Lords Chamber

Tuesday 17th March 2026

(began 2 weeks, 6 days ago)

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None Portrait Oral questions: BBC World Service Baroness Royall of Blaisdon (Labour)
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>> Second. >> Oral Question Baroness Royall of Blaisdon. >> I beg. >> Leave to ask the question.
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None Portrait Oral questions: Representations to Fujitsu on making an interim payment towards the costs of investigation and redress in the Post Office Horizon case. Lord Arbuthnot of Edrom (Conservative)
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Fourth Oral Question Lord Arbuthnot.
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Baroness Finn Portrait Baroness Finn (Conservative)
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their families at the forefront of our minds. I pay tribute to the brave women and girls who were abused by him, and who have spoken out and called for justice, the Prime Minister told the House of Commons on the 4th of February that Peter Mandelson, when questioned about his relationship with Jeffrey Epstein, lied repeatedly. To date we are yet to see evidence of those lies, but we do now have proof that the Prime Minister was directly informed that Mandelson had maintained his relationship with Epstein after the latter had been convicted for child sex offences.

Upon receipt of this information, the Prime Minister, a former Director of Public Prosecutions, did not undertake a searching inquiry for the truth but instead left it to two personal friends of Mandelson, Morgan McSweeney and Matthew, now Lord Doyle, to engage in a farcical form of due diligence consisting of questions we are yet to see and answers which continue to be withheld. As if that were not concerning enough. It has been reported in the times that no written record of the appointment of Mandelson exists.

My Lords, I find this extraordinary as others who have, like me, worked in Downing Street know, there simply has to be an audit trail to transmit the Prime Minister's decision. The decision, we are asked to believe, was made in an. In an informal meeting with senior advisers and it is worth at this stage that the House should pause to recollect that a previous Prime Minister was heavily criticised by the House of Commons Committee of Privileges report of the 15th of June, 2023, when, in making statements to the Commons, he relied upon assurances that did not emanate from senior permanent civil servants or government lawyers.

Can the noble Baroness, the Minister, say whether the Prime Minister misled the House of Commons when he gave the assurance that full due diligence was followed? Does she accept that the sole basis upon which the Prime Minister gave that statement was the undocumented assurances of two personal friends of Peter Mandelson. Turning to other matters, why was Peter Mandelson paid £70,000? The government's argument is that not paying him would have resulted in a claim in the Employment Tribunal, with associated costs to the taxpayer.

Can the noble Baroness, the Minister, explain why the government did not have the courage to stand up to Mandelson to ensure he would not receive a penny of taxpayers money? Following his dismissal? The Prime Minister has said on the record that Mandelson acted dishonestly to gain the post of ambassador. If that is true, surely Mandelson's case would not have been successful at the tribunal. Does the noble Baroness, the Minister, understand why the public are so angry about this? He should not have received a penny.

My Lords, when we last repeated a statement on the government's response to this Humble Address, I asked whether the government would publish a schedule which would show which documents are being withheld and which are being published. I did not get an answer then, but the Chief Secretary to the Prime Minister said in the other place, I would need to take advice from lawyers in the Metropolitan Police before I could say whether these documents are being held for their criminal investigation. Yesterday, the official opposition reiterated the need for this, given at least 56 documents are thought to be missing.

Can the noble Baroness, the Minister, say whether that advice has been sought? When will the government give a formal answer to this important question, which has already been put to Ministers a number of times for the sake of public confidence in the process that Ministers and officials are following in response to the Humble Address, we must be able to see the amount of information that is being withheld and for what reason? My Lords, evidence we have already seen shows that the Prime Minister knew as a fact that Mandelson maintained his relationship with Epstein.

After the latter's conviction, the Prime Minister knew that Mandelson was unfit to be our ambassador, but he appointed him anyway. He allowed two of Mandelson's personal friends to synthesise an entirely farcical, illusory form of due diligence. At the end of this, the Prime Minister placed into our most prestigious and pivotal diplomatic post a man who is a man who is, as a matter of public record, already known to be a serial liar. Surely the truth is that the misplaced trust is not that of the Prime Ministers in Peter Mandelson, but the trust the British people placed in the Prime Minister at the last election, a trust which all too many now fail to have been entirely misplaced.
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Lord Wallace of Saltaire Portrait Lord Wallace of Saltaire (Liberal Democrat)
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My Lord Willis hesitate to criticise the due diligence process by the security services and the civil service. It seems to have been effectively and efficiently done, but disregarded by the Prime Minister's political advisers and overridden by the Prime Minister. He presumably thought that the task of establishing and maintaining a close relationship with President Trump demanded someone like Peter Mandelson in spite of, or even because of, his flaws. Can the Minister tell us when further files will be released? I've just looked through the first package of that has been released.

It's actually very thin and there's clearly an awful lot more to come out. And just to repeat, there's a lot to come out, not just from London but also from Washington, which will overlap onto this. I'm sure the whole House will be happy that the Minister has been appointed by the Prime Minister to look further into this, and we will all do our best to cooperate with her in making sure that standards and procedures are improved. Can she tell us more about what she sees her work programme as being in her new responsibilities on ethics and standards? Will this work be primarily within government, or will it be as far as possible across the parties? And both houses, to make sure that, as far as possible, it gets the maximum buy in from everyone concerned and interested in politics and will therefore have the best chance of succeeding.

Will she, for example, consider strengthening parliamentary oversight of major public appointments, which is, after all, a common occurrence in a number of other parliamentary democracies. Can you tell us how the government proposes to strengthen further the ministerial code? Will it commit to regular revisions with advice from committees in both houses? Does she recognise that the case, which many of us keep making for putting the Ethics and Standards Commission and Acoba and a number of other things on a statutory basis, is a matter of future proofing.

We do not know what the outcome of the next election will be. It could be extremely messy and lead to some form of coalition government or whatever, and we need to make sure that we are future proofing our standards and commitments to make sure that any new government which comes in will find it easier to accept them than to override them. We have plenty of lessons from Washington of how easily things can go wrong. We need to make sure, as far as we can, to prevent them similarly going wrong over here.

Can you say a little about implications for the House of Lords? I note that the Conduct Committee is being charged with a rather difficult task of looking at our standards. The Leader of the House the other week reprimanded me for referring to us as a part time house, and she replied that we are now effectively a full time house. Yes, we are, but the way in which we are managed and governed still assumes that we are part time, that we earn other things outside the house, and that that requires us to have a different set of concerns about private interests and commercial and financial interests and activities outside than the Commons.

If we are now to be judged on the same level as the Commons as a full time house, that's quite a radical readjustment of the way in which one thinks about the second chamber. Can I also ask a little about what happens when peers are disbarred from the House, whether the government will consider putting before the House the idea that they should no longer be able to hold their titles, just removing them from the peerage role would be perhaps a more important way of signalling that they no longer have a position of honour within our political system.

Behind all this, there are some broader issues, of course, about the financial and political culture in London and in Washington and in New York and in Westminster, wealth and money in politics is something which we are all going to be facing as the representation of the people's Bill arrives in this House in a few months time, we will need to look at that very carefully. I hope we may be assured that the government will work with us to make sure that money does not override other matters in our life.
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Baroness Anderson of Stoke-on-Trent Portrait Baroness Anderson of Stoke-on-Trent, The Parliamentary Secretary, Cabinet Office (Labour)
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May I thank both.

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Baroness and the noble Lord for their questions? These are matters. Which are incredibly important.

