The Chancellor of the Exchequer was asked—
Poverty: Social Security
Thanks to our welfare reforms, we have been able to get more people into work, we have the lowest unemployment rate since 1974 and more than 667,000 fewer children are living in workless households than in 2010.
Some £30 billion of support to working-age people has been cut from the social security budget, and there is more still to come. Eight out of nine disabled people will not benefit from the measures introduced in last autumn’s Budget and over 4 million are living in poverty. In the Chancellor’s last few weeks in post, what will he do to right this wrong?
I do not agree with the hon. Lady’s analysis. The fact is that income inequality is lower now than it was in 2010 and absolute poverty after housing costs is at a historic low for children.
Can the Chief Secretary confirm that the number of children living in workless households is now the lowest ever record achieved in our country?
My hon. Friend is absolutely right. It is because of our welfare reforms and economic policy that more people are now in work and are benefiting from our cuts to basic rate tax, giving working families £1,200 a year extra in their pay packets.
The Chancellor has been brave recently, speaking out on how no deal will impact our economy. Poverty will only get worse if we face no deal, so will the Chief Secretary be as brave as the Chancellor and tell this House the truth about poverty and no deal?
I can tell the hon. Lady what would lead to greater poverty in this country: a Government who wanted to overthrow capitalism, declare business the enemy and ruin the private sector businesses that are employing people and giving them extra wages.
The Chancellor has been at the forefront of arguing that a decade of austerity was necessary. This has led to 24% of Scottish children and 30% of English children being in poverty. If the Chancellor believes that this pain was not ideological and unnecessary, will he vote against a Tory tax cuts for the rich Budget, as proposed by the Prime Minister’s most likely successor?
With respect to the hon. Lady, she clearly did not hear my earlier answer, when I said that absolute poverty after housing costs is at a historic low for children. That is true right across our country. Of course, the Scottish National party Government in Scotland could take steps to help children by improving educational standards; that is what they should be focusing on.
The Minister might not want to tackle inequality, but the Scottish Government do. The polls show that a majority of Scottish people support the tax changes that mean the Scottish Government can fund a £10 a week payment to families with the most vulnerable children, mitigating the ideological austerity obsession of this Conservative Government. If the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) becomes Prime Minister, 53% of Scots will support independence. And who can blame them, given the Scottish Government’s plans to support and help young people and this Government’s ideological austerity obsession?
The reality is that the Scottish Government are now forecast to bring in lower rates of income tax than expected, because they have not followed through on our raising of the threshold to £50,000, so people in Scotland on £50,000 are now paying £1,500 more tax. The fact is that raising tax reduces incentives for people to get up the earnings ladder, reduces economic growth and means that we do not have the opportunities and funding for public services.
As my hon. Friend the Member for Wirral South (Alison McGovern) said, the poorest, most vulnerable people in society, even those who are in work but struggling to make ends meet, will be hit particularly hard by a catastrophic no-deal Brexit. The Minister cannot get away with simply deflecting this into an attack, which I would share, on the economic policies of the Labour party. This is the clearest, most present danger facing our country, and surely she will not happily move towards a no-deal Brexit.
What the hon. Gentleman is missing is the fact that if we continue to delay Brexit, first, we would not be delivering on what British people voted for over three years ago; and secondly, there will be continued delay in our economy—a continued lack of investment—due to a lack of certainty.
Yesterday, the Chancellor slapped down both Tory leadership candidates for making irresponsible spending promises. Has the Minister noticed, as we have, that not one of those promises was aimed at lifting the 4 million children out of poverty? She is responsible for the management of Government finances—heaven help us! What does she think this says about the Tory party and the next Prime Minister?
I am incredibly proud of our record, as a Government, of reducing inequality. Income inequality is now lower than it was in 2010. We have also cut taxes for basic rate taxpayers by £1,200 a year and put an extra £630 into universal credit for working families.
Leaving the EU: Scotland
I regularly discuss EU exit with the Secretary of State for Scotland and other members of the Cabinet. The Government remain committed to securing a deal that works for the entire United Kingdom.
There might be two people competing to be Prime Minister, but I think there are at least five who think they will be the next Chancellor, so perhaps right hon. Gentleman should just get to stay in post and then they will all be equally disappointed. He seems to be concerned that they are somehow going to ruin his deal dividend, but is it not the truth that there is no real dividend from any Brexit, that the best possible deal for Scotland and the rest of the UK is the one we already have, which is membership, and that that is the case that he and other sensible Government Members should have the courage to be making?
I have consistently made the case and explained to this House that there is fiscal headroom within the current fiscal rules. If we have a smooth exit from the European Union through a transition that will remove the economic uncertainty that is hanging over our economy, it will then be safe to release that headroom and make it available for additional public spending or, at the choice of the next Government, to reduce taxation. Either way, we have the headroom available once we have removed the Brexit uncertainty.
Is it not the case that Scotland, like everybody else, will know the plans for future public spending, for fiscal headroom and for the economic effects overall if the comprehensive spending review were to be started sooner rather than later? Is the Chancellor able to tell the people of Scotland, the people in this House and the people beyond when the comprehensive spending review will be starting?
