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Surplus Target and Corporation Tax

Part of the debate – in the House of Commons at 4:27 pm on 4th July 2016.

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Photo of George Osborne George Osborne Chancellor of the Exchequer and First Secretary of State 4:27 pm, 4th July 2016

When I became Chancellor, there was a question mark over Britain’s ability to pay its way in the world, and that was reflected in our bond yields, but because of our determined effort over the last six years, when we have hit an economic shock, as we have done in the last two weeks, the response has been a fall in bond yields—because people have confidence in the UK.

First on planning, extensive contingency plans were in place to deal with financial market disorder as a result of a leave vote, and the fact that we are not debating that today shows that those plans have been effective—we remain vigilant, but those plans were in place. Secondly, we must now decide on the new model of our relationship with the EU. That was not on the ballot paper and has to be a decision for Parliament. We set out the options for the country in advance of the referendum debate, and now we must have that discussion.

Thirdly on planning, the fiscal charter specifically provides for the impact of a negative shock, which is what we have had, and as a result the rules of the charter apply. As I say, it is unlikely that the surplus will be achieved in 2019-20—although that will be for the OBR formally to assess—and it will then be up to the Chancellor to produce new plans to restore the public finances to surplus and for Parliament to vote on them. We thought about that in advance: it is in the charter that the House voted on.

The hon. Gentleman talked about investment. On Friday, I met the Labour leader of Manchester City Council, Richard Leese. We talked about how we could redouble our efforts to invest in transport across the Pennines and about devolved powers for mayors and the like. That will be part of our response to the disfranchisement that too many of our citizens in the midlands and the north of England have clearly felt.

Finally, the hon. Gentleman also asked about business confidence and the corporation tax cuts. Not only have our corporation tax cuts given us the lowest corporation tax rate of all the advanced economies of the world, but we have seen a 20% increase in receipts from corporation tax—because businesses are coming to this country, growing their businesses in this country and employing 2 million people. The best response we can send to the world to show that we are open for business is to go on reducing business tax.