Philip Hammond – 2018 Speech to European Business Summit

Below is the text of the speech made by Philip Hammond, the Chancellor of the Exchequer, on 24 May 2018.

Thank you for inviting me to speak at this conference, and to address this distinguished group this afternoon.

It’s apt that I speak today on the anniversary of another momentous event for European unity and shared values.

Sixty-two years ago today – as a war-torn Europe rebuilt itself – countries across our continent came together to form a positive vision of a tolerant, free Europe…

…where talent and hard work was recognised…

…and established a new pan-European partnership.

I am not speaking about the Treaty of Rome, or the formation of the European Economic Community…

…but of the first Eurovision Song Contest.

And I can tell you that today, the Eurovision Song Contest is one of the very few issues that generates as much debate and strength of feeling in the UK as the European Union itself does.

But we all take part in it…

…and we all accept the rules of it. Even when we lose.

And today, I want to reflect on the enduring shared values of our continent…

…and on the shared opportunities, and the shared challenges that lie ahead.

And this summit…

…bringing together leaders from both government and businesses…

…comes at an important time for our continent:

Because while the global and European economies have recently enjoyed a period of relative strength…

…we cannot take this for granted…

And the geopolitical context is increasingly uncertain…

…whether it’s the presence of an emboldened and re-arming Russia on Europe’s eastern doorstep…

…the ongoing escalation in tensions across the Middle-East…

…or uncertainty around the policy of Europe’s largest trading partner, the US, on trade and tax reform.

And governments across Europe…

…and indeed around the world…

…are having to manage a rising tide of sentiment among our electorates, against the conventional wisdom of free trade, globalisation, and the benefits of the liberal market economy…

…an argument that as leaders in government and business we must make all over again;

These are challenges that face all of us across this continent…

…challenges we must confront if we are to deliver the security, prosperity and higher living standards for our citizens for which we all strive.

But my message this afternoon is that there are significant shared opportunities too…

One such opportunity that I spend a lot of time talking about, is presented by the coming technological revolution…

…a revolution that will shape people’s lives and have far-reaching implications for our economic model…

…and will have a long-term impact on all our economies, far bigger in scale than the United Kingdom’s decision to leave the European Union.

Of course, such profound change brings with it major challenges…

…such as evolving our tax and regulatory systems…

…our competition policies, so they are fit for…

…for the digital age…

ensuring that our people have the skills they need to prosper in a world of increasing automation;

and convincing them that everyone can share in the proceeds of this technological change and the economic growth that can flow from it….

At a time of unprecedented scepticism of our liberal market economic and political model…

That requires collaboration and cooperation.

And if we want European values and interests to prevail in this debate we must ensure that Europe speaks with one voice.

Of course, as Chancellor of the Exchequer of the United Kingdom, my most immediate priority is our negotiation with the EU…

…but the point is, that the challenges and opportunities facing our economies and societies are shared challenges and common opportunities…

…And our shared values and shared history….

…go back far beyond our membership of the European Union…

…or even Eurovision…

…and they will continue far beyond the timeframe of Brexit.

And our continent’s shared commitment to economic openness, democratic values and human rights…

….and our shared belief in the power of the liberal market economy to deliver rising living standards for all of our people…

…remains unshakable.

With our different history, culture, and outlook, the British people decided that the deep political integration to which the EU institutions increasingly aspire, was simply not right for Britain…

…but the British people have not, and never will, turn their backs on free, open and fair trade with our European neighbours. That is an established part of our economic culture – going back to Hanseatic times and earlier.

Britain is leaving the political institutions of the EU; but it is not leaving Europe

And British prosperity is, and always will be, closely bound to European prosperity.

So Europe’s success – and the success of the Euro as a currency – is very strongly in Britain’s interest, and we will not do anything which jeopardises that success.

Our economy is recognisably a European-style economy…

…with high levels of consumer and worker protection, a highly developed social welfare system and strong environmental standards…

…and it is the clear wish of the British people, regularly demonstrated, to keep it that way…

…as we build a new deep and special partnership with the European Union.

We have made significant progress since Article 50 was triggered, just over a year ago…

…both in our own internal debate about what Brexit should mean…

…and in our negotiation with the EU.

The first stage in the negotiations successfully settled many withdrawal issues, including the UK’s financial obligations, in December.

And in March we reached agreement on a transition period, running until the end of 2020…

… during which businesses can operate exactly as before…

…ensuring only one set of changes, at the end of that period, that businesses have to navigate.

We are now focussed on our future customs relationship, and our future economic partnership, and I’ll briefly say a bit about both.

I know that for business getting clarity on our future customs relationship is a top priority…

…and so it should be a top priority for European governments too.

EU27 businesses export more services to the UK than to any country outside the EU.

Almost 80% of Irish poultry exports go to the UK…

…one eighth of German automotive exports…

…10% of all French cheese exports.

And here in Belgium, almost half of the total tonnage handled at the port of Zeebrugge last year, went to, or came from, the UK – up from just a third in 2011.

Over 1 million cars were transported between Europe and the UK via Zeebrugge…

…up 80% on seven years ago.

The UK is exploring two possible future customs models…

…both are “works in progress” with more work to be done…

…but we are confident that, building on the work we have done already on these models…

…we can develop a solution that responds to the concerns of business…

…minimises frictions and burdens at and behind the border…

…avoids new barriers in Ireland…

…and sustains our trade with the EU27.

And beyond customs, we seek a comprehensive future economic partnership …

…a partnership that protects the supply chains and established trade relationships that I have just talked about…

… safeguards the jobs and businesses that depend on them on both sides of the Channel…

…and promotes the values we share across the continent of Europe.

And of course, in doing so, we don’t have to start from scratch.

The UK and EU27 are in a unique positon:

…with deeply interconnected economies and supply chains…

…a starting point of common regulatory standards and regimes…

…and unrivalled collaboration in everything from trade, security and defence…

…to people to people exchange, education, science, technology, culture and many other shared areas.

There are a range of possibilities for the shape that our future relationship could take…

…and those of you who follow UK media, as I know many of you do, will recognise there is a range of views in the UK about those options.

And we will set out in the coming weeks more detail on the British Government’s ambition for a mutually beneficial future relationship between the EU and the UK…

…in the context of our vision for the UK’s future role in the world.

For example, we’ll seek a comprehensive system of mutual recognition to ensure that, as now, products only need to undergo approvals in one country to show that they meet regulatory standards across Europe;

We’ll explore the terms on which the UK could maintain a continuing relationship with EU agencies, such as those for chemicals, pharmaceuticals, and aerospace, so that they continue to benefit from UK expertise and we can deliver such a system of single approvals;

On services we have the opportunity to establish a broader agreement than has ever been done before, including continued recognition of professional qualifications, and a labour mobility framework that enables travel to provide services to clients in person.

We seek a bespoke partnership in financial services, that will enable the ongoing delivery of cross-border financial services in both directions, while protecting financial stability and maintaining fair competition.

I believe it is very much in our mutual interest to maintain access to London’s financial services market for Europe’s business and citizens.

We manage in the UK more than EUR1.5 trillion of assets on behalf of EU clients;

Around two-thirds of debt and equity capital raised by EU corporates is facilitated by banks based in the UK. 78% of European Forex trading and 74% of European interest rate derivatives trading takes place in the UK. These are services that businesses rely on to run their operations efficiently, with the benefit passed on as lower prices for consumers in all 28 EU countries…

…and more competitive exports to the rest of the world.

And we should be under no illusion about the significant additional costs if this highly efficient market in London were to fragment.

Costs that would be borne by Europe’s businesses and consumers.

And more prosaically, while we are working through the spectrum of issues in relation to our future relationship…

…we are also making progress with the introduction, application and transformation of the many technical systems and processes that underpin the trade relationship between the UK and EU so that we are ready for exit whatever our future relationship.

But reaching a vision of a deep and comprehensive future relationship will only be possible if both sides want it.

A deal only works if it works for both parties as we say: “it takes two to tango”.

And I am saying this to you this afternoon, because I fear that many EU opinion-formers in government and in business, see the Brexit challenge as simply one for the UK to resolve.

And I understand the temptation to say “let the brit’s sort out what they want – and then come back to us”.

But this has to be a two-way conversation.

Because the final deal won’t be determined simply by what Britain wants…

…it can’t be just about British prosperity and British jobs…

…it must also be about European prosperity and jobs.

And if EU27 Member States don’t want to have a close future economic, security, technical relationship with the UK…

…then it won’t happen.

So we need a frank conversation about our shared appetite for such a future close partnership.

Do we both want it? Or don’t we?

If we do, let’s focus on making a deal that works.

Personally, I passionately believe that all of us in this room, and across Europe, should be interested in an outcome that properly reflects the 45 years that we have spent together as members of the EU…

…that reflects our shared history and shared values…

…and looks forward to the challenges and the opportunities, which we will face so much more effectively by working together.

There is no denying that there are a range of complex issues to resolve…

…but I believe that with the political benefits articulated by the Member States; with the economic logic, articulated by the voice of business…

…we can make the case for a close future partnership – the UK, the EU; governments and businesses…

…working in the common interests of all of our citizens.

Ensuring Europe’s voice in the world…

…a strong voice for the values that reflect the lessons of our Continent’s long and turbulent history…

…at a time when others sometimes appear tempted to forget those lessons…

…to step away from those values.

So let us resolve today to work together to ensure that all of Europe remains an open, outward looking free-trading Continent…

…attracting talent and capital from around the world.

Let us build a future partnership that we can be proud of…

…one that will stand the test of time

…and that will support the prosperity, security and living standards of our children, and our children’s children.

The voice of business a decisive influence as we take this debate forward…

…and I look forward to the common sense, pragmatism and economic logic of business playing a crucial role as we shape our future relationship

Thank you.

Philip Hammond – 2018 Speech at CBI Annual Dinner

Below is the text of the speech made by Philip Hammond, the Chancellor of the Exchequer, on 22 May 2018.

Thank you, Paul.

And let me join you in commemorating those who lost their lives and those who were injured during the appalling attack in Manchester, a year ago today…

…our thoughts this evening are with the families and friends of those affected.

As ever it’s a pleasure to speak to you tonight.

And what a week it has been.

The Royal Wedding; the FA Cup Final; and now the CBI dinner!

And I’m especially pleased to be here this evening to mark the end of Paul’s three-year tenure at the helm.

I was doing a little research and stumbled across an FT interview with Paul in 2011.

When asked “which historical or fictional character do you most identify with?”, Paul replied, with characteristic modesty: “Nelson Mandela”.

History will determine!

Paul, congratulations on the achievements of your Presidency, and thank you for the leadership you have shown.

It was Nelson Mandela, reflecting on his first 100 days as President, who noted that “on occasion, strong language has been used to drive home a strongly held belief”…

…and he reassured his audience that this was a sign of “a robust, vibrant democracy, with broad consensus on the most important national questions”.

Paul, I will welcome your speech tonight as a sign of our “robust, vibrant democracy”!

Because we are in broad agreement on the big questions facing our country and our economy.

We agree that:

We must rebuild a consensus for the liberal market economy as the best way to deliver future prosperity.

We must embrace digital technology, and ensure Britain is at the forefront of the technological revolution.

We must invest in skills and training – to ensure the next generation is prepared for the economy of the future.

We must build the world class infrastructure and invest in the R&D needed to ensure Britain stays ahead in the global race.

We must raise our productivity – and thus deliver higher wages for people up and down this country.

And yes, we must deliver a Brexit that prioritises jobs, growth, and prosperity.

And it is absolutely my belief that central to all of this, is listening to business, and believing in the power of business to deliver higher living standards, and spread greater prosperity.

I can promise you, Paul, business advice is a welcome input, not an “inconvenient truth”!

So I hear the concerns you have set out tonight about the Brexit challenge…

…but I remain confident. And, by the way, when Donald Tusk says Brexit is the “saddest moment in Modern European history”…

…I assume he didn’t see this year’s Eurovision.

The PM has always had a vision for a close economic partnership between the UK and the EU…

…a partnership that protects supply chains, and established trade relationships…

…that backs businesses, and safeguards jobs…

…and that promotes the values that we share across the continent of Europe.

We have made good progress:

In March we agreed on an implementation period…

…which allows “business as usual”…

…and ensures you only have to navigate one set of changes.

Focus has now moved on to our future economic partnership, and in particular the customs relationship.

I have listened to the four customs tests you have set out tonight…

…and we share your aspirations to minimise frictions and burdens…

…to avoid new barriers in Ireland…

…and to grow British exports.

But we do not agree that staying in the customs union is necessary to deliver them.

The UK has proposed two possible future customs models…

…both are “works in progress”…

…but we are confident that, building on these two models, we can develop a solution that will allow us to move forward while meeting your concerns, Paul.

And beyond customs, we will seek a comprehensive system of mutual recognition to ensure that, as now, products only need to undergo approvals in one country to show that they meet regulatory standards across Europe…

…and we will explore the terms on which the UK could maintain a relationship with the EU agencies, such as those for the chemicals, pharmaceutical, and aerospace industries…

…as the route to deliver such an outcome.

On services, we have the opportunity to establish a broader agreement than ever before…

…including continued recognition of professional qualifications, and a labour mobility framework that enables travel to provide services to clients in person.

And an opportunity to seek a bespoke partnership in financial services…

…that will enable the ongoing delivery of cross-border financial services in both directions, while protecting financial stability and maintaining fair competition.

We made good progress in December and March, and I hope and expect we will make further progress at the upcoming June Council.

It is in the interests of both the UK and the EU to secure a mutually beneficial deal that will allow us to continue to have a close economic partnership…

…and to do so as soon as possible to give businesses the certainty they need.

I am confident that we will reach such a deal.

That is my most immediate priority as Chancellor.

But as we embark on a technological revolution that will transform our economy and our lives…

…my most important long-term challenge is to ensure that the UK continues to be at the forefront of that technological revolution, leading the world in innovation.

This is what our Modern Industrial Strategy is all about.

It isn’t about picking winners…

…or propping up failed industries.

But about exploiting the synergy between the facilitating power of the state…

…and the energy of the private sector…

…to deliver the innovation that will secure Britain’s future…

…within a market that is working properly and fairly.

Supporting entrepreneurship to ensure the industries of the future get off the ground…

…investing in research and development…

…ensuring that start-ups can access the finance they need to become “scale-ups”…

…and, most importantly, creating an environment where innovation can flourish.

And we’re putting our money where our mouth is…

…we’ve committed to the largest increase in public R&D spending in three decades, as part of our ambition to raise R&D investment across the economy to 2.4% of GDP.

We’re investing £640 million of public money in artificial intelligence and over £1.7 billion in autonomous and ultra-low emission vehicles…

…and in the Budget last Autumn I launched a plan to unlock over £20 billion of patient capital, for the UK’s most innovative firms to grow to scale.

But we won’t be able to put the UK at the front of the pack unless we have infrastructure that is fit for the future.

And that is why infrastructure is at the heart of our plan.

In the 18th century, it was canals;

In the 19th, it was the railways, and in the 20th the arterial roads and then the motorways.

In the 21st century, fibre networks will be the enabling infrastructure that drives economic growth.

We’ve already connected more than 95% of the UK to superfast broadband.

But we must now take the next big leap forward.

Full-fibre networks are faster, more reliable, and cheaper to operate than their copper predecessors.

Over a million premises already have direct access to them…

…70% of those connected in the last 18 months alone.

But if we are to achieve our ambition of a truly high-speed economy, and keep up with our competitors, then we need a step change in our approach.

So I am now setting a new target to see full-fibre to the premises connections being available to 15 million premises, that’s the majority of homes and businesses, by 2025.

This is ambitious…

…and it will require industry to connect more than 2 million additional premises a year for the next seven years.

We won’t do that by government diktat.

We will do it by creating the conditions for the market to deliver…

…and we will use all the tools at the government’s disposal to ensure that target is met…

…and we’ll go further, by committing to finish the job – and deliver a nationwide full-fibre to the premises network by 2033.

Running both copper and fibre networks indefinitely will not benefit either the consumer or the industry…

…so we must start thinking now about that switchover and how to sharpen the incentives for industry to move customers away from copper and on to fibre.

And Matt Hancock, the DCMS Secretary, will set out our strategy to deliver these ambitious targets in the Future Telecoms Infrastructure Review, later this Summer.

The talent of the future.

The digital industrial revolution and Artificial Intelligence will bring about a step-change in automation.

This, in turn, will have profound implications for jobs, and the way we work.

And if we want our people to embrace the digital economy, we must support them when they are affected by automation…

…and help them train and retrain into the new high quality jobs of the future.

