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House of Commons Hansard
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Oral Answers to Questions
24 October 2017
Volume 630

Treasury

The Chancellor of the Exchequer was asked—

Unemployment

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1. What recent fiscal steps he has taken to reduce unemployment. [901359]

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In 2010, we inherited the UK’s largest deficit since the second world war, at 9.9% of GDP. We set out a clear fiscal framework to restore confidence in the economy and reduce the deficit, which has subsequently fallen by more than two thirds.

We have delivered the lowest corporation tax rate in the G20 and cut employment costs through the employment allowance. Our unemployment rate, in consequence, is at its lowest level for more than 40 years, and since 2010 we have seen 3 million more people find work. With the economy operating at near record high employment, our focus now must be to increase productivity and, thus, real wage growth.

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Will my right hon. Friend confirm that despite all the fearmongering from many, including Opposition Members, since the Brexit referendum, we have the best growth rates and best inward investment rates in the whole of Europe, and the lowest unemployment rates for four decades? Is that not a ringing endorsement of this Government’s policies?

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My hon. Friend is absolutely right to say that we have the lowest unemployment rate for four decades, and that is a remarkable achievement. The British economy has performed with remarkable resilience since June 2016. Last year, we had the second highest growth rate in the G7. The British economy is fundamentally strong and resilient. Yes, we have some short-term uncertainty, but underneath that is a strong and resilient economy ready to go forward and reap the benefits that are available in the future.

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A fortnight ago, at the International Monetary Fund, the Chancellor was talking about the fiscal and unemployment consequences if a transition deal on Brexit is not achieved by the first quarter of next year. He was right then, so what is he doing to help secure a specific transition agreement in that first quarter of next year?

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We are preparing for all outcomes in our negotiations with the European Union, but the Government’s objective is to reach a deal. As the Prime Minister made clear in her Florence speech, as part of that deal we want to agree an implementation period, during which businesses and Governments can prepare for the new relationship, and we want to agree the principles of that period as soon as possible. Last week, at the European Council, the 27 agreed to start internal preparatory discussions on guidelines in relation to an implementation period. Together with the broad support for the idea in Parliament, this should give British businesses confidence that we are going to provide them with the certainty they require.

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Will the Chancellor welcome the fact that there are more women in work than ever before and set out what steps we can take to ensure that this is one of the best countries in the world for women to set up and run their own businesses?

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One of the remarkable achievements of the past seven years has been the increase in participation in the workforce, particularly in the number of women participating in the workforce. That is in large part due to the family-friendly policies this Government have pursued, with huge increases in the availability of childcare—free childcare—and in the tax deductability of childcare. We will continue to drive a set of policies that encourages women into the workforce, both because it is economically sensible and because it is socially inclusive.

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One of the biggest fiscal steps that can be taken to reduce unemployment is public sector investment in housing. May I therefore welcome the Communities Secretary’s statement yesterday that the Treasury has agreed to increase net borrowing by, I believe, £50 billion in order to enable this to happen? Will the Chancellor confirm that this is Government policy?

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No, and that was not what my right hon. Friend said, as the right hon. Gentleman very well knows. I would, however, agree with him that increasing activity in the construction sector is a very good way of creating jobs, but he will know that at 4.3% our economy is approaching full employment and the output gap is extremely small.

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Given that more people are in employment, there is more opportunity for people to take advantage of employee share ownership saving schemes. Unfortunately, the maximum amount of time someone can pause one of those schemes is six months, which means that many women on maternity leave for up to a year have to cash in their schemes and cannot take advantage of them to maximum effect. I am sure that is an out-of-date anomaly, so in the Budget will the Chancellor extend the period of time that an employee share ownership saving scheme can be paused to up to 12 months? In that way, women on maternity leave can enjoy the same benefits of those schemes as everybody else.

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The hon. Gentleman used the words “employment” and “employee” and just about got his question in order.

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I am sure he did, Mr Speaker. My hon. Friend raises an interesting but technical point that has been raised with me by others, including the TUC. I will take what he said as a Budget representation and look into it carefully.

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Getting second earners and couples into work is one of the best ways to reduce family poverty and protect women economically for the future. Rather than putting money into continuing to increase the tax threshold, which rarely benefits low-income families, will the Chancellor consider measures in his Budget on the work allowances in universal credit, which are currently a real deterrent to second earners looking to increase their labour market participation?

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The Government made commitments on the personal allowance and higher-rate threshold in their previous election manifesto. We reiterated them in the 2017 manifesto, and we remain committed to those policies. Of course, I will take into account all the representations I receive from right hon. and hon. Members, and I shall take the hon. Lady’s comments on the work allowance as such a representation.

Fiscal Devolution: London

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2. Whether his Department has made an assessment of the potential merits of recommendations from the London Finance Commission on fiscal devolution for London. [901360]

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I thank my hon. Friend for his work on the London Finance Commission, which recommended giving London a wide range of additional powers. The Government have committed to continue to work with the Greater London Authority and London Councils to ensure that London has the powers it needs to maintain its status as a world-leading city.

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I am grateful for that response, but will my hon. Friend particularly and urgently consider whether an element of fiscal devolution—for example, a tourist levy or something similar—might be part of a robust funding package for Crossrail 2, which is a critical part of national infrastructure and will give a boost worth around £150 billion to the whole UK economy?

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As my hon. Friend is aware, the Department for Transport is scrutinising the business case for Crossrail and discussing it with Transport for London. It is right that the London region does not retain disproportionate amounts of revenue. Some of the recommendations in the commission’s report are very broad ranging.

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If the ministerial team are to deliver anything for the London Finance Commission, will the Minister at least talk to the commission about the difficulty, with Brexit coming, of recruiting anyone to come to live and work in London? The search for talent is very difficult indeed. No one wants to work in this financial capital because of Brexit—what is he going to do about it?

