Middle East: Economic Update

Tuesday 28th April 2026 Lords Chamber

Statement

16:50

The following Statement was made in the House of Commons on Tuesday 21 April.

“With permission, I will update the House on the spring meetings of the International Monetary Fund and the continued action that the Government are taking to strengthen our economic and energy security in response to the conflict in the Middle East.

We did not start this war and we did not join this war, but since the war in the Middle East broke out, I have been clear-eyed about my duty: to be responsive to a changing world and responsible in the national interest. The best economic policy today is our diplomatic policy—negotiation, de-escalation and the permanent reopening of the Strait of Hormuz.

Last week in Washington, I held talks with world Finance Ministers, including the US Treasury Secretary, Scott Bessent. I struck a joint agreement with 10 other major economies, calling for a swift and lasting negotiated resolution to the conflict and agreeing to avoid unnecessary trade restrictions in order to support energy and food security. We agreed to maintain maximum economic pressure to ensure that Russia cannot profit from this war. I was proud to announce the UK’s third tranche of the extraordinary revenue acceleration funding for Ukraine’s defences, as well as continuing to work with the US Administration to increase economic pressure on Iran.

The Prime Minister has also led global action, convening a summit of nations with the President of France to work together to support freedom of navigation through the Strait of Hormuz. The UK will continue to play its part, including engagement with the insurance industry to support shipping when conditions allow.

We are continuing to plan for every eventuality, but we must deal with the economic costs that are already being felt. I reject the demands for a knee-jerk response to this crisis that would put household finances at risk through higher inflation and higher interest rates. Every choice that I make will be about keeping costs down for families and businesses. That is why I have extended the 5p cut to fuel duty twice since the election, saving the average motorist £90 a year compared with the plans that I inherited. It is why I have frozen prescription charges for two years in a row and frozen rail fares for the first time in 30 years. It is why I am taking £150 off energy bills, with additional help for those struggling with the cost of heating oil; and it is why I have expanded the British industrial competitiveness scheme to over 10,000 manufacturers, addressing long-term competitiveness and cutting electricity costs from this year.

During the last energy shock, the previous Government’s package of unfunded and untargeted support saw more than a third of direct energy bill support go to the wealthiest households. That meant higher inflation, higher interest rates and higher taxes. I will not repeat those mistakes. Last week, the IMF said that my plan is ‘the appropriate response’ to the conflict. I led a joint statement, with 10 other major economies, agreeing to co-ordinate our domestic responses, to ensure that they are responsive and responsible.

This Government have the right plan for our economy. At the spring forecast, we saw how the action that we have taken since the election has prepared Britain to better weather this conflict. Inflation was at 3% and set to fall to target—a lower base than at the outset of the Russia-Ukraine conflict, when inflation was high and rising. Borrowing was set to fall more over this Parliament than in any other G7 economy. We are set to reduce the deficit by £20 billion, from 5.2% to 4.3% of GDP this year. I increased our financial buffers, with headroom against the stability rule of £23.7 billion, so that we can weather shocks and keep borrowing costs down.

Last week, the IMF welcomed the UK’s ‘notable improvement’ in our public finances. I am clear that the best way we can build a stronger, more resilient economy is through economic growth. I welcome recent figures showing that the economy grew by 0.5% in the three months to February and upgraded growth for the three months to January to 0.3%. I also welcome this morning’s labour market figures for February, which show unemployment coming down and real wages continuing to rise, as they have in every month since I became Chancellor—adding to the evidence that the Government have the right economic plan to steer our economy through the uncertainty ahead.

However, as I have said, the war in Iran will come at a cost. Last week, the IMF published its updated forecasts for the global economy in response to the war. It reduced its expectations for GDP growth in the United Kingdom and increased its expectations for inflation. That builds on the IMF’s judgment that the UK is more exposed to energy price shocks than our counterparts—a problem that the previous Government failed to address in 14 years—and on its observation that, since the last energy crisis, the UK has had higher inflation than other countries. The aftermath of Liz Truss’s disastrous mini-Budget, and the previous Government’s untargeted and unfunded support package, contributed to a more persistent rise in inflation and interest rates than in other countries around the world.