Because just as the assembly line allowed Ford to triple the number of cars produced per worker…

…cut the price of a car in half…

…and increase employment eleven-fold…

So the digital industrial revolution will also create millions of new jobs, and huge increases in living standards…

…but that will not reassure those whose current jobs will be displaced.

So, between us in government and business we have a vital role in managing this transition;

In investing in skills and retraining;

In providing the reassurance our workforce will need.

We have made a start.

Through the Apprenticeship Levy, we are increasing the quality of apprenticeships, and the capacity of the system.

We’ve already seen a 25% increase in higher level apprenticeship starts.

But I recognise the new levy system presents some challenges…

…and we’re listening to your concerns around flexibility, and will keep that issue under review to make sure the levy works as intended.

We’re investing over £500 million a year in our new T-Level technical qualifications…

…and with the help of the CBI and the TUC we are establishing a new National Retraining Scheme…

…to help adults faced with the consequences of technological change to re-train throughout their working lives.

It’s a groundbreaking collaboration and I’m delighted we were able to make it happen through the leadership of Paul and others here tonight.

But government cannot solve our nation’s productivity challenge on its own.

Because it is not only about infrastructure and skills…

It is also about management.

Britain of course has many world-leading companies with globally competitive productivity…

…but there are also far too many that could be doing a lot better.

Tomorrow I will publish a call for evidence into why some businesses aren’t keeping up and don’t learn from the best…

…seeking ideas for how government and industry can work together to help more firms realise their potential by taking best practice.

And in parallel with the call for evidence I will announce with Greg Clark, the Business Secretary, further steps to boost firm-level productivity.

We’ll invest £5.6 million to support smaller firms to adapt modern management practices and simple digital technologies, through two new pilot programmes delivered by Charlie Mayfield’s Be the Business.

And we’re extending our backing for the Made Smarter Digital Manufacturing strategy…

…led by Juergen Maier – and supported by the CBI.

Made Smarter will help to maintain our position as a global leader in the digital revolution…

…and so we’ll provide £20 million for a pilot in the North West, to support SME manufacturers to adopt industrial digital technologies, such as robotics and data analytics.

Before I close, I want to touch on one further, important issue.

I have talked about the big opportunities ahead;

But there will be big challenges too – and challenges that go beyond the mere uptake of technology…

…to pose questions about economic governance and the organisation of society in the 21st century digital economy.

For those of us who believe in the demonstrated power of liberal market economics to deliver both prosperity and political freedom…

…this is a question about how this most resilient of economic models transforms itself in response to the challenges of technological and societal change…

…as it has done so many times before.

For people of my generation – and looking around the room at many – though not all – of you, I see people who I think are of my generation…

…congratulations that you can still get out of an evening!

For people like us, who lived through the 1970s, the economic model [political content removed] is not a text book theory, but a vivid memory.

And for people in a small number of countries around the globe, it is a miserable reality today.

But not everyone in our society has shared that experience.

And some of a younger generation will be tempted by ideas that sound radical; maybe even “new” (even though they are rooted in a book written in the 1860s).

…because they do not feel the system is working for them.

Many of them have started their working lives at a difficult time for our country…

…emerging into the workforce as the financial crisis and its aftermath shook our system…

…and enduring a decade of recovery from it.

They look at their parents’ and their grandparents’ generations…

…at the home ownership levels, the defined benefit pensions, the traditional jobs…

…and they ask who or what decreed that so many of the things that previous generations took for granted, should be so much harder for them to obtain.

They are not looking for a hand-out…

…but they are looking for a reassurance that hard work will allow them, too, to achieve their aspirations for a better life for their kids.

And as we look forward to, and prepare for, the transformational impact that technology will have on our economy and our society…

…we must answer their challenge.

We must articulate how we will refresh our economic model to respond to technological change…

…in competition policy…

…in taxation policy…

…in ensuring an equitable distribution of the proceeds of growth as we manage the impact of smart automation and artificial intelligence on the world of work…

…so that it speaks to their values…

…addresses their concerns…

…and unlocks the door to the achievement of their aspirations…

…with solutions, which are framed not by the stale ideologies of the past, but by the exciting potential of our future.

Solutions that build on, not undermine, the liberal market economy that is the bedrock, not only of our prosperity…

…but of our freedom too.

I have spoken tonight of our strategy for negotiating Brexit…

…and of our vision for post-Brexit Britain.

It is a vision of an open, dynamic, evolving, market economy…

Of a Britain whose firms are at the cutting edge of technology and innovation.

A Britain with infrastructure fit for the future…

…and workers equipped with the skills they need for the challenges that lie ahead.

A Britain where government and business work together to realise the potential of unlocking Britain’s productivity puzzle…

…to deliver an economy that works for everyone.

That is our vision of the prize that lies within our grasp.

And I know we can count on British business to work with us to deliver it for the British people.

Thank you.

Philip Hammond – 2018 Speech at Commonwealth Heads of Government Meeting

Below is the text of the speech made by Philip Hammond, the Chancellor of the Exchequer, at the Heads of Government Meeting in London on 17 April 2018.

Lord Mayor, Excellencies, Ladies and Gentlemen.

It gives me great pleasure to welcome our visitors to London, for the Commonwealth Heads of Government Meeting 2018.

The biggest meeting of Heads of Government, of any kind, that the UK has ever hosted.

From the Pacific Islands, to the British Isles, from the Caribbean to Central Africa, the Commonwealth is a community which spans the reach of global geography.

And the entire breadth of the economic spectrum.

A community united in its vast diversity, by a common heritage, and shared values of democracy and human rights.

Tomorrow, I will chair a roundtable of heads of government and senior business leaders to reflect on key themes of this year’s summit.

From boosting intra-Commonwealth trade, spreading inclusive growth, and how we can build upon our ‘Commonwealth Advantage’.

That is, using our common language, institutions, trade ties, legal systems and values, for the common good of all our citizens.

Because the fact is that together we have the capacity to do enormous good, and spread significant prosperity.

We, the Commonwealth, represent a third of the global population.

Half of the world’s top 20 emerging cities.

And 60% of our population is under the age of 30.

And the common-wealth is just that.

Our commonalities mean as members we trade 20% more.

Generate 10% more foreign direct investment.

And enjoy costs of trade around 19% lower by comparison with non-Commonwealth relationships.

And over seven decades we have used these deep ties to help newly independent countries develop their national institutions, make economic progress, and share common experiences with one another.

But we cannot simply sit back and admire our achievements and past successes.

We must look forward, and the Commonwealth must reform and change in an ever-changing world.

We must continue to make the case for free trade as the best way to promote higher living standards amongst all of our citizens.

And particularly we must look for opportunities to liberalise trade in services.

We must ensure that our growth is inclusive.

And at this Summit we have committed to increase opportunities for women to trade internationally.

And to look at ways that we can tackle youth unemployment.

And that it is sustainable.

And we must prepare to embrace the changes of the technological revolution which is gathering pace around us.

And ensure our economies, and our citizens, are ready to seize the opportunities that that revolution will bring.

For example from FinTech – which has the potential to change the way in which our people and our businesses access financial services.

Whether its cashless transactions between friends.

Or sending remittances to family in other countries.

I recently signed a FinTech Bridge between the UK and Australia.

And we are exploring similar opportunities between the UK and India.

And I hope we can encourage more of these agreements between Commonwealth countries in the years ahead.

Because by working together in the Commonwealth we can be a force for good and for progress around the world.

We can work together on the challenges that we face.

Across the Commonwealth.

Recognising our common values and needs.

To grow our trade links.

Unleash the talents of our populations.

And strive to improve the lives of our 2.4 billion citizens, wherever in the world they live.

We live in a time of extraordinary global change.

The future offers incredible new opportunities, as well as immense new challenges to overcome.

Our countries have dealt with the challenges of the past together.

Now, as a Commonwealth of Nations, we shall win the future together.

Thank you all for being here – and I wish you a productive and inspiring week.

Thank you.

Philip Hammond – 2018 Speech at FinTech Conference

Below is the text of the speech made by Philip Hammond, the Chancellor of the Exchequer, at the FinTech Conference on 22 March 2018.

Thank you, it’s great to be here for the second year running…

…and to welcome so many brilliant fintech leaders, entrepreneurs and investors from around the world.

When I look around this room I see the great strength of the British fintech community.

A community that is full of countless stories of incredible vision, groundbreaking innovation, and tireless hard work.

One such is the story of Ismail Ahmed.

Ismail began his life in Somaliland, in northern Somalia.

In 1991, civil war engulfed Ismail’s hometown. His family, like so many others, lost everything. They became refugees in Ethiopia.

Ismail eventually made his way to the UK and became an economics student at the University of London.

He worked hard putting himself through university – and even as he was working, he would send money home to his family.

Every few weeks, he would trek across London to visit a money transfer agent, pay an exorbitant fee, and sent a very modest sum of money home.

During this time, Ismail thought a lot about money transfer systems and how to make payments cheaper and more efficient.

And in 2010, he founded a little company you may have heard of, called WorldRemit.

From its base here in London, WorldRemit raised $220m from investors to make sending money abroad as easy as sending an instant message.

Today, millions of people use WorldRemit to transfer money quickly and affordably in more than 140 countries – and Ismail is one of the world’s leading fintech entrepreneurs.

The reason I’m sharing his story isn’t just because he deserves enormous respect or recognition, or because he makes many of us look like terrible underachievers.

It’s because this is a story that exemplifies Britain’s FinTech experience – and a story that is being repeated over and over again across Britain’s fintech industry.

So much so that today, Britain is the global capital of fintech.

Fintech contributes nearly $7 billion to the UK economy each year;

London is home to 17 of the top 50 international fintech firms;

And last year investment in UK fintech more than doubled…

…and UK firms attracted almost four times more funding than Germany…

…and more than France, Ireland and Sweden combined.

And I am pleased to welcome great examples of this success today:

Citi have announced London as the destination for their next Innovation Lab.

Next month NatWest will launch new fintech accelerators in London, Edinburgh, Bristol and Manchester.

Level 39 will soon expand into a 100,000 square foot building in Canary Wharf – making it one of the largest FinTech hubs in the world.

Augmentum have created a £100m fund for fintech investment, here in the UK.

And just last week Estonia’s LHV Bank announced it was opening a UK branch to serve the finch industry – a great sign of confidence that cross-European collaboration and investment will continue and grow beyond Brexit.

But none this progress can be taken for granted.

The very nature of this industry means that it moves incredibly quickly and is fiercely competitive.

So let me restate my commitment and determination to ensure Britain remains the best place in the world to set up and grow a Fintech business…

…and to continuously build upon our unique strengths to offer the most attractive home for global fintech leaders.

Of course, we’ve been working on these strengths for quite some time.

In 1649, we were the first country to issue permanent banknotes…

…you might say the Bank of England is the original fintech unicorn.

We were the first to lay telegraph cables under the ocean…

…and by connecting France in the 1850s, and then the United States, we built the essential infrastructure for a global financial system.

We had the first ATM in the world, installed in 1967 – two full years before the United States caught up…

…in fairness, I should say they were busy landing on the moon that year…

…but, if you want to get on…

…you have to be able to multi-task.

And while the British inventor, Tim Berners-Lee is rightly credited with unlocking the digital revolution by inventing the World Wide Web…

…it was a much earlier British pioneer who kickstarted the computer age.

In 1823, Charles Babbage asked the then Chancellor of the Exchequer for £1,700 to build his ‘Difference Engine,’…

…the first advanced mechanical computer – apparently sold it to the then Chancellor on the basis that it would cut down on the amount of paperwork officials did.

Mr. Babbage, can I say I’d like that money back.

And while we are at it, his collaborator Ada Lovelace, can probably claim to have pre-empted our Women in Finance initiative by nearly 200 years.

And now, on top of these deep historical foundations…

…we have built the best modern ecosystem in the world for innovation.

We are home to the English language, the global language of business. Our legal system is the jurisdiction of choice for international commerce.

Our world-class universities have pioneered many of the breakthrough discoveries powering today’s digital revolution – with more Nobel Prizes than any country outside the United States.

And British cultural products and talent inspire huge global audiences – as witnessed by the 30 British Oscar nominations this year.

All of that makes London a Fintech-friendly pluriculture.

And when it comes to innovation, Britain is a workshop for the world – the innovation leader for Europe.

We have the greatest tech hub in Europe, Tech City.

We are home to more than a third of all Europe’s billion-dollar tech firms – with a record £8.26 billion invested in UK startups last year.

London is home to more than 250,000 software developers – more than anywhere in Europe – and the UK is Europe’s top destination for tech talent.

Every hour, a new tech business is founded in the UK.

And my ambition is to see that become every half-hour.

And my message to everyone in this room today is that…

…when it comes to building the Fintech companies of the future…

…you need never doubt that you are among friends in Britain.

Our doors will always be open to the innovators and inventors.

And we will keep working to support you – and ensure Britain remains the best place in the world for fintech.

First, we are committed to building the most pro-growth and pro-innovation regulatory environment in the world for fintech.

We’ve introduced new rules on open banking….

…and I’m delighted to see products here today made possible by this initiative.

We legislated to require big banks to share credit information on small and medium-sized businesses…

…helping more entrepreneurs to get the funding they need to grow…

…and helping alternative funders to grow their market presence.

The FCA’s world-leading ‘regulatory sandbox,’ allows firms to test and refine their products with consumers in a safe environment.

And I know it’s a great idea…

…because multiple other countries around the world have already copied it.

But there’s more to do.

So today I’m proud to launch our new strategy for the fintech sector.

As part of which, I’m pleased to announce that the FCA and Bank of England will take the first steps towards automating regulatory compliance…

…reducing costs for financial services firms, and removing a key barrier for fintechs as they enter financial services markets.

A new code of industry standards will make it easier and cheaper for fintechs to partner with established financial service providers…

…both boosting the ability of banks to offer new services, and helping fintechs to find a ready market for their products.

And we’re appointing new envoys to England, Wales and Northern Ireland to promote the adoption of fintech by regional banks and building societies, complementing the work of the existing Scottish envoys.

Secondly, we’re driving our global collaboration in fintech.

Before today we had signed four FinTech Bridges with Singapore, China, Korea, and Hong Kong…

…committing governments and regulators to collaborate on supporting growth and investment in fintech across markets.

And today, I am delighted to announce that the Australian Treasurer, Scott Morrison and I have just signed an agreement for a new FinTech Bridge between the UK and Australia.

This is our most ambitious collaboration to date, bringing together regulators, policy-makers and private sector leaders to collaborate on growing our respective fintech markets in tandem.

But our strategy is about more than sector specific interventions.

It is about championing the UK’s position as a pro-business, pro-innovation environment…

…about making it easier for knowledge intensive scale-up businesses to raise the funding they need…

…in short, about creating the best possible ecosystem for Fintech to thrive.

Last Autumn I announced the launch of an action plan to unlock over £20 billion of finance for high-growth innovative firms in the fintech sector and beyond.

And today I can set out some next steps:

From April, changes to the Enterprise Investment Scheme will take effect, significantly increasing investment in high-growth and knowledge-intensive firms.

And earlier this month, we published consultations on further extensions to this scheme and to Entrepreneurs Relief.

Alongside greater investment by individuals, greater institutional investment in venture funding is needed.

So alongside changes to tax relief, the British Business Bank will launch a new £500m programme in May that will invest in a series of funds to encourage co-investment by leading institutional investors in those businesses.

Later this year, the British Business Bank will launch a new ‘British Patient Capital’ investment fund– which will co-invest with the private sector to unlock £7.5 billion of public and private investment.

UK pension funds have relatively low allocations to patient capital and we are determined to fix that. The Pensions Regulator will clarify guidance on how trustees can invest in illiquid assets such as venture capital.

And as part of our plan to get the best Brexit deal for jobs, business and prosperity…

…we are discussing with the EU our future relationship with the European Investment Bank and European Investment Fund…

…and we will keep the financing needs of high growth businesses under continuous review as we leave the EU, and if necessary, we will use the British Business Bank to provide an alternative to the EIF, which has done great work in supporting the industry.

Britain is, and will remain, a great place to do business.

It is the global capital for Finance, Fintech, and a major hub of Fourth Industrial Revolution technologies…

…and my priority as Chancellor is to go on pushing us to do even better.

We will go on creating the conditions and providing the resources that have allowed pioneers from Charles Babbage to Ismail Ahmed to succeed.