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The hon. Gentleman needs to question whether Labour Members are fully signed up to the recommendations of the London Finance Commission. For example, many of his colleagues on the Opposition Benches may not support the retaining of almost half of all stamp duty across England.

Scottish Economy

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3. What assessment he has made of the contribution of the UK internal market to the Scottish economy. [901361]

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The UK internal market benefits all the nations and regions of the United Kingdom. It is essential that no new barriers to living and doing business in the UK are created. Exports to the rest of the UK are vital to the success of Scotland’s economy, generating £50 billion in 2015. That compares with £12 billion of exports to the EU and £16 billion to the rest of the world and it accounts for 63% of Scotland’s total exports.

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Small and medium-sized enterprises make a vital contribution to local economies, so I am delighted that in East Renfrewshire the number of registered enterprises has gone up by 18% since 2010. Does the Chancellor agree that as those businesses look to expand from being local to national players, it is vital to maintain the integrity of the UK internal market? Any moves to fragment it would damage the Scottish economy, place huge barriers to trade on both sides of the border, and put that vital contribution he just outlined in jeopardy.

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I strongly agree with my hon. Friend that the fragmentation of the UK internal market would be damaging for the Scottish economy, particularly small businesses. This is not just an issue for Scotland, though. We all agree that protecting the UK internal market is in our shared interests, and the Government will work to make sure that there are no new barriers to doing business across the UK.

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Staying in the UK internal market while the UK crashes out of the EU is set to cost Scotland £30 billion over five years, according to research by the London School of Economics published today. Aberdeen is set to lose the most, at 7% of gross value added. Will the Chancellor be clear on behalf of his Government that no deal is not an option?

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As I have already said, the Government are preparing for all possible outcomes of the negotiations with the European Union, as any prudent Government would, but the Prime Minister has made it very clear that our strong preference is to achieve a deal, which is good for Britain and which protects British jobs, British businesses and British prosperity—by which I mean the jobs, businesses and prosperity of all of the United Kingdom.

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On that note, 56% of EU nationals in FTSE 250 companies are highly likely, or quite likely, to leave the UK before the conclusion of the Brexit negotiations. What is the Chancellor’s assessment of the impact on the Scottish economy of all of this talent leaving the UK?

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I am very confident that, whatever the outcome, all of this talent will not leave. The Prime Minister made it very clear yesterday that her top priority remains giving assurance to EU citizens living in the UK, which is why she is working hard to deliver a deal on citizens. It is the area in which our discussions with the European Union are most advanced. The hon. Lady has the Prime Minister’s personal commitment on the importance that she attaches to that area.

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Financial and accounting services amounted to Scotland’s most valuable export service in 2015. Of the £8.8 billion they were worth, £7.6 billion, or 86%, went to the rest of the UK. Does my right hon. Friend agree that conserving the UK internal market is vital to protect such an important sector of the Scottish economy?

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My hon. Friend is right to draw attention to the important role of financial services and insurance in the Scottish economy as a subset of the broader point that the internal market works extremely well for Scotland and is very important to Scotland’s exports. It would clearly be catastrophic for the financial and insurance services sector if businesses based in Scotland were no longer able to operate across the border into England.

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If I understand this correctly, we have Scottish National party members who understand the benefits of the European single market, but not the UK single market, and we have fanatics in the Conservative party who extol the benefits of the UK single market but who would happily drive a coach and horses through the European single market. Perhaps, in his characteristic fashion, the Chancellor can set out a slightly more grown up position and tell us how he will protect both in the interests of the British economy.

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The Government’s position is very clear: the benefits of the UK internal market are absolutely clear to all of us and we will not allow it to be compromised. In our negotiations with the European Union, we hope and expect to agree a deal that will allow British businesses to continue to enjoy the benefits of access to the European marketplace and European companies to continue to enjoy the benefits of access to the UK market.

Digital Infrastructure

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4. What recent investment the Government have provided for digital infrastructure. [901362]

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The Government are investing more than £1 billion to stimulate the market to build the next generation digital infrastructure that the UK needs for the future. This includes the £400 million digital infrastructure investment fund and the £740 million for full fibre broadband and 5G mobile. That is in addition to the Government-led £1.7 billion superfast programme, which will extend coverage to 95% of UK premises by the end of the year.

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The vast majority of my constituents in east Yorkshire and north Lincolnshire now enjoy superfast broadband, but a small number in rural areas still struggle with access to broadband and to good 4G, 3G or even 2G mobile coverage. What more can the Government do to give BT Openreach and the mobile networks a kick up the backside to make sure that we get the coverage that we are all paying for?

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The Government are working to continue their progress on the superfast broadband roll-out. We expect to reach 95% by the end of this year. We have already seen some changes from the internal reorganisation within British Telecom, separating out Openreach. The progress will be maintained through Government expenditure in that programme and in the digital infrastructure investment fund.

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The Office for Budget Responsibility has just reported on the poor productivity record in this country. Investment in broadband is crucial to improving that, so when will the Minister respond to the letter that I wrote to him on 1 September about broadband in Teesdale?

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I absolutely agree that broadband and digital progress are critical to the productivity of our economy. I am not aware of that letter. I will look into it with immediate effect, and I apologise for the delay.

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As the fourth industrial revolution accelerates, superfast broadband will be key to the productivity of our high-growth technology businesses. Will the Minister continue working with entrepreneurs and businesses to ensure that they get the broadband system that they need?

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I most certainly will continue to work on that. My hon. Friend has consistently spoken up on behalf of entrepreneurs and enterprise since he arrived in this House. The Government’s intention to pursue our broadband investment, whether it is superfast or full fibre, is right at the heart of our efforts to improve productivity.