I announced at the spring statement that it is the Government’s intention to conduct a three-year spending review concluding this autumn, subject to a deal with the EU being completed. Departments are already commissioned to carry out the work necessary for such a spending review, but it will be for the new Government to decide whether the circumstances make it appropriate to conduct a full three-year spending review or a single-year exercise.
As I have consistently said in this House, I do not believe that a no-deal exit would be in the interests of this country, and I will do everything I can to ensure that we avoid it, but an exit based on a negotiated deal that allows us to continue a close trading relationship with the European Union can work for Britain, and that is what I will be arguing for.
Is the Chancellor aware that only 18% of Scottish exports go to the rest of the European Union but 61% go to the rest of the United Kingdom? Is not the Union that really matters to Scotland the Union of the United Kingdom?
Yes, my hon. Friend is exactly right. The Scottish economy would be far more adversely affected by a breach of trading relationships with the rest of the United Kingdom than it will by a breach in trading relationships with the European Union.
Shared Prosperity Fund
The Government will establish a UK shared prosperity fund to spread prosperity and opportunity across all four nations once we have left the European Union and the EU structural funds. The fund will seek to raise productivity, focusing on levelling up parts of our country whose economies are further behind. More details will be announced following the spending review, and the Government will consult widely on the funds.
Analysis of local enterprise partnerships by the charity think-tank NPC found that only 26% of board members were women and that only 5% were black, Asian and minority ethnic. When will the Government finally come forward with their consultation on the shared prosperity fund? Does the Minister agree that funnelling the UK fund through the LEPs would be a mistake unless they are made more representative?
We intend to consult later this year, following the spending review. Officials at the Ministry of Housing, Communities and Local Government have already held 26 engagement events and have met more than 500 representatives from across the United Kingdom.
With respect to the hon. Lady’s very important point about representation on LEP boards, I should say that the LEP review conducted by MHCLG jointly with the Treasury last year did conclude that they needed to have broader representation from the groups that she mentioned—and from private sector businesses, large and small. Those rules and guidelines are now in force.
Shortly after the referendum on Europe, I asked the then Prime Minister David Cameron what would happen to the £726 million of European funding that we were due to receive in the north-east. He could not answer. We are now three years on and none the wiser about the supposed replacement—the shared prosperity fund. How can anyone have confidence in this Government and their handling of Brexit if they cannot give even that basic information to the region that is set to be the worst hit by any form of Brexit?
The people of the north-east of England voted to leave the European Union; I know that the hon. Lady takes a different view, but we are trying to deliver on the outcome of the referendum. Had she voted for the withdrawal Bill, these matters would, of course, be progressing. As my right hon. Friend the Chancellor has already said, we are guaranteeing funding to the beneficiaries of all EU structural funds to 2023, so there is a degree of certainty as we move forwards. But the sooner that this House can coalesce on a good deal and that we can leave the European Union in an orderly fashion, the sooner this matter can be cleared up.
My constituency and the rest of Cornwall continues to be one of the less developed areas, even though there is much going for where we are and where we live. What would the Minister say to my county, the Duchy of Cornwall, about how soon it can expect to really contribute to the process of the shared prosperity fund?
As I have already said, we intend to consult later this year. I strongly encourage my hon. Friend’s constituents to take part in that consultation; he and I have already spoken about this. I have met representatives from Cornwall Council, for example, to talk about the issue and some of the projects that they care strongly about—including, of course, the stadium in Cornwall, of which my hon. Friend has been a strong proponent.
Rebalancing the economy is not just about north and south or the different nations of the United Kingdom. Will the Minister ensure that the shared prosperity fund is distributed using a range of indicators, such as gross value added, the regional human poverty index and disposable income, so that areas in the west midlands in need receive their fair share?
Absolutely—those are exactly the kinds of questions that we dealt with in the consultation.
Some of the problems in our United Kingdom can be traced to the disparity between the regions and nations of the UK. Will the Minister ensure that the shared prosperity fund is not the end, but just the beginning, of ensuring that there is prosperity across the entirety of our nation?
The hon. Gentleman is absolutely right: there are disparities of income and productivity across the United Kingdom, and what he mentions will be one of the key objectives. But the shared prosperity fund is not our only intervention in this area: we are taking a range of measures, including significantly increasing the amount of public investment in infrastructure—to the highest levels in this country since the 1970s.
Despite pledges that the Government would provide details on the shared prosperity fund by the end of last year, the Chancellor has been silent on how much communities could lose from the £17 billion-worth of structural funds. The Chancellor has only now woken up to the danger, splurging nearly £10 billion, almost half that amount, on tax cuts for the well off—as advocated, of course, by the right hon. Member for Uxbridge and South Ruislip (Boris Johnson). Surely the only shared prosperity under the Conservatives is for those who are already well off.
Clearly, it is not possible to progress this matter until we have greater certainty about our exit from the European Union. Those Members of this House who want to see this matter progressed should be voting to leave at every opportunity, as we on the Government side have done. The important thing to point out on regional disparities is that this Government are investing far more than the previous Labour Government. In fact, £430 million a week more in real terms is being invested by this Government than under the previous Labour Government on infrastructure in all parts of the UK.
The Government are supporting the northern powerhouse through devolution deals for, among others, Manchester, Liverpool, the West Midlands and, most recently, North of Tyne, as well as through over £13 billion of investment in better transport across the north. In addition, we have invested over £3 billion from the local growth fund in the region since 2015, and we committed at the Budget to announce a renewed northern powerhouse strategy later this year.
