Chancellor says assurances to Nissan create 'no new contingent liabilities'
Assurances given to Nissan to persuade it to keep making cars in Sunderland following Brexit have not exposed the Government to the possibility of new financial liabilities, the Treasury has said.
In a letter to the House of Commons Treasury Committee, Chancellor Philip Hammond said any costs arising from the assurances would be small enough to be covered within the Department for Business’s existing departmental expenditure limits (DELs).
Nissan last month announced plans to extend production of Qashqai and X-Trail vehicles in Sunderland, putting an end to speculation that it could ditch the UK following the country’s decision to quit the European Union.
The move secured 7,000 jobs in the Brexit-backing city, but prompted a volley of questions over whether a so-called “sweetheart deal” between the carmaker and the Government had been struck.
Speculation was revived last week, when the independent Office for Budget Responsibility (OBR) revealed that the Treasury had declined to answer its questions over whether the deal could result in contingent liabilities on the taxpayer.
In his letter to committee chair Andrew Tyrie, Mr Hammond said: “T he Department for Business, Energy and Industrial Strategy have confirmed that no new contingent liabilities have been created in respect of Government reassurances provided to Nissan.
“In any case, we expect any commitments incurring costs to be managed within existing overall DEL totals.”
Mr Hammond noted that Business Secretary Greg Clark had already told MPs that the carmaker was reassured that the Government would continue to support the competitiveness of the automotive sector and work with the sector to ensure more of its supply chain can be located in the UK.
He said the Government would back research and take-up of ultra-low emission vehicles and that in its Brexit negotiations, the UK would emphasise the need to ensure “free and unencumbered” trade.
He told Mr Tyrie that any grants offered to Nissan would require explicit Treasury approval and that the Government was content that its actions fell “entirely within state aid and World Trade Organisation rules”.
OBR chairman Robert Chote told the Treasury Committee that the new letter raised questions over whether it was the Treasury’s assessment, or that of DBEIS, that no contingent liabilities had been entered into.
And he said Mr Hammond’s comment about DELs implied that “the commitment could incur a cost … but that they assume that if there are costs, they are significantly modest that they could be incorporated in the DELs without having to draw on the reserve or do something more dramatic”.
Asked by Mr Tyrie whether he was reassured by Mr Hammond’s comments, the OBR chair replied: “I would be more reassured than having not had anything at all.
“It clearly remains open to the interpretation that this is the Treasury simply reporting the view of the Business Department as distinct from being their own view. Which of those it is, I wouldn’t prejudge but I assume you will be taking that up with the Treasury.”
Mr Tyrie responded: “The short answer to my question might have been `No’, because either it does or it doesn’t and you’ve just told me it’s open to interpretation, so it doesn’t … It therefore falls short of what you would have expected to have received, had you had a reply at all.”
Mr Chote replied: “You are right in saying that this can be interpreted as the Treasury simply reporting what the Business Department has said. Whether that’s what they mean by that or not, I can’t make windows into men’s souls.”
The OBR chief said there did not appear to be anything in Mr Hammond’s letter that the Treasury could not have shared with the OBR before it published its twice-yearly Economic and Fiscal Outlook last week.
His request for information on contingent liabilities was entirely routine but was refused twice by the Treasury, he said.