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I would like to thank the Chancellor for his response. I think it is important that, as in the Opposition day debate last week, we set the tone of our response at the level of the national interest and take care to avoid making any statements that would adversely impact on fragile markets.
I have to say, however, that a lack of planning for a leave vote is becoming evident across all policy areas. Instead of a clear plan of action, we have so far had a series of ad hoc statements and announcements, including the grateful abandonment of the “Brexit Budget”, which was to increase the sharply the level of austerity being applied. The fiscal surplus target has been abandoned and today the Chancellor has announced planned reductions in the headline rate of corporation tax.
Rather than ad hoc announcements, we need a framework for economic decision making. Previously, the Government sought to do that with the fiscal charter, which was passed into law last autumn despite Labour opposition. May I ask the Chancellor now, since he is no longer pursuing the fiscal surplus target, if the charter is also to be abandoned? Will he be putting a motion to repeal the law before this House? Will he be seeking to place a new fiscal rule on a similar basis in legislation?
The Chancellor has announced today that he will redouble his efforts to invest in the northern powerhouse. Of course the details of that are to be decided, but will he tell the House when he expects to have a detailed programme of investment? What scale of investment should we expect? What areas, and how focused will that investment be? Does he now agree with Labour Members, and the Secretary of State for Work and Pensions, that a major programme of Government investment is urgently needed? Does he agree with the Home Secretary’s decision not to give a guarantee to existing EU nationals living and working in this country? What will be the economic effects of that? Will he therefore give a more detailed statement to the House on the economic consequences of this decision?
The Chancellor has promised that, while seeking to boost investment, he will be maintaining
“the consolidation that we put in place last year.”
May I ask him for some clarification on this point? Is he now ruling out any further or additional consolidation in light of the leave vote? Regarding the planned cuts to the headline rate of corporation tax, the news has not been well-received by our international partners. Pascal Lamy of the World Trade Organisation has accused the Chancellor of “tax dumping”. He also highlights the risk to future negotiations with the EU.
I want to raise three critical questions on this issue. The Chancellor’s Budget this year suggested that his one percentage point reduction in the headline corporation tax rate will reduce expected revenues by about £1 billion. Does the Chancellor still hold to that estimate? How will the Chancellor pay for any losses in tax revenues from the proposed corporation tax cuts? Who will pay? The evidence from existing cuts to corporation tax is not favourable. Despite year-on-year reductions in the headline rate to the lowest rate in the G7, business investment remains low by G7 standards and has now fallen for two consecutive quarters.
Businesses are sitting on a cash pile of at least £500 billion yet are failing to invest. What assessment has the Chancellor made that a dramatic reduction in the corporation tax rate will have the desired effect on business investment, given the absence of evidence so far?
Finally, we know that the circumstances after the leave vote will be trying and that major forecasters now anticipate the UK possibly entering a recession over the next year. The Chancellor’s fiscal approach has failed and has been steadily abandoned. In the interests of the country, will he now commit to adopting a fiscal approach that allows the flexibility to invest while maintaining fiscal discipline, as the Opposition and now some on his own side are urging?