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  • >>The Chancellor of the Exchequer (Mr Philip Hammond): It is a privilege to report today

  • on an economy that the International Monetary Fund predicts will be the fastest-growing

  • major advanced economy in the world this year. It is an economy with employment at a record

  • high and unemployment at an 11-year low; and an economy that, through the hard work of

  • the British people, has bounced back from the depths of Labour’s recession. It is

  • an economy that has confounded commentators at home and abroad with its strength and resilience

  • since the British people decided, exactly five months ago today, to leave the European

  • Union and chart a new future for our country.

  • That decision will change the course of Britain’s history. It has thrown into sharp relief the

  • fundamental strengths of the British economy that will ensure our future success: the global

  • reach of our services industries; the strength of our science and high-tech manufacturing

  • base; and the cutting-edge British businesses that are leading the world in disruptive technologies.

  • But it is a decision that also makes more urgent than ever the need to tackle our economy’s

  • long-term weaknesses such as the productivity gap, the housing challenge, and the damaging

  • imbalance in economic growth and prosperity across our country. We resolve today to confront

  • those challenges head on, to prepare our country to seize the opportunities ahead, and, in

  • doing so, to build an economy that works for everyonean economy where every corner of

  • this United Kingdom is part of our national success.

  • I want to pay tribute to my predecessor, my right hon. Friend the Member for Tatton (Mr

  • Osborne). My style will, of course, be different from his. I suspect that I will prove no more

  • adept at pulling rabbits from hats than my successor as Foreign Secretary has been at

  • retrieving balls from the back of scrums, but my focus on building Britain’s long-term

  • future will be the same. My right hon. Friend the Member for Tatton took over an economy

  • on the brink of collapse, with the highest budget deficit in our post-war history, and

  • brought that down by two thirds. That is a record of which he can be proud.

  • But times have moved on, and our task now is to prepare our economy to be resilient

  • as we exit the EU and to be match-fit for the transition that will follow. So we will

  • maintain our commitment to fiscal discipline while recognising the need for investment

  • to drive productivity, and for fiscal headroom to support the economy through the transition.

  • Let me turn now to the forecasts. Since 2010, the Office for Budget Responsibility has provided

  • an independent economic and fiscal forecast to which the Government must respondgone

  • are the days when the Chancellor could mark his own homeworkand I thank Robert Chote

  • and his team for their hard work. Today’s OBR forecast is for growth to be 2.1% in 2016—higher

  • than forecast in March. In 2017, the OBR forecasts growth to slow to 1.4%, which it attributes

  • to lower investment and weaker consumer demand driven, respectively, by greater uncertainty

  • and by higher inflation resulting from sterling depreciation. That is slower, of course, than

  • we would wish, but still equivalent to the IMF’s forecast for Germany, and higher than

  • the forecast for growth in many of our European neighbours, including France and Italy. That

  • fact will, no doubt, be a source of very considerable irritation to some.

  • As the effects of uncertainty diminish, the OBR forecasts growth recovering to 1.7% in

  • 2018, 2.1% in 2019 and 2020, and 2% in 2021. While the OBR is clear that it cannot predict

  • the deal the UK will strike with the EU, its current view is that the referendum decision

  • means that potential growth over the forecast period is likely to be 2.4 percentage points

  • lower than would otherwise have been the case. The OBR acknowledges that there is a higher

  • degree of uncertainty around these figures than usual.

  • Despite slower growth, the UK labour market is forecast to remain robust. We have delivered

  • over 2.7 million new jobs since 2010, and this forecast shows that number growing in

  • every yearanother 500,000 jobs created over the OBR forecast, providing security

  • for working people across the length and breadth of Britain.

  • For those who claim that the recovery is just a south-east phenomenon, I have some news:

  • over the past year employment grew fastest in the north-east, the claimant count fell

  • fastest in Northern Ireland, pay grew most strongly in the west midlands, and every UK

  • nation and region saw a record number of people in work. That is a labour market recovery

  • that is working for everyone.