Because Fintech offers the chance to connect the world…

…to deliver financial services and innovations that can drive widespread growth and prosperity…

…create millions of jobs, and build stronger, fairer, faster financial services that serve the common interests of all the peoples of this interconnected planet.

My commitment to you is that Britain will continue to drive this agenda…

…will continue to be the best place for fintech to thrive.

Because, Fintech is the future of global finance…

…and working together, we have a chance to reach that future faster.

We look forward to continuing to welcome you, from wherever you come from around the world, to stay and build for many years to come – and we wait with baited breath, to see the astonishing innovations you are going to reveal next.

Thank you.

Philip Hammond – 2018 Spring Statement

Below is the text of the speech made by Philip Hammond, the Chancellor of the Exchequer, in the House of Commons on 13 March 2018.

I am pleased to introduce to the House the first spring statement. The UK was the only major economy to make hundreds of tax and spending changes twice a year, and major international organisations and UK professional bodies alike have been pressing for change. In 2016, I took the decision to move to a single fiscal event in the autumn, giving greater certainty to families and businesses ahead of the new financial year and allowing more time for stakeholder and parliamentary engagement on potential fiscal changes.

Today’s statement will update the House on the economic and fiscal position, report progress on announcements made at the two Budgets last year and launch further consultations ahead of Budget 2018, as I set out today in my written ministerial statement. I will not be producing a Red Book today, but of course I cannot speak for the right hon. Member for Hayes and Harlington (John McDonnell).

I am pleased to report today to the House on a UK economy that has grown in every year since 2010—an economy that, under Conservative leadership, now has a manufacturing sector enjoying its longest unbroken run of growth for 50 years, that has added 3 million jobs and seen every single region of the UK with higher employment and lower unemployment than in 2010, that has seen the wages of the lowest-paid up by almost 7% above inflation since April 2015 and that has seen income inequality lower than at any time under the last Labour Government. That is solid progress towards building an economy that works for everyone.

So I reject the Labour party’s doom and gloom about the state of the nation. Every Wednesday, we have to listen to the Leader of the Opposition relentlessly talking Britain down, and every year since 2010 we have had to listen to the right hon. Member for Hayes and Harlington predict a recession—none of which has actually happened. So if there are any Eeyores in the Chamber, they are on the Opposition Benches; I, meanwhile, am at my most positively Tigger-like.

As I contemplate a country which faces the future with unique strengths.

Our language is the global language of business.

Our legal system is the jurisdiction of choice for commerce.

We host the world’s most global city, and its international finance and professional services capital.

Our companies are in the vanguard of the technological revolution.

While our world-class universities are delivering the breakthrough discoveries and inventions that are powering it.

British culture and talent reaches huge audiences across the globe.

And our tech sector is attracting skills and capital from the four corners of the earth.

With a new tech business being founded somewhere in the UK every hour.

Producing world-class products including apps like TransferWise, CityMapper,

And Matt Hancock.

Mr Speaker.

Today the OBR delivers its second report for the fiscal year 2017-18.

And I thank Robert Chote and his team for their work.

It forecasts more jobs.

Rising real wages.

Declining inflation.

A falling deficit.

And a shrinking debt.

The economy grew by 1.7% in 2017, compared to 1.5% forecast at the Budget.

And the OBR have revised up their forecast for 2018 from 1.4% to 1.5%.

Forecast growth is then unchanged at 1.3% in 2019 and 20, before picking up to 1.4% in 21 and 1.5% in 22.

That’s the OBR’s forecast Mr Speaker.

But forecasts are there to be beaten.

As a nation, we did it in 2017.

And we should make it our business to do so again!

Our remarkable jobs story is set to continue.

With the OBR forecasting more jobs in every year of this parliament.

And over 500,000 more people enjoying the security of a regular pay-packet by 2022.

I am pleased to report that the OBR expect inflation, which is currently above target at 3%.

To fall back to target over the next 12 months.

Meaning that real wage growth is expected to be positive from the first quarter of 18-19, and to increase steadily thereafter.

Mr Speaker.

I reported in the Autumn that borrowing was due to fall in every year of the forecast.

And debt to fall as a share of GDP from 2018-19.

The OBR confirms this today.

And further revises down debt and borrowing in every year.

Borrowing is now forecast to be £45.2 billion this year.

£4.7bn lower than forecast in November.

And £108bn lower than in 2010 which, coincidentally, is almost exactly the total cost of the additional spending pledges made by the Labour party since the general election in June last year; it has taken them just nine months to work up a plan to squander the fruits of eight years’ hard work by the British people.

As a percentage of GDP, borrowing is forecast to be 2.2% in 17-18.

Falling to 1.8% in 18-19, 1.6% in 19-20, then 1.3%, 1.1% and finally 0.9% in ‘22-‘23.

Meaning that in 18-19 we will run a small current surplus, borrowing only for capital investment.

And we are forecast to meet our cyclically adjusted borrowing target in ‘20-21 with £15.4bn headroom to spare.

Broadly as forecast at the Budget.

Mr Speaker,

The more favourable outlook for borrowing means the debt forecast is nearly 1% lower than in November.

Peaking at 85.6% of GDP in 17-18.

And then falling to 85.5% in 18-19, then 85.1%, 82.1%, 78.3%, and finally 77.9% in 2022-23.

The first sustained fall in debt in 17 years.

A turning point in the nation’s recovery from the financial crisis of a decade ago.

Light at the end of the tunnel, another step on the road to rebuilding the public finances that were decimated by the Labour party. And it is one that Labour would again place at risk, because under Labour’s policies, our debt would not fall over the next five years; it would rise by more than £350 billion to more than 100% of our GDP, undermining our recovery, threatening investment in British jobs, burdening the next generation and wasting billions and billions of pounds more on debt interest. There is indeed light at the end of the tunnel, but we have to make absolutely sure that it is not the shadow Chancellor’s train hurtling out of control in the other direction towards Labour’s next economic train wreck.

Mr Speaker.

In Autumn 2016, I changed the fiscal rules to give us more flexibility to adopt a balanced approach to repairing the public finances.

Reducing debt.

Not for some ideological reason.

But to secure our economy against future shocks.

Because we in the Conservative Party are not so naïve as to think we have abolished the economic cycle.

Because we want to see taxpayers’ money funding our schools and hospitals, not wasted on debt interest.

And because we want to give the next generation a fair chance.

But I do not agree with those who argue that every available penny must be used to reduce the deficit.

And nor do I agree with the fiscal fantasists opposite who argue that every available penny should be spent immediately.

We will continue to deliver a balanced approach.

Balancing debt reduction against the need for investment in Britain’s future.

Support to hard-working families through lower taxes.

And our commitment to our public services.

Judge me by my record, Mr Speaker [political content removed].

Since Autumn Statement 2016, I have committed to £60 billion of new spending.

Shared between long-term investment in Britain’s future.

And support for our public services.

With almost £9 billion extra for our NHS and our social care system.

£4bn going into the NHS in 18/19 alone.

And as I promised at the Autumn Budget.

More to come if, as I hope, management and Unions reach an agreement on a pay modernisation deal for our nation’s Nurses and Agenda for Change staff.

Who have worked tirelessly since the Autumn in very challenging circumstances to provide the NHS care that we all value so highly.

£2.2 billion more on education and skills.

And £31 billion going to fund infrastructure, R&D and housing through the National Productivity Investment Fund.

Taking public investment in our schools, hospitals, and infrastructure in this parliament to its highest sustained level in 40 years.

And at the same time we have cut taxes for 31 million working people by raising the personal allowance again in line with our manifesto commitment.

Taking more than 4 million people out of tax altogether since 2010.

Freezing fuel duty for an eighth successive year, taking the saving for a typical car driver to £850 compared with Labour’s plans, and raising the national living wage to £7.83 from next month, giving the lowest paid in our society a well-deserved pay rise of more than £2,000 for a full-time worker since 2015.

Since becoming Chancellor, I have provided an extra £11 billion of funding for 2018/19.

To help with short-term public spending pressures.

And to invest in Britain’s future.

In the longer term, I can confirm that, at this year’s Budget I will set an overall path for public spending for 2020 and beyond.

With a detailed Spending Review to take place in 2019.

To allocate funding between Departments.

That is how responsible people Budget.

First you work out what you can afford.

Then you decide what your priorities are.

And then you allocate between them.

And if, in the Autumn, the public finances continue to reflect the improvements that today’s report hints at.

Then, in accordance with our balanced approach, and using the flexibility provided by the fiscal rules.

I would have capacity to enable further increases in public spending and investment in the years ahead.

While continuing to drive value for money to ensure that not a single penny of precious taxpayers’ money is wasted.

A balanced approach.

Getting our debt down.

Supporting our public services.

Investing in our nation’s future.

Keeping taxes low.

Building a Britain fit for the future.

And an economy that works for everyone.

Updates since the Budget.

Mr Speaker.

There is much still to do.

Since Autumn 2016 we have set out our plan to back the enterprise and ambition of British business and the hard work of the British people.

A plan to unleash our creators and our innovators.

Our inventors and our discoverers.

To embrace the new technologies of the future.

And to deliver the skills we will need to benefit from them.

To tackle our long-standing productivity challenges.

And to say more loudly than ever that our economy will remain open and outward-looking.

Confident to compete with the best in the world.

We choose to champion those who create the jobs and the wealth on which our prosperity and our public services both depend.

Not to demonise them.

Mr Speaker,

The shadow Chancellor is open about his ideological desire to undermine the market economy, which has driven an unparalleled increase in our living standards over the past 50 years. We on the Conservative Benches reject his approach outright.

The market economy embraces talent and creates opportunity.

Provides jobs for millions and the tax revenues that underpin our public services.

So we will go on supporting British businesses.

We are reducing business rates by over £10 billion.

And we committed at Autumn Budget 2017 to move to triennial revaluations from 2022.

Today I am pleased to announce that we will bring forward the next business rates revaluation to 2021 and make the triennial reviews from that date.

We will launch a Call for Evidence to understand how best we can help the UK’s least productive businesses to learn from, and catch-up with, the most productive.

And another on how we can eliminate the continuing scourge of late payments – a key ask from small business.

Because Mr Speaker, we are the champions of small businesses and the entrepreneur.

Since the Budget, we have made substantial progress in our negotiations with the European Union.

To deliver a Brexit that supports British jobs, businesses and prosperity.

And I look forward to another important step forward at the European Council next week.

But we will continue to prepare for all eventualities.

And today my RHF the Chief Secretary is publishing the Departmental allocations of over £1.5 billion of Brexit preparation funding for 2018-19 which I announced at the Autumn Budget.

Our Modern Industrial Strategy sets out our plan to keep Britain at the forefront of new technologies.

With the biggest increase in public R&D spending for four decades.

Much of this new technology depends on high-speed broadband.

And today I can make the first allocations of the £190 million local full fibre challenge fund announced at Autumn Budget and confirm £25 million for the first 5G testbeds.

As our economy changes, we must ensure that people have the skills they need to seize the opportunities ahead, so we have committed over £500 million a year to T-levels—the most ambitious post-16 reforms in 70 years. From next month, £50 million will be available to help employers to prepare for the roll-out of T-level work placements. Last week the Education Secretary and I chaired the first meeting of the national retraining partnership between the Government, the TUC and the Confederation of British Industry. I can reassure the House that there was no beer and no sandwiches—not even a canapé—but there was a clear and shared commitment to training in order to prepare the British people for a better future ahead. Next month our £29 million construction skills fund will open for bids to fund up to 20 construction skills villages around the country.

We’re committed as a government to delivering 3 million apprenticeship starts by 2020 with the support of business through the apprenticeship levy.

But we recognise the challenges the new system presents to some small businesses looking to employ an apprentice.

So I can announce today that my Right Honourable Friend the Education Secretary will release up to £80 million of funding to support those small businesses in engaging an apprentice.

We publish a consultation on improving the way the tax system supports self-funded training by employees and the self-employed.

And because we currently understand more about the economic pay-back from investing in our infrastructure than we do about investment in our people.

I have asked the ONS to work with us on developing a more sophisticated measure of human capital.

So that future investment can be better targeted.

Mr Speaker, we’re undertaking the largest road building programme since the ‘70s.

As Transport Secretary, I gave the green light to fund the new bridge across the River Mersey in 2011.

And I was delighted to see it open late last year.

The largest infrastructure project in Europe, Crossrail, is due to open in just 9 months’ time.

We’re making progress on our plans to deliver the Cambridge-Milton Keynes-Oxford Corridor.

We’re devolving powers and budgets to elected mayors across the Northern Powerhouse and Midlands Engine.

We’re in negotiations for city deals with Stirling and Clackmannanshire, Tay Cities, Borderlands, North Wales, Mid Wales, and Belfast.

And today we invite proposals from cities across England for the £840 million fund I announced at the Budget to deliver on their local transport priorities.

As part of our plans to spread growth and opportunity to all parts of this United Kingdom.

And at the heart of our plan for building an economy that works for everyone is our commitment to tackle the challenges in our housing market.

With an investment programme of £44 billion to raise housing supply to 300,000 a year by the mid-2020s.

And today I can update the House.

We are working currently, with my Right Honourable Friend the Housing Minister, with 44 authorities who have bid into the £4.1 billion Housing Infrastructure Fund, to unlock homes in areas of high demand.

We are concluding housing deals with ambitious authorities who have agreed to deliver above their Local Housing Need.

And I can announce today that we have just agreed a deal with the West Midlands to have committed to deliver 215,000 homes by 2030-31, facilitated by a £100 million grant from the Land Remediation Fund.

And my Right Honourable Friend the Housing Minister will make further announcements on the over the next few days on the Housing Infrastructure Fund.

We will more than double the size of the Housing Growth Partnership with Lloyds Banking Group to £220 million, to help providing additional finance for small builders.

And London will receive an additional £1.7 billion to deliver a further 26,000 affordable homes, including homes for social rent, taking total affordable housing delivery in London to over 116,000 by the end of 2021-22.

Mr Speaker, my Right Honourable Friend for West Dorset has outlined his initial findings on the gap between planning permissions granted and housing completions.

In a letter which I have placed in the Library of the House.

And I look forward to his full report at the Budget.

And I am delighted to inform the House that an estimated 60,000 First Time Buyers have already benefited from the Stamp Duty relief I announced at the Autumn Budget. I remind the House that the Labour party voted against this.

In the Autumn, we published a paper on taxing large digital businesses in the global economy.

And today we follow up with a publication that explores potential solutions.

And I look forward to discussing this issue with G20 Finance Ministers in Buenos Aires at the weekend.

We also publish a call for evidence on how online platforms can help their users to pay the right amount of tax.

We will consult on a new VAT collection mechanism for online sales.

To ensure that the VAT consumers pay actually reaches the Treasury.

And we will call for evidence, too, on how to encourage cashless and digital payments, while ensuring cash remains available to those who need it.

Mr Speaker.

This government is determined that our generation should leave the natural environment in a better state than we found it.

And improve the quality of the air we breathe.

So we will publish a call for evidence on whether the use of non-agricultural red diesel tax relief contributes to poor air quality in urban areas.

And following our successful intervention to incentivise green taxis, we’ll help the Great British White Van driver go green with a consultation on reduced VED rates for the cleanest vans.

And follow up on the vital issue of plastic littering and the threat to our oceans.

With a call for evidence to support us in delivering on our vow to tackle this complex issue.

It will look at the whole supply chain for single use plastics.

At alternative materials.

Reusable options.

And recycling opportunities.

And it will look at how the tax system can help drive the technological progress and behavioural change we need.

Not as a way of raising revenue.

But as a way of changing behaviour.

And encouraging innovation.

We’ll commit to investing to develop new, greener, products and processes.

Funded from the revenues that are raised.

And as a downpayment Mr Speaker, we’ll award £20m now from existing departmental budgets to businesses and universities, to stimulate new thinking and rapid solutions in this area during the call for evidence.

Mr Speaker,

We are delivering on our plan.

With a balanced approach.

Restoring the public finances.

Investing in our economy and our public services.

Raising productivity through our modern industrial strategy.

Building the homes our people need.

Tackling the environmental challenges that threaten our future.

Embracing technological change, seizing the opportunities ahead.

As we build our vision of a country that works for everyone.

An economy where prosperity and opportunity are in reach of all.

Wherever they live.

Whatever their gender, colour, creed or background.

Where talent and hard work alone determine success.

A beacon of enterprise and innovation.

An outward looking, free-trading nation.

One that is confident that our best days lie ahead of us.

A force for good in the world.

A country we can all be proud to pass on to our children.

And, I commend this statement to the House.