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Which are incredibly important. That need to be addressed, not least because they now drive a huge amount of my own personal work. But I will come on to that. My Lords, I would first like to provide an update following the statement made update following the statement made last week by the Chief Secretary to the Prime Minister in the other place on the release of the first tranche of documents in response to tranche of documents in response to the Humble Address motion of the 4th of February.

As the Chief Secretary to the Prime Minister stated, Jeffrey Epstein was a despicable criminal who committed disgusting crimes and destroyed the lives of countless women and girls. What he did is unforgivable. His victims must be our first priority and Peter Mandelson's behaviour, including encouraging Jeffrey Epstein to fight his conviction for abusing a vulnerable young girl, was an insult to them and their suffering. We should also never forget that every time we discuss Epstein's horrendous behaviour, his victims relive awful experiences and these survivors must be front and centre.

When we debate all issues related to Jeffrey Epstein, his network and their impact. That is why there is a cross-party consensus in both houses for full transparency and accountability. The government is committed to publishing all documents relevant to the Humble Address and last week published the first tranche. These documents relate specifically to the decision to appoint Peter Mandelson as ambassador to the to the US, and the discussions that subsequently led to his dismissal. Further work is ongoing to compile the rest of the information in scope.

The government recognised the urgency with which this work must be completed and will keep your Lordships updated as that work progresses. My Lords, the Prime Minister has taken personal responsibility for Peter Johnson's appointment as ambassador. He has acknowledged it was a mistake and apologised, not least for believing Peter Mountains lies. Whilst the documents point to public reports of an ongoing relationship between Peter Madsen and Jeffrey Epstein, the advice did not expose the depth and extent of their relationship, which only became apparent after the release of files by Bloomberg and then the US Department of Justice, as the Chief secretary to the Prime Minister set out last week, there are specific documents that this government would like to disclose, but the Met Police have asked us not to do so yet in order to avoid prejudicing the ongoing criminal investigations.

Peter Mandelson We have agreed to that request. We will publish these documents in future. Once the Metropolitan Police have confirmed it will no longer prejudice their investigation. My Lords, the government have already taken steps to address weaknesses in the system. I would like to update you on the further steps we will take. As noble Lords will be aware, the government has asked the Conduct Committee of your Lordships' House to review the Code of Conduct, to consider what changes are required to ensure members of your Lordships' House can be removed when they have brought the period into disrepute.

We are also exploring whether the Committee can further strengthen the rules on lobbying and page advocacy. The Chief Secretary to the Prime Minister also announced that the Prime Minister has asked the Ethics and Integrity Commission to conduct a review of the current arrangements relating to financial disclosures for Ministers and senior officials, transparency around lobbying and the business appointment rules, and I look forward to receiving their report from before the summer recess. My Lords, the Chief Secretary also confirmed that we will conduct a review of the National Security Vetting system to ensure that we learn the lessons from the policy and process weaknesses related to the Mandelson case.

With regards to some of the specifics that were asked, I think some of the questions from Lord Alderdice will be slightly easier for me to answer, given that they're in my direct purview. But with regards to some of the questions asked by the noble Baroness, Lady Finn, my Lords, we have been clear that there are a series. There are many more documents which will follow in coming tranches. I'd like to be clear that even that any concern that the noble Lady has about who's seeing what and when, while it is.

While we have stated that we are withholding some documents at the request of the Met Police, we have agreed with Simon Hoare MP, the chair of the PAC and the. Of Pacac in the other place, that he is seeing all documents that are being withheld. So there is a member of His Majesty's opposition who is seeing everything as we are going through them. It is also incredibly appropriate that, given the scale of what we are doing and the fact that we are trying to and we are complying and will comply with both the spirit and the letter of the Humble Address that we are, that we're releasing the documents in such a way that is sensible given the nature of them, but also that the eyes are seeing them so that they can deal with them.

I want to assure noble Lords that all the documents will be published. Noble Lords will just and noble Lords have the opportunity to see all of them. But given the live police investigation, we have to take this step by step. I just want to touch on the 56 documents. I've read, the paperwork related to the 56 documents. I don't recognise the 56 documents, but the noble Lady did ask me a specific question about whether legal advice has been taken on the schedule.

My Lords, I have not seen that, but I will revert to her if such if such advice exists. Noble Lady also asked. Questions whether the Prime Minister had misled the Commons. He absolutely has not, and his comments all the way through are in line with the paperwork that is being released in each tranche. I think there's the bit of paper I was looking for in terms of some of the specifics raised by the. Obviously she is. The noble Lady is aware that I can't comment on the procedure on the privileges committee of the other place that was Parliament holding a former member to account.

But she asked specifically about some of the things that we have already done, as did the noble Lord, Lord Wallace. Actually, I'm going to touch actually on the question of the severance payments, which was a core theme from the noble Lady, as the documents show, Peter Mandelson initially requested a sum for his severance payment that was substantially larger than the final payment, more than six times the final amount, despite the fact that he was withdrawn from Washington because he had lost the confidence of the Prime Minister as the chief secretary to the Prime Minister explained yesterday, the government obviously found that to be inappropriate and unacceptable.

The settlement that was agreed was to avoid even higher, further costs involving a drawn out legal claim at the Employment tribunal. Given Peter Manson's employment as a civil servant rather than a Minister. As noble Lords will know, Ministers can be dismissed without recourse to the Employment Tribunal. Let's hope I am not experiencing that soon. But civil servants are treated differently. As you can see from the documents, Peter Manson settlement was in line with his employment contract and standard civil service HR processes, avoiding the risk and high cost of drawn out legal action, ensuring he was quickly removed from the payroll.

As set out in the documents, the Chief Secretary to the Treasury approved this payment in line with standard HMT guidance on the use of severance payments. I've already touched on the issue of vetting, but I want to spend a couple of moments just responding to the questions of Lord Wallace, given that this is regards to the question about the release of further documentation, given that this is a request supported by both houses, but about the Commons and complying with Commons, obviously we need to lay those documents in front when the house is sitting.

So those documents will be will be come forward in due course. It's just where the recess gets in the way or not, but either before or after. With regards to my own work program, I look forward to discussing many details of that with members of your Lordships' House, not least Lord Wallace. I truly believe that if we are going to rebuild faith in in politicians and in what I consider to be one of the most important buildings in the country, then it has to be a cross-party, cross-government and cross parliament project.

So I really would actively seek to work with all members of your Lordships' House on where we believe the gaps are and what is realistic about what we can fix, but also how we can rebuild trust. With regard to the ministerial code revisions. And I would not be surprised that, unlike his colleagues in the Other place who suggested that we may want to put it on a statutory footing, that is not something that we will be seeking to do. But what I do want to do, and I'm very aware of what the noble Lord said about future proofing standards.

Many people who have been at this Dispatch Box and have been at Dispatch Box in the other place are aware that we rarely get to look at standards in the round. The last time this was done with a clear objective was to note was the establishment of the Nolan principles. I view this as a once in a generation opportunity to make sure that we get this right. We have a Minister dedicated to it. I don't know the last time that happened. So this is about how we can make sure we use this moment to fix the things that typically get pushed to one side.

I will, however, agree with my noble friend Baroness Smith, the leader of our house. She was right. We are a full time house with part time members and we are different to the other place, so noble Lords will be aware. I used to be a member of the Other place and I'm married to a member of the Other place. What he is expected to do and what I do, what I do before I was on the front bench are two very, very different sets of responsibilities.

