Budget 2018

Hammond denies abandoning goal of eliminating UK deficit

Philip Hammond
PA

Philip Hammond's evidence to MPs is over now.

The chancellor has rejected suggestions he has abandoned a target to eliminate the budget deficit by the middle of the next decade.

Questions over Philip Hammond's commitment to the target were raised after his Budget last week which promised a big increase in spending.

But he told the Treasury Committee on Monday that the target, set in autumn 2016, "hasn't been abandoned".

There would, though, be a "balanced approach" to cutting the deficit.

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Money in no deal Brexit

Even if there is a no deal Brexit, the UK will still have to make payments to Brussels, the Chancellor has told MPs on the Treasury Committee.

The UK has agreed a formula with the EU about payments post-Brexit, Mr Hammond said, but that this was on the assumption there would be a deal.

If there was not a deal that might change but it was "not plausible" that if there was not a deal no money would be paid.

But, he said, that the EU would rather not receive a payment in a lump sum so this could be a point of leverage in negotiations.

Brexit deal dividend ?

Philip Hammond has been asked by the Treasury Committee about whether there will be a Brexit deal dividend.

If there is a "good deal" business confidence could rise and consumers have the confidence to spend, the Chancellor said.

" It would be choice, say in 2021 if we had a deal agreed, signed and sealed everybody was happy, business confidence was rising, it would be a choice.. in 2021 whether to maintain £15bn of headroom to the fiscal rule or whether to borrow a little more and put a little more into the spending review. That would be a choice we could make".

He added that the UK would not be sending £9bn or £10bn a year to Brussels and the OBR had assumed this would be spent on items that the EU would be doing, such as agriculture.

He defined a good deal as one that involved frictionless trade continuing.

Digital trangressions

amazon
Reuters

Philip Hammond has been asked by the MPs on the Treasury Committee about the digital tax announced in last week's budget.

The 2% tax is on sales - not profits - by large social media platforms, internet marketplaces and search engines from April 2020.

The US has warned it could retaliate as it hits US companies, such as Amazon.

Mr Hammond said that ensuring the tax was proportionate and "does not transgress our obligations under international tax laws" was very important.

He added that the tax was not an on-line sales tax.

While it was reasonable to argue that an on-line sales tax should be considered, he said that high street stores also had on-line sales.

Growth v surplus

Philip Hammond has also touched on ways to reduce the UK's debt during his evidence session with the Treasury Committee.

The "smart way" to shrink debt as a proportion of GDP was faster economic growth, rising living standards and growth in wages, the Chancellor said.

The harder way was trying to run a budget surplus and pay off debt.

Brexit deal headroom - Hammond

eu and uk flag
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Philip Hammond has told the Treasury Committee that public spending could increase if there is a deal to leave the EU.

"In the event of a successful negotiated exit deal with the European Union I would expect confidence to return to the UK economy very quickly".

"I would expect us to no longer need to hold the kind of level of headroom against meeting our fiscal rule in 2021 and indeed, it's not just a single year - we've got a profile of headroom against that metric across the whole five year period. We could, if we chose to, allow borrowing to rise a little and eat into that headroom and that would be a choice."

'No love' for fixed odd betting machines

Sports minister Tracey Crouch resigned last week over "delays" to a crackdown on maximum stakes for fixed-odds betting machines.

Philip Hammond has been asked about this at the Treasury Committee where he has told MPs that the decision to implement the cut in stakes from £100 to £2 would in October 2019 was taken because the change needed to be managed in an "orderly and sensible" way.

"I have absolutely no love for these machines. They are terrible things".

But thousands of jobs will go in the gambling industry and jobs losses needed to be conducted on a voluntary basis.

Nicky Morgan, who chairs the committee, says that the changes were expected to kick in from April 2019.