MP, Chancellor of the
Exchequer, appeared before the House of Lords Economic Affairs
Committee today in his annual session with the
Committee.
opened the session by
asking about the extension of Mark Carney’s contract and also
asked for the date of the budget. said a possible special
European Council made it difficult to set a firm date for the
Budget.
asked how confident the
Chancellor was about the assumptions for a no-deal Brexit. And
what improvements the government had made to its forecasting
since the EU referendum.
Mr Hammond said since the referendum the Treasury, with other
departments, had overseen the construction of a long-term
forecasting model, which was different to the one used before the
referendum.
Replying to a question by Lord Darling, the Chancellor said the
government would not expect Parliament to vote on the exit
agreement unless it had the text of a future economic partnership
agreement.
Lord Kerr asked about Prof. Minford’s predictions for a no-deal
Brexit. Mr Hammond said Prof. Minford had made several incorrect
assumptions. For example, he assumed a 4% benefit as a result of
abolishing tariffs unilaterally. Apart from this being an
exaggeration, the model made no allowance for differences in
quality, safety of imported goods nor for distance-related
transport costs.
On the withdrawal agreement, Mr Hammond told Lord Kerr there were
legal obligations to the EU on exit. The quantum of those may be
open to dispute. In December a range was negotiated which would
skip over the potential protracted negotiation and create a
methodology for arriving at a sum.
Replying to Lord Sharkie and on the subject of student
loans, Mr Hammond said it was not for him to change the terms of
reference for the Augar review
(https://www.gov.uk/government/news/prime-minister-launches-major-review-of-post-18-education).
He didn’t think the evidence supported the suggestion that the
withdrawal of maintenance grants had deterred disadvantaged
students.
changed the subject to HS2
and to the suggestion that it should end at Old Oak Common
instead of Euston to make savings. Mr Hammond disagreed.
moved questions onto
the subject of education, asking if the Chancellor was concerned
about the reduction in the number of apprenticeships. He replied
that the dip in apprenticeship starts was not surprising. But
there had been a qualitative change in the type of
apprenticeships being undertaken which had not been predicted.
There had been a shift from level 2 to level 3 apprenticeships, a
result of people using their own money to create the
apprenticeships.
asked about RPI versus
CPI. Was it tenable not to reform the system? Mr Hammond said the
shortcomings of RPI were well known and acknowledged. It was for
the ONS to change the formula. He disputed that the government
was guilty of ‘index shopping.’ Business rates had been moved to
CPI and the Transport Secretary would like to do the same with
rail fares. The government had said that once fiscal
consolidation was completed use of RPI for indirect taxes would
be reviewed. asked if the Chancellor
would consider an approach from the ONS if it wanted to put
forward a programme of ‘progressive reform.’ Mr Hammond said he
would be happy to talk to the ONS.
turned the Chancellor’s
attention to the funding of social care. Mr Hammond said the
government was working on a green paper to make the options for
older people sustainable in the long-term. He pointed out that
different solutions would be required for the elderly who
required social care, who were more likely to be asset-owning
people, and those people who were living longer who were not
asset-owing.
The full proceedings will be sent as soon as they are
available