And and we need to make sure that we don't lose. What is so special about this building and about our chamber and about some of the expertise we have because of people's outside interests compared to the other place, the noble Lord also raised the representation of the people's Bill and the impact of money. Also, what noble law didn't touch on the Ryecroft review, which will be coming to and will hopefully and will very much tie into our discussions on these issues.

But let me conclude by reiterating that Jeffrey Epstein was a despicable individual, and Peter Mandelson's decision to put their relationship before his victims and the vulnerable is reprehensible. As the Prime Minister said, the victims of Epstein have lived with trauma that most of us can barely comprehend. They've had to relive it again and again, and they have had to see accountability delayed and too often delight denied. My Lords, Peter Mandelson should never have been appointed. The government will comply with the Humble Address and I will provide further updates to your Lordships' House in due course.
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Baroness Anderson of Stoke-on-Trent Portrait Baroness Anderson of Stoke-on-Trent, The Parliamentary Secretary, Cabinet Office (Labour)
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I think it might be helpful just >> I think it might be helpful just for information for your Lordships' House. Is that the previous ambassador to America had had come ambassador to America had had come to the end of her tenure. So the question would have been whether it would be an extension or not, not about whether she should have been removed or not. I don't believe that that was that is within the scope of the paperwork, because the paperwork, the paperwork being released directly pertains to the the appointment and removal or and withdrawal of Peter Mandelson as His Majesty's Ambassador.

If I'm wrong, I will write to the noble Lord with regard to also the scope of the Humble Address the EU processes. I believe there are other organisations looking at other roles and some of the history, the scope of what is currently at play. Obviously there is the police live police investigation, but there is also the matter that that is before us relating to the Humble Address is of his. The immediate appointment.

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My Lords, in the Humble Address it refers on several occasions to electronic communications between electronic communications between officials in the government and political appointees. It's been a long standing practice under the Freedom of Information Act, that communications between Ministers communications between Ministers and officials, on whatever device and whether on private emails or government emails, are all within government emails, are all within scope of freedom of information laws. Can the Minister confirm that the government is working on the
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Lord Harris of Haringey Portrait Lord Harris of Haringey (Labour)
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>> My. >> My, my Lords, my Lords, my Lords, my Lords, my Lord, my Lords.

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my Lords, my Lord, my Lords. My Lords. We have time to hear from both benches. Let's go to the Labour benches first and conservative benches.

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My Lords, could my noble friend the Minister, I mean, first of all, this is not the first political appointment to an ambassadorship, appointment to an ambassadorship, including that of Washington, which hasn't been without controversy. But could my noble friend the Minister confirm that there are some circumstances in which it is appropriate for there to be a political appointment, rather than one which is selected from civil service ranks, provided it is quite clear that that is the responsibility of the Ministers making that appointment.

Secondly, could she confirm that it is actually quite common for organisations who are facing what may seem quite unreasonable severance requests from individuals actually to make a judgement about what the cost is of fighting those arrangements and reaching a balanced decision. And in the circumstances where people are criticising the nature of some of the material being published and trying to read too much into it, is it not the case that, as Bismarck said about if you ever want like laws or sausages, never watch either being made that actually this minute inspection which quite properly the opposition has called for to be released, will reveal the imperfections of any process in government or indeed anywhere else.
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None Portrait Amendment:1 Lord Sandhurst (Conservative)
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prosecutions are a vital avenue for parties to get access to justice. In particular, many charities use In particular, many charities use private prosecutions to recover losses by theft and fraud. The losses by theft and fraud. The removal of clause 12 preserves the current system. Clause 12 would have created an state of uncertainty in the legal market. It would have had a detrimental effect on the availability of private prosecutions for those who need that service. I thank the noble and learned Lord Lord Marks for his support on these points.

I also seek to move amendment one in my name today and that in and that of Lord Keen, which removes a cross-reference the clause which no longer stands part of the bill. My Lords, I also commend the Liberal Democrats for their engagement in this bill. It was pleasing to find areas of agreement during this bill's passage. I'm grateful for their amendments regarding both notification and exceptional circumstances. For unduly lenient sentence applications, I strongly urge the government, in the other place, to recognise the importance of these reforms and to support all amendments that passed at report.

Both of these amendments have the support of the Conservatives and of the Victims' Commissioner. Turning briefly to amendment 29, it was disappointing that the noble Baroness, the Minister, spoke against our opposition to the automatic release of sexual offenders and domestic abusers at the one third point of their custodial sentences. If the government has still committed to their manifesto pledge of halving violence against women and girls, then this amendment deserves serious consideration. I thank the noble Baroness Baroness Brinton for her expression of support on this point.

We, in turn, intend to return to this issue at a later date. To conclude, I remain grateful to all noble Lords for their contributions during the various stages of this Bill. I urge the government to reflect carefully on the amendments relating to publication of sentencing remarks, private prosecutions and the unduly lenient sentence scheme. I have no doubt that these issues will return to your Lordships House in due course. Thank you. I beg to move amendment one.
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Baroness Levitt Portrait Baroness Levitt, The Parliamentary Under-Secretary of State for Justice (Labour)
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My Lords, amendment one is a is a.

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one be agreed to? My Lords, it's a minor and technical amendment following Report stage and the government Report stage and the government will not oppose it today. My Lords, I beg to move that this bill do now pass. This bill represents a significant step forward in strengthening both the rights of victims and the way in which our victims and the way in which our courts operate. At its heart, it seeks to ensure that victims are treated with dignity, compassion and respect throughout the justice process, whilst ensuring that our courts are able to deliver justice more swiftly and effectively.

I would like to thank all members of your Lordships House who contributed during debates and the officials for their support during its passage, and all those noble Lords who have given their time and expertise to scrutinising the Bill through its passage, through your Lordships House and through their engagement, have strengthened the Bill in the process. I am especially grateful to the noble Lady Baroness Brinton and the noble Lords Lord Marks and Lord Russell, for their support and engagement on the key measures in the Bill, and I look forward to continuing working with them on the recent amendments regarding the unduly lenient sentencing Scheme.

Court transcripts and support for victims of homicide abroad. I also thank the Noble and learned, Lord Low Lord Keen and the noble Lord Lord Sandhurst for their informed, thoughtful interventions and the constructive challenges that they have put forward. I also look forward to discussing further their recent amendments regarding court transcripts and private prosecutions. My Lords, I am grateful for the broad support of this bill across the House. I look forward to working on its implementation. I beg to move here. Here.
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Baroness Brinton Portrait Baroness Brinton (Liberal Democrat)
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Benches the Liberal Democrat benches. My Lords, I'm very benches. My Lords, I'm very grateful that the Conservatives have already spoken their thanks for the bill. We want to echo the thanks. And I also want to start with the very constructive engagement from all sides of the House. I particularly want to thank my my colleagues, Lord Marks and and also Lord Russell, who I have worked closely with on victims issues for, for many, many years. I also want to thank the House more generally, the timely passage of this bill just at the moment is an unusual thing, and I'm very pleased that we were able to conduct our business in the time allocated and still come to the end of the bill and feel that real progress has been made.

And that's where I want to thank the noble Lady, the Minister and all her officials, because despite the fact that a number of votes were won at Report stage, and we look forward to continuing work with her, many of the items we discussed in private between committee and report have been resolved to some extent or another. And speaking on behalf of all the groups and the individual victims who got in touch, not just now but in the run up to the bill, we are grateful for the progress that has been made, but that does not mean everything is done and I and many others will continue to work on those particular issues in the future from our sides.