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BT has received hundreds of millions of pounds from the Government for public investment in the digital network. But there are parts of my constituency—both rural and urban—where broadband coverage is still very poor, such as the town of Carrickfergus. BT refused to look at innovative ways of splitting the network. Is it not time that the Government looked to other bids for some of the money they are investing in broadband in order to ensure that there is better coverage?

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The hon. Gentleman makes an important point. All our constituencies have some areas that are not yet fully able to access the important benefits of broadband. I will discuss his points with my colleagues in the Department for Communities and Local Government, and report back to him.

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I am pleased that the Communities Secretary has been inspired by Labour’s fiscal credibility rule in relation to investment in infrastructure—including digital infrastructure and, recently, house building. But this does beg crucial questions. Does the Minister support his colleague’s bid to “borrow more to invest” or is it more a bid to steal the Chancellor’s job?

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I have already outlined the Government’s progress on broadband. The hon. Gentleman mentions, I think, some kind of speculative comment regarding the forthcoming Budget. The Chancellor has already answered that question.

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The digital infrastructure plans are wholly inadequate, as my hon. Friend the Member for Bishop Auckland (Helen Goodman) indicated. Is the Minister aware that productivity figures are at pre-crisis levels, and is he really aware that regional industries are up to seven times more productive than others? What is the digital investment strategy doing to close that shocking gap?

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The hon. Gentleman seems to have forgotten the announcement of the national productivity investment fund—a £23 billion pot of money for investment in infrastructure, including digital infrastructure, across the country. I have already mentioned the £400 million digital infrastructure investment fund and the £740 million for full-fibre broadband and 5G. We are already approaching the figure of 95% of UK premises having access to superfast broadband by the end of the year, and that puts us in a strong place for the future.

SMEs (East Midlands)

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5. What steps he is taking to reduce tax-related bureaucracy for small and medium-sized enterprises in the east midlands. [901363]

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The Government are committed to reducing the administrative burdens for small and medium-sized enterprises, including in the east midlands. That is why we delivered £272 million of net reductions in administrative burdens between 2011 and 2015, and why we continue to reduce unnecessary interaction with the tax system.

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We still have one of the longest tax codes in the world. I know that the Treasury is under constant pressure to bung extra pieces of money to particular interest groups, but may I suggest to the Minister that he sticks to his last on the Treasury Bench and argues the case for less taxation, simpler taxation and less debt? That is the best service we can give to the young and to businesses.

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My hon. Friend raises an important point about complexity, which is why we continue to work with the Office for Tax Simplification to ensure that our tax code is as simple as it can be. But there is no doubt that, in upholding our exemplary record of clamping down on avoidance, evasion and non-compliance— £160 billion of revenue from 2010 to 2015—we make no apologies for having a tax code that works to support our public services.

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Some 130,000 small and medium-sized businesses that export to Europe currently do not have to deal with any bureaucracy at our border to do so, but they could face such bureaucracy if the Minister’s colleagues have their way. Does the Minister think that that will be good or less good for British business?

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As the hon. Lady knows, we are in the middle of negotiations with our European partners. I am confident that, as the Prime Minister has expressed at every turn, we will secure a good deal for this country. In the context of our borders, that will mean that the situation will be as frictionless as possible, which will be good for trade, our country and our economy.

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Does the Minister agree that the Labour party’s plans to raise corporation tax would harm small and medium-sized businesses—

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Order. Just for the benefit of the hon. Gentleman, may I say that the Opposition’s plans for taxes are not a responsibility of the Government? This is a lesson we all have to learn; in my case I learned it early in my first Parliament, and the hon. Gentleman has learned that lesson today.

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Across the whole United Kingdom, and not just in the east midlands, small and medium-sized businesses have created not hundreds but thousands of jobs. Small and medium-sized businesses in my constituency tell me that they are over-regulated and that bureaucracy restricts their ability to employ more people. What is the Minister doing to address that?

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The hon. Gentleman is absolutely right about the critical importance of small and medium-sized enterprises. We have more than 5 million small businesses in our country, and they are right at the heart of generating the wealth that generates the taxes that support the public services we all wish to see thriving. I have already explained that we are working closely with the Office of Tax Simplification to make sure that, wherever possible, the Government get out of the way of business, rather than standing in its way.

Gender Pay Gap

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6. What progress he has made on closing the gender pay gap in the public sector. [901364]

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The gender pay gap in the public sector is 18.3%, which is a record low, and this compares to 24.5% in the private sector.

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I am grateful to my right hon. Friend for those comments. Will she explain how the new duty introduced by this Government, requiring public sector bodies to publish the differences between male and female pay, will support the trend of an ever-reducing gender pay gap, which is at a record low?

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The new duty we have introduced will mean more transparency, so we will be able to find out where the particular issues are in the public sector. Are there, for example, occupations such as engineering that are well paid and that women are less likely to go into, and what can we do to encourage women to apply for roles in them?

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Median public sector wages are £1,000 lower in real terms than they were in 2010. Does the Minister agree that it is about time that hard-working public sector workers got the pay rise they deserve?

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We have already been clear that the pay review bodies will have the remit to look at how high-quality public sector workers can be retained and recruited right across the board, whether they are teachers, nurses or police officers.

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The chief executive of Virgin Money, Jayne-Anne Gadhia, has this morning given evidence to the Treasury Committee on the Treasury’s women in finance charter—she is the Government’s women in finance champion. Ministers will know that one way of tackling the gender pay gap is to ensure that we have more women in senior roles, so will the Chief Secretary urge the Chancellor to reply to the letter I wrote to him last week about appointments to the Bank of England, where more senior women are needed, because the evidence this morning shows the importance of role models?