Philip Hammond – 2018 Speech on Financial Services

Below is the text of the speech made by Philip Hammond, the Chancellor of the Exchequer, on 7 March 2018 in Canary Wharf, London.

It’s great to be here in Canary Wharf, and I am grateful to HSBC for hosting me.

But I am conscious that holding this event in London risks feeding the prejudice that financial services is just a London business…

…when, in fact, of course it is a vibrant part of the economy across the length and breadth of Britain…

…with over two-thirds of financial services jobs outside London…

… and significant financial services hubs in Edinburgh, Leeds, Bristol, Belfast, Birmingham and Bournemouth, to name but a few.

On Friday, the Prime Minister set out the UK’s vision for its future economic partnership with the European Union…

….in a speech which answered the call to set out “what we want”…

…while being clear that we understand this is a negotiation, where both sides will need to give and take.

As the PM said, our task, together with our European partners, is to deliver a Brexit that works…

…for the UK…

…and for the EU.

A partnership that protects supply chains and established trade relationships…

…that backs businesses, safeguards jobs…

…and promotes the shared European values that we all hold.

And the first step will be delivering on the Implementation Period which was agreed as a fundamental part of the deal on Withdrawal issues that we did in December…

…and which we expect to be formalised at the March European Council meeting.

This Implementation Period is essential if we – and by “we”, I mean all of us, businesses and citizens, in all 28 countries – are to benefit from a smooth pathway to a future partnership between the UK and the EU.

Nowhere will this be more important than in Financial Services, where we must work together to avoid the potential risks to financial stability that could arise if we faced a cliff-edge in March 2019.

But for the Implementation Period to deliver the smooth transition we all want to see, it needs to be effective.

That means our regulators working together so that businesses – especially regulated businesses – are able to plan on the basis of it.

Giving full and meaningful effect to what we agreed in December…

…delivering clarity and certainty to businesses and citizens across Europe.

The PM was clear in her speech that after we have left the EU, we’ll be outside the Single Market and the Customs Union…

…but equally, we’ll be free to cooperate closely with partners, including the EU, where it is in our mutual interest to do so.

Financial services is such an area where we can, and should, collaborate closely.

…recognising that a future economic partnership will always need to ensure a fair balance of the rights and obligations associated with market access.

Today I want to build on the vision the Prime Minister delivered on Friday.

I want to explain why it makes sense, for both the UK and the EU, that we continue to collaborate closely on cross-border financial services.

I want to challenge the assertion that Financial Services cannot be part of a free trade agreement…

…to set-out why it is in the interest of both the UK and the EU27 to ensure that EU businesses and citizens can continue to access the UK Financial Services hub…

…and how this is not a zero-sum game, where any loss of market share in London is automatically a gain to another EU Capital.

And I want to describe what a future financial services component of a comprehensive trade partnership agreement could look like.

The UK Financial Services hub is an engine that powers the real economy not just in the UK, but right across Europe…

Because the fact is that the UK financial services hub is not just a British asset…

…but a European asset too…

…supporting businesses, savers and citizens across the EU…

…serving the whole of our continent, as well as the world beyond.

And not just serving Europe…

…but powered by the talent of hundreds of thousands of Europeans who work in it.

And it is an asset unparalleled in its history, its scale, its complexity, its agility and its connectivity to the economies of Europe and the world.

A “global public good”, as the IMF described it.

EU passporting did not create the City of London.

…nor did some smart regulatory fix or government incentive.

It is a combination of intangibles: language, legal system, time zone, culture, networks, risk appetite, regulatory approach…

…all blending together to create an ecosystem…

…an immensely potent combination of factors…

…impossible to replicate…

…or perhaps even to map.

Of course, having such a significant financial services industry brings to the UK great benefits…

…but it is not cost free.

The UK economy bears the related risks and UK taxpayers stand behind those risks.

As we learned to our very real cost during the financial crisis…

…when those taxpayers provided support to financial sector firms to the tune of £136bn.

…and that is not a lesson we will forget.

So, even as a member of the EU, we have chosen to go higher and faster on regulatory standards at times to protect our taxpayers.

And because we understand the risks we are taking, our commitment to rigorous and robust regulation will remain undimmed….

…David Davis was right in Vienna when he said that Britain’s plan is for a race to the top in global standards.

And because those risks are so significant, it is vital that the citizens of any country bidding to take on a bigger share of Europe’s financial services market have a full and transparent understanding of them.

The deep pools of capital, specialist skill and regulatory competence in London provide efficient, safe, and high quality services to the EU.

We manage EUR1.5 trillion of assets on behalf of EU clients;

Around two-thirds of debt and equity capital raised by EU corporates is facilitated by banks based in the UK.

78% of European Forex trading and 74% of European interest rate derivatives trading takes place in the UK. These are services that businesses rely on to run their operations efficiently, with the benefit passed on to consumers in all 28 EU countries.

And we should be under no illusion about the significant additional costs if this highly efficient market were to fragment.

Costs that would be borne by Europe’s businesses and consumers…

…costs that industry bodies across Europe are beginning to recognise.

The consultancy, Oliver Wyman calculates that the wholesale banking industry would need to find USD 30–50bn of extra capital if new regulatory barriers forced fragmentation of firms’ balance sheets.

And LSEG estimate that the EU’s proposal on location of clearing houses, if implemented, would increase costs to EU27 firms by around $25 billion a year…

…by fragmenting the market and losing the efficiency of “offsetting” between trades. Already evidence is emerging of market actors reassessing their commitment to Europe in the face of potential regulatory fragmentation.

For example, Intercontinental Exchange announced plans last month to launch daily gold futures contracts in the US next year, based on metal held in the UK.

Those who think that the major winners for any fragmentation of London’s markets would be Paris or Frankfurt…

…Dublin or Luxembourg…

…should take note!

The real beneficiaries are more likely to be New York, Singapore, and Hong Kong…

…cutting Europe’s market share.

And leaving Europe as a whole, less competitive…

…and more reliant on distant financial centres, operating under very different rules.

So it is time to address the sceptics who say a trade deal including financial services cannot be done because it has never been done before:

…to them I say: “every trade deal the EU has ever done has been unique”.

The EU has never negotiated the same arrangement twice.

It has bespoke relationships with Turkey, Canada, Singapore, Korea.

Every FTA has varying degrees of market access depending on the countries involved…

…which is not surprising, given the different economies and the different interests reflected in those agreements.

In the last hour or so the EU has published its draft regulatory guidelines.

It is clear that a deal based wholly on precedent cannot deliver the depth and breadth of market access that these guidelines envisage.

Because any trade deal between the UK and the EU must start from the reality of today:

That our economies, including in Financial Services, are deeply interconnected;

That our regulatory frameworks are effectively identical;

That our supervisors and regulators work hand in glove to maintain the stability of our financial systems and have developed high levels of mutual trust;

And that our businesses and citizens depend on cross-border financial services trade in their day-to-day lives far more than most of them will ever know…

…when they buy a car…

…or take out a fixed rate loan…

…or hedge their fuel costs…

…or insure an aircraft.

The EU itself pursued ambitious financial services co-operation in its proposals for TTIP – which it described as a partnership that would be: “more than a traditional free trade agreement”. And in its initial proposals for CETA.

We know because back then, British and French officials worked hand-in-hand on the proposals, with the Commission.

Both CETA and TTIP were intended to promote convergence between entirely separate markets… …with different rules.

And low levels of interconnectedness.

We can do so much better…

…given our starting point..

At the time of the TTIP negotiations, people rightly argued that this was a challenging objective…

…but it need not be so in a partnership between the UK and the EU.

Our markets are already deeply interconnected.

If it could be done with Canada or the USA…

…it could certainly be done with the UK.

And there is another reason why it must be done:

A trade deal will only happen if it is fair and balances the interests of both sides.

Given the shape of the British economy, and our trade balance with the EU27, it is hard to see how any deal that did not include services could look like a fair and balanced settlement.

So I am clear not only that it IS possible to include Financial Services within a Trade Deal but that it is very much in our mutual interest to do so.

But in making that statement, I do not minimise the challenges.

I recognise that there will be many legitimate concerns…

…concerns about the policing of rules once we are separate legal jurisdictions…

…concerns about the legal framework for regulatory and supervisory cooperation…

…concerns about the implications for Financial Stability and for the operation of Eurozone monetary policy.

We stand ready to engage on all of these issues…

…and we have been giving a great deal of thought to how to address these concerns…

…to ensure that all our economies continue to benefit.

…rather than simply throwing in the towel and allowing the market to fragment…

…to everybody’s cost.

I will set out our initial thoughts…

…but first, let me say a word or two about financial stability.

We have come a very long way since the autumn of 2008.

Working collaboratively across the EU and indeed, beyond with international partners…

…we have increased the capital requirements of our banks…

…we have tightened supervision of their operations …

…and we have put in place resolution plans…

… to avoid contagion should the worst happen to an institution.

In the UK we have gone further and ring-fenced the retail banking operations of integrated groups from their wholesale market activities.

So the risk now to financial stability is not from continued close co-operation and integration…

…it is from the opposite: breaking up the intense co-operation that has developed between regulators across the EU and the UK.

Modern Europe is, quite literally, testament to the benefits of tearing down walls.

Let us not now propose new barriers where there need be none between our successfully collaborating financial services regulators.

So, building on the Prime Minister’s speech last week…

…let us consider how we might structure a future partnership in financial services…

…in a world beyond the single market and passporting.

A partnership that enables the ongoing delivery of cross-border financial services in both directions…

…while protecting financial stability…

…and consumers, businesses, and taxpayers across the UK and EU.

In my Mansion House speech last June, I set out three principles for a future partnership in financial services:

A process for establishing regulatory requirements for cross-border trade between the UK and the EU; Cooperation arrangements that are reciprocal, reliable, and that prioritise financial stability; and

A legal framework that makes this structure durable and reliable for participants in the market and for businesses who use their services.

Today, I want to describe how the vision of the Prime Minister’s speech could shape those principles into a framework that could be the basis of a future partnership in financial services…

…as part of a wide-ranging Free Trade Agreement.

We will start from a unique position…

…with full alignment on Day 1.

The challenge is what happens next.

So the way forward must surely be to bank our Day 1 defacto equivalence.

…and shape a regime to manage future regulatory change that ensures that…

…while our rule systems may evolve separately…

…we deliver fully equivalent regulatory outcomes…

…maintaining commitments to support open-markets and fair competition.

As these rules systems for financial services evolve, the United Kingdom cannot simply be an automatic ‘rule taker’.

Let me explain why.

We have invested heavily in the current rulebook, and our industry is structured around it.

And we hope that from Day 1, good sense, sound economics, and a commitment to mutual benefit will be the guiding principle of future rulemaking on both sides…

…often within the framework of internationally agreed regulatory standards.

But, because of the size of the UK’s financial services market…

…around 10 times our GDP…

…and the complexity of the products traded on it…

…and the consequent risks our taxpayers bear…

…we cannot sign up to automatically accept as-yet-unknown future rule changes.

We must have the ability, if necessary, to deliver an equivalent outcome by different means…

…maintaining our commitment to ensure access to each other’s markets is on fair and non-discriminatory terms.

…while protecting UK taxpayers from potentially unacceptable risks.

At first glance, this may appear to point to a solution based on the EU’s established third-country equivalence regime.

But that regime would be wholly inadequate for the scale and complexity of UK-EU financial services trade.

It was never meant to carry such a load.

The EU regime is unilateral and access can be withdrawn with little to no notice.

Clearly not a platform on which to base a multi-trillion pound trade relationship.

But the principle of mutual recognition and reciprocal regulatory equivalence, provided it is objectively assessed, with proper governance structures, dispute resolution mechanisms, and sensible notice periods to market participants clearly could provide an effective basis for such a partnership.

And although we will be separate jurisdictions, we would need to maintain a structured regulatory dialogue to discuss new rules proposed by either side…

…building on our current unparalleled regulatory relationships…

…to ensure we deliver equivalent regulatory outcomes…

…agreeing mutually acceptable rule-changes where possible.

And where rules do evolve differently we will need an objective process to determine whether they provide sufficiently equivalent regulatory outcomes…

…including not only the rules themselves, but also an assessment of the way in which they are enforced…

…drawing on international standards where they exist, or on additional principles for equivalence where the UK and EU have more developed rules.

Second, there would need to be continued close supervisory co-operation.

The EU itself noted in the context of TTIP discussions that “in too many instances, international standards have been implemented in a way that does not allow…the relevant regulators and supervisors to work together”…

…weakening the resilience of financial markets.

We must not risk exacerbating that tendency.

While the UK would cease to be a part of the EU’s supervisory agencies, there is no reason why we could not maintain a very close working relationship.

Indeed it would be an essential part of supporting the regulatory equivalence that I have described…

…for instance, through proactive and extensive information exchange…

…authorised by the data-sharing agreements within the overarching FTA…

…going far beyond what is available in ordinary third-country relationships.

It could cover market abuse, transaction reporting, and stability monitoring, as well as prudential concerns about individual firms…

…and it could involve a version of today’s college structures, covering both day-to-day supervision and resolution in crisis.

Of course how each party organises its internal governance would be a matter for it.

Neither party would have a role in the other’s governance processes.

But we should be able to build on the extraordinary level of supervisory collaboration and trust that already exists between the EU and UK authorities…

…to establish the most comprehensive supervisory cooperation arrangements anywhere in the world…

…protecting our respective financial systems and our taxpayers from instability risks.

We recognise, also, that the supervision of major clearing houses conducting euro-denominated activity is a particularly important and sensitive subject for our EU partners…

…and we stand ready to discuss a mutually satisfactory way forward in this area.

The supervisory cooperation that I have described does not involve either party transferring any responsibility for its rules or ceding any sovereignty.

And that leads me to the third principle.

As the PM said on Friday, in certain circumstances we may choose not to maintain equivalent outcomes but we will know there may be consequences…

…we would have to address how this future partnership would work in such circumstances…

…with clear institutional processes to do so.

Our concern in a financial services partnership would be to ensure that any such consequences were reasonable and proportionate…

…applied in a predictable way that allows industry to plan with confidence…

…and that they were delivered through an independent arbitration mechanism that has the confidence of both parties.

Such mechanisms already exist within FTAs, including CETA.

The Prime Minister was clear on Friday that we have decided to leave the EU…

…and we accept that there will be consequences.

We do not expect the same relationship we have today across all areas of activity in financial services…

…trade-offs should be expected…

…and the industry will change.

But we should ensure that the future partnership strengthens European stability and prosperity…

…rather than weakening it.

The ideas I have set out today suggest a way to move forward…

…to shape a potential partnership in Financial Services…

…based on the core concept of fair and non-discriminatory competition…

…recognising legitimate concerns where they exist…

…but drawing a distinction between those concerns, and protectionism or political expediency which would undermine that competition.

What I have set out today is a possible route to a future partnership grounded in logic, pragmatism, and compromise…

…a partnership that would protect Europe’s financial stability and underpin one of its great competitive advantages.

And I look forward to constructive engagement with our friends and partners in the EU to take these ideas forward.

Thank you.

Philip Hammond – 2018 Speech at Davos

Below is the text of the speech made by Philip Hammond, the Chancellor of the Exchequer, in Davos on 25 January 2018.

Over the years, Professor Schwab has had a knack of expressing the tone for the year ahead with his Davos theme.

In 2010, ‘Rethink, Redesign, Rebuild’ was apt as countries and companies looked to move on from the financial crisis.

Last year, in the aftermath of the American Presidential elections and the referendum results in the UK, we convened under the banner ‘Responsive and Responsible Leadership’.

And this year, as the global economy gains momentum, but societal divides and geopolitical uncertainty remain, we discuss how we go about “creating a shared future for the fractured world”.

Because the fact is the global economy enters 2018 with more momentum than I can remember for a decade.

The IMF has yet again revised up its global growth prospects.

Equities are hitting new highs.

Business confidence is buoyant.

And we are seeing the broadest synchronised global recovery since 2010, with the IMF estimating that 120 economies saw a pickup in growth last year.

But despite this, political uncertainty persists.

And there is an abiding sense that the benefits of economic growth and technological advances are not being shared by all.

So in the past, where Davos has been the place to proclaim the rewards of globalisation and the fruits of free trade and open borders.

Today, as winners and losers are more polarised than ever before.

World leaders and business people have a duty not only to make the case all over again.

For the societal benefits of the continued cross-border flow of ideas, goods and services, people, and capital.

Of the technological revolution.

And for sound money and the modern market economy.

But to help to ensure that those benefits are genuinely delivered to all our people.

In the UK we have heard this debate loud and clear.