As has already been mentioned, we particularly want to to see some movement on court transcripts on homicide abroad and on unduly lenient sentences. Very grateful to the discussions that are already beginning between now and ping pong.
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Lord Hacking Portrait Lord Hacking (Labour)
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My Lord Moynihan. >> To speak on the motion that this bill do now pass. And in doing so, I readily start with praise and I readily start with praise and thanks for my noble friend, the Minister, for her entire conduct of this bill throughout this House. I expressed particularly thanks to my noble friend for a willingness to hold meetings with us on a number of occasions. Despite have very heavy and busy diary. This bill does well in strengthening the position of victims in our judicial processes and in strengthening the powers of the Victims' Commissioner.

But there is unfinished business, my Lords, relating to the victims of trafficking of women and girls, particularly related to the provision of sexual services. And as I told the housing committee, the numbers are large now, not in the hundreds but in their thousands. This is the third as this is the Third Reading. My Lords, I don't seek to repeat arguments made in committee or report. It suffices to say that that these women and girls are often illegally brought into this country, are in a fraught and difficult position.

They are, for example, terrified when the authorities are drawn to their attention that they will be deported. My Lords, they need our help. And help, I have to say, is not being provided to them either in this bill or in the policing, the Crime and Policing Bill as the as the independent Anti-Slavery Commissioner rightly said in her excellent report, and I strongly commend your Lordships to read it. I strongly commend those responsible in the Home Office. Read it as obligatory reading.

And, as she says in her foreword, tackling modern slavery is everybody's business. My Lords, indeed it is. And I recognise when speaking to your Lordships and to my noble friend, that although modern slavery is in the remit of the homeless and not the Department of Justice, I do ask my noble friend to speak strongly in government of the need to give the victims of modern slavery the support which they are not currently receiving and which they need.
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None Portrait Debate: Spring Forecast Statement (to be debated together with the Finance (No.2) Bill)
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Lord Livermore Portrait Lord Livermore, The Financial Secretary to the Treasury (Labour)
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I beg to move that this House takes note of the spring forecast. My Lords, it is a privilege to open this debate on the spring forecast and the Second Reading of the finance Bill. I very much look finance Bill. I very much look forward to the valedictory speech from the noble Lord Lord St John of Bletso. My Lords, upon taking office, this government inherited three major crises the crisis in the public finances, a crisis in our public services, and a crisis in the cost of living.

That is why we have repeatedly taken the action necessary to bring stability to the economy. The choices we have made are the responsible ones, and the spring forecast showed that the economic plan we have been driving forward since the election is the right one. In our first budget, we took action to fix the foundations of the economy by repairing the £22 billion black hole in the public finances left by the previous government. Then, at the spending Review last summer, we stuck to our non-negotiable fiscal rules, keeping a tight grip on day to day spending on investing an additional £120 billion in growth, driving infrastructure and getting debt on a downward path.

In the budget last November, we built greater resilience by doubling the headroom against the stability rule and cutting borrowing as a share of GDP. In every year of the forecast. Our economic plan is built on three pillars stability in our public finances, investment in our infrastructure and reform to Britain's economy. Stability is the cornerstone of this plan because it's the single most important precondition for economic growth. That is why we've committed to one fiscal event a year, limiting major policy changes to the budget, helping to give businesses and households the certainty they need to plan and to invest.

The forecast from the office for Budget Responsibility, published last month, showed that our plan is working and that we enter this period of global uncertainty with the fundamentals of our economy strong. We have cut inflation standing now at 3%, a lower base than at the outset of Russia's illegal invasion of Ukraine. We have prioritised growth to drive up living standards, and the OBR forecast showed GDP per head set to grow more than was expected at the budget, with growth of 5.6% over this parliament, and we have stabilised the public finances, having already reduced the deficit by £20 billion this year from 5.2% to 4.3% of GDP.

These forecasts, of course, predate the current conflict in the Middle East, and the full economic impact of that conflict will depend on its severity and its duration. The movements on energy markets we've already seen are likely to put upward pressure on inflation in the coming months. Our economic approach will be both responsive to a changing world and responsible in the national interest. As the government has demonstrated time and again, we will take the necessary decisions to help families with the cost of living and to protect the public finances.

This government is delivering the biggest uplift in defence spending since the end of the Cold War. The Chancellor has also approved access for the Ministry of Defence to the Special Reserve to deploy additional capabilities in the Middle East, meaning that no net additional costs of these operations will be funded by the Ministry of Defence, but instead will be funded by the Treasury. Last week, following her call with other G7 finance Ministers, the Chancellor set out her further priorities for international cooperation, for immediate de-escalation and a return to a diplomatic process guaranteeing the security of vessels passing through the Strait of Hormuz, supporting a coordinated release of collective International Energy Agency oil reserves, the release of which has since helped to stabilise international oil markets and setting out how the UK will play its part as the global hub of maritime insurance.

And on Friday, the Chancellor met with petrol retailers and energy suppliers to make clear that the government would not tolerate any company exploiting the current situation to make excess profits at consumers expense. My Lords, while we don't yet know how long this conflict will last, it underlines the importance of building a stronger, more secure economy able to withstand whatever instability we may face, the strength of our economy and of our public finances are possible only because of the budget last year and the measures contained in the finance Bill before us today.

That budget had at its heart three pro-growth choices. First, by choosing to maintain economic stability, getting inflation and interest rates down, we helped give businesses the confidence to invest in our economy, the room to grow. Secondly, by choosing to reject austerity, we protected £120 billion of additional investment in growth driving infrastructure. And thirdly, by choosing to back the fast growing companies of the future, we supported the investment, innovation and economic dynamism that will increase growth in the next decade and beyond.

That includes measures in this bill to make Britain the best place in the world for firms to start scale and to stay. We are doing that by widening eligibility for our enterprise incentives, so scale ups can attract the talent and the capital that they need. We're expanding the enterprise management incentive so more companies can offer tax relief share options, and we are re-engineering our enterprise investment and venture capital trust schemes. So they don't just back early stage ideas, but stay with companies as they grow.

For all businesses, both large and small, we're also maintaining the lowest corporation tax rate in the G7 and the joint most generous capital allowances in the OECD. In her Mays lecture today, the Chancellor has gone further on our growth agenda, setting out how we will deepen our economic relationship with our European partners, how we will back innovation and harness the power of AI, and how we will take the necessary action to build growth on a broad, stable basis right across the UK. But of course, the pro-growth choices we made in the budget do need to be paid for, and that does mean asking everyone to make a contribution.

The previous government froze the main income tax thresholds from 2021 to 2028. This finance bill maintains all income tax and equivalent national Insurance thresholds at their current level for a further three years from 2028. I do accept that maintaining these thresholds is a decision that will affect working people. The Chancellor and I both said this in 2024, and I won't pretend otherwise now. But while we are asking everyone to make a contribution, we're keeping that contribution as low as possible through reforms to our tax system to make it fairer and to ensure the wealthiest contribute the most.

That includes increasing taxes on property, dividend and savings income to narrow the gap between tax paid on work and tax paid on income from assets. Currently, a landlord with an income of £25,000 will pay nearly £1,200 less in tax than their tenant with the same salary because no national insurance is charged on property dividend or savings income, that is not fair. That's why this finance bill increases the basic and high rate of tax on property savings and dividend income by two percentage points, and the additional rate of tax on property and savings income by two percentage points.

Around two thirds of the revenue from these increases are expected to come from the top 20% of households. We are also reforming the tax system to ensure it keeps pace with the fast changing economy. This finance bill increases taxes on online gaming and online betting, while protecting UK horse racing and abolishing bingo duty, and it prevents private hire vehicles operators from exploiting a tax administration administration scheme so that everyone pays fairly. We're going further to close the tax gap to ensure that everyone pays the tax they owe.

