Afternoon summary
- There appear to be problems in the discussions between the Tories and the Democratic Unionists over the Ulster party’s 10 MPs supporting a minority Conservative government. As Henry McDonald reports, senior DUP sources have told the Guardian this afternoon that the negotiations “haven’t proceeded the way we would have expected.” They added that the DUP “can’t be taken for granted” in ongoing discussions with the Conservatives. The Tories want a “confidence and supply” arrangement with the DUP that would guarantee that they get the DUP’s support in confidence motions and key budget votes. They can probably survive without a deal, because they still outnumber all other opposition parties in the Commons apart from the DUP by two, and because the DUP would not vote against them in a division that could lead to Jeremy Corbyn becoming prime minister. But passing legislation without a deal would be much harder. McDonald reports.
In Belfast other DUP sources said that “backbiting from Tory backbenchers” against their party had stiffened their resolve to “dig in.”
They said complaints by Tory MPs about having to deal with the DUP had gone down badly.
“They attempted to bounce us into a deal on Saturday night and then we had the backbenchers saying that we were unsavoury etc.
“There is also a feeling within the DUP that if we can get extra spending in Northern Ireland in, say, the local NHS to bring down waiting lists here, then there would be a barrage of complaints from English, Scottish and Welsh Tories over the special treatment our part of the UK was receiving.
“Conservative high command ought to stop their backbenchers whinging about the DUP and show our party some respect,” the DUP sources added.
- Nicola Sturgeon is “likely” to make a statement on plans for a second independence referendum before Holyrood breaks up for the summer, a spokesman has said.
That’s all from me for today.
Thanks for the comments.
Updated
Here is the Financial Times’ Sebastian Payne’s take on Philip Hammond’s Mansion House speech (paywall). And here is an excerpt.
Although one suspects Mr Hammond believes in a soft or partial Brexit — remaining the single market and/or customs union — he stuck to Mrs May’s programme, albeit with a plea for a very gradual transition. “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,” he said. Hard Brexit with a soft landing, in other words.
Those hoping for radical change will be disappointed. It was an illusion to think that a weak Conservative government would take the risk of changing tack, even with its leadership woes. Although it is very much business as usual, it is welcome to see the chancellor back and able to urge some caution about what lies ahead.
There has been a worrying lack of expectations management with British voters in terms of what lies ahead for Brexit. Too many ministers default to the Panglossian “it’s all going to be fine” approach, while offering scant detail. Mr Hammond’s input is welcome, therefore, and should not be dismissed.
According to Sky’s Ireland correspondent David Blevins, the Tory/DUP talks do not seem to be going particularly well.
Sky sources: DUP urging government to give "greater focus" to negotiations. "Party can't be taken for granted." 1/2
— David Blevins (@skydavidblevins) June 20, 2017
Sky sources: "Negotiations haven't proceeeded in a way that DUP would have expected." 2/2
— David Blevins (@skydavidblevins) June 20, 2017
The Scottish Government has published a written request from DUP leader Arlene Foster asking that it restrict gay couples from Northern Ireland converting their civil partnerships to same sex marriages in Scotland, the Press Association reports.
The publication comes days after Foster said she had no recollection of sending such correspondence to the administration in Edinburgh.
The letter, written in September 2015 when Foster was Stormont finance minister, urged then Scottish local government minister Marco Biagi to exclude Northern Ireland-based couples from legislation that enabled people in civil partnerships to convert those unions to same sex marriages.
Biagi tweeted about the existence of the letter in the wake of the General Election, amid increased UK-wide focus on the DUP’s conservative stance on social issues such as gay marriage.
When I was a minister DUP's Arlene Foster wrote to me asking us to curtail access of Northern Irish citizens to Scottish same-sex marriages.
— Marco Biagi (@MarcoGBiagi) June 10, 2017
The Press Association story goes on:
But in a radio interview last week, the former Stormont first minister denied sending such a letter.
“I’m not quite sure what he [Biagi] was referring to but it certainly wasn’t a letter from me and I’ve no recollection of a letter from me,” she told BBC Radio Ulster’s Inside Politics show.
“If I’d written to him officially as minister of finance or something like that around recognition laws here in Northern Ireland, I have no recollection of it. I certainly didn’t write in a personal capacity.”