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First, I congratulate my right hon. Friend on her work to promote these issues that she did as Women’s Minister. It would be great to see other professions, such as legal services, looking at the success of the women in finance charter and seeing what they could do. I will urge my colleague to reply to my right hon. Friend’s letter asap.

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In addition to the gender pay gap, the disability pay gap remains extraordinarily high, yet disabled people are not mentioned in the Government’s industrial strategy. When will we harness the potential of disabled people in our economy and create policies that effectively show that?

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The hon. Lady is absolutely right to highlight the issue of making sure that disabled people have a full opportunity to participate in the economy. The fact is that we are missing out on huge amounts of talent—the talent of disabled people, women and older people—in our economy. We need to unleash that to help our country to become more productive, and also for the sake of those people, who have so much to contribute.

Public Services

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7. What comparative assessment the Government have made of the level of spending on public services in the UK and other developed countries. [901365]

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Last year, public spending was 38.9% of GDP, which equates to about £28,500 per household. This is comparable with other leading countries.

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Does the Minister agree that it is due to this Government’s responsible management of the public finances that we are able to spend more on education than Germany and Japan, and more on defence and policing than any other European country?

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My hon. Friend is absolutely right. We spend more per student on education than Germany or Japan. Because of our management of the public finances, we have been able to push £1.3 billion more of education spending to the frontline, where it is going to make the most difference in classrooms.

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Is the Chief Secretary concerned by speculation that the Bank of England will increase interest rates by 0.25% in November, which would have an adverse effect on public spending?

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That is one of the reasons why we need to make sure that we are reducing our debt and reducing our deficit in order to reduce the interest payments that came as a result of the previous Labour Government leaving us with the highest deficit in history. We have an independent Bank of England, and it is very important that as a Government Minister I do not tell it what to do on interest rates.

Public Sector Pay

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8. What recent assessment his Department has made of trends in the level of public sector pay since 2010. [901366]

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In 2010, there was a significant gap between wages in the public and private sectors whereby public sector workers received an average of 5.76% higher pay. Today, wages are comparable, and when we take into account more generous pension benefits, there is an additional 10% pension premium in the public sector.

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Last week, the rate of inflation was announced at 3%. Public sector pay rises are at 1%. Will the Chief Secretary confirm that that is a pay cut for millions of workers, and will she take this from me as a Budget representation: “Scrap the cap”?

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It seems that the right hon. Gentleman cannot take yes for an answer. There is not a public sector pay cap. We have said that individual Secretaries of State will be responsible for making proposals on their workforces dependent on specific circumstances. We are facing very different issues in the NHS and in the armed forces. What is important is that we look at the evidence and make sure that we can recruit and retain the best possible workers in the public sector, but we also need to make sure that we do not price out of the market people working in the private sector.

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Will the Chief Secretary urge her Cabinet colleagues, when they are making these decisions, to bear in mind that public sector pay rises must be fair not only to public sector workers, but to the five sixths of workers in the private sector who face the same pressures and challenges?

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My right hon. Friend is right. The fact is that we were left a legacy by a previous Government who spent money that they did not have. We have had to get the public finances back on track. We do recognise that there are areas in which we need to make sure that we can recruit and retain high-quality public sector workers, but we also need to make sure that we have a thriving private sector economy. That is why we have ended up with the lowest unemployment for 40 years.

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We know from the Resolution Foundation that this decade, from 2010, is the worst for wage growth in 210 years, so when will the Chief Secretary to the Treasury ensure that Departments are fully funded to scrap the cap?

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The reason we have not seen the wage growth that we want to see is that we have an issue with productivity in this country. In order to raise living standards for everybody, regardless of whether they work in business or in the public sector, we need to make sure that we raise productivity. That is why we are investing in infrastructure and skills—doing all the things that the previous Government did not do to make our country more productive.

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Can my right hon. Friend confirm, for the avoidance of doubt, whether there is a pay premium for the public sector over the private sector?

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There is not a pay premium. Public and private sector pay are roughly comparable, but in the public sector there is an average of 10% additional remuneration in terms of pension contributions.

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I hope that the whole House will join me in congratulating very warmly the right hon. Member for Tatton (Ms McVey) on her significant birthday today.

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I am older and, I hope, wiser. Like all the ladies who are at my age, I am just hitting my stride and coming of age.

Transport Infrastructure: Cheshire

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9. What investment his Department has provided for transport infrastructure projects in Cheshire in the last 12 months. [901367]

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I wish my right hon. Friend many happy returns of the day.

I confirm that the Government are taking big decisions for Britain’s future and investing in transport infrastructure in Cheshire and across the north. Just last week, my right hon. Friend the Secretary of State for Transport announced road investment of £65 million in Cheshire. That included £18 million of funding for five different local road schemes and £47 million for the Middlewich bypass. That is on top of improvements that the Government are already making to the M6, M62 and M56.

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I welcome the Minister’s reply. The Cheshire and Warrington local enterprise partnership has a bold agenda for increasing business in Tatton and Chester. The local plan has an equally bold agenda for increasing the number of houses, which will bring money to the Exchequer and help to meet the country’s housing need, but we have a significant need for the mid-Cheshire rail line. May I ask the Chancellor and his team to look at that for the forthcoming Budget?

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I will take that as a Budget representation. The basic point is that we are clearly very ambitious to unlock, through transport investment, both residential and commercial opportunity. That has been a feature of Government policies over the past few years, and I am sure that it will continue to be.

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In Cheshire and across the north, the reality is, as the Minister says, that infrastructure investment will unlock productive capacity. Does the Minister recognise that the disproportionate investment per head between the south-east and the rest of the country is unacceptable and must change?