  • Monetary policy has played an important role in supporting growth since the referendum

  • decision, but a credible fiscal policy remains essential for maintaining market confidence

  • and restoring the economy to long-term health. In view of the uncertainty facing the economy,

  • and in the face of slower growth forecasts, we no longer seek to deliver a surplus in

  • 2019-20, but the Prime Minister and I remain firmly committed to seeing the public finances

  • return to balance as soon as practicable, while leaving

  • enough flexibility to support the economy in the near term.

  • Today I am publishing a new draft charter for budget responsibility with three fiscal

  • rules: first, that the public finances should be returned to balance as early as possible

  • in the next Parliament and, in the interim, cyclically adjusted borrowing should be below

  • 2% by the end of this Parliament; secondly, that public sector net debt as a share of

  • GDP must be falling by the end of this Parliament; and, thirdly, that welfare spending must be

  • within a cap set by the Government and monitored by the OBR. In the absence of an effective

  • framework, the welfare bill in our country spiralled out of control, with spending on

  • working-age benefits trebling in real terms between 1980 and 2010. As a result of the

  • action that we have taken since 2010, that spending has now stabilised. The cap I am

  • announcing today takes into account the policy changes made since the last Budget, setting

  • a realistic baseline reflecting all announced welfare policies. I confirm again today that

  • the Government have no plans to introduce further welfare savings measures in this Parliament

  • beyond those already announced.

  • I now turn to the OBR’s fiscal forecasts, but first I will set out the key drivers of

  • changes since the Budget: the post-Budget changes that were made to welfare and housing

  • policies cost the Exchequer £8.6 billion over the forecast period; expected Office

  • for National Statistics classification changes have added £12 billion since the Budget;

  • and tax receipts have been lower than expected this year, causing the OBR to revise down

  • projected revenues in the future. Added to this is a structural effect of rapidly rising

  • incorporation and self-employment, which further erodes revenues.

  • Combining those pressures with the impact of forecast weaker growth, and taking account

  • of the measures I shall announce today, the OBR now forecasts that, in cash terms, borrowing

  • is set to be £68.2 billion this year, falling to £59 billion next year and £46.5 billion

  • in 2018-19, and then £21.9 billion, £20.7 billion, and finally £17.2 billion in 2021-22.

  • Overall, public sector net borrowing as a percentage of GDP will fall from 4% last year

  • to 3.5% this year, and it will continue to fall over the Parliament, reaching 0.7% in

  • 2021-22. This will be the lowest deficit as a share of GDP in two decades. The OBR expects

  • cyclically adjusted public sector net borrowing to be 0.8% of GDP in 2020-21, comfortably

  • meeting our target to reduce it to less than 2% and, importantly, leaving significant flexibility

  • to respond to any headwinds that the economy may encounter.

  • The OBR’s forecast of higher borrowing and slower asset sales, together with the temporary

  • effect of the Bank of England’s action to stimulate growth, translates into an increased

  • forecast for debt in the near term. The OBR forecasts that debt will rise from 84.2% of

  • GDP last year to 87.3% this year, peaking at 90.2% in 2017-18 as the Bank of England’s

  • monetary policy interventions approach their full effect. In 2018-19, debt is projected

  • to fall to 89.7% of national incomethe first fall in the national debt as a share

  • of GDP since 2001-02—and it is forecast to continue falling thereafter. Members might

  • be interested to know that after stripping out the effects of the Bank of England interventions,

  • underlying debt peaks this year at 82.4% of GDP and falls thereafter to 77.7% by 2021-22.

  • It is customary in the run-up to the autumn statement to hear representations from the

  • shadow Chancellor of the day, usually for untenable levels of spending and borrowing.

  • Conservative Members used to think that Ed Ballsdemands were an extreme example,

  • but I have to say that the current shadow Chancellor has outperformed him in the fiscal

  • incontinence sweepstake. What we do not know, of course, is whether the shadow Chancellor

  • can also dance—[Interruption.] He can. Good; a second career awaits him.