It is quite an achievement for the Minister to get up and say that without any sense of irony whatsoever. The truth is that we have had the incredibly disappointing news this week that Pacer trains in the north of England will not be removed by the end of this year, as previously promised. Despite the warm words about the northern powerhouse, the truth is that since 2014 spending on transport in the south of England has risen twice as fast as in the north of England. Will the Minister use the spending review as an opportunity to rectify these imbalances and finally give meaning to those words, “the northern powerhouse”?
With respect to the hon. Lady, she is not correct on the numbers. This Government are investing more in the north than the previous Labour Government. Over the course of this Parliament, central Government investment in transport infrastructure will be higher in the north of England than it will be in London and the south-east on a per capita basis. We have seen a 40% increase in central Government funding per person in the north under this Government.
Will my hon. Friend confirm that this Government have invested more than £500 million in the northern powerhouse, attracting more businesses and creating more jobs?
Over the course of this Parliament and the last, this Government will have invested £13 billion in transport for the north. With respect to Northern Powerhouse Rail, which was mentioned earlier, over the last two years we have given £97 million to Transport for the North to build the business case and prepare the ground for that project. In the course of the spending review—our zero-based review—we will be considering how to take forward that project.
My constituents in Barnsley Central and people right across the north of England will judge this or any Government on deeds, not words. Does the Minister agree with me that if the northern powerhouse agenda is to be taken seriously, we need to see schemes such as Transport for the North’s strategic transport plan, which includes Northern Powerhouse Rail, properly resourced by the national Government?
I agree with the hon. Gentleman, and that is why we have given funding to Transport for the North to prepare a properly thought-through business case. We of course have decisions to make in the spending review about which of those projects should be taken forward and which provide good value for money. In the hon. Gentleman’s own city and city region of Sheffield, we have of course given money through the transforming cities fund to improve inter-city connectivity for his constituents.
My constituency and the wider Humber region would greatly benefit if there were improved rail-freight connections east-west. What plans does the Minister have to fund those?
We have received representations from the midlands engine, and from Midlands Connect in relation to transport, about both road and rail east-west connectivity. We are considering them carefully, and they will form part of the spending review.
I spot the Leader of the House on the Treasury Bench, but I do not know whether he wants his old job back.
The Exchequer Secretary talks a good talk on fiscal steps to support the northern powerhouse, but the broader facts speak for themselves. Since 2015, for the first time in 50 years, the UK Government no longer provide regional investment aid in England, according to the Industrial Communities Alliance’s evidence to the Business, Innovation and Skills Committee inquiry. What is his explanation for that?
We give many other funding streams to northern communities, including £3.3 billion through the local growth fund and £13 billion for wider transport schemes.
So that’s an unambiguous no. The north is home to 15 million people in five major city regions, 265 towns and 1,000 villages and smaller communities. It has 29 universities, the UK’s largest airport outside the south-east and eight major ports, one in my constituency. Does the Exchequer Secretary agree that changing those eight ports, as suggested by the Foreign Secretary and the former Foreign Secretary, into not economic hubs of excellence but potential revenue-draining, tax-avoiding, money-laundering free ports—more like free-for-all ports—is no substitute for a focused, well-resourced and sustainable economic strategy for the north?
Perhaps unlike the hon. Gentleman, I am interested in any proposal that can drive economic growth in the north of England. Free ports are an interesting proposal, which we have discussed with a number of communities. We have urged them to come forward with well-thought-through business cases. We have yet to receive them from many places, but we have received one from Teesside and we will consider them carefully in future.
The loan charge tackles so-called disguised remuneration arrangements, which use loans to avoid tax. It applies in the same way to people in the public and the private sectors. A tax information and impact note published in 2016 and a report on disguised remuneration published in March 2019 both considered the impacts.
What more can be done to tackle the promoters of loan schemes who gave workers and businesses assurances, even though the Treasury had made it clear that the schemes were unacceptable? Should not they be brought to book? Have any of them been convicted yet?
My right hon. and learned Friend is absolutely right and HMRC will continue to take firm action against those who promote tax avoidance schemes. As he will know, and I think has been made public, it currently has more than 100 promoters under civil inquiry. It is important to be clear that although there are no criminal offences of promoting or marketing tax avoidance schemes specifically, HMRC may conduct criminal investigations and make referrals to prosecuting authorities where, for example, there is evidence that promoters have deliberately misrepresented the facts to it.
Perfectly innocent working people are caught in a terrible trap here and there have already been several suicides. HMRC said that
“teams are trained to identify customers who are anxious, worried or need extra support to ensure they get the help they need.”
Will the Minister confirm whether those people have had that training? Will a dedicated helpline be set up to help people who are under huge stress?
The hon. Gentleman is right that there is stress, but he should also be clear that a large number of people have been systematically using those means to avoid paying tax, and the potential amount payable is more than £3 billion. He should be protective of the tax base more widely when he reflects on those matters. He is right that HMRC is taking careful steps to ensure that it protects and supports those who may be in genuine difficulty, and those who have other personal concerns can of course be referred to outside agencies.