The letter dated September 4 2015 released by the Scottish Government on Tuesday is signed by Mrs Foster.
It was a follow-up to a letter from her predecessor as finance minister, the DUP’s Simon Hamilton. Hamilton’s letter has also been made public.
The letters did not cite moral or political objections to the proposed legislation in Scotland, but highlighted potential legal issues.
They said complications could arise from couples having “dual status”, where they are recognised as civil partners in Northern Ireland but as married in Scotland.
Foster wrote: “I’m sure neither of us would wish to place same sex couple in an uncertain legal position, which maybe difficult and expensive to resolve.”
Biagi rejected the request from the Northern Ireland ministers.
Bradley to announce provisional decision on Murdoch's takeover bid for Sky by next Thursday
Karen Bradley, the culture secretary, has said that she will announce her provisional decision on whether or not to allow Rupert Murdoch’s 21st Century Fox full control of Sky by Thursday next week. In a statement, she said that she has now received reports from Ofcom assessing the takeover on the grounds of media plurality, Fox’s commitment to broadcasting standards and whether its executives are “fit and proper” owners. She has also received an assessment from the Competition and Markets Authority (CMA).
Bradley said:
The decision before me now, which I am required to take acting in a quasi-judicial capacity, is whether - taking account of the specified public interest grounds - it is, or may be the case, that the merger operates, or may be expected to operate, against the public interest and therefore whether or not to refer for a fuller phase 2 investigation by the CMA. I will consider these reports in detail before coming to an initial view on whether or not I am minded to refer the merger.
I will aim to make my initial ‘minded to’ decision, publish the CMA and Ofcom public interest reports - in line with the requirements under the Enterprise Act 2002 - and return to parliament to make an oral statement by Thursday 29th June. There will then be an opportunity for representations to be made before I take a final decision.
Gerard Coyne claims he is victim of a Unite 'stitch-up'
Gerard Coyne has issued a statement about his sacking. (See 2.47pm.) He says he is the victim of a “kangaroo court” and of a “stitch-up”.
I have been notified by email that I have been sacked from my position as West Midlands regional secretary of Unite the union following a disciplinary hearing held at Unite’s London office on June 15th.
I am deeply disappointed but not surprised at my dismissal. When you are in a kangaroo court, you are rarely surprised by the outcome.
I have held the post for 16 years and no complaint was raised during the hearing about how I carried out that role.
However, during the disciplinary process I was informed that union rules require a regional secretary to be “the general secretary’s representative in the region.”
It was implied that because of the way I criticised Len McCluskey during the campaign I could not fulfil that role any longer.
Seven charges were originally made against me that it was claimed amounted to gross misconduct. They consisted of such heinous crimes as publicly criticising and challenging Mr McCluskey’s decisions in leaflets, newspapers and social media. All related to my conduct during the general secretary election campaign.
Three of those charges I managed to knock out before the hearing and three were dismissed at the final hearing. The final one related to to an alleged technical data breach, which it was claimed had damaged Unite-Labour party relations.
This preposterous trumped up charge has been used to indict me - even though the returning officer from Electoral Reform Services had already ruled that there was no breach of the rules.
It was always clear to me that the charges were nothing more than a stitch-up. My real ‘crime’ was having the audacity to challenge Mr McCluskey in the general secretary election that he called unnecessarily.
Coyne also said that he would be appealing against the decision to dismiss him and that he expects the certification officer to order a re-rerun of the general secretaryship election.
According to the Evening Standard’s Kate Proctor, the government has dropped plans to scrap free school meals for all infants. The proposal was in the manifesto, but it won’t be in the Queen’s speech tomorrow. Ministers have accepted that, without a majority, it would not be possible to get the measure through the House of Commons.
Gerard Coyne sacked by Unite
Gerard Coyne, the senior Unite official who challenged Len McCluskey for the leadership of the union but narrowly lost, has been sacked, my colleague Rajeev Syal reports. Coyne was told that he must leave the union after 28 years for the alleged misuse of data.
Here is Rajeev’s story.
Lunchtime summary
- Mark Carney, the governor of the Bank of England, has subtly mocked Boris Johnson’s claims about the benefits of Brexit in a speech arguing that leaving the EU is a threat to the economy. (See 10.40am.)