It was a feature of the election campaign last year.

And of course it was a key driver behind the Brexit vote in 2016.

I’ll say a few words about some of the challenges we face this year to ensure we get Brexit right.

And then I’ll say a bit about how we look beyond Brexit and make a success of the opportunities provided by the new economy.

When I spoke at this lunch last year, the UK was yet to trigger Article 50.

The idea of a transition period had hardly surfaced.

Since then, we have made significant progress in the negotiations, on issues from citizens’ rights, to our financial settlement.

And in December, we reached that magic point of “sufficient progress” that has allowed us to move onto the second phase of the negotiations.

But yet, two weeks ago, when I was in Berlin addressing leaders from across business, government and the media.

I was surprised to find myself still being asked whether Britain’s decision to leave the EU was reversible.

So let me be clear.

Britain will be leaving the European Union on 29th March 2019.

This decision is not going to be reversed.

That’s a statement of political reality.

The challenge now is not to debate the merits or otherwise of that decision.

It is about how we forge a new relationship between Britain and the EU, that best supports the interests of the British and the European people.

That backs business, and safeguards jobs.

And preserves the shared European values that we all hold.

And that’s where we need people to focus their energy now.

I welcomed Carolyn Fairbairn’s speech on Monday this week.

For the contribution it made to the ongoing debate.

And its focus on securing the closest possible future relationship between the EU and the UK, post Brexit.

Because while economies across the EU are recovering, this is no time to be complacent.

None of our European economies are so strong that we can afford to be exposed to any unnecessary economic, fiscal, or financial stability risks.

And despite the enormous progress that we have made, it right to recognise that the process of the UK moving from membership of the EU to a future and different relationship with the EU, has the potential to present such risks.

And, notwithstanding the progress that we’ve made, there is still a residual risk of an outcome that does not deliver what we want – to promote jobs and prosperity across this continent.

The EU27 exports more goods and services to the UK than to any other country, and 43% of UK exports go to other countries in the EU.

More than twice as many Euros are traded in the UK as in all the 19 Euro area countries combined.

60% of all UK trade with the EU is conducted through the ports of Calais and Dover.

Which underlines the importance of a customs arrangement with the EU, that protects free and frictionless trade.

And avoids significant disruption at the choke points that the ports of Calais and Dover represent.

And avoids any physical border infrastructure on the island of Ireland.

Because I agree with Carolyn that those who have suggested the Irish border can be kept open by establishing a customs border in the Irish sea are only shifting the issue, rather than solving it.

I also agree with Carolyn that an off-the-shelf deal – whether “Canada” or “Norway” – is not the right option for either Britain or the EU.

The existing models won’t work; because we are trying to do something which is literally unique in the history of trade agreements.

Because we start from a position of high levels of bilateral trade in goods and services.

Deeply interconnected economies and supply chains.

Highly aligned regulatory systems.

And unparalleled cooperation in security and defence.

So instead of doing what we’re normally doing in the trade negotiations – taking two divergent economies with low levels of trade and trying to bring them closer together to enhance that trade

We are taking two completely interconnected and aligned economies with high levels of trade between them, and selectively, moving them, hopefully very modestly, apart.

And so we should be confident of reaching something much more ambitious than any free trade agreement has ever achieved.

Something that properly reflects the 45 years that we have spent as members of the EU bringing our economies closer together, and the common regulatory starting point that follows from that experience.

But, as I know people in this room are very much aware, the UK will leave the EU on 29th March 2019. That’s in just over 14 months time.

And businesses and people in the UK and across the EU need to know very soon how we get to the end state.

They need to have confidence that there will be a smooth and orderly path to the new arrangements, rather than a disruptive and dangerous cliff edge.

That is why we agreed in December the principle of a time-limited Implementation Period of around two years after we have left the European Union.

Where Britain will be outside of the EU Customs Union and the Single Market, but during which we will replicate the effects of both.

With reciprocal access to each other’s markets.

And harmonised customs arrangements, ensuring a frictionless border.

So that business can continue, pretty much as before.

And so that businesses only have to make one set of adjustments during the whole process of the UK’s departure from the EU

Recognising, as we clearly do, the obligations that will continue during such an implementation period.

And we should look to the March European Council to confirm the detail of this agreement.

Giving further clarity and certainty to UK and European businesses.

Of course, achieving progress on the Implementation Period and the future partnership negotiations is of vital importance to the UK economy in the short term.

And it is my current absolute priority as Chancellor…

But the long-term future of Britain’s economy is about much more than Brexit.

As you have heard me say before, and will hear me say again.

We are on the brink of a technological revolution.

And you don’t have to be in Davos to experience it.

Artificial intelligence is transforming our hospitals.

Robotics is remodelling our supply chains.

Big data is revolutionising our public services.

And this time it isn’t just British Universities doing the inventing and the discovery, it is British business and industry.

Leading the innovation, the development, and the commercialisation.

Pioneering a revolution that will transform the global economy and the way we live and work.

And that has the potential to dramatically increase people’s living standards – through delivering a significant upgrade in our productivity.

This is critical to the future of the UK economy.

And it’s critical to addressing the societal challenges to which I have already referred.

Because it cannot be right that it takes a British worker until Friday evening to produce what a German worker has produced by Thursday afternoon.

And the technological revolution we are embarking upon gives us the perfect opportunity to change all that.

It is said that robotics in manufacturing and IT have already improved global productivity by 0.4 to 0.6% per year.

Other studies have suggested that artificial intelligence could double economic growth rates in advanced economies by 2035.

And this isn’t all about virtual reality and driverless cars.

Ocado already uses AI to forecast demand for 50,000 items.

Meaning the suburban middle classes is already blazing the trail for artificial intelligence – the fourth industrial revolution in Britain.

But there are those who watch this gathering technological revolution with some concern.

Where people in this room see driverless cars and robotics as opportunities, others, perfectly rationally, see them as threats to their living standards and their employment prospects.

And our job, as leaders in government and industry, is to ensure that individuals, firms, and the whole economy are able to reap the benefits of this the new technology, and manage the disruption that it will bring.

At the level of the individual, people must feel that technological change will make them better off, not unemployed.

So not only must we ensure that people have the skills to maintain their employability through the change, we must ensure that they benefit from it in higher earnings.

In other words – returns from the greater productivity delivered through new technology cannot just go to capital, they must flow to labour too.

So that, as this year’s Davos theme implies, the “proceeds of technological change” as we might call them, are spread to the many – not just concentrated in the hands of the elite few.

And it is not only workers who will be challenged.

At the firm level, new technology will have significant implications as intermediaries become redundant and business models are challenged.

Technology-enabled platforms will bring consumers and suppliers together directly in delivering services from finance to communications, to healthcare, and disrupting existing market structures and supply chains.

And at a macro-economy level, this technological revolution will connect billions of people and businesses around the world.

Rendering geographical distance an increasing irrelevance for the delivery of services.

While at the same time reducing the significance of labour cost (and perhaps the significance of economies of scale).

Allowing manufacturing, once again, to be located close to the point of consumption.

And like the revolutions that have preceded it, this technological revolution has the potential to raise global income levels, and improve the standards of living of people around the world.

But to realise this potential we will have to overcome profound new challenges, from the labour market to taxation, from regulation to income distribution that it will bring.

This won’t all happen overnight.

And as we saw this week with a robot assistant getting fired from its job in a supermarket in Edinburgh, it won’t all be smooth sailing.

But it is happening around us already.

And it is not going to be stopped.

So our choice is simple.

Embrace it.

Meet the challenges and reap the benefits.

Or hide from it and awake to find the world has moved on and left us behind.

I am clear, and certainly for an open economy like Britain, we must embrace this challenge.

Run towards it and champion the benefits it brings to our people.

And it is incumbent on all of us – governments and businesses around the world – to work closely together to demonstrate to our societies that we harness this potential to deliver a high wage, high growth economy.

Confident that together we can drive prosperity for all of our citizens.

Thank you.

Philip Hammond – 2017 Budget Speech

Below is the text of the Budget Speech made by Philip Hammond in the House of Commons on 22 November 2017.

I report today on an economy that continues to grow, continues to create more jobs than ever before, and continues to confound those who seek to talk it down: an economy set on a path to a new relationship with our European neighbours and a new future outside the European Union—a future that will be full of change, full of new challenges, and, above all, full of new opportunities. In this Budget, we express our resolve to look forward, not back; to embrace that change; to meet those challenges head on; and to seize those opportunities for Britain.

The negotiations on our future relationship with the European Union are in a critical phase. My right hon. Friend the Prime Minister has been clear about the fact that we seek a deep and special partnership, based on free and frictionless trade in goods and services, close collaboration on security, and strong mutual respect and friendship; and, as Chancellor, I am clear about the fact that one of the biggest boosts that we can provide for businesses and families—one of the best ways to protect British jobs and prosperity as we build that new future—is to make early progress in delivering my right hon. Friend’s vision, with an implementation agreement that allows businesses to plan and invest with confidence. This Government will make the pursuit of that progress a top priority in the weeks ahead.

While we work to achieve this deep and special partnership, we are determined to ensure that the country is prepared for every possible outcome. We have already invested almost £700 million in Brexit preparations and today I am setting aside over the next two years another £3 billion. I stand ready to allocate further sums if and when needed. No one should doubt our resolve.

But this Budget is about much more than Brexit. The world is on the brink of a technological revolution—one that will change the way we work and live, and transform our living standards for generations to come. We face a choice: either we embrace the future, seize the opportunities which lie within our grasp and build on Britain’s great global success story; or, as the Labour party advocates, we reject change and turn inwards to the failed and irrelevant dogmas of the past.

We have no doubts. We choose the future. We choose to run towards change, not away from it, and to prepare our people to meet the challenges ahead, not to hide from them. And the prize will be enormous because, for the first time in decades, Britain is genuinely at the forefront of this technological revolution—not just in our universities and research institutes, but this time in the commercial development labs of our great companies, and on factory floors and business parks across this land. But we must invest to secure that bright future for Britain, and at this Budget that is what we choose to do.

We are listening and we understand the frustration of families where real incomes are under pressure. So at this Budget, we choose a balanced approach—yes, maintaining fiscal responsibility as we at last see our debt peaking, continuing to invest in the skills and infrastructure that will support the jobs of the future and building the homes that will make good on our promise to the next generation, but crucially also helping families to cope with the cost of living.

As we invest in our country’s future, I have a clear vision of what that global Britain looks like: a prosperous and inclusive economy where everybody has the opportunity to shine, wherever in these islands they live and whatever their background, where talent and hard work are rewarded, and where the dream of home ownership is a reality for all generations; a hub of enterprise and innovation; a beacon of creativity; a civilised and tolerant place that cares for the vulnerable and nurtures the talented; an outward-looking, free-trading nation; and a force for good in the world. That is the Britain that I want to leave to my children—a Britain we can be proud of, and a country fit for the future. I know we will not build it overnight but we will lay the foundations in this Budget today. [Interruption.] Mr Deputy Speaker, I am being tempted with something a little more exotic here, but I will stick to plain water. I did take the precaution of asking the Prime Minister to bring a packet of cough sweets, just in case. [Laughter.]

Mr Deputy Speaker (Mr Lindsay Hoyle)

Order. I think it might be hearing aids that we will all need if this noise continues.

Mr Hammond

I shall first report to the House on the economic forecasts of the independent Office for Budget Responsibility. This is the bit with the “long, economicky words”. Once again, I thank Robert Chote and his team for their hard work over the last few weeks. I believe passionately that the best way to improve the lives of people across the length and breadth of this country is to help them get into work. I am acutely aware that 1.4 million people out of work is 1.4 million too many, so today I welcome the OBR forecast that there will be another 600,000 people in work by 2022. I am immensely proud of this Government’s record in having created over 3 million new jobs since 2010—incidentally, a rather far cry from the 1.2 million job losses that the right hon. Member for Hayes and Harlington (John McDonnell) predicted in 2011—but let nobody be in any doubt that this Government will continue their relentless focus on getting more people into work, giving them the security and peace of mind of a regular wage.

I also want work to be good quality and well paid, and regrettably our productivity performance continues to disappoint. The OBR has assumed at each of the last 16 fiscal events that productivity growth would return to its pre-crisis trend of about 2% a year, but it has remained stubbornly flat. So today it revises down the outlook for productivity growth, business investment and GDP growth across the forecast period. The OBR now expects to see GDP grow 1.5% in 2017, 1.4% in 2018, 1.3% in 2019 and 2020, before picking back up to 1.5% and finally 1.6% in 2022, with inflation peaking at 3% in this quarter before falling back towards target over the next year. I reaffirm the remit for the independent Monetary Policy Committee and its 2% CPI inflation target.

We took over an economy with the highest budget deficit in our peacetime history. Since then, thanks to the hard work of the British people, that deficit has been shrinking and next year will be below 2%. However, our debt is still too high and we need to get it down, not for some ideological reason but because excessive debt undermines our economic security, leaving us vulnerable to shocks; because it passes the burden unfairly to the next generation; and because it cannot be right to spend more on our debt interest than we do on our police and our armed forces combined. So I am pleased to tell the House that the OBR expects debt to peak this year and then gradually fall as a share of GDP—a turning point in our recovery from Labour’s crisis. Apparently not everyone shares the view that falling debt is good news. I have heard representations from Labour Members suggesting increasing the debt by £500 billion, taking us back to square one and wasting an extra £7 billion a year on debt interest. If they carry on like that, there will be plenty of others joining Kezia Dugdale in saying, “I’m Labour, get me out of here.”

I have rejected these representations, and instead I reaffirm our pledge of fiscal responsibility and our commitment to the fiscal rules I set out last autumn, but now I choose to use some of the headroom I established then, so that as well as reducing debt, we can also invest in Britain’s future, support our key public services, keep taxes low and provide a little help to families and businesses under pressure: a balanced approach that will prepare Britain for the future, not seek to hide from it.

Today, the OBR confirms that we are on track to meet our fiscal rules. Borrowing is forecast to be £49.9 billion this year. That is £8.4 billion lower than forecast at the spring Budget. After taking account of all decisions since the spring Budget, the OBR’s GDP revision and the measures I will announce today, borrowing will fall in every year of the forecast, from £39.5 billion next year to £25.6 billion in 2022-23, to reach its lowest level in 20 years. As a percentage of our GDP, it falls from 2.4% this year to 1.9% next year, then 1.6%, 1.5%, 1.3% and, finally, 1.1% in 2022-23. The OBR forecasts the structural deficit to be 1.3% of GDP in 2020-21, giving £14.8 billion of headroom against our 2% target. Debt will peak at 86.5% of GDP this year and then fall to 86.4% next year, then 86.1%, 83.1%, 79.3% and, finally, 79.1% in 2022-23—the first sustained decline in debt in 17 years. Under Conservative-led Governments, the hard work of the British people is steadily clearing up the mess left behind by Labour.

At the heart of a global Britain must be a dynamic and innovative economy. On Monday, the Prime Minister set out the key elements of our modern industrial strategy—a strategy to raise productivity and wages in all parts of our country and to guarantee the brighter future we have promised to the next generation. My right hon. Friend the Secretary of State for Business, Energy and Industrial Strategy will present a White Paper to the House in the next few days. This is not just an economic plan; it is a key part of our vision for a fairer Britain—a Britain where every one of our citizens can contribute to, and share in, the benefits of prosperity. The key to raising the wages of British workers is raising investment, both public and private, and we are investing in Britain’s future: half a trillion pounds since 2010; the biggest rail programme since Victorian times; the largest road building programme since the 1970s; the biggest increase in science and innovation funding in four decades; and the two largest infrastructure projects in Europe—Crossrail and HS2.

When I took this job, I committed to making the battle to raise Britain’s productivity, and thus the nation’s pay, the central mission of the Treasury. Last autumn, I launched the national productivity investment fund to provide an additional £23 billion of investment over five years to upgrade Britain’s economic infrastructure for the 21st century. Today, I can announce that I will extend the fund for a further year and expand it to over £31 billion, meaning that public investment under this Government will, on average, be £25 billion higher per year in real terms than under the last Labour Government. We are allocating a further £2.3 billion for investment in R and D, and we will increase the main R and D tax credit to 12%, taking the first strides towards the ambition of the industrial strategy to drive up R and D investment across the economy to 2.4% of GDP.

