the hon. Lady that I will do so.