The IMF’s forecasts are a stark reminder of why we must stick to our economic plan and go further and faster on delivering economic security. Since the election, we have invested in clean, homegrown energy, in renewables and in nuclear power. In 2025, we imported 17% less gas than in 2021, and gas generation now sets the wholesale price of electricity around a third less frequently than it did in the early 2020s, meaning that our energy system is now more secure and less exposed to volatile global energy prices.

Today we are going further, with a package of changes to reduce our reliance on imported oil and gas, boost the use of renewables, and smooth the impact of energy price shocks. First, oil and gas production from the North Sea is an important and valuable resource, and its workforce is a vital asset for our country. That is why we are harnessing our domestic supply by managing existing fields for their entire lifetimes, including by allowing tiebacks for those fields to ensure that they remain viable. Today, in advance of legislation, we are publishing further details on tiebacks, which I first announced in the Budget. External analysis has predicted that they could result in tens of millions more barrels of oil and gas being available for UK supply. Today’s announcement gives industry greater clarity to support investment in those projects and maximise supply from our existing sites to support our energy security.

Secondly, we are sweeping away the barriers to new renewables investment by accelerating vital grid infrastructure, reforming land access rules and extending permitted development rights, as well as making more public land available for renewable infrastructure, which could unlock up to 10 gigawatts of capacity, and helping households and businesses to switch to clean, cheaper renewable electricity through plug-in solar panels and better electric vehicle charging.

Thirdly, we are reforming our energy system. Currently, households and businesses pay more for their electricity when the gas price is high. The electricity generator levy already recoups some of the excess returns made by generators due to high gas prices. Today, I am announcing that I will extend the electricity generator levy beyond its scheduled conclusion in 2028, and, ahead of that, I will increase the rate of the levy from 45% to 55%. That will ensure that a larger proportion of any exceptional revenues from high gas prices are passed back to government, providing a vital revenue stream so that money is available for government to support businesses and families with the impacts of the conflict in the Middle East. Crucially, it will encourage older low-carbon electricity generators, which supply about a third of our power, to move from market pricing to fixed-price contracts for difference.

New proposals set out today by the Secretary of State for Energy Security and Net Zero will further weaken the link between high gas prices and the price paid for our electricity, and limit the spikes in energy prices in driving up inflation and costs for households and businesses.

The Government have the right economic plan—a plan that was right before this conflict in the Middle East started and is now essential to weather the impact of that conflict. The plan, backed by the IMF, will keep costs down for everyone and provide support for those who need it most. In a world that is more uncertain, it is a plan to build a Britain that is stronger and more secure. I commend this Statement to the House”.

[Baroness Neville-Rolfe (Con)]

My Lords, the International Monetary Fund, in its latest World Economic Outlook, has warned that the energy shock stemming from the Iran war will hit the United Kingdom harder than any other advanced economy, notably in terms of growth and inflation. It is also the case that UK borrowing costs are higher than those in other comparable OECD countries. In short, the prospects are depressing in the extreme. What, we ask ourselves, are the Government proposing to do about it?

We read one apparent answer in today’s newspapers: freeze rents; in other words, adopt a policy which has always failed everywhere that it has been tried. Can the Minister tell us when we will be told the details of this latest whizz idea, or will he be willing to rule out the ridiculous idea definitively from the Dispatch Box, given the adverse effect on the share prices of some property companies today?

I turn a much more serious subject: defence. The world situation is becoming more worrying by the day, which makes the much-delayed defence investment plan even more important and the funding shortfall of £28 billion ever more disturbing. A responsible Government would act with vigour to progress matters. Experts are unanimous in the view that our capabilities are woefully short of what is necessary. What have the Government done about this unhappy situation? The answer is: very little, unless delay constitutes action. Can the Minister tell us when the defence investment plan will finally be published?