Britain is the world’s sixth largest economy. London is the No. 1 international financial services centre. We have some of the world’s best companies, and a commanding position in a raft of tech and digital industries that will form the backbone of the global economy of the future. Those who underestimate Britain do so at their peril, because we will harness that potential and turn it into the high-paid, high-productivity jobs of tomorrow. Others may choose to reject the future; we choose to embrace it. A new tech business is founded in Britain every hour, and I want that to be every half hour, so today we invest over £500 million in a range of initiatives from artificial intelligence to 5G and full-fibre broadband. We support regulatory innovation with a new regulators’ pioneer fund and a new geospatial data commission—[Interruption.] Opposition Members should listen. The new commission will develop a strategy for using the Government’s location data to support economic growth.

To help our tech start-ups reach scale, we asked Sir Damon Buffini to review the availability of patient capital, and I am grateful to him. Today, we are publishing an action plan to unlock over £20 billion of new investment in UK knowledge-intensive, scale-up businesses, including through a new fund in the British Business Bank seeded with £2.5 billion of public money, by facilitating pension fund access to long-term investments, and by doubling enterprise investment scheme limits for knowledge-intensive companies while ensuring that EIS is not used as a shelter for low-risk capital preservation schemes. We stand ready to step in to replace European Investment Fund lending if necessary.

There is perhaps no technology as symbolic of the revolution gathering pace around us as driverless vehicles—[Interruption.] Opposition Members surely do not want me to make that joke about the Labour party again. I know that Jeremy Clarkson does not like driverless vehicles, but there are many other good reasons to pursue the technology, so today we step up our support for it—sorry Jeremy, but this is definitely not the first time that you have been snubbed by Hammond and May. Our future vehicles will be driverless, but they will be electric first, and that is a change that needs to come as soon as possible for our planet. So we will establish a new £400 million charging infrastructure fund and invest an extra £100 million in plug-in car grants and £40 million in charging R and D. I can confirm today that we will clarify the law so that people who charge their electric vehicles at work will not face a benefit-in-kind charge from next year. The tax system can play an important role in protecting our environment.

We owe it to our children that the air they breathe is clean. We published our air quality plan earlier this year, and we said then that we would fund it through taxes on new diesel cars. From April 2018, the first-year vehicle excise duty rate for diesel cars that do not meet the latest standards will go up by one band, and the existing diesel supplement in company car tax will increase by one percentage point. Drivers buying a new car will be able to avoid the charge as soon as manufacturers bring forward the next-generation cleaner diesels that we all want to see, and we will only apply the measures to cars. Before the headline writers start limbering up, let me be quite clear: no white van man or white van woman will be hit by these measures. The levy will fund a new £220 million clean air fund to provide support for the implementation of local air quality plans, improving the quality of the air in cities and towns up and down the UK.

However, air quality is, sadly, not our only environmental challenge. Audiences across the country who have been glued to “Blue Planet II” have been starkly reminded of the problems of plastics pollution. The UK led the world on climate change agreements and is a pioneer in protecting marine environments. I want us now to become a world leader in tackling the scourge of the plastic that is littering our planet and our oceans. With my right hon. Friend the Secretary of State for Environment, Food and Rural Affairs, I will investigate how the tax system and charges on single-use plastic items can reduce waste, because we cannot keep our promise to the next generation to build an economy fit for the future unless we ensure our planet has a future.

Meeting the challenge of change head-on means giving our people the confidence to embrace it and the skills to reap the rewards from it, and we have a plan to do so. We are delivering 3 million apprenticeship starts by 2020 thanks to our apprenticeship levy, and I will keep under review the flexibility that levy payers have to spend that money. We are introducing T-levels, and today I provide a further £20 million to support further education colleges to prepare for them. Knowledge of maths is key to the high-tech, cutting-edge jobs in our digital economy, but it is also useful in less glamorous roles such as frontline politics.

So we will expand the Teaching for Mastery of Maths programme to a further 3,000 schools; we will provide £40 million to train maths teachers across the country; we will introduce a £600 maths premium for schools, for every additional pupil who takes A-level or core maths; and we will invite proposals for new maths schools across England, so that highly talented young mathematicians can release their potential, wherever they live and whatever their background. More maths for everyone—Mr Deputy Speaker, don’t let anyone say I don’t know how to show the nation a good time.

Computer science is also at the heart of this revolution, so we will ensure that every secondary school pupil can study computing by tripling the number of trained computer science teachers to 12,000, and we will work with industry to create a new national centre for computing. But rapid technological change means that we also need to help people retrain during their working lives, ensuring that our workforce are equipped with the skills they will need for the workplace of the future. Today, my right hon. Friend the Education Secretary and I are launching an historic partnership, between the Government, the CBI and the TUC, to set the strategic direction for a national retraining scheme. Its first priority will be to boost digital skills and support expansion of the construction sector. To make a start immediately, we will invest £30 million in the development of digital skills distance learning courses, so that people can learn wherever they are and whenever they want.

I am pleased to be able to accept the representation I have received from the TUC to continue to fund Unionlearn, which I recognise is a valuable part of our support for workplace learning. [Interruption.] Apparently the Opposition do not know what that is, Mr Deputy Speaker. I got an email from Len asking me especially, so I couldn’t say no, could I?

Backing skills is key to unlocking growth nationally, but far too much of our economic strength is concentrated in our capital city. If we are truly to build an economy that is fit for the future, we have to get all parts of the UK firing on all cylinders. That is what our modern industrial strategy is all about. Today we back the northern powerhouse, the midlands engine and elected Mayors across the UK, with a new £1.7 billion Transforming Cities fund: half to be shared by the six areas with elected metro Mayors, to give them the firepower to deliver on local transport priorities, and the remainder to be open to competition by other cities in England.

We are investing £300 million to ensure that HS2 infrastructure can accommodate future northern powerhouse and midlands engine rail improvements. I am also providing £30 million today to trial new solutions to improve mobile and digital connectivity on trains on the TransPennine route. We are developing a local industrial strategy with Manchester, and I am pleased to announce a second devolution deal with Andy Street in the west midlands. We have agreed a new devolution deal with North of the Tyne, and we will fund the replacement of the 40-year-old rolling stock on the Tyne and Wear metro, at a total investment of £337 million.

We will invest £123 million in the Redcar steelworks site to support the ambitious plans of our new Tees Valley Mayor, Ben Houchen, and my hon. Friend the Member for Middlesbrough South and East Cleveland (Mr Clarke), who are leading the fight for prosperity in their area. We are piloting 100% business rates retention in London next year and continuing to work with Transport for London on the funding and financing of Crossrail 2. We will also make over £1 billion of discounted lending available to local authorities across the country to support high-value infrastructure projects—a Conservative Government giving power back to the people of Britain, and driving prosperity and greater fairness across our United Kingdom.

The decisions taken in this Budget also mean £2 billion more for the Scottish Government, £1.2 billion more for the Welsh Government and over £650 million more for a Northern Ireland Executive. I can confirm today that progress is being made on city deals for Tay Cities and Stirling, and on a growth deal for Borderlands. I am getting used to the experience of having my ear bent by 13 Scottish Conservative colleagues, most recently on the issue of Scottish police and fire VAT. The Scottish National party knew the rules and knew the consequences of introducing these bodies, and ploughed ahead anyway. My Scottish Conservative colleagues have persuaded me that the Scottish people should not lose out just because of the obstinacy of the SNP Government, so we will legislate to allow VAT refunds from April 2018.

In response to yet more representations from my hon. Friends from Scotland, aided and abetted by my hon. Friend the Member for Waveney (Peter Aldous), from November 2018 we will introduce transferable tax history for transfers of oil and gas fields in the North sea, an innovative tax policy that will encourage new entrants to bring fresh investment to a basin that still holds up to 20 billion barrels of oil.

We will begin negotiations towards growth deals for north Wales and mid-Wales, and we will abolish tolls on the Severn bridge, as promised, by the end of next year. We will deliver on our commitment to review the effect of VAT and air passenger duty on tourism in Northern Ireland, reporting at next year’s Budget, and we will open negotiations for a Belfast city deal as part of our commitment to a comprehensive and ambitious set of city deals across Northern Ireland—a Conservative Government delivering for all parts of our United Kingdom.

It is only by supporting our regions and nations, dealing with our debts and investing in skills and infrastructure for the long term that we can we build an economy fit for the future. But I recognise that many people are feeling pressure on their budgets now, and because we are all in politics to make people’s lives better, in the short term as well as the long term, we will take further measures in this Budget to help families and businesses where we can.

The switch to universal credit is a long-overdue and necessary reform, replacing Labour’s broken system that discouraged people from working more than 16 hours a week and trapped 1.4 million on out-of-work benefits for nearly a decade. Universal credit delivers a modern welfare system where work always pays and people are supported to earn, but I recognise the genuine concerns on both sides of the House about the operational delivery of this benefit, and today we will act on those concerns.

First, we will remove the seven-day waiting period applied at the beginning of a benefit claim so that entitlement to universal credit will start on the day of the claim. To provide greater support during the waiting period, we will change the advances system to ensure that any household that needs it can access a full month’s payment within five days of applying; we will make it possible to apply for an advance online, and we will extend the repayment period for advances from six months to 12 months; and any new universal credit claimant in receipt of housing benefit at the time of the claim will continue to receive that housing benefit for a further two weeks, making it easier for them to pay their rent. This is a £1½ billion package to address concerns about the delivery of the benefit. My right hon. Friend the Secretary of State for Work and Pensions will give further details in a statement to the House tomorrow.

We also want to help low-income households in areas where rents have been rising fastest. In the long run, of course, the answer lies in increasing the amount of housing available, a theme I shall return to. In the meantime, the best way to help them is by increasing the rate of support in those areas where rents are least affordable. So we will increase targeted affordability funding by £125 million over the next two years, benefiting 140,000 people. We will always listen to genuine concerns and act where we can to help.

Making work pay is core to the philosophy of this Government. That is why we introduced the national living wage in 2016. From April, it will rise by 4.4%, from £7.50 an hour to £7.83, handing full-time workers a further £600 pay increase and taking their total pay rise since its introduction to over £2,000 a year. We also accept the Low Pay Commission’s recommendations on national minimum wage rates, supporting our young people with the largest increase in youth rates in 10 years and delivering a pay rise for over 2 million minimum wage workers of all ages across the country.

The facts are these: income inequality today is at its lowest level in 30 years; the top 1% are paying a larger share of income tax than at any time under the last Labour Government; the poorest 10% in Britain have seen their real incomes grow faster since 2010 than the richest 10%; and the proportion of full-time jobs that are low paid is at its lowest level for 20 years—a Conservative Government delivering a fairer Britain.

As well as making work pay, we want families to keep more of the money they earn. When we came into office, the personal allowance stood at £6,475 a year. From April, I will increase the personal allowance to £11,850 and the higher rate threshold to £46,350, making progress towards our manifesto commitments, which I reiterate today. The typical basic-rate taxpayer will be £1,075 a year better off compared with 2010, and a full-time worker on the national living wage will take home more than £3,800 extra—this Conservative Government, delivering for Britain’s workers.

I turn now to duties. The tobacco duty escalator will continue at inflation plus 2%, with an additional 1% duty on hand-rolling tobacco this year, and minimum excise duty on cigarettes will also rise. Excessive alcohol consumption by the most vulnerable people is all too often done through cheap, high-strength, low-quality products, especially so-called white ciders. I pay tribute to the campaign led by my hon. Friend the Member for Congleton (Fiona Bruce) on this issue. Following our recent consultation, we will legislate to increase duty on these products from 2019. But, recognising the pressure on household budgets, and backing our great British pubs, duties on other ciders, wines, spirits and beer will be frozen. This will mean that a bottle of whisky will be £1.15 less in 2018 than if we had continued with Labour’s plans, and a pint of beer 12p less. So, merry Christmas, Mr Deputy Speaker.

The cost of travel is an important factor for families and businesses. From April 2019, I will again freeze short-haul air passenger duty rates, and I will also freeze long-haul economy rates, paid for by an increase on premium-class tickets and on private jets—sorry, Lewis. For those who do not stretch to a private jet, I can announce a new railcard for those aged 26 to 30, giving 4.5 million more young people a third off their rail fares. I will, once again, cancel the fuel duty rise for both petrol and diesel that is scheduled for April. Since 2010, we will have saved the average car driver £850 and the average van driver over £2,100, compared with Labour’s escalator plans. Fuel duty has now been frozen for the longest period in 40 years, at a total cost to the Exchequer of £46 billion since 2010.

Our NHS is one of our great institutions: an essential part of what we are as a nation and a source of pride the length and breadth of the country. Its values are the values of the British people, and we will always back it. Dedicated NHS staff are handling the challenges of an ageing population and rapidly advancing technology with skill and commitment, and we salute them. Mr Deputy Speaker, although you would not think so to listen to the Leader of the Opposition as he regularly talks down the achievements of the NHS, the number of patients being treated is at record levels, cancer survival rates are at their highest ever level, 17 million people are now able to access GP appointments in the evenings and at weekends, and public satisfaction among hospital in-patients is at its highest level in more than 20 years.

It is central to this Government’s vision that everyone has access to the NHS, free at the point of need. That is why we endorsed and funded the NHS’s five-year forward view in 2014. But even with this additional funding, we acknowledge that the service remains under pressure, and today we respond. First, we will deliver an additional £10 billion package of capital investment in frontline services over the course of this Parliament to support the sustainability and transformation plans that will make our NHS more resilient—investing for an NHS fit for the future. But we also recognise that the NHS is under pressure right now. I am therefore exceptionally, and outside the spending review process, making an additional commitment of resource funding of £2.8 billion to the NHS in England: £350 million immediately, to allow trusts to plan for this winter, and £1.6 billion in 2018-19, with the balance in 2019-20, taking the extra resource into the NHS next year to £3.75 billion in total, meaning that our NHS will receive a £7.5 billion increase to its resource budget over this year and next.

Our nation’s nurses provide invaluable support to us all in our time of greatest need and deserve our deepest gratitude for their tireless efforts. My right hon. Friend the Health Secretary has already begun discussions with health unions on pay structure modernisation for “Agenda for Change” staff, to improve recruitment and retention. He will submit evidence to the independent pay review body in due course, but I want to assure NHS staff and patients, and Members of this House, that if the Health Secretary’s talks bear fruit, I will protect patient services by providing additional funding for such a settlement.

Just as our public services must be fit for the future, so too must our tax system. It must remain competitive to attract the brightest and the best to establish and grow the businesses of the future. It must raise the revenue we need to fund our public services and it must be robust against abuse so that it is fair to all. We have heard a lot of talk recently from the Opposition about what they would do to crack down on tax avoidance and evasion, but the truth is that they did not. It is this Government who have clamped down on avoidance and evasion; this Government who have seen the tax gap cut by a quarter since 2010, to a record low; and this Government who have raked in an extra £160 billion over seven years for our public services by collecting the taxes that are due. So I am going to take no lectures, but I will take action. This Budget continues the work of the last seven years, with a package of measures that is forecast to raise £4.8 billion by 2022-23—doing the job that Labour failed to do for 13 years in office.

Our long-term phased reduction of corporation tax has generated investment and jobs and raised £20 billion extra for our public services. We are committed to maintaining Britain’s competitive corporation tax rates, but there is a case now for removing the anomaly of the indexation allowance for capital gains, bringing the corporate tax system into line with the personal capital gains tax system.

I will therefore freeze this allowance so that companies receive relief for inflation up to January 2018, but not thereafter.

I am grateful to the Office of Tax Simplification for its recent report on the VAT registration threshold. At £85,000, the UK’s VAT threshold is by far the highest in the OECD. By contrast, in Germany it is just £15,600. I note the OTS conclusion that it distorts competition and disincentivises business growth. I also note the concerns of the Federation of Small Businesses about the cliff edge of the threshold. But such a high threshold also has the benefit of keeping the majority of small businesses out of VAT altogether, so I am not minded to reduce the threshold, but I will consult on whether its design could better incentivise growth, and in the meantime we will maintain it at its current level of £85,000 for the next two years.

We cannot build an economy fit for the future without supporting its backbone: our 5.5 million small businesses, which are responsible between them for nearly half of our private sector jobs. They give our economy its extraordinary vibrancy and resilience, but I recognise that many are feeling under pressure right now. I know what hard work it is to get a business off the ground, to get it to grow, so today I want to do what we can to ease that pressure.

Business rates represent a high fixed cost for small businesses. At Budget 2016 we introduced a package of business rate relief worth almost £9 billion, with a further £435 million in the spring Budget. Today I go further. We have listened to concerns about the potential costs of the annual uprating of business rates in April next year, and today I will accept the representation of the British Chambers of Commerce, CBI and other business organisations and bring forward the planned switch from RPI to CPI by two years, to April 2018—a move worth £2.3 billion to businesses over the next five years.