Reforms contained in this finance bill will help to collect more unpaid taxes and modernise the tax system, to make it easier for taxpayers to get their tax right the first time. And having listened carefully to feedback from the farming community and family businesses, this bill also raises the 100% rate of relief on Agricultural Property Relief and Business Property Relief, from £1 million to £2.5 million. This means a couple will now be able to pass on up to £5 million of agricultural or business assets tax free, on top of the existing allowances such as the nil rate band.

My Lords, since coming to office, this government has implemented an economic plan to bring stability to the public finances and to strengthen Britain's economy for the long term, the spring forecast shows. This plan is the right one, with lower inflation and borrowing, higher living standards and a growing economy, Britain today is in a stronger position to withstand whatever uncertainty comes our way. But that is only possible because of the action we took in the budget last year and the measures contained in this finance Bill.

They are the right choices to protect families and businesses in an uncertain world, and they demonstrate that this government has the right economic plan for Britain's future. I beg to move.
16:39
16:40
Baroness Neville-Rolfe Portrait Baroness Neville-Rolfe (Conservative)
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alone that in place when the finance bill was introduced, finance bill was introduced, different and significantly worse. The Middle East war has overturned economic expectations, especially optimistic ones. A major factor of this deterioration is, of course, this deterioration is, of course, increased oil and gas prices, which are inevitable consequence of political instability in the Middle political instability in the Middle East. This exacerbates the unfortunate effects of the government's own policies, which all agree have led to the highest fuel prices in the developed world.

The resulting inflation already mentioned by the Minister adds to the elevated levels we've already experienced during the Chancellor's time in office, and that in turn risks pushing interest rates higher, meaning rising mortgage costs for homeowners and greater pressure on household finances. Investors are now pricing in a 70% chance that the Bank of England will increase rates by a quarter point before the end of the year, having previously expected two quarter point cuts this year. Unfortunately, gilt yields have jumped by more than any other more than any other G7 country.

Public finances are already under severe strain. Borrowing is running higher than forecasts when the government took office, and the country is now spending well over £100 billion a year simply servicing debt. Since this government came into office. Gilt yields are up, growth is down, inflation is up, unemployment is up, debt is up and the UK goes into this potential energy crisis, already facing some of the highest energy prices in the world. It is extraordinary that Mr. Ed Miliband, at a time when we face some of the greatest fuel insecurity in modern history, is content for the country to rely on oil from the Middle East, but is against investing in the oil and gas from our North Sea.

This, my Lords, is a very serious moment when the global outlook darkens. Our domestic economic resilience matters more than ever. Yet the government's stewardship of the economy has left the country more exposed to shocks like this. And when that happens, it is ordinary taxpayers who end up paying the price. A lot has been said about the government's level of preparedness on the military front, but what is also true is that they were poorly prepared on an economic front. The economy that has developed under this government and this Chancellor is profoundly precarious, and we are finding ourselves at the mercy of events.

I mean, the noble or the Minister has again waxed lyrical about the legacy of the last government. There were things we did wrong, notably on immigration, but I would remind the House that we had to cope with the legacy of the financial crisis, Covid and the Ukraine war, but we still delivered low inflation and an economy that was growing. And we now have a new conservative leader with a refreshing determination to change things. So I turn to the spring statement. This was largely a non-event.

Once the rhetoric, feeble rhetoric that is stripped away, it's difficult to identify any clear substance in what the Chancellor had to say. There were a few fairy tales, such as the Chancellor's willingness to blame everyone else, from Trump to Putin, for the state of our economy. When the last time I checked, she herself is the Minister responsible. And looking at the statistics, unemployment is rising sharply, hitting a staggering 7.6% in the capital, including a nine year high for young Londoners. Youth unemployment in London is above that for the eurozone because of massively tightened employment regulations and much reduced economic incentives to employ them through changes to NICs and the minimum wage.

Yesterday's Youth jobs grant is a drop in the ocean, and a poor attempt by the government to cover up the immense harm they have done to employment in this country since assuming office. Meanwhile, the OBR have predicted that the government will spend £330,000,000,333 billion on welfare this year, 10.9% of GDP, and by 2030 to 31, it's forecast at £407 billion, 11.7% of GDP. Working people will be asked to pay ever more in tax to fund the government's failure to get people back to work.

Above all, the OBR has downgraded its forecast for growth from 1.4% to just 1.1%, which in truth amounts to growth that is barely there at all. And when elected Prime Minister and the Chancellor talked endlessly about growth as their prime objective promised us planning reform, promising planning, planning reform, CPD infrastructure investment, world leading AI and a skills revolution. All good things which I supported. But the delivery has been abysmal. Now they've almost stopped talking about growth in favour of vain efforts to subsidise the cost of living.

And history tells us that subsidies do not constitute a viable long term strategy. Indeed, the OBR warns that inflation is expected to rise again, bringing with it the real prospect of higher mortgage rates and higher borrowing costs for the government. The reality for working people is stark. Wages are being eroded by rising prices. While taxes continue to climb, millions more will be dragged into higher tax bands by the so-called stealth tax of frozen income tax thresholds, now locked in place until April 2030, 232 031 and yet, despite all of this, the Chancellor has boasted that her economic plan is the right one for Britain.

I really doubt if anyone believes that, my Lords, what Britain needs is growth, jobs and investment. What the Chancellor has delivered is rising unemployment, ever expanding welfare and a flatlining economy. The failure to tackle welfare reform is particularly worrying when we need to fund extra defence spending to protect ourselves and our citizens in an increasingly dangerous world. As it is, we are not yet on the path to prosperity. I now turn to the finance Bill and first, perhaps the Minister could kindly confirm that the fuel duty increase of £0.05 provided for for in the Bill is being delayed.

With oil prices sky high, this makes good sense. As we have argued, this bill lays bare the government's priorities. It makes a clear and deliberate choice to raise taxes on those who work, save and invest, and to use a substantial share of that money to expand the welfare bill. In doing so, the government is targeting and taxing precisely those people who sustain the productive heart of our economy, which is savers who put money aside, investors who back enterprise and the businesses that create jobs and growth take the continued freezing of the income tax thresholds.

This is fiscal drag on an enormous scale, around 800,000 people will be pulled into the basic rate of income tax, and around 1 million more will be dragged into the higher rate by 2030. It is expected that 1 in 4 taxpayers will be paying either the higher or additional rate of income tax, and it doesn't stop there. In addition to the unfair arrangements for salary sacrifice which the House. This House has voted against, the repayment threshold for student loans is frozen, effectively imposing another hidden tax on younger generations starting their careers.

Even those citizens who rely solely on the state pension are now at risk of being poured into the income tax net. The government is reaching into the pockets of those who invest in Britain. The 2% increase in the tax on dividends, a £1.2 billion tax grab, sends exactly the wrong signal. Instead of encouraging investment in British companies and rewarding those who take risks to build and grow businesses, it penalise them. And it is no surprise that 16,500 of them have signalled their intention to move abroad last year.

And then we come to the deeply troubling changes to IHT, the family farm and family business taxes just before Christmas, under enormous pressure, the government attempted a partial retreat. But let us be clear this so-called concession does not solve the problem. Many farms and family businesses may own valuable land or machinery, but they operate on tight margins. A paper valuation is not the same as spare cash sitting in the bank, and the consequences are predictable. When faced with this kind of uncertainty, businesses do not expand.