I turn to North Sea oil and gas, where there are possibilities that would help our economic situation by increasing output, increasing well-paid jobs and improving our balance of payments. But the Jackdaw and Rosebank decisions do not seem to have moved from the desk of the Secretary of State. His ideological prejudices are well known, though difficult to understand in the circumstances that now face us. When we last debated the Middle East, the Minister seemed warmer to North Sea exploitation than I had expected. But, in short, we are still seeing more delay.

We know that the Government face very difficult circumstances, many of which are exogenous and they can do little about, but what action they have taken has tended to make matters worse, and what they have left undone is significant. Will the Minister urge his ministerial colleagues to get serious, to avoid economically damaging ideas such as freezing rents, and to take those decisions which need to be taken as a matter of urgency?

The truth is that the Government’s position on energy is woeful, as we heard during today’s PNQ. Let us take the Jackdaw gas field: it is ready, the infrastructure is in place, the operators are prepared; it could supply enough gas to heat 1.4 million homes by the autumn, and more cleanly than much of the gas we currently import; and it would strengthen our energy resilience by 6%. So why, in the face of rising global instability, with energy security more critical than ever, are the Government not bringing the Jackdaw field online? Equally importantly, why is the industry so fearful that the Government will not approve the Rosebank field? Is it right?

From an energy perspective, Britain could scarcely be entering this crisis in a weaker position. We face the highest industrial energy costs in the developed world, crippling our manufacturing industries and making life very difficult for our SMEs—and consumer prices are not far behind. This is a dangerous position to be in, and I gently say to the Minister that the public will not thank the Government for ideological gestures. They will expect, and they deserve, practical action to secure our energy future.

What unites each of these issues is the absence of domestic resilience. The war in the Middle East has exposed that weakness, but it did not create it. So the question for the Government is a simple one: will they now act to strengthen the resilience of this country, restore credibility to their economic and energy strategy, and provide the certainty that our Armed Forces, our businesses and our households all need—or will they continue to rely on hope when what is required is action? The time for hope has passed, and the time for decision is now.

[Baroness Kramer (LD)]

My Lords, the impact of the Iran war has made previous economic forecasts pretty much redundant. We talked last week about warnings from the IMF and the OECD, repeated today by the noble Baroness, Lady Neville-Rolfe, which essentially assess that the UK would suffer more than any other G7 economy. This conclusion is being reinforced by recent inflation and unemployment numbers. The Government’s response has been limited and very much a “wait and see”. Uncertainty is a reason for resilient action, not a reason for inaction. We need to see action now from the Government.

Each day, as an ironic consequence of the war, the Treasury is taking in some £20 million more in taxes, including VAT and the electricity generation levy, so why are the Government not using this money proactively to help people with spiralling living costs? That money could be reducing petrol prices at the pump through a temporary cut in fuel duty. It could be used to cut rail and bus fares or to reduce the price of home EV charging. Families need help now—they need early reassurance on the energy price cap after June and a cancellation of the 5p duty rise due in September.

We strongly support reform of the energy pricing system. Our manifesto made a clear commitment to break the link between gas prices and electricity prices—ours was the only manifesto that had that in black and white—so we are glad that the Government have taken up that approach and that they are moving to a contracts for difference model. But we are still concerned about energy costs for individual households; for small businesses, including hospitality; and for the food and agricultural sector, which has such an impact on the cost of living.