  • I have received some more measured representations from a range of external bodies. Some have

  • called for fiscal expansion, while others have suggested that there is no need at all

  • to respond to a changed economic outlook. That reflects, to be fair, the challenge that

  • we face of resolving how best to protect the recovery and build on the economy’s manifest

  • strengths, yet at the same time respond appropriately to the warnings of a more difficult period

  • ahead.

  • But with our debt forecast to peak at over 90% next year, and a deficit this year of

  • 3.5%, I have reached my own judgment. It is a judgment based on a sober analysis of our

  • fiscal position, and also on a realistic appraisal of the weakness of UK productivity and the

  • urgent need to address our fiscal challenge from both endscontinuing to control public

  • expenditure, but also growing the potential of the economy and protecting the tax base.

  • So we choose in this autumn statement to prioritise additional high-value investment, specifically

  • in infrastructure and innovation, that will directly contribute to raising Britain’s

  • productivity. The key judgment we make today is that our hard-won credibility on public

  • spending means that we can fund this commitment in the short term from additional borrowing,

  • while funding all other new policies announced in this autumn statement through additional

  • tax and spending measures. That is the responsible way to secure our economy for the long term.

  • The productivity gap is well known to hon. and right hon. Members, but shocking none

  • the lessit bears repeating. We lag the US and Germany by some 30 percentage points

  • in productivity, but we also lag France by over 20 points and Italy by 8 points, which

  • means, in the real world, that it takes a German worker four days to produce what we

  • make in five. That means, in turn, that too many British workers work longer hours for

  • lower pay than their counterparts, and that has to change if we are to build an economy

  • that works for everyone. Raising productivity is essential for the high-wage, high-skill

  • economy that will deliver higher living standards for working people across this country.

  • As a result of decisions taken by my predecessor, public investment is higher over this decade

  • than it was over the whole of the period of the last Labour Government, but today I can

  • go further. I can announce that we are forming a new national productivity investment fund

  • of £23 billion to be spent on innovation and infrastructure over the next five yearsinvesting

  • today for the economy of the future.

  • Let me set out for the House how this money will be used. We do not invest enough in research,

  • development and innovation. As the pace of technology advances and competition from the

  • rest of the world increases, we must build on our strengths in science and tech innovation

  • to ensure that the next generation of discoveries is not only made here, but developed and produced

  • in Britain. So today I can confirm the additional investment in R and D, rising to an extra

  • £2 billion per year by 2020-21, that was announced by my right hon. Friend the Prime

  • Minister on Monday.

  • Economically productive infrastructure directly benefits businesses, but families, too, rely

  • on roads, rail, telecoms and, especially, housing. We have made good progress, with

  • the number of new homes being built last year hitting an eight-year high, but for too many,

  • the goal of home ownership remains out of reach. In October, my right hon. Friend the

  • Communities and Local Government Secretary launched the £3 billion home building fund

  • to unlock over 200,000 homes and up to £2 billion to accelerate construction on public

  • sector land, but we must go further still. The challenge of delivering the housing we

  • so desperately need in the places where it is currently least affordable is not, of course,

  • a new one, but the effect of unaffordable housing on our nation’s productivity makes

  • it an urgent one. My right hon. Friend will bring forward a housing White Paper in due

  • course to address these long-term challenges but, in the meantime, we can take further

  • steps.

  • One of the biggest objections to housing development, as hon. and right hon. Members will know from

  • their constituencies, is often the impact on local infrastructure, so we will focus

  • Government infrastructure investment to unlock land for housing with a new £2.3 billion

  • housing infrastructure fund to deliver infrastructure for up to 100,000 new homes in areas of high

  • demand. To provide affordable housing that supports a wide range of need, we will invest

  • a further £1.4 billion to deliver 40,000 additional affordable homes. I will also relax

  • restrictions on Government grant to allow providers to deliver a wider range of housing

  • types. I can also announce a large-scale regional pilot of right to buy for housing association

  • tenants, and continued support for home ownership through the Help to Buy equity loan scheme

  • and the Help to Buy ISA.

