Tuesday 17 July 2018
Fiscal Risks and Managing Fiscal Sustainability Report
Today sees the publication of two reports which underscore the need for continued fiscal responsibility: the Office for Budget Responsibility’s (OBR) 2018 Fiscal Sustainability Report (FSR) and the Government’s report on Managing Fiscal Risks [CM 9647]. The publication of the FSR fulfils the OBR’s legal obligation to publish an analysis of the sustainability of the long-term public finances and an assessment of the public sector balance sheet at least once every two years. Managing Fiscal Risks fulfils the Government’s obligation to respond to the OBR’s 2017 Fiscal Risks Report (FRR). These reports have been laid before Parliament today and copies are available in the Vote Office and Printed Paper Office.
These reports come at a turning point for the public finances. The Government have made significant progress in repairing the public finances over the past eight years. The deficit has been cut by over three quarters from its post-war peak of 9.9% of GDP in 2009-10 to 1.9% in 2017-18. The debt-to-GDP ratio is now forecast by the OBR to have peaked last year and to begin its first sustained fall in a generation from this year.
Both reports illustrate the long-term pressures and risks to the public finances, underscoring the importance of locking in this hard-won progress and continuing to reduce debt. As analysis by international experts and the OBR’s own fiscal stress test has shown, Governments with high levels of debt are more vulnerable to shocks and have less room to use fiscal policy to mitigate their impact on the economy. Moreover, leaving Government debt at current levels would see the burden of servicing that debt rise to levels not seen since the mid-1980s if interest rates normalise in the way assumed in the OBR’s long-run projections. This would pass an unacceptable burden on to the next generation. The Government are therefore committed to continuing to reduce debt as a share of GDP.
The 2018 FSR projection shows that, left unaddressed, demographic change and non-demographic cost pressures on health, pensions, and social care would push the debt-to-GDP ratio to over 280% of GDP by 2067-68. One of the most important drivers of the long-run fiscal outlook in the FSR is health spending, which the OBR projects will rise from 7.6% of GDP in 2022-23 to 13.8% in 2067-68 in the absence of action to increase productivity and contain costs. While this is partly explained by population ageing, most of the projected increase is due to non-demographic cost pressures—including the low productivity of the health sector relative to the rest of the economy; increases in chronic conditions; and improvements in technology and medical research leading to the provision of new drugs and treatments.
The Government recognise that the NHS will need additional resources to help meet these pressures. In June, the Prime Minister announced that the NHS in England will receive an increase in funding over the next five years that equates to over £20 billion a year more in real terms by 2023-24. The Government also recognise the need for action being taken to address long-term cost drivers in health. The final settlement will be confirmed at a future fiscal event, subject to an NHS 10-year plan that delivers the efficiency, productivity, and performance improvements necessary to help address the long-term cost pressures highlighted by the OBR. The Government will fund this five-year commitment in a responsible way, while continuing to meet its fiscal rules and reduce debt. As the Prime Minister has said, this will be partly funded by money that we will no longer spend on our annual membership subscription to the European Union after we have left. In addition, across the nation, taxpayers will need to contribute a bit more in a fair and balanced way to support the NHS we all use.
The Government are also determined to tackle the other risks and pressures facing the public finances, to lock in the hard-won progress we have made in reducing borrowing and getting debt falling. The OBR’s 2017 Fiscal Risks Report provided the UK’s first ever survey of the potential risks to the public finances and was recognised by the IMF, OECD, and others as the most comprehensive report of its kind and the only one produced by an independent body. By publishing our response today, the Government invite Parliament and the public to hold us to account for the responsible management of those risks.
Managing Fiscal Risks shows how the Government are tackling these risks as we continue to repair the public finances for the benefit of current and future generations—following our balanced approach to the public finances, getting debt falling while investing in our vital public services and keeping taxes as low as possible.
The report sets out the specific steps the Government are taking to mitigate key sources of risk identified by the OBR. These include actions to reduce the likelihood and cost of financial crises, adapting the tax system to a changing economy, improving the sustainability of the state pension in the light of rising longevity, tightening controls over the issuance of loans and guarantees, and managing the Government’s inflation exposure by considering the appropriate balance of index-linked and conventional gilts.