So will the Government now work with the banks to introduce a scheme of low-interest loans for householders who want to adopt energy-saving measures but need a way to finance the upfront cost? Will the Government press Ofgem to investigate the broken energy market, which is in effect blocking small businesses and hospitality from accessing good energy deals? My colleague in the other place, Daisy Cooper, met last week with Ofgem, and it is absolutely clear that there is a case for the energy retail market to answer here in dealing with small businesses and specifically with hospitality. Will the Government recognise the particular need to act on costs in the food and agribusiness sectors, which are being so impacted by this war? That impacts clearly and directly on the cost of living for ordinary people.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, I am grateful for the questions and comments from the noble Baronesses, Lady Neville-Rolfe and Lady Kramer. The noble Baroness, Lady Neville-Rolfe, started her comments by focusing on the IMF’s revised forecasts that were published last week and that we discussed briefly in this House then. As both noble Baronesses know, the IMF reduced its expectations for GDP growth in the UK and increased its expectations of inflation. Both of these build on its judgment that the UK is more exposed to energy price shocks than our counterparts—a problem that the previous Government, as I have pointed out before, failed to address over 14 years. This builds on the IMF’s observation, following the last energy crisis, that the UK had higher inflation than other countries in the aftermath of Liz Truss’s disastrous mini-Budget and the previous Government’s untargeted and unfunded support package, which contributed to a more persistent rise in inflation and interest rates in this country than elsewhere.

I noticed, though, that the two noble Baronesses did not mention the positive economic news that came out last week. The latest GDP figures show that the economy grew faster than expected in the three months to February and that growth for the three months to January was upgraded. Last week’s data releases also showed unemployment coming down, real wages continuing to rise and borrowing in the year to February falling by £20 billion compared with last year. Neither noble Baroness mentioned any of those figures in their comments.

The noble Baroness, Lady Kramer, said that previous forecasts are now redundant and that we have no resilience. Previous forecasts are not redundant because they show that, going into this crisis, Britain was well placed to weather this conflict. At the time of the spring forecast, inflation was at 3% and set to fall to target; that compares with 11% at the start of Russia’s illegal invasion of Ukraine. We were in a much stronger position at the outset of this crisis, in terms of inflation, than we were then.

The spring forecast also showed that borrowing was set to fall more over this Parliament than in any other G7 economy. GDP per capita was forecast to rise by 5.6% over this Parliament, compared with a fall of 0.2% in the previous Parliament. We had increased headroom to more than £23 billion, making the right decisions to make sure that we had the necessary fiscal buffers to weather this conflict. As a result, we are well placed.

Some of the figures that came out last week, which neither noble Baroness mentioned, show that our economic plan was indeed working, but no one denies that we must do more on economic security so that the UK does not continue to be more exposed to energy price shocks than our counterparts. Since the election, we have invested in clean, homegrown energy, in renewables and in nuclear. Last week the Chancellor announced steps to go further: harnessing our domestic supply of oil and gas production in the North Sea, which the noble Baroness, Lady Neville-Rolfe, mentioned; further removing barriers to new renewables investment; and reforming our energy system by further weakening the link between high gas and electricity prices. I am grateful to the noble Baroness, Lady Kramer, for her support for that measure. I believe our economic plan was the right one before the war started; it is even more essential now in a world that is even more uncertain.

The noble Baroness, Lady Neville-Rolfe, spoke about defence spending. We are delivering the biggest sustained increase in defence spending since the Cold War. The Chancellor has approved access for the Ministry of Defence to use the special reserve to deploy additional capabilities in the Middle East, meaning that the net additional costs of these operations will be funded by the Treasury. We are investing £270 billion over this Parliament, after years of our Armed Forces being neglected under the previous Government. We will increase defence spending to 2.6% of GDP from 2027, and we are increasing spending on defence by £5 billion in this year alone. In answer to the noble Baroness’s specific question, the defence investment plan will be published in due course.

The noble Baroness, Lady Neville-Rolfe, mentioned oil and gas in the North Sea. As she knows, I agree with much of what she said on that point. Oil and gas production from the North Sea is an important and valuable resource, and its workforce is a vital asset for this country. That is why we are harnessing our domestic supply by managing existing fields for their entire lifetimes, including by allowing tie-backs for those fields to ensure that they remain viable. Last week, in advance of legislation, we published further details on tie-backs, which external analysis has predicted could result in tens of millions more barrels of oil being available for UK supply. Last week’s announcement also gives industry greater clarity to support investment in these projects and maximise the supply of our existing sites to support our energy security. The Government will legislate to introduce these changes in due course.