  • This package means that over the course of this Parliament, the Government expect to

  • more than double, in real terms, annual capital spending on housing. Coupled with our resolve

  • to tackle the long-term challenges of land supply, this commitment to housing delivery

  • represents a step change in our ambition to increase the supply of homes for sale and

  • for rent to deliver a housing market that works for everyone.

  • Reliable transport networks are essential to growth and productivity, so this autumn

  • statement commits significant additional funding to help to keep Britain moving now, and to

  • invest in the transport networks and vehicles of the future. I will commit: an additional

  • £1.1 billion of investment in English local transport networks, where small investments

  • can often offer big wins; £220 million additionally to address traffic pinch points on strategic

  • roads; £450 million to trial digital signalling on our railways to achieve a step change in

  • reliability and to squeeze more capacity out of our existing rail infrastructurethat

  • is something I know the Leader of the Opposition will welcomeand, finally, £390 million

  • to build on our competitive advantage in low-emission vehicles and the development of connected

  • autonomous vehicles, plus a 100% first year capital allowance for the installation of

  • electric vehicle charging infrastructure.

  • The Department for Transport will continue to work with Transport for the North to develop

  • detailed options for northern powerhouse rail. My right hon. Friend the Transport Secretary

  • will set out more details of specific projects and priorities over the coming weeks.

  • Our future transport, business and lifestyle needs will require world-class digital infrastructure

  • to underpin them, so my ambition

  • >>Kevin Brennan (Cardiff West) (Lab): It says here.

  • >>Mr Hammond: Yesit says here because I wrote it here.

  • My ambition is for the UK to be a world leader in 5G. That means a full-fibre network; a

  • step change in speed, security and reliability. So we will invest over £1 billion in our

  • digital infrastructure to catalyse private investment in fibre networks and to support

  • 5G trials. From April, we will introduce 100% business rates relief for a five-year period

  • on new fibre infrastructure, supporting further roll-out of fibre to homes and businesses.

  • We have chosen to borrow to kick-start a transformation in infrastructure and innovation investment,

  • but we must sustain this effort over the long term if we are to make a lasting difference

  • to the UK’s productivity performance, so today I have written to the National Infrastructure

  • Commission to ask it to make its recommendations on the future infrastructure needs of the

  • country, using the assumption that the Government will invest between 1% and 1.2% of GDP every

  • year from 2020 in economic infrastructure covered by the commission.

  • To put that in context, we will spend around 0.8% of GDP on the same definition this year.

  • I am also backing the commission’s interim recommendations on the Oxford-Cambridge growth

  • corridor, published last week, with £110 million of funding for east-west rail and

  • a commitment to deliver the new Oxford-Cambridge expressway. That project can be more than

  • just a transport link. It can become a transformational tech corridor, drawing on the world-class

  • research strengths of our two best-known universities. I welcome the commission’s continuing work

  • on delivery model options. We will carefully consider its final recommendations in due

  • course.

  • The major increase in infrastructure spending I have announced today will represent a significant

  • increase in funding through the Barnett formula, of more than £250 million to the Northern

  • Ireland Executive, £400 million to the Welsh Government and £800 million to the Scottish

  • Government.

  • Public investment is only part of the picture, however. About half of our economic infrastructure

  • is financed by the private sector, and we will continue to support that investment through

  • the UK guarantee scheme, which I am today extending until at least 2026. The new capital

  • investment I have announced will provide the financial backbone for the Government’s

  • industrial strategy that the Prime Minister spoke about on Monday, a firm foundation upon

  • which my right hon. Friend the Secretary of State for Business, Energy and Industrial

  • Strategy will work with industry to build our ambition of an economy that works for

  • all.

  • I can announce four further measures to back business. I am doubling the UK export finance