The reality is that many people caught up in the loan charge scandal were effectively mis-sold schemes that they were told had been QC vetted and were perfectly legal. That is underlined by the fact that no criminal charges are being pursued against any of the individuals who sold the schemes. Is not it time for this fresh Minister to take a fresh look at the Treasury’s approach to all this?
I think that my right hon. Friend misstates the case. A disclosure of tax avoidance number was associated with a large number of those cases. The people knew that they were in schemes that were potentially suspect. Every person is responsible for signing off their own tax return. I trust that my right hon. Friend will be reassured by the fact that recently six individuals were arrested on suspicion of promoting fraudulent loan charge arrangements. That speaks to a wider picture.
I can only admire the ingenuity of a man who can crowbar in a question about the Ministry of Justice, unrelated to the loan charge, into this issue. Let me point out to the hon. Gentleman that regardless of what may be the case on that, HMRC is taking tens of billions of pounds, relating to avoidance and evasion matters, that are due. He should be very grateful and delighted about that.
The loan charge all-party group claims evidence for four suicides relating to the loan charge and HMRC has referred itself with respect to one. When I asked a parliamentary written question on the assessment the Treasury had made of the impact of the loan charge on the mental health of the people subject to pursuit, the answer was, to put it mildly, less than satisfactory. Will the Minister now tell us what effect the Treasury believes its policy has had on the mental health of all the people subject to pursuit in both the public and private sectors?
May I put on record my surprise that a former chairman of the Public Accounts Committee, with its concern for the public finances, should take that view? Some people may have been very adversely affected in mental health terms and we must protect them at all times using all proper measures. HMRC is attempting to do that. However, there is a much larger number of people who are simply seeking to avoid paying tax due.
People were told that they could work particular jobs if they took on this way of remuneration. Will that be considered? Will the Minister take on board what the right hon. Member for Putney (Justine Greening) said and just take a fresh look at this issue?
I remind the hon. Gentleman that there were other signs that indicated to people that they were in tax avoidance schemes—for example, a very low or relatively low effective rate of tax. The signs were there and people would have been right to pick up on them. Even if they were mis-sold, that does not have a bearing on the question of whether tax is now due.
Off-payroll Working Rules
In response to stakeholder representations at Budget 2018, the Government announced that the extension of the off-payroll working rules reform would not take effect until April 2020. That was designed to allow organisations more time to prepare. The reform will also not apply to the smallest 1.5 million organisations. The Government have now consulted on the detailed design of the reform. Responses to that consultation will be taken into account when drafting the legislation.
Nevertheless, there are concerns within the private sector about the forthcoming adoption of IR35. What lessons are there from its application to the public sector?
That is a very important question. I hope my hon. Friend will be reassured. Independent research shows that the public sector reform has been meeting its objective of improving compliance with existing off-payroll working rules without disrupting public services or reducing labour market flexibility. The Government recognise that the private sector is much more diverse, but HMRC will continue to work with stakeholders to improve employment status checks and associated guidance. It will also provide a significant package of education and support to businesses to help with implementation.
It is only correct that contractors pay their fair share of tax, but the IR35 rule fails to equalise tax equally between them and employees, and is overly bureaucratic. Will the Minister join me in urging the Chancellor to ensure that the 2019 Budget and Finance Bill improve the rule or scraps it altogether?
I am sure the hon. Gentleman will be aware that there is only about a 10% compliance rate with proper tax payable in this sector. He should therefore be applauding, as I am, the means to raise the level of compliance. In many ways, this is a simplification of the rules, which is being carefully and deliberately handled.
Early Years Education
I regularly meet the Secretary of State for Education to talk about education funding. This issue will be settled as part of the spending review.
I hope the Chief Secretary has learned from those conversations and will go out to talk to early years providers. The shortfall in funding is having a huge impact. I visited a nursery in my constituency recently and it is clear that it is the staff who are bearing the brunt of it. They are on only just above minimum wage. I cannot help thinking that if the people working there were not women then perhaps their work would be valued more. Will she ensure that she makes representations, when the spending review comes, on lifting the freeze?
I point out to the hon. Lady that we are spending a record amount on childcare and early years support—£6 billion a year, which is £700 million more than in 2015—but of course we will look at representations as we go forward into the spending review and make sure we treat all parts of education fairly.
Will the Minister look particularly at funding for two-year-olds? Providers of early years education in my constituency tell me they lose money on providing that service for two-year-olds because there are significant additional costs in looking after two-year-olds but only a small uplift in the rate paid.
My hon. Friend is right to raise this issue. We will look at that. It is important to acknowledge the progress this Government have made by introducing 30 hours of childcare for three and four-year-olds with working parents and 15 hours of childcare for children with parents on low incomes. Those are important steps. Of course, we will look in the spending review at the rates and ensure they are fair right across the country.
Children with higher educational needs are losing out even more. My local authority overspent by £760,000 last year and will overspend by £1.3 million this year and £1.9 million next year. Those children need this vital support in order to grow. Will the Minister look at the funding of the higher needs budget to ensure that local authorities can support those families?
The hon. Lady is certainly right that we have seen demand for special educational needs funding rise. We need to look at that as part of the spending review, from both a local government point of view and a Department for Education point of view.