The noble Baroness asked specifically about Jackdaw and Rosebank. Development proposals are a matter for the North Sea Transition Authority and the Offshore Petroleum Regulator for Environment and Decommissioning. I am not able to comment on the specifics of any individual project while the regulatory process is under way, or on the investment decisions of individual operators. The Secretary of State for Energy Security and Net Zero will make a decision regarding the environmental impact assessments for these projects in the coming months.

The noble Baroness, Lady Kramer, asked about action to tackle energy bills. As she knows, we do not yet know what the full impact of this conflict will be, so we must be agile in responding appropriately at each moment. It remains the case that the best way to protect families and businesses is rapid de-escalation of this conflict. She knows that we have taken action already in a previous Budget, when we reduced energy bills by £150. We also froze rail and bus fares, as she asked, and we froze prescription charges, so we have done many of the things that she is calling for. She knows, too, that the price cap is giving households certainty on their bills until July, ahead of the winter months when people use 78% of their gas.

It is important to point out, as we respond to this crisis, that we must learn from the mistakes of the past. The previous Government pushed up borrowing, interest rates, inflation and mortgage costs with an unfunded, untargeted package of support under Liz Truss. Both noble Baronesses mentioned the importance of inflation; we must absolutely learn the lessons of the past. We are planning for every eventuality so that we can keep costs down for everyone and provide support for those who need it most, acting within our fiscal rules to keep inflation and interest rates as low as possible.

17:05

[Lord Clarke of Nottingham (Con)]

My Lords, one of the big problems that the Government faced when they took office was an unsustainable level of public debt and a totally unsustainable level of debt interest being paid by taxpayers each year on that debt. The Government saw clearly at the time that one thing they had to do was to stop the welfare budget exploding as it is and increasing so rapidly. They introduced some modest measures, which they then dropped as soon as they faced discontent from left-wing Back-Benchers in the House of Commons.

Do the Government intend to allow the welfare bill to increase by the hundreds of billions of pounds forecast at the moment? Do they intend to do nothing to alter the financial incentives, which they have made better for large families, not to seek work if they have established a good claim to benefits? These are major national problems that really ought to be tackled in the face of this worrying economic position, and the Government, almost two years into office, seem to be slipping into inaction, with a complete lack of leadership, allowing Back-Benchers in the House of Commons to leave the problem to fester.

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. We are repairing the public finances. At the time of the spring forecast, borrowing was set to fall more over this Parliament than in any other G7 economy. We are now borrowing below the G7 average, something that was not achieved in any of the 14 years of the previous Government. Just last week, we saw borrowing in the year to February fall by £20 billion compared with the previous year.

The noble Lord is absolutely right, of course, that the welfare system requires reforming. In the last five years of the previous Government, spending on welfare increased by £88 billion so, clearly, reform is necessary. There might not be consensus on what to do about it, but no one would believe that the system we inherited is working. It abandoned too many people to a life on benefits, wrote off too many people as too sick to work and condemned too many children to be too poor to eat. That is not a system that does not require reform, and reforming it we are.

To tackle fraud and error, we are increasing the proportion of face-to-face assessments for PIP from 6% in 2024 to 30%, saving £4.6 billion. We are rebalancing universal credit to incentivise people to work, rather than encouraging inactivity. We are redeploying 1,000 work coaches to support sick and disabled people who were previously left without contact. We are also supporting people to move into work, with £3 billion of investment into the pathways to work employment support and a £1.5 billion investment in the youth guarantee and the growth and skills levy.

[Lord Fox (LD)]

My Lords, returning to defence spending, the Minister referred to the biggest sustained increase in that spending. If it happens, we will welcome it, but it does not happen until the defence investment plan is published. I noted the slight smile on his face when he said, “in due course”, but if that money is not forthcoming then the GCAP project will not have its next stage payment. If it is not forthcoming, there will be SMEs across the country waiting for contracts to go but will not be able to fulfil them, because they will be out of business. Last week, the noble Lord, Lord Dodds, and I heard the Estonian Defence Minister specifically call out the United Kingdom for being slow to come up with the money. When will the Treasury release the defence investment plan, because, if it does not, there will be consequences?