It also highlights that in the long run, boosting productivity growth would accelerate the return to fiscal sustainability and alleviate pressures on taxpayers and public services. The Government are taking forward a comprehensive strategy for boosting productivity based on supporting long-term investment in physical, human and intellectual capital.
Supporting the vision set out in the modern industrial strategy, the Government are increasing investment in key productivity-boosting infrastructure; The National Productivity Investment Fund will provide £31 billion of additional investment in areas critical to improving productivity and £1 billion in improving the UK’s digital infrastructure. We have increased public support for R&D to its highest level in 30 years and are committed to increasing public and private investment in R&D to 2.4% of GDP by 2027.
The Government are also committed to making sure that Britain is the world’s most attractive location for private investment. We are supporting UK businesses by delivering a competitive tax system that supports growth and investment—including by reducing the corporation tax rate from 28% to 19% today, the lowest in the G20.
Building human capital through strengthening education and training is a priority for the Government. We are taking action to transform technical education and help prepare people for the high-skilled jobs of the future, by investing in apprenticeships through the introduction of the apprenticeship levy, introducing a national retraining scheme, and introducing T-levels, which will mean that all 16-18 olds have a choice of technical and academic routes of equal status and quality.
These OBR reports and the Government’s Managing Fiscal Risks report keep the UK at the frontier of fiscal management internationally and demonstrate the Government’s commitment to fiscal transparency and accountability. No other Government are so open about the risks to the public finances or more determined to manage them responsibly for the benefit of current and future generations.
Combat Air Strategy
On 21 February 2018, I informed the House that the Ministry of Defence (MOD) would produce a strategy for the combat air sector. Development of the strategy has drawn heavily on expertise from across defence, wider Government, academia, think-tanks, industry and international partners. The approach adopted is driven by the developing themes of the modernising defence programme and the recent review of defence’s contribution to national economic and social value conducted by the hon. Member for Ludlow (Philip Dunne).
Defence of the UK, protection of our people and our contribution to securing the rules-based international order requires us to deter adversaries by having the capability and the will to use decisive force to deliver our defence, foreign policy and economic objectives. The threats we face are evolving and proliferating ever more rapidly. World-class combat air capability allows us to maintain control of the air both at home and around the world.
The UK combat air sector provides the capability to underpin our operational advantage and freedom of action . It also makes a significant contribution to the UK economy and our international influence. The UK is a global leader in combat air, with cutting-edge military capability underpinned by world-class industrial and technical know-how.
The UK combat air sector has an annual turnover of over £6 billion and directly supports over 18,000 highly skilled jobs across the UK. It supports over 100,000 jobs in the supply chain and more than 2,000 companies across the UK. The UK is the world’s second largest exporter of defence equipment with defence aerospace representing over 80% of the value of these exports. We are at the heart of a number of key international programmes, including F-35—the largest defence programme in the world. Our position was secured through world-leading intellectual property, understanding, innovation and industrial capability. As we leave the EU, we will continue to seek partnerships across Europe and beyond to deliver UK, European and global security. To do this we must retain access to our proud industrial base. The UK’s combat air sector is therefore critical to the UK’s prosperity, our global Britain outlook and our ability to deliver the best capability to the front line.
The future of the UK’s combat air sector is, however, not assured. There has been a gap between major combat air development programmes and a clear indication of future UK military requirements is required to stimulate the research and development investment necessary to refresh UK intellectual property.
Today I can announce the publication of the UK combat air strategy. The strategy defines a clear way ahead to preserve our national advantage and maintain choice in how it is delivered. The MOD will work with wider Government, industry and international partners to deliver the strategy by taking the following steps:
The MOD will continue to invest in upgrading Typhoon to maintain its world-class capabilities for the coming decades.
The MOD will provide investment in key UK design engineering skills and a means to UK combat air strategy generate UK intellectual property by implementing the future combat air system technology Initiative. The initiative was established by the 2015 strategic defence and security review and builds on recent UK technology investment.
The MOD will initiate the UK’s capability acquisition programme to define and deliver the future capabilities required when Typhoon leaves service by 2040. An initial acquisition decision will be made by the end of 2020.
UK Government and industry will work together to achieve a more open and sustainable industrial base which invests in its own future, partners internationally and breaks the cycle of increasing cost and length of combat air programmes.