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The hon. Gentleman’s assessment is simply mistaken: Government investment is broadly equal across the different regions of our country. I highlight to him that the central Government investment going into the north during this spending period is £13 billion, which is a record in British history.

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Order. As a very distinguished chartered surveyor, the hon. Member for The Cotswolds (Geoffrey Clifton-Brown) will know that the Cotswold is a very significant distance from the north or the north-west, but we will look forward with eager anticipation to hearing the hon. Gentleman at some later point.

Deficit Reduction

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10. What recent progress has been made on reducing the deficit. [901368]

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15. What recent progress has been made on reducing the deficit. [901373]

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The Government have reduced the deficit by well over two thirds—from a post-war high of 9.9% of GDP in 2009-10 to a low of 2.3% of GDP in 2016-17. We have done that not out of some ideological obsession, but because the key challenge is to get debt falling to increase the resilience of our country so that if the need were ever to arise, we would have the capacity to support the economy against a future shock.

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I thank my right hon. Friend for that answer. May I make one simple request about the Budget: whatever measures he announces, he resists the temptation to pay for them by billing our grandchildren? Instead, will he continue the excellent work that has seen us slash by nearly three quarters, as a percentage of GDP, the record post-war deficit that we inherited from the Labour Government?

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Yes. It is not responsible to make so-called hard choices by loading the price on to the next generation and the generation after that. We have to make difficult decisions and we have to bear the consequences of those decisions. At £65,000 per household, our public debt is still far too high, so I can confirm to my hon. Friend that we will continue the plans that we have announced to reduce the deficit in a measured and balanced way to ensure that debt falls as a share of GDP.

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Despite this Government’s significant efforts to tackle the deficit by reducing tax avoidance, companies such as Microsoft and Apple are still saving hundreds of millions of pounds in corporation tax by booking sales in Ireland. Does my right hon. Friend agree that we need to continue to develop measures to make sure that companies that sell to UK customers pay tax in the UK?

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My hon. Friend puts his finger on an important problem. Corporation tax in the UK—in fact, in all countries—is levied on profits generated by the activities of companies within the territory. The big global digital companies present us with a new challenge of attributing profits effectively to individual jurisdictions. We are continuing to work with the OECD’s taskforce on the digital economy, and we are also looking carefully at ideas emerging within the EU for interim solutions pending a full international solution.

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Given that the previous Chancellor has now said that in 2008 the Labour Government

“did what was necessary in a very difficult situation”,

does the current Chancellor accept that the fact we have thousands of people going to food banks and desperately underpaid public sector workers is entirely the fault of Tory policy?

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No. Of course a Government need to be able to respond to an external shock, but a prudent Government have got the economy in good shape to respond before such a shock arises. The problem in 2008-09 was that the then Labour Government were borrowing tens of billions of pounds at the top of the economic cycle—grossly irresponsibly.

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The major cause of the deficit was of course the collapse in tax revenue following the global financial crisis in 2008, yet that is exactly what we will face again unless there is a transitional deal with the EU to allow our world-leading financial services sector—it contributes £66 billion a year in tax revenue—to operate legally within the single market. As my hon. Friend the Member for Nottingham East (Mr Leslie) has already said, we have been asking the Government all year to confirm that there will be a transitional deal. As today is the penultimate Treasury questions before the end of the year, the last Treasury questions before the Budget, and—if hon. Members have read the papers—perhaps the Chancellor’s last Treasury questions ever, will the Government promise UK-based firms a transitional deal guaranteeing market access before the end of this year?

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As I have already said, the Government have made it clear—the Prime Minister set this out in the Florence speech—that we want to agree an implementation period as part of a deal with the European Union. We are greatly encouraged by the fact that, at last week’s European Council, the 27 agreed to start internal preparatory discussions on guidelines in relation to an implementation period. We are confident that that will give British businesses confidence that we are going to provide them with the certainty they require.

Infrastructure: Government Investment

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11. What assessment he has made of the effect of Government investment on infrastructure since 2010. [901369]

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14. What assessment he has made of the effect of Government investment on infrastructure since 2010. [901372]

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Infrastructure is at the heart of the Government’s economic strategy, and our investment will boost productivity and growth. Since 2010, more than £250 billion has been spent on public and private sector infrastructure.

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The biggest investments in transport infrastructure in generations, including the Ordsall rail curve in Greater Manchester, have been made possible by this Government. Will my hon. Friend commit to further investment in our rail network, particularly on local commuter routes through my constituency?

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My hon. Friend makes a good point. This Government have committed to the largest rail investment programme since Victorian times, including a £55.7 billion investment in High Speed 2. He will be aware of the Chancellor’s announcement in Manchester last month of £300 million to improve connectivity to High Speed 2 across the northern region.

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Will my hon. Friend confirm his commitment to the Tay cities and the Clackmannanshire and Stirling city deals, and will he commit to meeting the local leaders and me to discuss how we can deliver this transformational change for our region?

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The Government remain fully committed to agreeing both city deals, and to working constructively with the Scottish Government and local partners. I am, of course, very happy to meet my hon. Friend to discuss this further.

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A decent transport infrastructure is an essential platform for economic growth, but the Minister will be aware that public transport investment in the north-east is only £200 per head, whereas it is £2,000 per head in London. Will he now commit to investing in the north-east on the Tyne and Wear metro, and with public money, not some private finance initiative?

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The Government are committed to increasing infrastructure investment across all regions, including the north-east. Indeed, investment is 30% higher than it was under the Labour Government. It would be better for Opposition Members to recognise the record investment in infrastructure, which is driving productivity and growth.

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Will the Minister say how much investment is going to the west midlands, as it is very important to the British economy?