[Lord Livermore (Lab)]

Of course there are consequences; I agree completely with the noble Lord. He talks of a hypothetical of the defence investment plan not happening. It will happen and, as I have said already, it will be published in due course.

[Lord Bridges of Headley (Con)]

My Lords, in response to my noble friend Lord Clarke’s question, the Minister spoke of the cuts that the Government are planning to make to the welfare budget. Is he saying that those cuts are sufficient and that that is all the Government will be doing?

[Lord Livermore (Lab)]

I do not have a crystal ball and I cannot look ahead to everything the Government will be doing, but I can tell the noble Lord, as I said to his noble friend, that we are reforming the welfare system.

[Lord Redwood (Con)]

In Washington, the Chancellor pledged to avoid unnecessary trade restrictions. Can we look forward to the Government cancelling the bad idea of introducing a large carbon border tax or tariff, which would be a penalty on British consumers and a further boost to costs, making British industry less competitive?

[Lord Livermore (Lab)]

No, and I disagree with the noble Lord, as I am sure I do on many issues. He talks about trade restrictions. He obviously championed a Brexit which put up massive trade restrictions with our nearest trading partners—

[Lord Redwood (Con)]

Tariff free!

[Lord Livermore (Lab)]

It was estimated at the time to be costing us some 4%, subsequently estimated to be 8%, of GDP, so he has put up massive tariff barriers with our biggest partner, which is not something that is in favour of free trade. He talks about it being tariff free, but he knows that the trade barriers in place are equivalent to some 20% in terms of tariff.

[Lord Ahmad of Wimbledon (Con)]

My Lords, I declare my interest as a member of the International Relations and Defence Committee. Does the Minister agree with the assessment made by the chair of the committee, the noble Lord, Lord Robertson, about complacency in the Government? Bearing in mind that the theme of this Statement is the Middle East and the Strait of Hormuz, we have seen the Prime Minister, together with President Macron, announce UK leadership as and when this conflict ends—we hope it will be soon—in marshalling and providing support for the Strait of Hormuz. With the defence investment plan due, to quote the Minister, “in due course”, does he think that is a sufficient response, bearing in mind the urgency of providing our allies, particularly those in the Gulf, with the required support?

[Lord Livermore (Lab)]

I have the greatest respect for my noble friend Lord Robertson but I disagree with him. Looking at the decisions that the Prime Minister and Chancellor have taken, we are delivering the biggest sustained increase in defence spending since the Cold War. As I have said already, and I am sure will continue to say, the defence investment plan will be published in due course. The noble Lord spoke of the international action that the Prime Minister has led; he knows that the Prime Minister has led global action by convening with the President of France a summit of nations to work together to support freedom of navigation through the strait. He will know that the UK will continue to play its part through engagement with many industries, including the insurance industry, to support shipping when the conditions allow.

[Lord Macpherson of Earl’s Court (CB)]

My Lords, does the Financial Secretary agree that, rather than increasing revenues, an oil price of more than $100 a barrel is far more likely to reduce them because of the wider effect on the economy? Does he agree that, at a time like this, when revenues are likely to be hard to come by, the Government should be very cautious about agreeing to increased spending proposals of the sort we have been listening to today?

[Lord Livermore (Lab)]

I agree with the noble Lord on that point. He is far more expert in these matters than me and was in the Treasury through many more crises than I have been, so he has great experience in this matter. He is absolutely right that the IMF showed last week that the impact on the size of our economy and GDP could be significant. No one quite knows yet what the full impact of this conflict will be; that will depend on its duration and severity. However, we must be agile in responding appropriately at each moment.

The noble Lord is absolutely right that, as we respond to this crisis, we should learn from the mistakes of the past. The previous Government, as I have said already, pushed up borrowing, interest rates, inflation and mortgage costs with an unfunded, untargeted package of support under Liz Truss. That package gave the most support to the wealthiest households: between 2022 and 2024, under the previous Government, households in the top income decile received an average of £1,350 of direct energy bill support. That left us with high levels of national debt and a cheque written then for a bill that is still being paid today. The party opposite talks about the importance of inflation, but we will not tackle inflation through an unfunded, untargeted package of support like we saw in the past.