They pull back. They postpone investment. They do not buy new equipment or improve their restaurants. And as we've seen, they reduce employee numbers. Moreover, before I close, I should refer to the troubling letter I have received from the Chartered Institute of Taxation about the difficulties the various IHT changes will cause for personal representatives of the deceased. The costs in administration of the bill's complexity and the defects of the tax avoidance provisions. So not easier for taxpayers as the Minister suggested.

My Lords, when we step back and look at the spring statement and the finance Bill, a clear picture emerges of the direction in which this government is taking the country. Instead of policies that reward work, encourage investment and drive growth. We see rising taxes, a growing welfare bill and a struggling economy. The people who carry the greatest burden under this government are precisely those who sustain our economy. The families who work hard and pay their taxes, the entrepreneurs who take risks to start and grow businesses, the investors who back innovation, and the farmers and family farms who keep our communities and supply chains alive.

My Lords, a healthy economy is built on confidence. The confidence to invest, the confidence to hire and the confidence to plan for the future. The statement in the finance Bill will give no confidence to anybody on the evidence before us today, it is clear that the government is moving in precisely the wrong direction at a time of international challenge. Against that rather difficult background, I very much look forward to the valedictory speech

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of the noble Lord, Saint John of Bletso. It's with a mix of sadness and

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It's with a mix of sadness and excitement that I address your Lordships House. And this my last Lordships House. And this my last time, a sadness because I shall miss participating in debates, particularly on Africa and particularly the Select Committee works of your Lordships' House and APPG work. But it has been an enormous privilege, and I'll also miss seeing your noble Lordships who've become great friends over so many years. I had hoped to make my valedictory speech on the Space Economy Select Committee, so ably chaired by Baroness Ashton, but sadly, we've run out of time on
16:51
Lord St John of Bletso Portrait Lord St John of Bletso (Crossbench)
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that score. But I'm enormously grateful to the doorkeepers, the refreshment department and all the refreshment department and all the staff of the Palace for the incredible support that they've given me over so many years, and given me over so many years, and they continue to give all of us. I'm also grateful to my noble I'm also grateful to my noble friend, Lord Kinnoull, for his able stewardship and leadership of the Crossbenches. I have to say, I joined the House of Lords more out of curiosity than desire.

I say so because I was just 21 when my father died and I joined your Lordships House six months before the Iranian Revolutionary Guard took control on Iran, and six months before Margaret Thatcher became our Prime Minister. But I joined your Lordships' House for one primary reason, and that was that I wanted to speak about the opportunities and the challenges facing South Africa and southern Africa, as well as petition for the release of Nelson Mandela, otherwise known as Madiba, to all of us.

But after my health challenges last year, I decided the time was up and I'm excited now to be spending more time in Africa. But enough about me. I shall restrict my comments today to the spring forecast statement and not the finance bill. And there are three points that I want to raise. Tell you, the Chancellor's forecasts have been overtaken by geopolitical events in the Middle East, leaving more questions than answers. We are now exposed once again to the very conditions that we thought we had escaped.

That is energy driven inflation and stagnation growth. The statement underestimates the scale of the structural challenges that we now face, surely against a backdrop of spiralling fuel costs, now is the time to reconsider the strategic role of our domestic energy resources, more specifically the North Sea. Would it not be wiser during a period of geopolitical instability to support responsible domestic production, whilst we continue the transition to cleaner energy sources? This is not a question of abandoning our commitment to net zero, but of recognising that the transition must be managed in a way that preserves resilience.

My second point is that on public procurement, public procurement of goods and services now accounts for between a quarter and a third of all government expenditure, amounting to an excess of £300 billion a year. Even modest inefficiencies within a system of that scale can translate into tens of billions of pounds of avoidable cost savings. At a time of constrained fiscal headroom, it is essential that we focus not only on what the government spends, but on how effectively it spends it.

What steps are Her Majesty's Government taking to deploy artificial intelligence to improve efficiencies, reduce duplication and identify cost savings across the procurement ecosystem? My Lords, I was fortunate way back in 2017 to be a member of the subcommittee, ably cheered on artificial intelligence so ably chaired by the noble Lord, Lord Clement-Jones. None of us then had any preconception about the impact that AI would have on all of our lives. We need to now confront the other side of the AI revolution, and that is the impact it is likely to have on employment.

Nonetheless, artificial intelligence will undoubtedly drive productivity as well as growth, but it will also displace roles, displaced roles, particularly in admin and professionalism, and middle income sectors. We are, in effect entering a period where technological progress may coincide with structural labour market disruption, and this presents a fundamental policy challenge. I cannot assume that the labour market will adjust itself organically. We need to act deliberately. My Lords, the noble Lord Lord Hunt of Wirral has been constantly questioning what measures Our Majesty's Government are taking are.

His Majesty's Government is taking to reduce spiralling unemployment in the UK. Can the noble Lord. The Minister, in winding up, elaborate on what is being done to invest in promoting large scale reskilling programmes, incentivising businesses to retrain their workforces and forging closer partnerships between industry, government and education. If we fail to do so, we risk creating a two speed economy where opportunity expands for some but contracts for many. In conclusion, my Lords, the Chancellor's spring forecast reflected a world of gradual recovery and relative stability.

But the world that we now face is far more volatile, more uncertain and more complex. This demands a shift in thinking. In closing, in the coarser words in South Africa, in Kosi Kakhulu Salaga, which means. Thank you very much. Goodbye. Was an excellent.
16:57
Lord Bilimoria Portrait Lord Bilimoria (Crossbench)
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Speech by the noble Lord Lord St >> Speech by the noble Lord Lord St John of Bletso, the 22nd Baron John of Bletso, the 22nd Baron Syndrome of Bletso, a title which has existed for 460 years. My Lord, I declare my interest in the nearly 20 years I've been privileged to be a member of this House. Anthony is my best friend in this House. He entered this chamber 21 years old, as we've heard the Baby of the House, and he's been here for nearly 50 years.

He's been a Lord in waiting. He has phenomenal expertise in African affairs. In fact, he is the expert on Africa in this chamber. He's held positions in committees and Vice Chair of the All-Party parliamentary Group on Africa and Zimbabwe and South Africa. I remember speaking in the debate, the tribute debate to Nelson Mandela when he passed away, and what a brilliant speech Lord St John made then. He's had a very successful business career. After going to school at Bishop's, the finest school in Cape Town and University of Cape Town, and then here at London School of Economics and qualifying as a lawyer, that real world business experience internationally, he has brought to bear in this House and the Lord Keen, the doorkeepers.

When I joined, they said, there is our James Bond Lord. He is merely 68 years old. The average age of this house is 71. He hasn't even reached the average in my book. You're young until you're 60. He's middle aged. Old age is from 80 onwards. Well, it's. I feel it's so sad that the hereditary peers are leaving the house in the way that they are, and there is no better shining example of their dedication, commitment and contribution than Anthony Lord St John of Bletso.

He's cheerful, energetic, charming, gracious, active, has friends in every corner of this house. I've never heard a bad word said about him and everyone loves him. Peers and staff alike. Yeah, yeah. Although Lord St John is retiring, we look forward to seeing him back at the house regularly. And I say farewell, my dear friend. And I farewell, my dear friend. And I mean fair. Well. My Lords, the statement on the 3rd of March focussed primarily on presenting the latest OBR forecasts rather than announcing new policy measures.