The UK will take a strategic approach to key combat air decisions. This will maximise the overall national value the UK derives from the sector; balancing military capability, international influence, economic and prosperity benefits.
Effective international partnering in combat air is fundamental to the delivery of our national goals and management of cost. The UK will work quickly and openly with allies to build on or establish new partnerships to define future requirements and how they could be delivered in a mutually beneficial manner.
By preserving our ability to maintain operational advantage and freedom of action, the strategy will ensure we have greater choice in how we deliver future capabilities and are able to maximise the economic and strategic benefits of future combat air acquisition programmes.
A copy of the combat air strategy has been placed in the Library of the House.
I will report annually to Parliament on progress in implementing the strategy.
 The ability to find and maintain an edge over potential adversaries, both to increase the chances of our success in hostile situations and to increase the protection of the UK assets involved, especially our people.
 The ability to determine our internal and external affairs and act in the country's interests free from intervention by other states or entities, in accordance with our legal obligations.
Environment, Food and Rural Affairs
Surface Water Management Action Plan
Surface water flooding happens when intense rain from storms overwhelms local drainage capacities. It is caused by short heavy rainstorms, tends to affect localised areas and is more difficult to forecast than flooding from rivers and the sea.
Managing surface water can be complex because it is difficult to forecast which areas the storms will affect, to understand the routes the water will take when it falls, and because there are many parties with relevant responsibilities.
The Government have today published their surface water management action plan on www.gov.uk. This action plan will bring our preparedness for surface water flood risks more closely into line with that for risks from main rivers and the sea. It delivers a commitment in the national flood resilience review and includes a number of actions to both improve our understanding of the risks and strengthen delivery. The action plan covers:
improving risk assessment and communication;
making sure infrastructure is resilient;
clarifying responsibilities for surface water management;
joining up planning for surface water management; and
building local authority capacity.
Foreign and Commonwealth Office
International Criminal Justice
Today is the Day of International Criminal Justice, which provides an opportunity to update Parliament on UK support for the principles and institutions of international criminal justice in the previous calendar year.
The UK maintains that those who commit atrocities should be held to account. As such, support for international criminal justice is a fundamental part of the UK’s foreign policy. Our approach is not limited to punishing the perpetrators—it seeks to help victims and their communities come to terms with the past, contribute to lasting peace and security, and deter those who might otherwise commit such violations in the future.
The International Criminal Court (ICC) is the world’s first permanent independent international criminal court with jurisdiction over the most serious crimes of international concern, and is complementary to national criminal jurisdiction. The UK Government believe that the ICC can play an important role in pursuing accountability when national authorities are either unable or unwilling genuinely to do so. We provide both political and financial support to the court, contributing £8.9 million in 2017. As of the end of 2017, the court had issued 31 arrest warrants, handed down verdicts in six cases and convicted nine individuals, one of whom has since been acquitted on appeal. It is currently considering cases from Africa, the middle east, Europe, South-East Asia and South America.
During the course of 2017, the court made reparations awards to the victims of Thomas Lubanga Dyilo and Germain Katanga, both convicted of war crimes in the Democratic Republic of Congo, and Ahmad Al Faqi Al Mahdi, convicted of destroying cultural heritage sites in Timbuktu. The UK contributed £400,000 to the court’s Trust Fund for Victims to support its work, which has included counselling for rape victims, provision of prosthetics and work to remove any stigma that may attach to child soldiers in Uganda and the Democratic Republic of Congo.
When the Rome Statute entered into force in 2002, three crimes were agreed to be within the immediate jurisdiction of the ICC: war crimes, crimes against humanity, and genocide. The court’s jurisdiction over a fourth, the crime of aggression, was postponed pending further consideration by states parties. In December 2017, the ICC Assembly of States Parties agreed to activate the court’s jurisdiction over the crime of aggression. It did so on the basis that all states parties explicitly agreed and confirmed in a consensus-based decision that, in the case of a state referral or proprio mutu investigation, the court shall not exercise its jurisdiction regarding a crime of aggression when committed by a national, or on the territory, of a state party that has not ratified or accepted the relevant amendments to the Rome Statute. The UK has no plans to ratify the crime of aggression amendments and welcomes the decision as an authoritative, unqualified and clear interpretation of the amendments to the Rome Statute on the crime of aggression, in accordance with article 121 paragraph 5 of the Rome Statute. The activation of the court’s jurisdiction for this crime takes place today.