- A Brexit deal that puts jobs and prosperity first is the only way the UK will be able to deliver the strong growth that will enable it finally to escape from the long years of austerity, the chancellor has said. As Larry Elliott reports, in his strongest call yet for a managed approach, Philip Hammond said a comprehensive trade agreement, a transitional deal after the 2019 deadline for the end of talks, and a commitment to keep borders open should form a three-point Brexit plan for Britain. Barry Gardiner, the shadow international trade secretary, said that Hammond’s speech showed that he had “swallowed entirely the Labour playbook” on Brexit. Gardiner told the Daily Politics:
Our Labour manifesto come out [in the speech] absolutely loud and clear. So it was fair and managed migration, it was about a jobs-first Brexit, it was about no deal being a very, very bad deal for the UK. [Hammond] has even said today he would look remaining within the customs union.
Labour also claimed the speech showed how the Tories were split over Breixt. But Iain Duncan Smith, the Conservative former work and pensions secretary and a leading figure on the leave wing of the party, said that he was happy with what Hammond said in the speech. He told the World at One:
I thought the speech was fine. It was straightforward - not much to disagree with in it.
- Vince Cable has launched his bid to become the next leader of the Liberal Democrats just over a week after winning back the Twickenham seat he lost to the Tories in 2015. Speaking on Radio 5 Live, Cable said that if he won, he could stand down later for a “younger colleague”. But he also said that his age - he is 74 now, and will be almost 79 on the date pencilled in for the next election in 2022 - should not count against him. He said that he felt young, and that Gladstone was much older when he became PM for the last time. He said:
[In] four years time the question arises, of a general election coming up, I’ve then got to make a choice; do I let one of my very able younger colleagues take over or do I do what William Gladstone did, quite a while ago, he became prime minister when he was 82, I think, way beyond my years. Winston Churchill did in his mid seventies. I mean these things happen, some of the brightest and most interesting people in British politics recently have been relatively old. You remember Bernie Sanders in America as well. I think age is a surety, if you feel old. I don’t feel old. I feel young and energetic and I’m very much up for a contest.
- Sadiq Khan, the mayor of London, has written to Theresa May making recommendations for how the public inquiry into the Grenfell Tower fire should be run. Among other suggestions, he said that an interim report should be published now, and that steps should be taken to stop relevant paperwork being destroyed.
It is also important that immediate steps are taken to preserve evidence if there is a risk of it being destroyed by those holding it. The relevant authorities, whether pursuant to an inquiry or to a criminal investigation should be considering whether those powers of seizure need to be exercised now as a matter of urgency. I strongly suggest that immediate legal advice is obtained as to how material should be preserved and the process of that material being reviewed for the purposes of disclosure to core participants so that there are not a lengthy delays relating to disclosure to core participants, as have occurred in other recent inquiries.
I would also urge you to require that there will be an interim report published this summer. Not only is this crucial for community confidence, but it will allow for the swift implementation of any urgent steps that need taking as regards fire safety in similar buildings across the country.
- Labour has demanded answers from the government after leaked letters appeared to show ministers were repeatedly warned that fire regulations were not keeping people safe in high rise blocks like Grenfell Tower. As the Press Association reports, shadow housing secretary John Healey has written to Communities Secretary Sajid Javid demanding a formal response after the BBC said the letters show ministers were warned that people living in high rises were “at risk”. The dozen letters, sent by the all-party parliamentary fire safety and rescue group in the aftermath of a 2009 fatal fire in Lakanal House, south London, warned the Government “could not afford to wait for another tragedy”, according to Panorama. The parliamentary group wrote in March 2014:
Surely ... when you already have credible evidence to justify updating ... the guidance ... which will lead to the saving of lives, you don’t need to wait another three years in addition to the two already spent since the research findings were updated, in order to take action?
As there are estimated to be another 4,000 older tower blocks in the UK, without automatic sprinkler protection, can we really afford to wait for another tragedy to occur before we amend this weakness?
- Theresa May is facing a landmark legal challenge over her proposed deal with the Democratic Unionist party on the grounds that it breaches the Good Friday agreement. As Josh Halliday and Owen Bowcott report, an experienced legal team, which has been involved in constitutional challenges, is planning to apply for a judicial review of the deal once it is announced, the Guardian has learned.High court judges would be asked to examine whether the pact breaches the British government’s commitment to exercise “rigorous impartiality” in the Good Friday agreement.