Access to Cash
I welcome the benefits that electronic payments are bringing to people and businesses across the UK. However, the Government recognise the importance of cash to many, particularly the most vulnerable members of society. That is why we have committed to safeguarding access to cash for those who need it. In the light of changing payment trends, the Government have created the Joint Authorities Cash Strategy Group. That Treasury-led group will seek to bring together the regulators and the Bank of England to inform and co-ordinate members’ activities related to cash and safeguard access for those who need it.
I recently sent a survey about access to cash to thousands of my constituents. There was an overwhelming response, because they are terrified that we are going far too fast into a cashless society. The next time the Minister meets banks, will he raise with them the impact that rural banking hubs could have on our local communities, just as the pilot business hub has had in Birmingham?
I recognise my hon. Friend’s excellent campaigning on this matter, which we have had meetings to discuss. The Government have no direct role in the matter, but we recognise the role that banking hubs have played for businesses across six trial sites. We are looking at that carefully, and I will be very happy to raise it with the banks when I meet them next.
Will the Government commit to working with cash machine suppliers to ensure that cash withdrawals remain free across the board? Charges disproportionately affect those on lower incomes, who make lower cash withdrawals.
Absolutely. We are looking into that. The Payment Systems Regulator, which was set up four years ago, is responsible for overseeing LINK. It has two schemes in place to safeguard access to cash in the most impoverished communities and to ensure that, when an ATM is vulnerable to closure, there is a responsibility to keep it open if constituents would have to go more than 1 km to access cash.
I acknowledge the difficult situation that my hon. Friend has in Bungay. The Government-established Payment Systems Regulator is closely monitoring developments in ATM provision and, as I said, there are mechanisms in place to intervene. I am very happy to meet him to discuss the application of those to the situation in Bungay.
Given that post offices and credit unions provide easy access to cash, is it not now time to offer business rates relief to both to enhance the provision of cash and other affordable financial services?
Of course small businesses receive that relief. The Chancellor will have heard that representation for the next fiscal event, but it is not a matter that I can comment on specifically at this point.
High Street Bank Closures
While branch closures are commercial decisions for banks, I regularly engage with all key stakeholders on this issue and I recognise that it can be very difficult for some constituents, particularly if a branch is the last one in a community. The major banks have signed up to the access to banking standard, overseen by the Lending Standards Board, and that commits them to work with communities to minimise the impact of branch closures.
When the Government bailed out the banks, it was partly in recognition of the fact that banks were public services as well as profit-making businesses. I am disturbed—as will be the people of Staveley—by the Minister’s hands-off approach. Do not the Government either need to sit down with the banks and ensure they have a real commitment to having a bank branch in towns such as Staveley or adopt Labour’s proposal for a post bank so that we can have some Government control to make sure we have services where they are desperately needed?
I have looked into the situation in Staveley and it will be served by a mobile bank following the closure. The post office, where a 24-hour ATM is available, is just a six-minute walk from Lloyds. The number of people visiting the counter at Lloyds bank in Staveley reduced by 22% in the last year, so it is understandable why Lloyds has made that decision. The Government’s investment in the Post Office and its banking services facility is our solution.
The Minister should make no mistake: communities up and down Britain are being deliberately starved of cash and banking services as the banks, with the support of Government, are trying to create a near cashless society. Can he say a bit more about what he is doing to help the more than 1 million poorer people who do not have access to a bank account?
A bit more, but not too much more.
I recognise the difficulty and I am happy to meet my right hon. Friend to discuss the issues in his constituency. We have invested considerably in the post office network and I am meeting the Lending Standards Board to look at the mechanism for transfer to the Post Office and to consider solutions on a case-by-case basis.
As the right hon. Gentleman would have heard me say if he had been in his place earlier, I announced in the spring statement that it is the Government’s intention to conduct a three-year spending review, concluding this autumn, subject to a deal with the EU being completed. He asks whether I plan to launch the spending review before the summer recess: I can tell him that Departments have already been commissioned to carry out the work necessary for such a review. It must be for the new Government to decide, in the circumstances, whether it is appropriate to conduct a full three-year spending review or a one-year exercise.
I can assure the Chancellor that I saw him give that response on television earlier. What would be the impact on the comprehensive spending review of either the proposal of the Secretary of State for Foreign and Commonwealth Affairs, the right hon. Member for South West Surrey (Mr Hunt) for a £13 billion cut in corporation tax and a £12 billion increase in defence spending, or the proposal of the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) for a £9 billion higher rate income tax threshold cut, £11 billion national insurance contributions cut and showing the public sector “some love”? Would those unfunded bribes be paid for by tax increases, cuts in services or both?
I fear that the right hon. Gentleman is manifestly asking the wrong person that question. I literally cannot answer it. The purpose of a spending review is that such matters can be looked at in the round, and the responsible way to do a spending review is first to set the envelope of what is affordable, and then to look at the different bids, which will—I can confidently predict—greatly exceed the available spending power, and prioritise. That is the difficult business of government, and that is why I am not in favour of ad hoc spending commitments or tax cut commitments being made.
The Chancellor is a clever chap, but his capacities do not include the capacity to penetrate the minds of colleagues, especially those in competitive vote-seeking mode.
Homes England indicates a current pipeline of some 15,000 community- led homes in England. That shows the significant positive impact of the community housing fund. Will my right hon. Friend confirm the continuance of the fund so that those much-needed homes can be built?