The International Criminal Tribunal for the former Yugoslavia (ICTY) closed at the end of 2017. In its 24 years of operation, the tribunal indicted 161 individuals for serious violations of international humanitarian law and provided a comprehensive historical record of the atrocities committed during the Balkans conflicts. One of its last acts was the conviction and sentencing of former Bosnian Serb military leader Ratko Mladic to life imprisonment for the Srebrenica genocide and other serious crimes during the 1992-95 conflict in Bosnia. Any outstanding work of the ICTY will now pass to the Mechanism for International Criminal Tribunals (MICT), which also assumed the residual functions of the International Criminal Tribunal for Rwanda in 2016.
In addition to the MICT and ICTY, the UK provides practical and financial support to the Extraordinary Chambers in the Courts of Cambodia, which was established to prosecute crimes committed by the Khmer Rouge regime in the 1970s; the Special Tribunal for Lebanon; and the Residual Special Court for Sierra Leone. Our contributions to these tribunals totalled £5.8 million in 2017.
The UK has also been at the forefront of international efforts to gather and analyse evidence of atrocities committed in the middle east. In 2017, we contributed £200,000 to the UN International Impartial and Independent Mechanism (HIM) to support the preparation of legal cases for serious crimes committed in the Syrian conflict. The UK also led efforts to adopt a UN Security Council resolution establishing an investigative team to collect, preserve and store evidence of Daesh atrocities in Iraq, and contributed £1 million towards its eventual operation.
Rotherham Independent Review of Child Sexual Abuse
The Home Office is today publishing an independent review of information passed to the Home Office in connection with allegations of child sexual abuse in Rotherham (1998 to 2005).
This independent review was commissioned by my right hon. Friend the Prime Minister, when she was Home Secretary, in response to suggestions contained in Professor Alexis Jay’s independent inquiry into child sexual exploitation in Rotherham (1997 to 2013). These indicated that in the course of funding and evaluating a Rotherham-based research project, the Home Office may have been passed information about the scale of child abuse in Rotherham and the response of local agencies such as the police and the local authority that should have raised concern. In particular, Professor Jay saw a document believed to have been written by a Home Office project researcher sometime in 2002 which—although the town was not named—contained a description of the extent of child sexual exploitation in Rotherham and a series of criticisms regarding the way in which this was being dealt with.
In response to these reports, my right hon. Friend the Prime Minister, as Home Secretary, announced that the Department would conduct a thorough analysis of all relevant papers covering the period in question to ascertain exactly what information had been made available to the Home Office. She confirmed this work would be independently reviewed by Peter Wanless, chief executive of the NSPCC, and Richard Whittam QC to ensure it had been conducted absolutely properly.
I can confirm that today’s publication includes Mr Wanless and Mr Whittam’s independent review and the internal Home Office review that this assesses.
The Home Office internal review could not locate key documentation produced by the project researcher in Home Office internal records, but notes records were imperfectly operated, meaning it could have been received. However, the review did find that pieces of information questioning the response of statutory services were available to the Home Office, meaning that opportunities to follow up on, or seek further information about matters in Rotherham, including whether the police and other statutory agencies were responding appropriately, existed.
Mr Wanless and Mr Whittam were content that the methodology of this review was sound and that the findings were reasonable. They made one recommendation to the Home Office, in summary, that the Home Office should record allegations of child abuse, what information is sent to the police, and what the result of that referral has been. I would like to take this opportunity to thank Mr Wanless and Mr Whittam for their work on the independent review.
As public servants, we all have an important responsibility to raise and respond effectively to any safeguarding concerns we may encounter in the work we do—not least allegations of child sexual abuse.
The Home Office fully accepts Mr Wanless and Mr Whittam’s review and since 2014, the Department has introduced a recording and referral system for allegations of child abuse to address their precise recommendation.
The Permanent Secretary and I take this issue extremely seriously and the Home Office will continue to promote among all staff the vital importance of using all available information to consider if a child is at risk of abuse.