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The investment going to the west midlands as part of the midlands engine and through the devolution deal is part of wider investment—the £23 billion of investment that has been announced through the national productivity investment fund. The hon. Gentleman will be aware of the Secretary of State for Transport’s announcement on rail spending between 2019 and 2024, which includes the £24 billion announced just last week.

Corporate Tax Evasion

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12. What recent progress he has made on reducing the level of corporate tax evasion. [901370]

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Since 2010, HMRC has secured more than £53 billion from big businesses alone in additional tax revenue from tackling tax evasion, avoidance and non-compliance, and we have made it an offence for a corporate to fail to prevent the facilitation of tax evasion by its employees. Corporation tax revenues were £55.3 billion in 2016-17, their highest level on record.

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Keeping up the pressure on multinationals to pay their fair share of tax is vital. Will my right hon. Friend join me in welcoming the additional £160 billion in tax revenue collected by HMRC since 2010 as a result of tackling avoidance and evasion, thus making the UK’s tax gap one of the lowest in the world?

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My hon. Friend is absolutely right—we have collected £160 billion since 2010, far more than was raised during the 13 years under the Labour party. The latest figures show that our tax gap overall is now at 6.5%, better than any year under Labour, where in 2005-06, for example, it was as high as 8.3%.

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Successive cuts to British corporation tax have manifestly not led to greater business investment, and according to the Institute for Fiscal Studies they are not responsible for the rise in receipts since 2010. So, with huge pressures on our public finances, will the Chancellor delay his proposed cuts to corporation tax?

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I am surprised that the hon. Lady should raise the issue of corporation tax, because we have brought corporation tax down from 28% in 2010 to 19% and we have further plans to reduce it further, to 17%, and yet the hon. Lady’s party wishes to inflate those rates of tax to 26%, which would destroy jobs, destroy wealth, destroy growth and lower the amount of tax that we can collect to support those vital public services that we all wish to see thrive.

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One way that companies avoid tax is, of course, by employing people illegally. We still have too many illegal jobs in our economy in sectors such as construction. So will my hon. Friend and his colleagues resist those calls that are floating around to place new and additional burdens on legitimate work, and instead redouble their efforts at enforcement through HMRC to root out illegal work in our economy?

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My right hon. Friend is absolutely right. As the Minister responsible for strategic oversight of tax, I am always concerned to ensure that the measures that we put in place are proportionate, and do not carry extra burdens for those who are rightly carrying on their business and running their companies in exactly the correct fashion.

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Intergovernmental co-operation is vital if we are to combat international corporate tax evasion. In February this year Treasury Ministers withdrew from a meeting with the EU PANA Committee, which was set up to investigate issues and prioritise reform. What sort of message does the Secretary of State think that sends to corporate tax evaders?

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International co-operation with other countries is an area where we have an exemplary record. We have co-operated with the OECD on the base erosion and profit shifting project—many of the recommendations are actually going through the House at this precise moment, in the latest Finance Bill—and, of course, we have common country reporting; we were leading that move in around 2012.

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Finally, Royston Smith.

Income Tax Thresholds

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13. What assessment he has made of the effect of recent increases in income tax thresholds on household income. [901371]

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In 2017-18, as a result of increasing the tax-free personal allowance and the higher rate threshold, 31 million individuals will see their income tax bill reduced and 1.3 million individuals will be taken out of income tax altogether; 585,000 individuals will have been taken out of the higher rate of tax in 2017-18.

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In 2017-18 and beyond, all basic rate taxpayers will pay £1,000 less per year in tax than they did in 2010. Can my right hon. Friend confirm that an employee paying the basic rate of tax would need to earn an additional £1,471 annually to take home £1,000 in extra income?

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I can absolutely confirm that. I can also tell my hon. Friend the good news that a typical basic rate taxpayer will pay £1,005 less income tax in 2017-18 than in 2010-11.

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This really is finally. I call Mr Nigel Huddleston.

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16. I am very proud of the fact that this Government have taken 3 million of the lowest paid out of paying income tax altogether. These are people who cannot afford to pay more tax. Some Opposition Members—and, indeed, others—often say that they would not mind paying more tax. Can we find a mechanism for them to do so? [901374]

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I am always very open to receiving from colleagues around the House ideas for specifically targeted taxes. If my hon. Friend has such an idea I would be very pleased to receive it.

Topical Questions

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T1. If he will make a statement on his departmental responsibilities. [901349]

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As we look ahead to the GDP figures out tomorrow and to the Budget in a month’s time, my focus is on the three key challenges we need to meet as we seek to build an economy that works for everyone: first, protecting the economy by managing short-term uncertainty; secondly, achieving a good Brexit outcome; and, thirdly, addressing the longer term productivity challenge to ensure that real wages, and thus living standards, can continue to rise. Everything my Department does will be focused towards those three objectives.

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What revenue has the privatisation programme raised and what would be the cost of nationalising the utilities?

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I refer my right hon. Friend to the analysis of the Opposition party’s proposals, if we can call them that, done by the Conservative party at the time of the general election. The Government’s policy is to sell assets when there is no longer a policy reason to retain them and to reinvest the proceeds of such sales in policy priorities. Nationalising assets would increase public sector net debt, which would increase our debt interest bill and divert public spending away from more valuable areas. It would also mean that the future investment needs of any nationalised industries would have to compete for capital with our public services.

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I listened very carefully to the Chancellor’s response to the hon. Member for Aberdeen North (Kirsty Blackman) and my hon. Friend the Member for Ilford North (Wes Streeting) on the issue of no deal. May I tell him that his response was crushingly disappointing? Expressions of hope of a deal are just not good enough. The Chancellor knows the economic perils our country faces if there is no deal: he described it, rightly, as a worst-case scenario. May I urge him, in the interests of our country, to have the courage of his convictions, and stand up and face down his opponents in Cabinet and confirm today that, like us, he will not support or vote for a no-deal Brexit?