Updated
The Times’ Sam Coates has written an interesting take (paywall) on Philip Hammond’s speech. Here’s an extract.
Although technically the chancellor did not breach any collective government positions on Brexit or the economy, it is inconceivable that [Hammond] could have delivered such a speech before the botched general election a fortnight ago.
Mr Hammond took aim at a series of Mrs May’s core beliefs: the need to bear down heavily on migration, the damage caused by globalisation, the ease with which the public spending taps can be turned on, and the need for a full “transition” deal rather than Mrs May’s “implementation” phase.
Before the election he would have been blocked from giving such an address and it had been expected that he would be removed from his post. Mrs May’s fall from grace, which has not yet halted, has given him new power and he is determined to use it to try and stop Britain making, in his view, catastrophic mistakes on Brexit.
The Institute of Directors has welcomed Philip Hammond’s Mansion House speech. Allie Renison, its head of EU and trade policy, said:
Business leaders will welcome the pragmatic approach taken when talking about Brexit in his Mansion House speech. There were no big surprises, but the focus on jobs and the economy is a step towards shoring up shaky business confidence. The chancellor reiterated the government’s intention to leave the EU customs union, which always seemed likely in the long-term, but crucially showed some flexibility on pushing for an orderly process to do so. The emphasis on the need for an early agreement on transitional provisions – as opposed to sorting this out toward the end of the negotiations – is positive. Firms will need to know, at the latest by next summer, whether there will be substantive changes to trade and migration arrangements in order to have time to activate any contingency plans.
Number 10 has sent out a (characteristically dull) read-out from this morning’s cabinet meeting. Here it is. It’s from a spokesman.
In this morning’s cabinet meeting, ministers discussed upcoming parliamentary business, including tomorrow’s Queen’s Speech which heralds an historically important two-year session to help deliver the legislation for a successful Brexit.
Ministers also discussed the awful events of the past week. The prime minister expressed her appreciation of the police and emergency services for their bravery and professionalism.
On Grenfell Tower, the secretary of state for communities and local government updated cabinet on the efforts to ensure everything is being done to help victims’ families and other survivors, as well as looking ahead to the longer-term recovery effort. On the tragic incident at Finsbury Park, the prime minster and home secretary discussed the importance of ongoing government work in reviewing its counter terrorism strategy and ensuring that police and security services have the powers they need.
The chancellor of the exchequer provided cabinet with an update on the economy and public finances, emphasising the underlying strengths of the UK economy and setting out the importance of making the case for a market economy, sound money and growth as well as prioritising rising productivity.
The secretary of state for Northern Ireland also provided an update to progress on talks to restore power-sharing institutions.
It is day 2 of the talks in Belfast aimed at restoring the power sharing devolved government in Northern Ireland. Day 1 has been described as “reasonably constructive” by one senior Irish official.
Both the Irish foreign minister, Simon Coveney, and the Northern Ireland secretary, James Brokenshire, are not at Stormont for the all-party discussions today. Coveney is holding Brexit talks at the EU in Brussels while Brokenshire has commitments in London. However, the parties, most notably Sinn Fein and the Democratic Unionists, will continue talking today.
One of the substantive issues on the table is Sinn Fein’s demand for an Irish Language Act that would put the gaelic language on a par with English, which would be a similar outcome to the situation already pertaining in Wales, where the Welsh language has parity to English. Sources at the talks say this morning that aspects of Ulster Protestant culture rooted in terms of “respect” for things like Ulster Scots might also be built into the legislation to make the language act more acceptable to unionists.
The other major area of contention is legacy or how to deal with the past crimes and atrocities of the Troubles. It appears that, while draft legislation may be possible, the ideas formulated at the talks will be put out to public consultation across Northern Ireland and in particular to a whole range of victims groups. By doing this, it is believed the ‘sting’ will be taken out of the legacy issue and it won’t become a deal breaker at Stormont.
Meanwhile those other talks - the ones between the DUP and the Tories - aimed at creating a minority Conservative government go on in London today. They also cast a shadow over the Belfast negotiations with Sinn Fein and others keeping one eye on what the outcome of the DUP/Tory discussions may bring forward.
In terms of the Belfast talks though the clock is ticking, with the 29 June deadline fopr the restoration of power sharing looming ever closer.