As my hon. Friend knows, we have signed off the Truro funding decision, and I am sure she is happy about that. The Prime Minister has made very clear that dealing with the challenges in the housing market is a priority for the Government, and in the spending review we will continue to prioritise funds to support both the housing market and the provision of social and affordable housing.
If the UK leaves the EU without a deal and the Chancellor is still in his post, does he envisage there being enough fiscal headroom following the spending review to give the top 10% of earners a tax cut worth more than £9 billion? Surely that is wholly unjustified.
I think the hon. Gentleman has sketched a highly unlikely scenario, but I can answer his question. We have built up about £26 billion or £27 billion of fiscal headroom, and the purpose of that headroom is precisely to protect the UK economy from the immediate effects of a possible no-deal exit. I have no doubt whatsoever that in the event of a no-deal exit we will need all that money and more to respond to the immediate impacts of the consequent disruption, which will mean that no money will be available for longer-term tax cuts or spending increases.
Let me go further: the Government’s analysis suggests that in the event of a disruptive no-deal exit there would be a hit to the Exchequer of about £90 billion, and that will also have to be factored into future spending and tax decisions.
I certainly agree with my right hon. Friend that we need to be careful with our spending pledges, but I think that investment spending is different, particularly when the investment is in the north. Has my right hon. Friend had time to consider our letter of 29 April—signed by 80 parliamentarians—which calls for £120 billion of investment spending over 30 years and a bringing forward of the Northern Powerhouse Rail programme?
We are committed to investment in infrastructure. One of the things that I have done in my three years as Chancellor is move the balance of spending towards investment in economic infrastructure, and we now have the highest level of public capital investment for 40 years. We have a National Infrastructure Commission to set long-term guidance for the Government on how to invest in infrastructure investment, and that will be considered in the zero-based capital spending review that sits alongside the main spending review. However, I assure my hon. Friend that this Government are committed to investing in the productive capacity of the UK economy, because it is the only way to raise real wages and living standards, and that is what government is all about.
The Government’s decisions on tax, welfare and spending on public services have benefited households across income distribution, with the poorest gaining the most as a percentage of net income. That is supported by the distribution analysis published by the Treasury at the time of the most recent Budget.
That is nonsense. The UK is already the most unequal society in Europe, and the gap is becoming wider. In order to mitigate the worst welfare cuts and reforms, the Scottish Government are having to pay out £125 million this year alone. The Special Rapporteur on extreme poverty and human rights has said that the situation is “unsustainable”. Does the Minister agree that instead of arguing about tax cuts for the rich, Westminster needs to reverse those welfare cuts?
The United Kingdom is not the most unequal society in Europe; it is not anything like that. The Government’s policies, such as our policies of investing in infrastructure and in boosting productivity, have been designed to level up the parts of the UK that need it the most. When it comes to poverty and living standards, things are improving. Real wages have been rising for 10 consecutive months, and more people are in work. In the hon. Gentleman’s constituency, unemployment has fallen by 60% since 2010.
Our priority has been getting young people into work. In 2010 we inherited a youth unemployment rate of 20%; we have almost halved that. The priority for this Government will be ensuring young people get a great education; more young people are in good or outstanding schools than when we came into power in 2010, and we want them to get apprenticeships and get into work and get on in life.
Charities: VAT Refunds
Having run a capital project myself, I am keenly aware of the importance of good cash flow; I am grateful to the hon. Lady for her question. HMRC receives more than 2 million VAT repayment forms a year, and in 2017, the latest year for which figures are available, over 90% of them were paid within five days of receipt. A supplement is paid if it takes more than 30 days before payment is made, and HMRC also has a free dedicated charities help desk designed to help organisations with their tax inquiries.
4Louis is a charity set up in Sunderland in the memory of Louis, who was stillborn in 2009. It fundraised and built the Louis bereavement suite at Sunderland Royal hospital at a cost of £75,000, some £12,500 of which was paid in VAT. Another suite is planned at Durham at a cost of £100,000 and £20,000 of that is VAT. These huge amounts of VAT could be used by the charity to build another bereavement suite. What advice can the Minister give to it specifically on how it can attempt to get this VAT back?
The hon. Lady will understand that a range of schemes is available for some parts of the charitable sector. We recognise the concern that the hon. Lady is expressing; I cannot deal with individual cases, but obviously if she wants to write to me on the wider issue I will be happy to take it up with HMRC.
A much loved local provider of employment for my constituents with learning disabilities has been forced to consider closure after a change in interpretation of the VAT rules regarding the provision of services under the personal payments arrangements; the retrospective VAT bill of around £150,000 means that Spokes, the trading arm of the charity the Emily Jordan Foundation, faces closure with the subsequent loss of a very important local resource. Will my hon. Friend consider meeting with Chris Jordan on behalf of the charity in order to discuss a way forward that can save this incredibly important local business?
Again, I absolutely recognise the concern, although of course I am not familiar with the details. I cannot get involved in a specific case, but my hon. Friend is welcome to write to me and I will refer the matter to HMRC.