House of Commons Commission
Restoration and Renewal: Shadow Sponsor Board
Both Houses have decided that the next phase of the restoration and renewal programme should be overseen by a sponsor board and delivery authority. While it is anticipated that these bodies will be placed on a substantive footing by primary legislation in due course, the Commissions of both Houses have agreed to establish the sponsor board in shadow form, with the following members:
Elizabeth Peace CBE (Chair)
Lord Carter of Coles
Lord Deighton KBE
Right hon. the Lord Geidt GCB GCVO OBE
Neil Gray MP
Right hon. Sir Patrick McLoughlin MP
Marta Phillips OBE
Baroness Scott of Needham Market
Simon Thurley CBE
Simon Wright OBE
The shadow sponsor board will act as the single client accountable to Parliament and own the budget, business case and scope of the programme.
The recruitment of the Chair and the other external members was overseen by an independent recruitment panel, chaired by the right hon. Dame Janet Paraskeva DBE, a former First Civil Service Commissioner. Other recruitment panel members possessed major projects and heritage experience. The panel’s role was to make a recommendation to the Commissions regarding the most appropriate candidates for the roles following a full and open competition. The panel unanimously recommended the appointment of the Chair and the other external members. The appointment of the external members is subject to satisfactory references and security clearance.
The parliamentarians on the board were nominated by the political parties and groups in both Houses.
I have laid a draft proposal for a remedial order to amend section 9 of the Human Rights Act 1998 (HRA) to allow an award of damages in a new set of circumstances. This is to implement the judgment of the European Court of Human Rights (ECtHR) in Hammerton v. UK (application no. 6287/10).
The domestic courts found that the applicant in Hammerton v. UK had spent extra time in prison as a result of procedural errors during his committal which breached his rights under article 6 of the European convention on human rights (ECHR) as set out in the HRA (right to a fair trial). He was subsequently unable to obtain damages to compensate for the breach of Article 6 ECHR in the domestic courts because section 9(3) HRA does not allow damages to be awarded in proceedings in respect of a judicial act done in good faith, except to compensate a person to the extent required by article 5(5) ECHR (deprivation of liberty).
In 2016, the ECtHR found a breach of article 6 ECHR and adopted the finding of the domestic court that the applicant had spent extra time in prison as a result of the breach. The ECtHR found that the applicant’s inability to receive damages in the domestic courts in the particular circumstances of this case led to a violation of article 13 ECHR (right to an effective remedy). The ECtHR awarded a sum in damages which has been paid.
Under article 46 ECHR, the UK is obliged to abide by the judgment of the ECtHR in any case to which it is a party. In order to address the finding of a violation of article 13 ECHR in Hammerton, legislative change is required as it was the result of a statutory bar on the award of damages under the existing section 9(3) HRA.
The Government propose to implement the judgment by making a targeted amendment to section 9 HRA to make damages available in respect of breaches of article 6 ECHR arising under similar circumstances to those in Hammerton. It would have the effect that:
in proceedings for contempt of court;
where a person does not have legal representation, in breach of article 6 ECHR; and
the person is committed to prison and the breach of article 6 results in the person spending more time in prison than they otherwise would have done, or causes them to be committed to prison when they would not otherwise have been committed;
then a financial remedy would be available to the person to compensate for the breach of article 6 ECHR that resulted in the person spending extra time in prison, or caused them to be committed to prison.
Following consideration of possible legislative options, the Government consider that there are compelling reasons to amend the HRA by remedial order under the power in section 10 HRA to take remedial action where a provision of legislation is incompatible with an obligation of the United Kingdom arising from the ECHR.
This draft proposal for a remedial order is being laid under the non-urgent procedure. It will be laid for a period of 60 days during which time representations may be made. The Joint Committee on Human Rights will scrutinise the remedial order and report on it to the House. Following that, the draft order, with any revisions the Government wish to make, will be laid for a further 60 days before being considered and voted on by both Houses.
Leader of the House
Independent Complains and Grievance Policy
In November, my right hon. Friend the Prime Minister convened a cross-party working group to establish a new independent complaints and grievance procedure, in response to reports of sexual harassment and bullying in Parliament. The House agreed to implement the proposals for the new procedure set out by the Working Group in February.
Today, I am pleased to attach to this statement a copy of the Programme Team’s delivery report, which is endorsed by all members of the Steering Group who have overseen the process of implementing the Working Group’s proposals.
It is available online at: https://www.parliament.uk/business/publications/written-questions-answers-statements/written-statement/Commons/2018-07-17/HCWS865.