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As the right hon. Gentleman very well knows, our clear objective and priority is to achieve a deal with the European Union. Our preference would be for a deal that gives a comprehensive trade, investment and security partnership between the UK and the European Union in the future. As part of such a deal, we will seek an implementation phase that gives British businesses, and indeed Government agencies, proper time to prepare for the new circumstances they will face.

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If the right hon. Gentleman cannot stand up to his opponents on a no-deal Brexit, can he at least stand up to them on the transition period? Business leaders yesterday made it clear that they need certainty now on a sensible transition period, yet the Prime Minister yesterday sowed more confusion in her statement, giving the impression that the transition is to be negotiated only after we have settled on what, as she describes it, the “future partnership” with Europe will be. Businesses cannot wait: they need to plan now; jobs are in jeopardy now. If the Prime Minister is not willing to stand up to the reckless Brexiteers in her party, will the Chancellor? Will the Chancellor make it clear, in a way that the Prime Minister failed to do yesterday and as business leaders have been calling for, that we need the principles of any transition confirmed by the end of this year?

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The right hon. Gentleman is correct to say that this matter is urgent and pressing, which is why we were so pleased that last week at the European Council the 27 agreed to start internal preparatory discussions for an implementation period. I am confident that we will be able to give businesses the confidence and certainty they need.

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T4. What estimate has been made of the effect on unemployment of the reduction in the corporation tax rate? [901352]

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As I said earlier, we have cut corporation tax dramatically and as a consequence we raise 50% more in corporation tax today than we did in 2010.

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T2. The Chancellor will be aware that the Office for National Statistics has revised downwards the UK positive net international investment position from £470 billion to minus £20 billion. What further shocks of this magnitude does he expect as a result of his Government’s handling of the EU negotiations? [901350]

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The hon. Gentleman will see, if he looks at that revision, that the cause is lower-than-anticipated returns on UK investment stocks held overseas, principally returns on mining and petroleum-related activities.

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T5. The location of Rugeley B power station is a large strategic site in the west midlands. Will my hon. Friend join me in urging all the parties involved in the redevelopment to be ambitious, bold and visionary, and will he outline what Government assistance is available to attract innovative high-tech businesses? [901354]

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I will most certainly join my hon. Friend in both celebrating the project and urging everybody working on it to be as ambitious as possible. In terms of support, since 2010, my hon. Friend’s area has benefited from more than £300 million in grants to support cutting-edge innovation in the west midlands through Innovate UK. The Government welcome private investment in innovative and high-tech businesses right across the economy, which is why we announced an additional £4.7 billion for research and development at the 2016 autumn statement.

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T3. The Scottish National party has repeatedly asked the Government to take action to enable Scotland’s police and fire rescue service to reclaim VAT in the same way as they have done for national bodies such as Highways England. If that action can be taken for Highways England, why not for Police Scotland and the fire and rescue service in Scotland? Will Ministers commit to doing that in the next Budget? [901351]

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As the hon. and learned Lady will know, when the Scottish Government decided to restructure their police and fire services, they went into that decision with their eyes wide open—they knew what the VAT consequences would be—so it is down to the SNP to ask those questions of itself.

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T6. When is the Treasury likely to give the sign-off to phase 2b of HS2, which you will know, Mr Speaker, runs through Cheshire? [901355]

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I will take the matter up with my right hon. Friend the Secretary of State for Transport and get back to my hon. Friend.

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T7. Inflation now stands at a staggering five-year high and businesses in Scotland, Falkirk and across the UK face the prospect of increased trade tariffs post-Brexit. On the high street, it is increasingly a case of bricks versus clicks, and businesses are closing down, as people buy online, leaving town centres struggling. Has the Chancellor spoken to retailers about the possibility of reducing the amount of VAT paid by businesses in our town centres to help them cope with online trade and the impending extra burdens? [901356]

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We are acutely aware that inflation has spiked, but the overwhelming majority of forecasters expect it to start to fall again in the new year. The spike in inflation has been driven primarily by the depreciation in the value of sterling last year, but I will take the hon. Gentleman’s comments on VAT as a representation for the Budget and will consider them carefully.

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T8. May I urge the Chancellor to reject the representations that we have just heard from the shadow Chancellor? Is it not the case that one cannot agree a price until one knows what one is paying for, and that only a fool would write a blank cheque with taxpayers’ money? [901357]

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My hon. Friend is absolutely right. We should not be giving away our negotiating position when we are entering one of the most important negotiations that the country has ever been involved in, and that is why we need to be prepared for all eventualities. I am delighted to be meeting my hon. Friend tomorrow to discuss the issue in more detail.

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We are having difficulties with mobile banking in my constituency. I know of instances in which two different mobile banks have arrived in the same community while other communities have seen no mobile banks at all. We have problems with people queueing in rough weather and getting wet, and problems with paper banking. Will the Chancellor, or some other Minister, propose ways of reorganising mobile banking and making it more user-friendly, and of getting the banks to co-operate with each other to deliver a service that is vital in the highlands?

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Mobile branches are vital to many communities, and I am sure that many banks will have heard the hon. Gentleman express his concerns, but these are commercial decisions. It should be recognised that since 2011 the number of branch visits has fallen by roughly a third, that more than 600,000 people aged over 80 are now registered for internet banking, and that a fifth less cash is used for payments. Those changes in the market reflect the way in which branches, including mobile branches, are being used.