My principal focus is to ensure the continued resilience of the UK economy and public finances at this time of uncertainty. Thanks to the hard work of the British people, our national debt is now falling sustainably for the first time in a generation, but it is still too high and it is vital that the Government continue to get debt down to ensure that the economy is resilient against future shocks, to prevent the wasting of billions of pounds more on debt interest payments, and to avoid burdening the next generation.
Since 2013 this Government have given tax handouts worth £4.1 billion to the big alcohol corporations at a time when the NHS is short of 40,000 nurses. Would it not be a sensible choice to invest in the nurses, doctors and police officers who have to deal with the problems caused by cheap alcohol?
We have done so: by 2023-24 we will be spending an extra £34 billion a year on the national health service. That is a record cash injection to our national health service, which represents this Government’s commitment to it.
Yes, it is a vital cornerstone of our institutional structure that the Bank of England remains independent, and those who have suggested that they would seek to politicise appointments to the Bank of England would be doing a great disservice to this country and our economy.
The Chancellor, like most of us, has been watching the accumulation of spending promises by the Tory leadership candidates. They amount now—[Interruption.] They amount now to nearly £100 billion, and one of the Chancellor’s colleagues commented yesterday that they make me look like a fiscal moderate. May I ask the Chancellor what impact this level of unfunded commitments would have on his economic strategy, or can he tell us how they could possibly be funded?
There are many people who could comment on spending commitments that have been made by candidates in the Tory leadership competition, but the right hon. Gentleman is not one of them.
Let me try this one. Both Tory leadership candidates are threatening no deal. This morning, the Chancellor has eloquently set out the consequences of no deal. Bearing in mind what he said, may I ask him very straightforwardly whether he will join us and commit himself to doing everything he possibly can to oppose the prorogation of Parliament to try to sneak no deal through, and also to voting against no deal?
With your permission, Mr Speaker, if I may: this might be the Chancellor’s last Treasury questions and I just want to thank him for the civility with which he has always maintained our relationship. I also admit that there have been times when we have enjoyed his dry sense of humour. I gave his predecessor a little red book as a present. We have another red book today, but this is a guide to London’s rebel walks and we hope that he will enjoy it in his leisure periods.
That is very kind of the right hon. Gentleman; I much prefer this little red book to the one he gave my predecessor, although I have to say that I have not read this one and I have read the other one.
On the broader question, I have been consistently clear that I believe that a no-deal exit would be bad for the UK, bad for the British economy and bad for the British people. We cannot rule out that happening, because it is not entirely in our hands, but I agree with him that it would be wrong for a British Government to seek to pursue no deal as a policy. I believe that it will be for the House of Commons, of which I will continue proudly to be a Member, to ensure that that does not happen.
Borrowers who believe that they have been mis-sold a shared appreciation mortgage are able to take their complaint to the Financial Ombudsman Service. The Government are unable to comment on group action cases relating to this issue as we have no role in deciding whether cases may be heard in court. I note that the annual review of the Financial Ombudsman Service in 2003-04 said that in most cases it had not upheld complaints of shared appreciation mortgage mis-selling due to the information being satisfactory. That is the situation at the moment.
The hon. Gentleman is right to point to storm clouds over the global economy. We tend to focus on Brexit-related issues and the domestic agenda, but I have just come back from the G20 in Osaka, and looking more widely, we can see that global growth is slowing and that global trade growth is slowing even more dramatically. A great deal hinges on finding a solution to the disputes between China and the United States. It is hugely in our interests that that dispute is resolved and that normal trading relations are resumed between the world’s two economic superpowers. As a middle-sized open economy, we are bound to be adversely affected if global trade slows down.
I am delighted to hear the news of new investment in my hon. Friend’s constituency, and I take my hat off to Dean’s shortbread. As he knows, the two-year increase in the annual investment allowance, which the Chancellor announced in the Budget, is helping firms right across the country to invest in new plant and machinery. It gives 100% first-year tax relief on the first £1 million of eligible investments and helps small and medium-sized firms such as Dean’s shortbread to continue to grow.
I reassure the hon. Lady that we have already put additional funding into the police grant, and we have raised spending power such that it increases in real terms. Additional surge funding has been put into the west midlands to acknowledge the specific issues in that area.
We made an announcement this morning about our plans for green finance. Over the coming months and years, it will be essential to demonstrate how we are able to mobilise our capital markets and the instruments of a market economy to deliver on this huge enterprise. If we do not demonstrate how the market economy can provide solutions to decarbonising our economy, there are others with alternative solutions to present.
As I think the hon. Gentleman knows, that position is enshrined in statute, and only this House of Commons could change it.
More of my Southampton constituents are in work than ever before, but many of their jobs are low-paid, with few career prospects, if any. What are the Government doing to improve employment opportunities for my constituents?
We have worked hard to build a stronger, fairer economy, dealing with the deficit that we inherited, helping people into work and cutting taxes for people, families and businesses, and the result is that the economy has grown continuously for the past nine years. Employment is currently at record high levels, unemployment is currently at the joint lowest rate since 1975, and real wages are rising again. We have created 3.5 million new jobs, but the next stage must be about increasing real wages by raising productivity, because that is the only sustainable way to raise the living standards of working people in this country.
The reality is that that we have got a record number of people into work. Universal credit has been shown to help more families get into work, and it has made work pay. We have also made adjustments to universal credit to shorten the wait time, and we have put in an extra £630 a week for families.