Sir Vince Cable is leaving open the option of only serving as a caretaker leader, the BBC’s Norman Smith reports.
Vince Cable leaves open option of serving as two year caretaker leader of @LibDems
— norman smith (@BBCNormanS) June 20, 2017
Cable is 74. If the next election is in 2022, he will be just days away from his 79th birthday when it takes place. Jo Swinson, who is 37 and who has ruled out running for the leadership this time, is running for the deputy leadership and hinted in her statement on Sunday that she would go for the top job in due course. Cable could end up running on the understanding that before 2022 he would step aside for her.
According to the BBC’s Chris Mason, Sir Ed Davey, the Lib Dem former energy secretary, will announce later this week if he is standing for the party leadership.
Asked if he will also be running for the leadership of the Liberal Democrats, the former Energy Secretary Sir Ed Davey has just told me...
— Chris Mason (@ChrisMasonBBC) June 20, 2017
... "I'll be letting you know later in the week."
— Chris Mason (@ChrisMasonBBC) June 20, 2017
Vince Cable announces he is running for Lib Dem leadership
Sir Vince Cable, the Lib Dem business secretary in the coalition who has just been re-elected to parliament after losing his seat in 2015, has announced in a blog for Lib Dem Voice that he is running for the party leadership.
Here is an extract.
There are big opportunities ahead. The Conservatives are in disarray and in retreat. The Labour Party outperformed expectations but complacently believes that ‘one more heave’ will see it into office. But an economic policy based on offering lots of free things lacks economic credibility and will be found out. Investing in infrastructure, rather than borrowing for everyday running costs is credible. There is a big space in British politics which I am determined that we should occupy.
The contest will take place with the largest membership electorate in our party’s history. We should be ambitious about increasing our number still further and in particular attracting young people to our cause. I welcome the more diverse party and parliamentary party we now have and will give priority to promoting diversity, an issue I championed as a minister and with some success in business leadership.
The party has survived five difficult years of Coalition government and the disadvantage of the current unreformed voting system. We are now growing again and the political winds are moving in our favour. I believe I can, as leader, offer the energy, dedication and drive, as well as experience, to help – with you – to make our party a credible contender for power.
With Jo Swinson having announced on Sunday that she is not standing, the bookmakers now have Cable and Norman Lamb (who has not yet said whether he will stand or not) as the favourites.
McDonnell says Hammond's speech shows austerity will continue
John McDonnell, the shadow chancellor, has put out a statement about Philip Hammond’s speech, saying Hammond effectively admitted austerity would continue. McDonnell said:
The chancellor has made clear this morning that the message remains the same - austerity will continue. The Tories have learnt nothing from the general election, and the last seven wasted years of economic failure. The Conservatives have no understanding of the depth of suffering, stress and insecurity their long austerity regime has caused.
McDonnell also claimed that Philip Hammond’s comments on Brexit showed the government was split on the issue.
And we have seen the chancellor again trying to distance himself from the position of his prime minister on Brexit. It just shows further disarray at the top of government. The fact that there is clearly such a serious split between Number 10 and 11 is very worrying and only helps to undermine our country ahead of the Brexit negotiations.
It further shows just how weak a position Theresa May is in. And raises the serious question of: how can she negotiate Brexit when her own chancellor is so publicly disputing her position on Brexit and briefing against his own cabinet colleagues?
Carney mocks Boris Johnson and suggests Brexit is a threat to the economy
Mark Carney’s speech (pdf) was a fairly classy production, involving footnotes, graphs and sarcasm. Here are the key points.
- Carney, the governor of the Bank of England, suggested that Brexit was a threat to the economy. In his speech he said Brexit had already led to the markets downgrading the UK’s economic prospects. He said:
Since the prospect of Brexit emerged, financial markets, notably sterling, have marked down the UK’s economic prospects.
In a footnote to the speech, he elaborated on this point.
The sterling ERI has fallen close to 20% from its November 2015 peak. Since then, UK-focused equity prices have fallen by over 2%. In contrast, broader equity price indices such as the FTSE 100 and S&P 500, which more heavily reflect global economic considerations, are almost 20% and 40% higher respectively (in sterling terms). UK 10-year real government bond yields have fallen 115 basis points; by contrast 10-year real government bond yields in the US are down by around 25 basis points only.