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T9. Does my hon. Friend accept that the contribution made by UK financial services vastly outweighs any cost of our contribution to the European Union, and that securing a sensible deal from day one is not only an imperative, but much more likely to be achieved through the patient work of my right hon. Friend the Chancellor than through the anti-business rhetoric of Opposition Members? [901358]

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My hon. Friend is right. The UK financial services industry pays more than £71 billion to the Exchequer in tax and employs more than 1 million people directly and 2.2 million through the sector as a whole, two thirds of whom are outside London. Because of his work as chair of the all-party parliamentary group for Gibraltar, my hon. Friend will be aware of the importance not just of financial services in the UK, but of our links with industries in territories including Gibraltar.

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Teachers have travelled from all over the country today to lobby Parliament about severe real-terms cuts in their pay. The Chief Secretary has said that she has lifted the pay cap owing to the pressure that Labour has placed on her, but will she confirm that her Department will fund the recommendations of the pay review body rather than cash-strapped local authorities?

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The fact is that teachers received, on average, a 4.6% pay rise last year, including promotions and responsibility allowances. Pay in schools involves a great deal of flexibility, and headteachers can decide how they pay teachers. However, it will be up to the Department for Education to look at the specific circumstances in schools and make those determinations.

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Does the Chancellor share my frustration at the fact that since the EU referendum, a number of senior politicians have been talking down the economy? Should they not be talking it up, because we have a great future outside the European Union?

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Yes. As I said earlier, the UK economy is fundamentally strong. We have the world’s second largest services export sector at a time when emerging economies across the globe are sucking in new demand for services, and we have a global lead in various areas of emerging technology that will drive the fourth industrial revolution. This country has a bright long-term future. Of course we must deal with short-term uncertainty, and of course we must tackle our productivity challenge, but we are fundamentally in good shape.

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Given that support for a single Scottish police force was in the 2011 Scottish Tory manifesto, can we assume that the Government think that the £280 million VAT fee is a price worth paying, or will they finally see sense and scrap the VAT on Scotland’s fire and police services?

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The hon. Gentleman’s colleague, the hon. and learned Member for Edinburgh South West (Joanna Cherry), asked exactly the same question, and I shall give exactly the same answer. When the Scottish Parliament and Government made that decision, they knew that structuring the police and fire services in the way that they chose would lead to the VAT outcome that they should have expected all along.

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What does the Chancellor believe we need to do to improve productivity, which is rightly one of his three priorities?

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We need to invest in our infrastructure and the skills of our people, we need to ensure that our high growth businesses have access to long-term capital, and address the regional disparity in productivity performance. If we can tackle those four things, we can start to close Britain’s productivity gap and see real wages rising sustainably over many years ahead.

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Speaking to the Treasury Committee earlier this month about the transition agreement for exiting the European Union, the Chancellor said that

“it will still have a very high value at Christmas and early in the New Year. But as we move through 2018, its value to everybody will diminish significantly.”

Yesterday, however, the Prime Minister told us that we will not get a transition agreement until October next year at the earliest. Does the Chancellor stand by the very different view he expressed just a fortnight ago?

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As I have said several times today, we are reassured by the fact that at the European Council the 27 agreed to start the internal preparatory discussions on an implementation period. We are absolutely aware of the needs of business in this area, and they have been reinforced again by business leaders this week. We are confident that we will be able to deliver reassurance to business in accordance with its needs.

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May I urge my right hon. Friend when looking at the business case for HS2 phase 2b to consider carefully the additional £750 million cost to the Exchequer of building over the Cheshire salt fields?

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We discussed this issue when I was a Transport Minister. All the topography and construction implications as the route is finalised will be taken into consideration as part of the business case.

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We all remember when the hon. Gentleman was a Transport Minister and he enjoyed telling us how he travelled to work by bus; I remember thinking that the fellow passengers on the bus must have been absolutely exhilarated to know that they were accompanied at the time by the Under-Secretary of State for buses.

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The Chancellor acknowledged earlier that the fall in the exchange rate following the Brexit vote has pushed up inflation. What is the Treasury’s estimate of the impact of that on people’s standard of living?

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The hon. Lady will be aware of the increase in inflation—CPI inflation stands at 3%. Most forecasts suggest that it might go 0.1% higher before falling steadily from late this year. Obviously any increase in inflation will have a negative impact on real wages, and we very much look forward to CPI inflation falling and real wage growth resuming in this country next year.

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We are out of time, but the temptation to hear remaining colleagues is, frankly, just too powerful.

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The Chancellor, in his efforts to secure a good Brexit deal and a transition period, has the confidence and support not only of Members on the Government Benches, but from across the whole of British business, including in Broxtowe—unlike the Labour party, which inspires complete fear with the Marxist mayhem it would put into policy if elected into government. Will my right hon. Friend confirm that it is in the best interests of British business to secure a transition period as a matter of some urgency, and will he do all he can to get that transition period?

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Yes, British business has made it clear that it wants the earliest possible certainty about the implementation of interim arrangements. It has also made it very clear that it does not want any Marxist mayhem.

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rose

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rose—

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Can either remaining Member ask a question consisting of 10 words or fewer?

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May I make a plea to the Chancellor? A teacher has visited me in the House today, whose school has run out of money for photocopying and for books in the Library. If the Chancellor wants to do something about productivity, he should invest in schools and colleges now.

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The hon. Gentleman seems to have missed the announcement just before the summer that we are putting £1.3 billion more into the frontline, not by taking in more taxes, but by using the money we have across government better.

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The previous Chancellor of the Exchequer implemented a second homes stamp duty levy, which has delivered £5.11 million into the Cornish economy and is set to deliver 1,000 homes. May I seek an assurance from the Treasury that this money will continue into the future?

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We consider all areas of taxation in the run-up to all fiscal events, but I have certainly heard my hon. Friend’s comments and I will take them as a representation.