[Lord Howell of Guildford (Con)]

My Lords, as the Minister says, no one quite knows yet the impact, particularly on the oil and gas sector. I declare an interest as a co-author of the original 1979 plan for sharing oil reserves in the event of a crisis. The crisis then was, of course, far bigger—not smaller, as the IEA says—than anything we are facing now.

Can I offer the Minister one piece of advice on the Government’s response? I know it is part of a much bigger jigsaw. The short-term impact of an oil shock, small or large, in any region, may be to push prices up, but they always come down very quickly, and the oil price is nearly always lower after these kinds of upsets than it was before. There is plenty of oil on the high seas, and plenty of oil can be added into the world’s supplies. And I gather that, if you have a big enough yacht and know the right people, you can get through the Strait of Hormuz without much difficulty. I suggest to the Minister that the greatest danger of using the oil price situation as an excuse for a lot more controls, caps on prices and so on, is that that will cause more danger and suffering than any possible shortage or temporary disruption in refined oil, imported or exported. Please could the Minister tell his colleagues to go very carefully in that area?

There are all sorts of other, bigger issues, but the current oil crisis is small beer compared with what we have had in the past. The economy can handle it pretty well without too much direction and involvement of a complicated kind, which could make things much worse and increase suffering.

[Lord Livermore (Lab)]

I am particularly grateful to the noble Lord for his optimism, which is much needed at times. Let us hope that he turns out to be correct. As I have said already, the long-term consequences of this are hard to predict at this point; they will depend on the severity and duration of the conflict. However, I think the noble Lord is saying that we need to make sure that our response is temporary and does not have long-lasting impacts. One of the principles that the Chancellor has set out for our response is that it should be temporary.

[Lord Scriven (LD)]

My Lords, one of the implications of what has happened in the Middle East is that the United Arab Emirates has announced that it is withdrawing from OPEC, which will have an impact on global oil market volatility. In the light of this new scenario, are the Government planning to take extra steps to shield energy-intensive industries from potentially very large swings in oil prices?

[Lord Livermore (Lab)]

The noble Lord is absolutely correct to say how important it is to do that. That is why we have taken further action to weaken the link. Last week, the Chancellor announced plans to weaken the link between high gas and electricity prices and to prevent spikes in energy prices from driving up inflation and costs for households. That is why the delinking steps that we have taken are so important.

The Chancellor also announced the extension of the British industrial competitiveness scheme, which was a commitment in the industrial strategy. That will reduce electricity costs from April 2027 by around 25% for electricity-intensive manufacturing frontier sectors in the industrial strategy and foundational sectors in their supply chains. Last week, the Chancellor announced that over 10,000 businesses are now expected to benefit from the scheme, rather than 7,000 as previously planned. Eligible businesses will also benefit from a one-off backdated payment in 2027, covering the support firms would have received if the scheme had been in place from April 2026. The consultation on scheme design and eligibility was published last week.

[Baroness O’Grady of Upper Holloway (Lab)]

My Lords, does my noble friend the Minister agree that conflict in the Middle East underlines the case for ever-stronger relationships with the EU, including on trade? Secondly, does he agree that on industrial strategy, the priority must be protecting plants and jobs? To what extent can we use our considerable procurement power to ensure that we protect the jobs and skills in this country?

[Lord Livermore (Lab)]

I do agree with what my noble friend said. Already, even before this crisis, the damage that Brexit was doing to our economy was apparent. As I say, at the time of Brexit it was estimated it would cost about 4 percentage points of GDP. That has now risen to between 6 and 8 percentage points of GDP. Obviously, cutting ourselves off from our closest trading partner was never going to be good for the economy, and that has been seen absolutely to be the case. It is why this Government have put in place the reset with our European friends, and we are deepening our trade relationships. The Chancellor set out her intention to deepen further our economic relationship with the European Union in her recent Mais Lecture, and I hope we will see more action on that in the near future.