It forecasts growth of about 1.1%, which is very low. It forecasts inflation to fall from 3.4% to 2.3% this year, and unemployment to rise to 5.3%, as well as net migration, which reached a peak of nearly a million just recently, to average just 235,000 between 2026 and 2020. But my Lords, but and Lady Neville-rolfe brought this to our notice. The forecast was prepared before the escalation of the conflict in the Middle East, and it is already completely out of date.

The OBR warned that the wider fiscal context remains difficult. It noted that UK public sector debt as a share of GDP, has nearly tripled over the past two decades and is now close to double the advanced economy average on a comparable basis, and borrowing has remained very high, and the Chancellor referred to the growing uncertainty generated by the events in the Middle East, arguing that in times of international volatility, the government should prioritise economic stability, infrastructure investment and resilience to external shocks.

But my Lords, Reuters has reported that economic economists expect instability. Investors argue that global geopolitical tensions and surges in energy prices are going to have a dramatic effect on the state of the UK economy. Business groups have said that higher taxes and rising operating costs have discouraged firms from hiring, and financial markets have reacted cautiously. Government bond yields have continued to rise, and investors fear that sustained increases in gas prices could prevent the Bank of England from cutting interest rates this year.

And in addition, motoring groups are calling on the government to reverse its planned end of the freezing of the fuel duty in September because of rising oil prices, ten year gilt yields have risen to over 4.5%, and on top of this, we have nearly 1 million people. Beneath, neither in education, employment or training. I chair the International Chamber of Commerce in the UK, and the British Chambers of Commerce have called for more decisive policy action to stimulate investment and growth.

I was president of the CBI, the Confederation of British Industry. The CBI has said the government still needs to do more to reduce the cost of doing business, including tackling delays in planning consents, skills approvals, grid connections and access to innovation. My Lords, Nicolaou Lord St John mentioned this to shut down at this time, oil and gas supplies that are sitting there that belong to us when we need them desperately. Now, surely the Minister agrees that we now need that more than ever.

This is a transition, as Lord St John said, to net zero. We need to live that transition. It's not an on off switch. The welfare bill is now well over $300 billion. The National Health and Social Care Bill is approaching $200 billion, and our debt to GDP is 100% of GDP. Almost after the Second World War, it had gone up to 250%. It took from 1945 to 1963 to bring it down to 100%, which is where we're back up to now.

And then we have a situation where there are 9 million people of working age who are not working. We have the record number of people signed off sick, with doctors signing patients off without even having assessments doesn't overload. The Minister agree that we need to do something and encourage people back to work. And then there's the sad impression, which really annoys me when I travel abroad where people say, oh, the crime in London, people have their watches stolen, their mobile phones stolen, we don't feel safe in London anymore.

And that is wrong. This is the greatest of the world's great cities. People should feel safe over here. And our risk premium is now we've got we're splurging more on interest than on defence and policing combined. We pay a higher risk premium than Germany, Holland, Spain, Sweden, Ireland, Belgium and other countries. And when we had austerity after the financial crisis in 2010, that didn't work. And then we had over £400 billion spent. When Rishi Sunak was Chancellor during Covid. And on top of that, we've got this huge pensions commitment.

The public sector pensions alone are 1.4 trillion. So we all agree we've got one of the most generous welfare states in the world, but that welfare is meant to be a safety net. And the Chancellor now does seem to recognise that the increase in minimum wages have harmed prospects for young people. I'm all for people being paid more, but can businesses afford it, including the hospitality sector? Employers are still being burdened with additional costs through increase taxes and more regulation, including employers, National insurance and we need to bring spending under control.

My Lords, we need to focus on nuclear. We need to look at small, medium, the small modular reactors. We need to look at fusion on top of renewables. And as noble Lord Lord St John said, AI, the threat and opportunity of AI. And as he very correctly said, the focus on skills and industry and education working together. The reality is that lower net migration in economic terms will pose a medium term risk to public finances, especially with the conflict going on around the world.

And we need to have an industrial strategy that is going to address what is going on. My Lords, I conclude we've got borrowing costs that are really high. We've got a war going on in Iran. We've got oil prices hitting over $100 a barrel and forecast to go even higher. And we've got inflation that is not going to go down but is going up. We've had so many inflationary spikes in the past five years, and that also has a threat of wage price spiral.

So my Lords, we need to have an economy that grows. And sadly the last growth figures were flat. The last quarter was 0.01%. We've got the highest public taxes highest tax burden, 37% since the Second World War, and a cost of living crisis. My Lord, this really, really hurts me because this is a country that has such phenomenal strengths, institutional strengths, entrepreneurship. We have the third highest number of unicorns, billion dollar companies generating this country in the world, the best universities in the world.

We deserve better. Please, could I implore the government 15 U-turns. I say the government is listening. When the U-turn. Wouldn't it be better if the government listened first? Then the government wouldn't have the U-turn.
17:07
Lord Liddle Portrait Lord Liddle (Labour)
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My Lords, I'd like to echo Lord Bilimoria tribute to Lord St John the Met so. And I'd like to pay tribute to his wonderful public service to this House over many service to this House over many years. This year I had the great privilege of chairing a select committee for the first time. The finance Bill Sub-Committee, which examined the measures in the. This finance Bill relating to inheritance tax on pensions and agricultural and business property reliefs.

We work quite hard. We heard evidence from 33 witnesses and accepted nearly 200 written submissions, and I'd like to thank the fellow members of that committee, one of whom sitting on the front bench of person of Lord Altrincham. But I particularly like to thank Lord Leigh of Hurley, who isn't in his place, but who I thought brought up lots of questions that I don't think the rest of us might have thought of. Why? We're pleased to see that the government has made changes to its initial proposals on inheritance tax.

Our report raised significant concerns about how these measures would work in practice for personal representatives, businesses and farms, and the particular concern is that of about personal representatives. As a result of unused pension funds, for the first time being brought into the scope of inheritance tax, the government told us that this would be just an extension of what personal representatives have to do when people die. However, we heard that the reality will be very different.

Pensions simply don't fit well in the framework of inheritance tax. There's contradictory timelines, imperfect information, conflicting responsibilities. All this puts personal representatives in a very difficult position, and even the most diligent of them risk being charged. High interest rate late payments by HMRC for not getting the stuff done on time. Worse, I think, is the case that many people are unaware that these changes are coming and it's going to hit them hard at a time.

For many of great personal griefs. Grief for agricultural and business property relief, we raised concerns that family, businesses and farms will face significant administrative burdens, especially when valuing their estates. And many, of course, of these witnesses are witnesses of these businesses that are witnesses explained to us tend to be asset rich and cash poor. So there is a real problem about where the money is going to come from. And it was disappointing and concerning that the government didn't appear to have properly considered the liquidity, the liquidity challenges, which states will face as a result of these changes and the impact this will have on the viability of businesses and farms.

And could I say, as someone who comes from Cumberland, very concerned about impact on farming, but also on family businesses, which are one of the really strong points in our community now, we made a number of recommendations in our report about how the bill should be amended, in particular, to extend the inheritance tax deadline, and the report has important recommendations that the government should take forward once this bill has passed, the government must act quickly to raise awareness of the impact of the pensions reforms for personal representatives and prioritise guidance and arrange practical support.

More broadly, we think that the government should review their approach to tax policy making. We saw the repeated redesign of these policies 3 or 4 changes before we get to the present and the serious impact this uncertainty has for those affected. So I look forward to the minister's response to our carefully considered report. Now, personally, I'd like to make clear that I think that wealth should be taxed more strongly than it has been and that, in fact, we've seen in the last 15 years great growth in wealth at a time when most people's wages have been pretty stagnant.