Carney also went on to suggest that Brexit could have a negative impact on wages, jobs and prices.
Monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU. But it can influence how this hit to incomes is distributed between job losses and price rises. And it can support households and businesses as they adjust to such profound change.
- He mocked Boris Johnson’s claim that Britain would be able to “have its cake and eat it” after Brexit. He did not mention Johnson, the foreign secretary, directly, but it was clear who he meant when he said, with mild sarcasm.
Markets have already anticipated some of the adjustment. Depending on whether and when any transition arrangement can be agreed, firms on either side of the channel may soon need to activate contingency plans. Before long, we will all begin to find out the extent to which Brexit is a gentle stroll along a smooth path to a land of cake and consumption.
- Carney said that he personally thought that now was not the time for interest rate rises, and he said that all members of the monetary policy committee (MPC) were agreed that, when rates did rise, they would rise gradually.
As spare capacity erodes, the trade-off that the MPC must balance lessens, and all else equal, its tolerance for above-target inflation falls. Different members of the MPC will understandably have different views about the outlook and therefore on the potential timing of any Bank Rate increase. But all expect that any changes would be limited in scope and gradual in pace.
From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment.
- He suggested that he did not think the trade deficit was sustainable.
In this environment, the UK is running a historically large current account deficit. On the positive side, the deficit is funded in domestic currency and financial reforms have increased the resilience of the UK system, thereby making larger imbalances more sustainable. But the UK’s deficit has also been associated with markedly weak investment and latterly with rapid consumer credit growth. This is not an imbalance that is, as yet, funding its eventual resolution.
Moreover, despite the large depreciation around the referendum, the extent to which the UK’s deficit has moved closer to sustainability remains an open question, one whose answer depends crucially on the outcome of the Brexit negotiations.
- He said he was opposed to fragmentation of financial services after Brexit. Philip Hammond made a similar point in his speech, but Carney spoke about this specifically in the context of central counterparty (CCP) clearing houses, such as those in the City involved in the euro clearing business. He said:
Fragmenting liquidity would drive up costs somewhat in the remaining market as well. On current volumes, almost 90% of swaps are traded by non-EU firms and could remain in the main UK-based liquidity pool. Given the size of this market, the impacts could be expected to be much smaller, although not insignificant.
Fragmentation is in no one’s economic interest. Nor is it necessary for financial stability. Indeed it can damage it. Fragmenting clearing would lead to smaller liquidity pools in CCPs, reducing the ability to diversify risks and diminishing resilience. And higher costs would reduce the incentives to hedge risks, increasing the amount of risk that the real economy would have to bear.
UPDATE: I’ve corrected one of the posts above. Carney was talking about the trade deficit, not the budget deficit.
Updated
Here is some more Twitter reaction to Philip Hammond’s speech.
From Paul Mason, the Guardian columnist
Hammond signalled no further loosening of fiscal policy this morning - here's what that will mean https://t.co/xLMrvrIu88
— Paul Mason (@paulmasonnews) June 20, 2017
From Sky’s Lewis Goodall
astonishing: Hammond barely mentioned any benefits to Brexit at all. Spoke about it as if he were mitigating a natural disaster.
— Lewis Goodall (@lewis_goodall) June 20, 2017
Extraordinary speech from Hammond. given up pretending he thinks there are benefits to Brexit. Confirmation that May's authority has gone.
— Lewis Goodall (@lewis_goodall) June 20, 2017
(To be fair, I don’t remember Hammond ever giving speeches saying there were huge benefits to Brexit.)
Hammond has basically just given the most enormous two fingers to the idea that no deal is better than a bad deal.
— Lewis Goodall (@lewis_goodall) June 20, 2017
And my colleague Dan Roberts did like Hammond’s Osborne joke.
it's rare that politician's jokes make me laugh, rarer still for an economics gag. but Hammond on Osborne's contribution to employment data!
— Dan Roberts (@RobertsDan) June 20, 2017
"we have the strongest employment growth since blah blah, and that's even if we only count George Osborne once" - better first time perhaps.
— Dan Roberts (@RobertsDan) June 20, 2017
Hammond's speech - Summary
Here are the main points from Philip Hammond’s Mansion House speech.