I have also listened to businesses affected by the so-called staircase tax. We will change the law to ensure that where a business has been impacted by the Supreme Court ruling, it can have its original bill reinstated, if it chooses, and backdated. I hope that I can expect cross-party backing to speed that measure through Parliament.

There are three simple steps to solve the staircase tax—[Interruption.] What do they expect? It’s the tax section. To support the thousands of small pubs that are at the heart of so many of our communities, we will extend the £1,000 discount for pubs with a rateable value of less than £100,000 for one more year, to March 2019.

And I have heard the concerns about the five-yearly revaluation system. Shorter revaluation periods will reduce the size of changes in valuations, so I can announce today that after the next revaluation, future revaluations will take place every three years—this Conservative Government listening to small business.

There is a wider concern across this House and in the business community about the tax system in the digital age. Along with the innovation and growth that it brings, digitalisation poses challenges for the sustainability and fairness of our tax system. But this challenge can only be properly solved on an international basis, and the UK is leading the charge in the OECD and the G20 to find solutions.

Today we publish a position paper on the tax challenge posed by the digital economy, setting out our emerging thinking about potential solutions. But in the meantime, we will take what action we can. Multinational digital businesses pay billions of pounds in royalties to jurisdictions where they are not taxed, and some of these royalties relate to UK sales. So from April 2019, and in accordance with our international obligations, we will apply income tax to royalties relating to UK sales when those royalties are paid to a low-tax jurisdiction, even if they do not fall to be taxed in the UK under our current rules. That will raise about £200 million a year. It does not solve the problem, but it does send a signal of our determination and we will continue work in the international arena to find a sustainable and fair long-term solution that properly taxes the digital businesses that operate in our cyber-space.

Following representations from a number of my hon. Friends, we are also taking further action to address online VAT fraud, which costs the taxpayer £1.2 billion per year, by making all online marketplaces jointly liable with their sellers for VAT, ensuring that sellers operating through them pay the right amount of VAT, just as we would expect traditional retailers to do.

I want to turn to the challenge of the housing market, but before I do so I want to touch on the aftermath of the appalling events at Grenfell Tower. We have provided financial support for the victims of this terrible tragedy, and today I can announce we will provide Kensington and Chelsea Council with a further £28 million for mental health and counselling services, regeneration support for the surrounding areas and to provide a new community space for local residents.

This tragedy should never have happened, and we must ensure that nothing like it ever happens again. All local authorities and housing associations must carry out any identified necessary safety works as soon as possible. If any local authority cannot access funding to pay for essential fire safety work, they should contact us immediately. I have said before, and I will say it again today: we will not allow financial constraints to get in the way of any essential fire safety work.

I want to address the issue of empty properties. It cannot be right to leave property empty when so many are desperate for a place to live, so we will legislate to give local authorities the power to charge a 100% council tax premium on empty properties. We will also launch a consultation on barriers to longer tenancies in the private rented sector and how we might encourage landlords to offer them to those tenants who want the extra security.

I also want to say something about rough sleeping. It is unacceptable that in 21st-century Britain there are people sleeping on the streets, so we will invest today £28 million in three new Housing First pilots in the west midlands, Manchester and Liverpool, and we will establish a homelessness taskforce as part of our commitment to halving rough sleeping by 2022 and eliminating it by 2027.

I thank the many colleagues who submitted ideas on how to tackle the challenge of the housing market, including my hon. Friends the Members for North East Hampshire (Mr Jayawardena), for Eastleigh (Mims Davies) and for Weston-super-Mare (John Penrose) in particular. By continuing to invest in Britain’s infrastructure, skills and research and development, we will ensure the recovery in productivity growth that is the key to delivering our vision of a stronger, fairer, more balanced economy, and the assurance to the next generation of their economic security.

But however successful we are in that endeavour, there is one area where young people today will, rightly, feel concern about their future prospects, and that is in the housing market. House prices are increasingly out of reach for many. It takes too long to save for a deposit, and rents absorb too high a portion of monthly income, so the number of 25 to 34-year-olds owning their own home has dropped from 59% to just 38% over the last 13 years. Put simply, successive Governments, over decades, have failed to build enough homes to deliver the home-owning dream that this country has always been proud of, or indeed to meet the needs of those who rent.

In Manchester a few weeks ago, my right hon. Friend the Prime Minister made a pledge to Britain’s younger generation that she would dedicate her premiership to fixing this problem, and today we take the next steps to delivering on that pledge. By choosing to build we send a message to the next generation that getting on the housing ladder is not just a dream of your parents’ past, but a reality for your future.

We have made a start with schemes such as Help to Buy, which has helped over 320,000 people buy a home. We have increased the supply of homes by more than 1.1 million since 2010, including nearly 350,000 affordable homes. House building stands at its highest level since the crash, with the latest figures showing that over 217,000 net additional homes were added to the stock last year. That is a remarkable achievement, but we need to do better still if we are to see affordability improve.

This is a complex challenge, and there is no single magic bullet. If we do not increase the supply of land for new homes, more money will simply inflate prices and make matters worse. If we do not do more to support the growth of the SME house building sector that was all but wiped out by Labour’s great recession, we will remain dependent on the major national house builders that dominate the industry. If we do not train the construction workers of tomorrow, we may generate planning permissions but we will not turn them into homes. Solving this challenge will require money, it will require planning reform and it will require intervention. So today we set out an ambitious plan to tackle the housing challenge.

Over the next five years, we will commit a total of at least £44 billion of capital funding, loans and guarantees to support our housing market, to boost the supply of skills, resources and building land, and to create the financial incentives necessary to deliver 300,000 net additional homes a year on average by the mid-2020s—the biggest annual increase in housing supply since 1970; new money for the home builders fund to get SME housebuilders building again; a £630 million small sites fund to unstick the delivery of 40,000 homes; a further £2.7 billion to more than double the housing infrastructure fund; £400 million more for estate regeneration; a £1.1 billion fund to unlock strategic sites, including new settlements and urban regeneration schemes; a lifting of HRA caps for councils in high demand areas, to get them building again; and £8 billion of new financial guarantees to support private house building and the purpose-built private rented sector. And because we need a workforce to build these new homes, we are providing an additional £34 million to develop construction skills across the country.

Solving the housing challenge takes more than money—it takes planning reform. We will focus on the urban areas where people want to live and where most jobs are created, making best use of our urban land and continuing the strong protection of our green belt, in particular building high quality, high density homes in city centres and around major transport hubs. And to put the needs of our young people first, we will ensure that councils in high demand areas permit more homes for local first-time buyers and affordable renters.

My right hon. Friend the Communities Secretary will set out more detail in a statement to the House in due course. However, one thing is very clear: there is a significant gap between the number of planning permissions granted and the number of homes built. In London alone, there are 270,000 residential planning permissions unbuilt. We need to understand why. So I am establishing an urgent review to look at the gap between planning permissions and housing starts. It will be chaired by my right hon. Friend the Member for West Dorset (Sir Oliver Letwin) and will deliver an interim report in time for the spring statement next year. And if that report finds that vitally needed land is being withheld from the market for commercial, rather than technical, reasons, we will intervene to change the incentives to ensure that such land is brought forward for development, using direct intervention compulsory purchase powers as necessary.

Mr Deputy Speaker, my right hon. Friend the Prime Minister has said that we will fix this problem, and no one should doubt the Government’s determination to do so. But the solution will not deliver itself. Local authorities will need help and support. Developers will need encouragement and persuasion. Infrastructure to facilitate higher-density development must be funded and delivered. So the Homes and Communities Agency will expand to become Homes England, bringing together money, expertise and planning and compulsory purchase powers, with a clear remit to facilitate delivery of sufficient new homes, where they are most needed, to deliver a sustained improvement in housing affordability.

But Mr Deputy Speaker, the battle to achieve and sustain affordability will be a long-term one, so we also need to look beyond this Parliament, to long-term measures. We will use new town development corporations to kick-start five new locally agreed garden towns in areas of demand pressure, delivered through public-private partnerships and designed to attract long-term capital investment from around the world.

Last week, the National Infrastructure Commission published their report on the Cambridge-Milton Keynes-Oxford corridor. Today we back their vision and commit to building up to 1 million homes by 2050, completing the road and rail infrastructure to support them. And as a down-payment on this plan, we have agreed an ambitious housing deal with Oxfordshire to deliver 100,000 homes by 2031. We are capitalising on the global reputations of our two most famous universities and Britain’s biggest new town to create a dynamic new growth corridor for the 21st century.

Mr Deputy Speaker, this is our plan to deliver on the pledge we have made to the next generation: that the dream of home ownership will become a reality in this country once again. But I also want to take action today to help young people who are saving to own a home. One of the biggest challenges facing young first-time buyers is the cash required up front. We have put £10 billion more money into Help to Buy: Equity Loan to help those saving for a deposit, but I want to do more still. I have received representations for a temporary stamp duty holiday for first-time buyers, but this would only help those who are ready to purchase now and would offer nothing for the many who will need to save for years. So with effect from today, for all first-time-buyer purchases up to £300,000, I am abolishing stamp duty altogether.

Hon. Members

More!

Mr Deputy Speaker (Mr Lindsay Hoyle)

Order. If you want more, you are going to have to let the Chancellor finish.

Mr Hammond

Mr Deputy Speaker, to ensure that this relief also helps first-time buyers in very high price areas like London, it will also be available on the first £300,000 of the purchase price of properties up to £500,000, meaning an effective reduction of £5,000. That is a stamp duty cut for 95% for all first-time buyers who pay stamp duty and no stamp duty at all for 80% of first-time buyers from today. When we say we will revive the home-owning dream in Britain, we mean it. We do not underestimate the scale of the challenge, but today we have made a substantial down-payment.

Mr Deputy Speaker, one of the things that I love most about this country is its sense of opportunity. I have always felt it, and I want young people growing up today to have that same sense of boundless opportunity. In this Budget, I have set out a vision for Britain’s future and a plan for delivering it: by getting our debt down, by supporting British families and businesses, by investing in the technologies and the skills of the future and by creating the homes and the infrastructure that our country needs.

We are at a turning point in our history, and we resolve to look forwards, not backwards—to build on the strengths of the British economy, to embrace change not hide from it, to seize the opportunities ahead of us and, together, to build a Britain fit for the future. I commend this statement to the House.

Philip Hammond – 2017 Mansion House Speech

Below is the text of the speech made by Philip Hammond, the Chancellor of the Exchequer, at the Mansion House in London on 20 June 2017.

My Lord Mayor, Ladies and Gentlemen, I am delighted to be able to deliver this speech here today.

And I am immensely grateful to the City Corporation for hosting us so soon after the cancellation of last Thursday’s banquet in the wake of the appalling tragedy which was then unfolding in West London.

We have suffered a series of shocking events in the past few weeks: the Westminster, Manchester, London Bridge, and Finsbury Park terrorist attacks; and the terrible fire at Grenfell Tower.

This fire was an unimaginable tragedy. My thoughts are with all those in the community who lost loved ones, and with the many people who are still suffering in hospital, and those who have lost their homes.

Our immediate focus is to ensure that survivors have everything they need in terms of housing, clothes, food and other essentials.

But we must, and will, also get to the bottom of the failure at Grenfell, and take decisive action to ensure nothing like this ever happens again.

As Her Majesty the Queen observed on Saturday, none of us can escape the sombre mood that these events impose.

But we should be cheered by the resilience of our communities and the strength of our shared values which shine through the dark clouds wherever such tragedies and outrages unfold.

And even in the face of such events, the business of government must go on: managing our economy in challenging times, improving our public services, taking the steps that will deliver on our ambition of an economy that truly works for everyone, and, of course, the huge, complex and vital task of negotiating the end of our membership of the European Union, and the terms of the partnership which we want to see replace it.

We have much work to do, and we’re determined to get on with it.

And we have a solid foundation on which to build.

Our economy has come a long way since the dark days of 2009.

Last year we grew faster than any other major advanced economy bar Germany, business has created 3.4 million more private sector jobs, the deficit is down by three-quarters – and below 3% of GDP, while at the same time we have lowered income tax for 31 million people and taken 4 million out of income tax altogether through raising thresholds, with more to come.

Inequality is at its lowest in 30 years, and the poorest households have seen their wages rise more since 2010 than in any other country in the G7, thanks to the introduction of the National Living Wage, adding £1,400 to the annual income of those in full-time work on minimum wage.

A record of which we are proud.

But that’s enough of our past achievements!

I’d rather talk about the future.

Travelling the country in the general election campaign I’ve had hundreds of conversations reflecting the challenges and issues that people face in their daily lives: fears about job security; about wage levels; the need for good schools for their children; a well-functioning health service; decent care for elderly relatives; or access to the housing market.

And it’s clear, as many of my colleagues have noted, that Britain is weary after seven years of hard slog repairing the damage of the great recession.

When I took office last year, I reset the fiscal rules, recommitting to achieving fiscal balance, but doing it over a longer timescale, creating additional fiscal space to support the economy, if needed.

But we must not lose sight of the unchanging economic facts of life.

Funding for public services can only be delivered in one of three ways: higher taxes; higher borrowing; or stronger economic growth.

And only one of those three choices is a long-term sustainable solution for this country in the face of the inexorable pressure of an ageing population.

Higher taxes will slow growth, undermine competitiveness, and cost jobs, so the government will remain committed to keeping taxes as low as possible.

And higher discretionary borrowing to fund current consumption is simply asking the next generation to pay for something that we want to consume, but are not prepared to pay for ourselves, so we will remain committed to the fiscal rules set out at the Autumn Statement which will guide us, via interim targets in 2020, to a balanced budget by the middle of the next decade.

Stronger growth is the only sustainable way to deliver better public services, higher real wages and increased living standards.

I thought we had won that argument.

But I learned in the General Election campaign that we have not.

That we must make anew the case for a market economy and for sound money.

The case for growth.

And we need to explain again how stronger growth must be delivered through rising productivity.

That means more trade, not less: maintaining our strong trade links with European markets after we leave the EU, as well as seeking out new opportunities for trade and investment with old friends and fast growing emerging economies alike.

It means the UK remaining open to the talent, the ideas and the capital that have driven the success of our economy in the past, and will drive it in the future.

But it also means addressing the domestic weaknesses that have plagued us: under investment, both public and private; inadequate skills; and regional disparities.

This government has a plan to address all three.

The National Productivity Investment Fund starts to address under-investment in economically productive infrastructure; T-Levels will overhaul our provision of technical education; and the Industrial Strategy will tackle regional economic disparity.

Lifting productivity growth by even one quarter of one percent a year, on a sustained basis over 10 years would add £67 billion to GDP – that’s £2,400 for every household in the UK.

Productivity is the elixir that raises incomes and living standards, and it must be a national priority to make every learner more skilled; every worker more productive; every business more competitive; and every public service more efficient.

That is the route to higher wages, higher quality public services, and a brighter future.

Productivity in the private sector, as in the public, is driven by investment.

One of my immediate priorities is making sure government is doing all it can to facilitate access for firms, large and small, to patient capital, to allow them to grow and bear the fruits of the flow of innovation that is pouring out of UK universities.

The European Investment Bank, and its offshoot, the European Investment Fund, have been an important source of funding for infrastructure investment and for growth businesses.

I want that access to EIB funding to continue while we are members of the EU on equal terms, so I am engaged with EIB and will provide the assurances it needs to sustain the flow of EIB and EIF funding to UK businesses and projects.

And to ensure that finance continues to be available after Brexit, alongside these discussions with the EIB I can also announce I am expanding the support available to capital funding in the UK.

For infrastructure projects, we will broaden the range of the UK Guarantee Scheme by offering construction guarantees for the first time.

And we’ll consider other credit enhancement tools, such as first loss guarantees, to reduce the financial risk that complex projects face.

To support the venture capital funds that are so important to growth and innovation in our economy, the British Business Bank will raise the limits on the amount it can invest in venture capital funds from 33% up to 50%.

And it will be able to bring forward some of the £400m additional investment that I announced at the Autumn Statement.

In the long-term, it may be mutually beneficial to maintain a relationship between the UK and the EIB after we leave the EU.

And we will explore the options together.

But we cannot take chances. So we will be prepared, in case we do not maintain that relationship.

Because investment is crucial for the economic future of this country, and we will not let Brexit uncertainty slow us down.

Investment is critical to securing economic growth; And so is trade.

The British public know that.

A recent poll showed that 90% of respondents believe that free trade is positive for our economy, regardless of how they voted in the referendum.