It has been a while since I asked the Chancellor about the blockchain and distributed ledger technology, so I was hoping that he could present an update on how the Treasury is embracing this new technology.
I thank my hon. Friend for his question. The UK’s digital economy is thriving and is growing 10 times as fast as the wider economy. We are pursuing a range of measures to reinforce that leading position, and that involves implementing a 10-year action plan to unlock over £20 billion in finance growth in innovative firms and a further £7 billion for research and development since 2016, with internationally competitive research and development tax reliefs to support investment.
As my right hon. Friend the shadow Chancellor has just pointed out, the right hon. Member for Uxbridge and South Ruislip (Boris Johnson) has made £30 billion-worth of spending pledges and the right hon. Member for South West Surrey (Mr Hunt) has made £13 billion-worth of pledges. The Chancellor has said it will not happen on his watch, but that seems to suggest that a magic money tree has been found in the barren soil of the no deal for which we seem to be heading.
I want to ask the Chancellor about the pledges announced by the current Prime Minister in the past few weeks, which unfortunately have not included any compensation for the infected blood community. How have the Chancellor and the Treasury prioritised and costed those announcements?
The Prime Minister has made a number of announcements since 23 May, including on modern slavery and mental health. All these announcements have been costed and are affordable within existing budgets for 2019-20.
What steps is my right hon. Friend taking to ensure that dementia care is adequately funded in the next spending review?
My hon. Friend makes a very good point about dementia care, which is one of the issues that will be looked at as part of the long-term plan for health. Due to the fiscal responsibility exercised by this Government, we are able to put extra money into health services to deal with issues such as dementia.
I welcome the Chancellor’s remarks about a no-deal Brexit and the disaster it would be for our country, costing jobs and livelihoods. Does he agree that both Conservative leadership candidates, who support a no-deal Brexit, should stop selling out the country to serve their own political ambitions? Will he commit to joining us in voting against a no deal when and if he returns to the Back Benches, and to voting with us on a no-confidence motion, if it comes to that, to stop a no deal?
At this stage of my career, I will not speculate on my future actions. What I will say is that the Government’s analysis shows that a no-deal exit would mean that all the regions, nations and sectors of the UK economy have lower economic output compared with today’s arrangements and compared with the White Paper scenario that the Government set out. It is important we all understand that preparing for a no deal, which is a perfectly sensible thing to do because it might happen to us without our volition, is not the same as avoiding the effects of a no deal.
Net zero emissions by 2050 is a desirable but very costly policy. Does the Chancellor agree that we must do everything to protect low-income families in my Cleethorpes constituency and elsewhere from bearing an unfair burden?
Yes. This is a huge commitment, but it is the right commitment to make. The Committee on Climate Change recommended that the Treasury should undertake a review of the funding and financing mechanisms to ensure that this huge undertaking can be funded, and that it will be funded in a way that is fair to families, households and businesses across the UK, which is exactly what we will do.
The “All Kids Count” report, on the impact of the two-child limit after two years, was published last week by the Church of England, the Child Poverty Action Group, Women’s Aid, Turn2us and the Refugee Council. The report illustrates the devastating impact of the two-child policy, particularly on working families who are unable to compensate for the £2,780 a year cut by working longer hours. Before the Chancellor leaves office, will he scrap the two-child policy and its devastating impact on families?
The universal credit policy has been designed to make sure that people who are being supported by the Government are in a similar position to families who have to make their own financial decisions based on the wages they earn every week.
The decision by the European Union to suspend the equivalence agreement with Switzerland seems to be very damaging. My right hon. Friend the Chancellor has done a fantastic job over the past few years. Will he confirm whether the United Kingdom was consulted on whether the decision should go ahead?
We have been closely involved in this issue, discussing it both in the EU and with the Swiss. I can tell the House that although on the face of it the withdrawal of equivalence had a very significant effect on the ability of UK shareholders to trade Swiss shares on the Swiss stock exchange, the measures that the European Securities and Markets Authority announced on Friday significantly mitigate the impact. So we very much hope that the European Union and Switzerland will be able to reach agreement, and of course there is a very direct relevance to the UK’s own negotiations with the European Union.
Will the Chancellor commit to enabling the 120,000 families on very low incomes who find out about a tax credit overpayment when they claim universal credit to have a fair chance to appeal against those deductions averaging £1,500 being made and to giving them a chance to raise themselves out of poverty?
I am grateful to the hon. Lady for the question, and I am happy to refer her to the welfare Secretary on the matter.
Does the Chancellor share my concern about the way some local councils are misusing Public Works Loan Board loans to speculate on commercial property, including many in Surrey?
My hon. Friend knows that I do share his concerns on this matter. The Public Works Loan Board is there to support local authorities’ capital spending. Some of the development activities of local authorities are perfectly legitimate: for example, the regeneration of urban areas. What is not legitimate is local authorities arbitraging the low interest rates of the PWLB to buy commercial property for yield, in order to develop income-yielding property portfolios. The Treasury is looking at how we can manage that situation.
Order. We have now had 20 topical questions. Whether this is the Chancellor’s last appearance at the Dispatch Box as Chancellor remains to be seen, but whether it is or not, he will always be able to tell his children that demand for him exceeded supply of him. He can say to them proudly, “I always left them wanting more of me.”