- Hammond, the chancellor, said the UK should abide by EU customs union rules for a period after Brexit. (See 9.08am) This would almost certainly lead to a delay in the UK being able to implement new trade deals with other countries, because the EU would not let the UK set its own tariffs while it was still effectively in the customs union.
- He insisted the government would “manage migration ... not seek to shut it down’ after Brexit.
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.
- He confirmed that he wanted Brexit to involve a transitional phase, “to avoid unnecessary disruption and dangerous cliff edges”.
- He claimed that some Europeans were already using Brexit to seek to impose “protectionist” restrictions on the City.
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.
He said Europe needed to avoid the “fragmentation of financial services” and he said Brexit would have to involve “evidence-based, symmetrical and transparent” rules for the regulation of financial services.
- He said he wanted a Brexit “that puts jobs and prosperity first”. (This is similar to Labour’s slogan; it wants a “jobs-first Brexit”.)
- He said he was taking measures to expand the supply of capital funding in the UK, to compensate for the impact of the UK no longer getting European Investment Bank infrastructure investment after Brexit. He said that he would broaden the range of the UK guarantee scheme so that it offers construction guarantees for the first time, that the British Business Bank would increase the amount it invests in venture capital funds and that he would bring forward some of the investment in the autumn statement.
- He acknowledged that the public were “weary” of austerity. And he said that he had already relaxed the government’s anti-austerity drive, setting a longer timescale for getting the budget into surplus when he took over as chancellor last year. But he played down the prospect of further measures to undo austerity, saying that he was opposed to higher taxes or higher borrowing.
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.
- He acknowledged that globalisation was unpopular and said the government would push for a new version, with a greater focus on services. This was “Gloablisation 2.0”, he implied, although he did not use that phrase.
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.
-
He said the government “must, and will, also get to the bottom of the failure at Grenfell [Tower] and take decisive action to ensure nothing like this ever happens again.”
Updated
I’m sorry the comments were left off earlier. That was an oversight. They are on now.
What Hammond said about the UK sticking with EU customs union rules for short term after Brexit
This is what Philip Hammond, the chancellor, said in his speech about how Britain would have to abide by EU customs union rules for a period after Brexit.
So, how do we achieve this “Brexit for Britain”? ...
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.
Pound falls after Bank of England governor says now is not the time to raise interest rates
The pound has fallen to a one-week low against the US dollar, as Mark Carney declares it is too early to raise interest rates.
The Bank of England governor is telling the Mansion House audience that the UK economy isn’t strong enough to handle higher interest rates, especially as we don’t know how the Brexit talks will proceed.
This sent the pound sharply lower, to $1.2674:
Carney explains that he doesn’t agree with the three members of the Monetary Policy Committee (MPC) who voted to hike borrowing costs last week (they were outvoted by the other five members, including Carney).
Here’s the relevant section from Mark Carney’s speech:
Different members of the MPC will understandably have different views about the outlook and therefore on the potential timing of any Bank Rate increase. But all expect that any changes would be limited in scope and gradual in pace.
From my perspective, given the mixed signals on consumer spending and business investment, and given the still subdued domestic inflationary pressures, in particular anaemic wage growth, now is not yet the time to begin that adjustment.
In the coming months, I would like to see the extent to which weaker consumption growth is offset by other components of demand, whether wages begin to firm, and more generally, how the economy reacts to the prospect of tighter financial conditions and the reality of Brexit negotiations.
Here’s the moment that traders saw those quotes:
The pound falls after Mark Carney says it's not yet time to raise interest rates in Britain https://t.co/8l0x5mr7gl pic.twitter.com/TBHvfg4q3h
— Bloomberg Brexit (@Brexit) June 20, 2017
My colleague Graeme Wearden has more on his business live blog.
Updated
The Carney speech involves some hardcore macroeconomics. Nothing wrong with that, of course, but rather than do it minute by minute, it is probably best if I just summarise from the full text.
I’ve got a full text of the Hammond speech too, so I will summarise that first.
Carney says UK faces 'weaker real income growth' as Brexit takes place
This is what Carney said about Brexit.
Since the prospect of Brexit emerged, financial markets, notably sterling, have marked down the UK’s economic prospects.
Monetary policy cannot prevent the weaker real income growth likely to accompany the transition to new trading arrangements with the EU. But it can influence how this hit to incomes is distributed between job losses and price rises. And it can support households and businesses as they adjust to such profound change. Indeed, in such exceptional circumstances, the MPC is required to balance any trade-off between the speed with which it returns inflation sustainably to the target and the support that monetary policy provides to jobs and activity.