In terms of the industrial strategy, I absolutely agree with my noble friend. That is why, for example, as I was just saying, the British industrial competitiveness scheme is so important in helping electricity-intensive manufacturing frontier sectors. That was a commitment given in the industrial strategy that has now been put in place. What my noble friend says about procurement is absolutely right. The noble Baroness, Lady Neville-Rolfe, will know how hard it is to change procurement rules in government, but I absolutely agree wholeheartedly with what my noble friend says.

[Lord Swire (Con)]

My Lords, when the Minister rehearsed his list of government initiatives and investments, he left one thing out: the issue of gas storage. Can he tell the House this afternoon how many days of gas we have in storage in the UK at the moment available to us, and what the Government are proposing to do to expand that capacity?

[Lord Livermore (Lab)]

I do not actually have with me the figure of the number of days of gas storage. I apologise if I should have that figure with me: I am more than happy to find it and to write to the noble Lord.

[Lord Londesborough (CB)]

My Lords, as a fair-minded Cross-Bencher, I acknowledge that there have been some encouraging signs in the first quarter, particularly GDP growth and employment in February. But I also recall that we had a brief fireworks display in Q1 last year, followed by a flatlining of the economy throughout H2. Now, as we know, as a result of the war in Iran, both the IMF and the OECD have marked down the UK’s employment forecast by more than any other G7 economy. So I hope the Government will be true to their pledge to be the fastest-growing economy in the G7—noble Lords will remember that pledge—by doing all they can to prove those forecasts wrong: none more so than for our SMEs, as we have heard, particularly our start-ups and scale-ups, which are swimming against the tide of rising taxes and increasing costs. What meaningful encouragement are the Government offering our SMEs, specifically to stimulate growth activity, investment and output, if we are to believe in this growth mission?

[Lord Livermore (Lab)]

I am very grateful to the noble Lord for his question. I have much experience of his fair-minded Cross-Bencher activities, and I am always grateful to him for his comments. He is absolutely right that there was encouraging economic news last week. As I said, the latest GDP figures show the economy grew faster than expected in the three months to February, and that growth for the three months to January was upgraded. He is obviously also right to say that Iran now presents serious challenges for our economy, and for all global economies. He is also absolutely right to say that it is important that we beat the forecasts. We have beaten the forecasts before: we beat them last year and I am confident we will be able to do so again.

We must continue to bear down on inflation and to build our energy security, both of which we have discussed already. Of course, we must continue with our growth plan. We must continue investing in growth-enhancing capital, transport and housing, for example, with record investment in R&D. We must continue reforming the planning system, to get Britain building; we must continue deepening our economic relationship with the European Union; we must make sure we have the fastest adoption of AI in the G7, which we have set as an objective; and we must deliver an effective regional growth strategy, so that growth and the increase in living standards are felt throughout our country.

[Lord Brooke of Alverthorpe (Lab)]

My Lords, the Treasury gets criticised for being too short-termist these days. I am wondering whether it undertakes market research among the public about the extent to which there may be an opportunity to get greater investment from them if we were ambitious enough to try one or two tactics such as, for example, reviving post-war credits. That produced money for the Government when they needed it and paid a return. People invested very widely after the last war, a long time ago; I am looking backwards. Looking forwards and at the Front Bench of the Tories, they are very much in support of public/private partnerships. When are we going to get that moving? I believe that, if we did market research, we would find that there is a view among the public that they would be willing to invest and this would provide new revenue.

[Lord Livermore (Lab)]

My noble friend is consistent in his support for public/private partnerships. He knows that I agree with him on that. He is also a consistent champion of greater levels of retail investment. He will know that we have launched a new model of public/private partnerships. We have said, for example, that they could be suitable for projects such as the Lower Thames Crossing, and we will look at additional projects where that model could add additional investment to our economy.