We are not about to turn inward. But we do want to ensure that the arrangements we have in place work for our economy.

Just as the British people understand the benefits of trade – so, too, they understand how important it is to business to be able to access global talent and to move individuals around their organisations.

So, while we seek to manage migration, we do not seek to shut it down.

Let me quote you from our manifesto, (just in case, by chance, any of you didn’t read it):

Britain is an open economy and a welcoming society and we will always ensure that our British businesses can recruit the brightest and best from around the world.

Britain has benefited from globalisation.

But we must not turn a blind eye to the growing tide of hostility to it in parts of the developed world.

To counter that, we must push for a new phase of globalisation, to ensure that it delivers clear benefits for ordinary working people in developed economies.

To date, much of the thrust of globalisation has focused on the removal of barriers to trade in goods.

“Globalisation 1.0” if you like – expanding the opportunities for major goods exporters like China and Germany to sell their products to a larger market.

But our economy is 80% services.

And many of our areas of greatest competitiveness are in services – for example, finance and insurance, ICT and communications.

So for the UK to be able to share fairly in the benefits of globalisation, we need to lead a global crusade for liberalisation of services.

And we must employ that logic in our Brexit negotiations, to agree a bold and ambitious free-trade agreement with our EU counterparts that covers both goods and services.

Let me talk in a bit more detail about what we want to achieve from those Brexit negotiations.

The Prime Minister’s Lancaster House speech in January set out clearly the arrangements that the UK would like to agree, built around a comprehensive trade agreement in the context of a deep and special partnership that goes much wider than trade.

But we recognise that this is a negotiation, and our negotiating counterparts, while broadly sharing our desire for a close ongoing relationship, will have their own priorities.

So we must be clear about ours.

I have said before, and I remain clear today, that when the British people voted last June, they did not vote to become poorer, or less secure.

They did vote to leave the EU.

And we will leave the EU.

But it must be done in a way that works for Britain.

In a way that prioritises British jobs, and underpins Britain’s prosperity.

Anything less will be a failure to deliver on the instructions of the British people.

So, how do we achieve this “Brexit for Britain”?

Firstly, by securing a comprehensive agreement for trade in goods and services.

Secondly, by negotiating mutually beneficial transitional arrangements to avoid unnecessary disruption and dangerous cliff edges.

Thirdly, by agreeing frictionless customs arrangements to facilitate trade across our borders – and crucially – to keep the land border on the island of Ireland open and free-flowing.

To do this in the context of our wider objectives will be challenging.

It will almost certainly involve the deployment of new technology.

And therefore we’ll almost certainly need an implementation period, outside the Customs Union itself, but with current customs border arrangements remaining in place, until new long-term arrangements are up and running.

And finally, by taking a pragmatic approach to one of our most important EU export sector – financial services.

Let’s be honest, we are already hearing protectionist agendas being advanced, disguised as arguments about regulatory competence, financial stability, and supervisory oversight.

We can have no truck with that approach.

But we acknowledge that, as Britain leaves the EU, there are genuine and reasonable concerns among our EU colleagues about oversight of financial markets that will then be outside EU jurisdiction, but which provide a vast proportion of economically vital financial services to EU firms and citizens.

We saw just such a concern articulated in the EU’s proposal on supervision of CCPs last week.

We must, and we will, engage with all genuine concerns.

And we must be flexible and pragmatic in responding to, and resolving them.

While never losing sight of the principal purpose of the regulatory and supervisory regimes: to ensure financial stability and to protect taxpayers from having to step in to deal with failure.

Getting this right will be critical to the future success of the British economy.

But it will also be critical to the future success of the EU economy.

Remember, 60% of all EU capital markets activity is executed through the UK.

UK banks provided more than £1.1 trillion of cross-border lending to the rest of the EU during 2015.

And almost half of all British private equity investments in 2014 went into companies across mainland Europe.

The financial ecosystem that underpins this activity is large and complex. And critical mass is important.

Let me be clear about this.

Fragmentation of financial services would result in poorer quality, higher priced products for everyone concerned.

And when we talk about complex financial products like derivatives – we need to remind ourselves that these seemingly esoteric instruments are crucial to facilitating everyday commercial and domestic transactions across our continent, allowing households to obtain fixed rate mortgages, airlines to hedge their fuel costs, and farmers to have certainty over the price they’ll get for their produce.

Avoiding fragmentation of financial services is a huge prize for the economies of Europe.

And I believe we can do it if we approach the challenge with three simple principles.

First, we will need a new process for establishing regulatory requirements for cross-border business between the UK and EU. It must be evidence-based, symmetrical, and transparent. And it must reflect international standards.

Second, cooperation arrangements must be reciprocal, reliable, and prioritise financial stability. Crucially they must enable timely and coordinated risk management on both sides.

Third, these arrangements must be permanent and reliable for the businesses regulated under these regimes.

The industry needs confidence in the structures if it is to provide the financing needed to underpin growth in the real economy.

In the UK. And across the European Union.

The future of our economy is inexorably linked to the kind of Brexit deal that we reach with the EU.

And I am confident we can do a Brexit deal that puts jobs and prosperity first, that reassures employers that they will still be able to access the talent they need, that keeps our markets for goods and services and capital open, that achieves early agreement on transitional arrangements, so that trade can carry on flowing smoothly, and businesses up and down the country can move on with investment decisions that they want to make, but that have been on hold since the Referendum.

The collective sigh of relief will be audible.

The benefit to our economy will be huge, in established sectors like manufacturing, the car industry, financial services, and pharmaceuticals; in emerging areas like biotech, and fintech; in the housing market; in the services sector; in the travel industry, in companies, large and small, right up and down our country, employing, between them, millions of people.

Our departure from the EU is underway.

But ensuring that it happens via a smooth pathway to a deep and special future partnership with our EU neighbours, one that protects jobs, prosperity, and living standards in Britain, will require every ounce of skill and diplomacy that we can muster.

Yesterday was a positive start.

It will get tougher.

But we are ready for the challenge.

And confident that we can deliver, for British jobs; British businesses; and British prosperity.

Thank you. I’m now pleased to hand over to the Governor of the Bank of England, Mark Carney.

Philip Hammond – 2017 Speech in Davos

Below is the text of the speech made by Philip Hammond, the Chancellor of the Exchequer, in Davos on 19 January 2017.

The theme of this year’s conference is ‘responsive and responsible’ leadership.

It’s quite clear why this title was chosen.

That leadership has never been more necessary as we leave 2016 behind us, and face the challenges of 2017.

At home, last year delivered the decision of the British people to leave the European Union.

In the US, the decision of the American people to elect a President who ran as an anti-establishment outsider.

And across Europe, a rise in support for non-mainstream parties, the effects of which may start to be seen in elections later this year.

Clearly something is going on and governments have to respond.

And what better way to respond than to gather the global elites for a serious discussion in an exclusive mountain ski resort?

The most immediate challenge facing the UK is negotiating and executing our departure from the European Union.

There have been many assessments made of, and conclusions drawn from, the referendum outcome in the UK, and the lessons will no doubt be pored over by historians and political scientists for years to come.

But two things in particular strike me:

First, while the drivers of global political events in 2016 may well be linked, we should be cautious about attributing motive to votes in a referendum, as opposed to an election.

I do not doubt that a section of the population is disillusioned by the obsolence of their skills and the stagnant real wages that implies – and happy to kick the political establishment when given an opportunity to do so. And we, as politicians, need to hear that message and react to it.

But it’s a big step to say the UK electorate as a whole is fundamentally rejecting capitalism or globalisation. It isn’t.

Some of them were simply expressing a view on the European Union! And, of course, on immigration.

As the Prime Minister has made clear, we need to show how we can build an economy – on the bedrock of our tired and proven system – that will work for everyone in an age, not just of globalisation but of unstoppable technological change.

And second, the UK vote to leave the European Union was clearly not a vote to turn inwards, whatever is going on elsewhere in the world.

The rhetoric of the referendum was not one of insularity and isolation, of protectionism and retreat.

In fact it was quite the opposite.

The UK takes pride in being the most open economy in the world.

And the successful leave campaign was premised on the rapid conclusion of free trade agreements with China, with India, with Japan, with the US and the wider Anglosphere – as well as other countries beyond it.

The argument put forward to the British people was that by leaving the EU we could do more, not less, trade with the rest of the world. And that the EU itself is too inward looking and is ill-equipped to exploit the full potential of the rebalancing of the world’s economy to the East and the South.

Politicians on both sides of that debate have been consistent and entirely aligned since the referendum in emphasising that Britain is open for business and will remain an open economy and an outward-looking society.

So we should react to signals of the popular mood, but we should not overreact.

In Britain, at least, what we have heard was a rumble of discontent, rather than a nascent revolution.

So as we move into 2017, we must define, and then deliver a new relationship with our European neighbours.

You heard from the PM on Tuesday, that we want to maintain the closest possible relationship with them – including the most comprehensive possible free-trade agreement.

But we must do that in a spirit of realism about the political context that we and our European partners operate within.

It is clear for instance, that on migration we cannot continue with freedom of movement as we have it today.

That doesn’t mean we’re pulling up the drawbridge: we must continue to attract the brightest and best to work and study in Britain; immigration from the EU will remain crucial to filling skills shortages, delivering public services and maintaining Britain as one of the most competitive places in the world to start and grow a business.

But we must be able to demonstrate that we can control the migration process in our own interest.

And we are equally clear that we must respect our EU partners when they say membership of the Single Market means accepting the so-called “four freedoms”.

That’s their political reality.

That is why the Prime Minister made clear this week that as we negotiate our future relationship with the European Union, membership of the Single Market is not our objective.

And because we want to be able to strike our own free trade agreements with countries around the world, we may not seek full membership of the Customs Union either.

It is on the basis of this pragmatic framework, recognising political realities on both sides, that we will set out to achieve the best possible deal for the British economy:

A trade-maximising deal, across low friction borders: a solution that delivers for the UK and for the EU alike.

It is clear that it is in European manufacturers’ interests to maintain access to our market, but access to our financial services should also be a priority for our EU partners.

Thanks to their depth and liquidity, UK capital markets provide a highly efficient source of finance to European companies and, indeed, governments. So much so that 60% of all EU capital markets activity is executed through the UK.

UK based banks provided more than £1.1 trillion of cross-border lending to the EU during 2015.

Half of all UK private equity investments in 2014 were in mainland European companies.

And this isn’t just about hedge funds and mergers and acquisitions.

It’s about the loan that gives someone a leg up onto the housing ladder for the first time; the insurance that protects cars and homes; the savings pot that provides support in retirement.

Consumers across Europe, as well as businesses, rely on our financial services industry for many of these critical services.

London’s financial services industry is a complex ecosystem that has grown up over decades.

In my conversations with business leaders in the sector I am told repeatedly that it is this scale and depth that has generated such strength.

Replicating this elsewhere in Europe in a short timescale is simply not feasible. Punishing the UK, by trying to fragment that ecosystem would only mean European businesses having to go to New York for some, at least, of the financial services they need.

Any diminution of London’s financial markets would be bad for businesses and consumers in Britain and in the EU. It would drive up costs. And it would act as a drag on the economy of this entire continent.

It is therefore in everyone’s interest to transition to a new relationship with the EU which provides the greatest possible degree of mutual access to each other’s market for goods and services, so that we can minimise the disruption to existing patterns of business and supply chains.

Of course, the interests we share are not solely economic.

The continuing risk of terrorism and geopolitical instability demonstrate the need to continue our close cooperation in areas such as security. And we want to maintain our close relationships in culture, science and technology, educational exchange and research and development too.

We recognise that we won’t achieve a deal overnight. But it is in nobody’s interests either to prolong uncertainty or for there to be a cliff-edge for business or a threat to stability as we transition to our new partnership with the EU.

Therefore we will seek to agree a phased process which gets us from where we are now to the end-state of our future, permanent, relationship with the EU.

Anything else would be damaging for both UK and European economic, and potentially financial, stability.

And a UK in a close, ongoing, partnership with the EU, will have a vital national interest in the future success of the EU. So we will do nothing that could undermine that success.

Let me be clear: our ambition is to remain in the economic mainstream of Europe, with a comprehensive deal with our European neighbours.

But maintaining Britain’s competitiveness is not an optional extra; it’s an existential necessity.

So if somehow, despite our best efforts, political retribution were to triumph over economic logic and we don’t get a fair deal providing the reasonable access to each other’s markets…

…we will have to do whatever is necessary to ensure the continued competitiveness of our economy in those circumstances.

That is not a threat, it’s a statement of the blindingly obvious.

Negotiating Brexit is not the only challenge of 2017. We have to understand and learn to work with a new administration in our closest ally and partner.

We have to manage the impact of currency driven inflation after a period of stable prices.

And we have to get our economy match-fit for the post-Brexit world that awaits us.

I am confident we will get a sensible Brexit deal. But to take full advantage of it, we need to focus on overcoming a weakness that has plagued our economy for well over a decade: our poor productivity performance.

The UK needs to up its game urgently.

We lag US and German labour productivity by some 30 percentage points. But we also lag France by over 25 and Italy by 9.

That means it takes a German worker less than 4 days to produce what a British worker makes in 5. And inevitably that means that too many British workers work longer hours for lower pay than their counterparts.

Our upcoming Industrial Strategy consultation will address this challenge head on.

The quality of public infrastructure, insufficient skills, and regional imbalances are all factors restraining productivity, alongside underinvestment in businesses.

That’s why I took the decision in the Autumn Statement to allow additional borrowing to invest £23 billion in a new National Productivity Investment Fund over the next five years, specifically focused on productivity-generating infrastructure, housing, research, development and innovation.

That means real-terms public sector set investment is forecast to be over 50% higher than the whole period of the last Labour government, and focused more clearly on the needs of the economy.

And we are taking a long term approach by establishing the National Infrastructure Commission as a permanent body.

I look forward to their first National Infrastructure Assessment later this year – which will offer the first comprehensive view of our long-term infrastructure needs.

And, of course, we are making sure Britain remains one of the most competitive places to invest with corporation tax set to fall to 17%, by far the lowest overall rate of corporate tax in the G20.

And addressing the productivity challenge is not only good for our economy – it also helps to address some of the social challenges we face.

That is important because, over the coming years our economy, and our social structures, will have to cope not only with the impacts of globalisation and an ageing population profile, but also with a quickening pace of technological change as the fourth industrial revolution gathers speed.

On the positive side, many of the new, disruptive technologies are being developed in the UK.

To support that we will be investing over £8 billion of public money in R&D annually by the end of the decade, ensuring that what is invented and discovered here gets developed and commercialised here.

And, yes, ultimately, taxed here.

But that won’t, in itself, protect us from the impact as first unskilled, and then skilled workers, find their jobs disappearing.

Indeed, looking at the relative speed of development of recent advances in computerised medical diagnostics on the one hand and driverless vehicles on the other, it could well be skilled workers who are under the most immediate threat.

I only hope that I’ve left the office before they automate the Chancellor of the Exchequer!

Of course, it is possible to mask the effects of change in the short-term: and we will certainly face demands to do so.

But Politicians who take the populist route will find it a very short road.

There is no sustainable future for a developed economy in protectionism, subsidy, and high debt.

So whether it’s on restoring the public finances to health, getting the right Brexit deal for Britain or tackling the long-term productivity challenge facing our economy, this government is providing the responsible economic leadership that our country needs.

That means facing up to the fact that we have some hard graft ahead.

There are no easy answers. Populism is a fool’s paradise.

I hope I have already demonstrated that I welcome suggestions from business and will act on them where I can.

You asked us to confirm the businesses rates reductions – and we did.

You asked us to boost spending on research and development, and at the Autumn Statement we responded by increasing public R&D spend by £2 billion a year by 2020-21.

You asked for investment in infrastructure – and we will deliver a higher rate of public sector net investment than in every year from 1993 until the financial crash.

But in the end, economic growth is not delivered by what we do. It’s delivered by what you do.

So let me close by thanking the CBI and business leaders for your enduring commitment to growing our economy and creating the jobs and the ideas on which it depends.

As we navigate our way through the unchartered waters of Brexit, the partnership and dialogue between business and government will be more important than ever.

So let us work together, using all our networks to impress on our European neighbours how much it’s in all our interests to retain that strong trading relationship.

Let us work together to ensure we retain the innovation, the dynamism, and the job creation that mark out the British economy from many of its competitors.

And let us work together to secure our long term prospects by matching public sector investment in productivity with a renewed wave of private investment as the fog of Brexit begins to clear.

Working together, we can be confident that our best days lie ahead of us.