That is why last summer the Bank announced a series of monetary and macro-financial measures to support the economy during this transition. This stimulus is working. Credit is widely available, the cost of borrowing is near record lows, the economy has outperformed expectations, and unemployment has reached a 40 year low.
The full text of Mark Carney’s speech is now here (pdf), on the Bank of England’s website.
Mark Carney's speech
Mark Carney, the governor of the Bank of England, starts by referring to the recent terrorist attacks, and to the murder of Jo Cox last year. We must respond by building a Brexit that works for all.
He turns to Brexit, and warns that people face weaker real income growth. It is not time for an interest rate rise, he says.
Mark Carney makes direct link between Brexit process & "weaker real income growth" - people poorer. "Not yet time" for interest rate rise
— Kamal Ahmed (@bbckamal) June 20, 2017
Here is some snap reaction to Philip Hammond’s speech.
From Dan Roberts, the Guardian’s Brexit editor
Hammond tells Mansion House speech that City is already on receiving end of "protectionist" tactics from Europe - "disguised as regulation".
— Dan Roberts (@RobertsDan) June 20, 2017
Feels like Hammond is toning it down on Brexit this morning. Has he had his spreadsheet locked?
— Dan Roberts (@RobertsDan) June 20, 2017
From the Daily Mirror’s Jack Blanchard
Hammond in summary:
— Jack Blanchard (@Jack_Blanchard_) June 20, 2017
- Jobs & prosperity the priority for Brexit
- Immigration is good
- Customs union arrangements should stay for some time
Hammond says Britain can get a Brexit deal that puts jobs first.
Yesterday was a confident start, he says.
He now hands over to the next speaker, Mark Carney, the governor of the Bank of England.
Hammond says UK should stick to EU customs union rules for period after Brexit
Hammond asks how Britain can achieve a Brexit that works for the people.
He identifies four priorities.
First, it must get a comprehensive agreement on trade and services.
Second, there must be mutually beneficial transitional arrangement, avoiding disruption and dangerous cliff edges.
Third, there must be frictionless customs arrangements.
This will involve an implementation period, when the UK will be outside the customs union, but customs rules will remain in place pending the new rules coming into force.
- Hammond says the UK expects to abide by customs union rules for an “implementation period” after Brexit.
He says the new system will also involve investment in technology.
And, fourth, there must be arrangements in place to protect the City, he says.
Hammond is now turning to Brexit.
He says the government set out its view in the prime minister’s Lancaster House speech.
But this is a negotiation, he says.
He says people voted to leave the EU. But they did not vote to become poorer.
Hammond says the government does not want to “turn inward” after Brexit.
But trade arrangements must work for the benefit of the UK.
Whilst we seek to manage migration, we do not seek to shut it down.
- Hammond says the government will not “shut down” immigration after Brexit.
He quotes from what the Conservative manifesto says about globalisation.
Hammond says it may be beneficial to maintain a relationship with the European Investment Bank (EIB) after Brexit.
But he says he will not take that for granted.
Hammond says the government wants to drive up productivity.
He says if productivity goes up by just a quarter of 1%, over 10 years that will add £67bn to the economy.
He says that is equivalent to £2,400 for every household.
He says the government wants to make every learner more skilled, every worker more productive, every business more competitive and every public service more efficient.
Hammond says people are “weary of seven years of hard slog” (ie, austerity).
But if the government wants to spend more, it can only do so three ways.
It can tax more - but the Conservatives are committed to low taxes, he says.
It can borrow more - but he says he is sticking to his deficit reduction targets.
That only leave higher growth and higher productivity, he says.
Hammond says he learnt during the election that the Tories have to make the case again for higher productivity.
Philip Hammond gives Mansion House speech
Philip Hammond, the chancellor, has just started giving his Mansion House speech. He was due to give it last week, but it was cancelled after the Grenfell Tower fire.
Instead he is now, unusually, giving it in the morning.
He started by talking about the fire, and saying that the survivors must get everything they need.
And he said the government must get to the bottom of what caused it.
He then spoke about the state of the economy, saying it was in good shape.
Now he is turning to the future.