And the question is how you do it properly. I think the best way for the government, and they have started down this road, is to think about how we tax property more efficiently than we have done in the past, and welcome the measures on the taxing of, of, of wealthy property. But this if it was extended, it would give us the opportunity to get rid of or mitigate the very high levels of stamp duty, which are economically efficient in terms of deterring people from moving house.

We've also, I think, and I'm speaking this side of the House as a as as on the left of politics, got to be careful that in in taxing wealth, we we do not discourage enterprise. And this is very, very important. If we're going to get the economic growth we need. We have to have a society where entrepreneurs can make themselves wealthy. I know a lot of people always say, oh, the pity is that in Germany we don't have the mittelstand, and it is a great pity that we don't have the range of companies which are family owned, where people are committed to the are committed, owners of those companies.

But the truth is also in Germany that many of the families that own Mittelstand companies are extremely wealthy and. And therefore, there is a balance that has to be struck between taxing wealth and promoting enterprise. And we should always remember that. Lord Darzi joined with others in saying how sad it is to say goodbye to Lord St John of Bletso. He will be much missed, particularly for his contributions on Africa and the Global South, and also for his contributions to the debate.

As his powerful speech showed. Today was quite excellent. My Lords, I want to concentrate my remarks on the spring statement. Apparently, the Chancellor wanted this to be a low key announcement.
17:15
Lord Lamont of Lerwick Portrait Lord Lamont of Lerwick (Conservative)
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She needn't have worried. It scarcely qualified as an event. For once there were no leaks as there once there were no leaks as there was nothing to leak. Not that I disagree with the Chancellor's disagree with the Chancellor's decision that there should only be one fiscal event a year, but listening to the statement as I did, listening to the statement as I did, if one closed one's eyes, it was like listening to a party political like listening to a party political broadcast in the House.

The Chancellor listed ending the two child benefit cap as one of the government's great achievements, forgetting that she was particularly enthusiastic herself about the government's initial policy of refusing to abolish it. My Lords, she attacked the last conservative government on growth and inflation without ever mentioning the words Ukraine or Covid. Can we expect the Chancellor or the Minister in future to talk about the economy without mentioning the words oil or war? Judging by today's speech, not at all.

But the government surely ought to judge themselves by the same criteria by which they judge others. My Lord the Chancellor pronounced everything that had happened was a great success, while the rapture of the OBR was somewhat more modified. Growth higher this year, but lower in future, and the same over Parliament as a whole, unemployment heading to over 5% with. As my noble friend on the frontbench said, a worrying rise in youth unemployment and a welfare budget ballooning to £407 billion.

I am pleased that the Chancellor stuck to her fiscal rules and I welcome the increased headroom. But of course, public sector net debt still remains at 90% of GDP and the 4.75 ten year gilt yield is the highest in the G7, showing that the markets are not convinced that our fiscal position is under control, or that it is robust enough for the potential challenges ahead. The Chancellor claimed that people would be a thousand a year better off by the time of the next election.

Both the Resolution Foundation and the Rowntree Foundation and the IFS cast doubt on this forecast. The Rowntree Foundation think it was more like £40 than £1,000. There can be different views about the statement, but what is clear is that it is now totally irrelevant. No one knows how long the conflict will last. As the Minister said. President Trump has said that it will be short. Qatar's energy Minister, who presumably knows a thing or two, warned that the Middle East crisis could bring down the economies of the world.

He predicted all exporters in the Gulf will have to call force majeure, and European nations will feel significant pain, as Asian buyers will bid them for whatever gas becomes available. If prolonged. Obviously, the crisis will bring higher inflation, higher interest rates, rising unemployment and even lower growth. The Chancellor has indicated that when the price cap expires in June, she wants to protect families or is open to doing it. And she has said on a targeted basis, I agree with her that rather than doing something across the board, if it is necessary, it would be far better to target help where it is most needed.

But where to draw the line is not easy, as the Chancellor herself found out when he tried to strip millions of people of their winter fuel payments. But today households are in a far weaker position than in 2022. Then, the total amount owed in unpaid debt to energy companies was just over £2 billion. Today, it's around 5 billion and expected to reach seven by the end of this year. The reality is that middle income households now also struggle to pay their bills.

That is the new normal the government needs, as Lord Bilimoria said, to end its war on the North Sea. If Britain is serious about energy security, we should use more resources from the North Sea, as is compatible with other policies. As President Trump pointed out, it makes little sense for the UK to be importing gas through pipelines from Norway, extracting fossil fuels from the very same North Sea gas which falls inside British waters. My Lords, according to the OBR, the tax burden is forecast to reach 38.5% of GDP by the end of the decade, up from 36.3% this year and higher than the record burden in 1948.

With fiscal drag, millions of taxpayers are dragged towards painful cliff edges. In the tax system, families get pay increases, or perhaps they turn down their pay increases because they leave them worse off. David Myles of the OBR said that both the extent and the design of additional taxes matters. I quote, tax increases that increase marginal that increase marginal rates are likely to act as a disincentive. We are in unchartered territory with the level of taxes. Taxes are now 5% higher than before Covid.

It would be a bold person to be confident that this will not hit even the modest growth rates forecast in the statement. Alarming as all that is, the IFS has forecast that the Chancellor may be forced to put up taxes even further. Higher inflation will increase welfare spending and the funding cost to government, forcing the Chancellor to find new measures to balance the books. If this happens, stagflation will stalk the land. My Lords, for all the bluster and boasting, alas, we are far from being in the best position to weather the storm ahead.

My Lords, I rise with some anxiety to make speech on the economy. Following a distinguished former Chancellor of the Exchequer and following a brilliant speech from Lord St John of Bletso. But nonetheless, I want to try and bring a note of optimism into our deliberations, because optimism
17:22
Lord Barber of Chittlehampton Portrait Lord Barber of Chittlehampton (Labour)
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itself may be part of the solution of the challenges that lie ahead. I want to congratulate the Chancellor, want to congratulate the Chancellor, my friend, my noble friend Lord Lord Livermore, and the Treasury team for the spring statement and team for the spring statement and the facts set out within it. I know it came before the conflict began, but growth was up, retail sales but growth was up, retail sales were up, inflation was down and interest rates were down there. There are grounds for optimism.

Of There are grounds for optimism. Of course, the conflict creates a new situation. But as we go into that conflict, as a result of the Chancellor's efforts over the last 18 months, we're better placed than we would otherwise have been to face that storm. I especially welcome the emphasis in the statement on spreading growth to every part of Britain. This is vital. I want to emphasise three factors that will help generate growth and spread growth across our country, and I want to illustrate it with examples from the southwest of England where I live.

I'm anxious about that as well, because the Earl of Devon is in the room and his family's been there for 700 years, and mine has only been there for 15 years. But nevertheless, it will be good to hear what he has to say about it. And the first message I should, by the way, declare an interest as the unpaid Chancellor of Exeter University. So I'm embedded in the system there. The first message I want to emphasise is stability. I strongly welcome the Chancellor's emphasis on bringing stability.

Of course you have to adapt to changing circumstances, but stability really matters, and the CBI welcomed it when the statement was made as well. And it's more important than ever given the uncertainty. Obviously we can't control global events, but we can control how we respond and we can control how we act within these shores. Let me give you an example from the southwest critical minerals. We all agree, my Lords, that those are essential to the future of the economy. We also agree that they're a source of global tension.

But we have some critical minerals right here in Britain. In Cornwall there are there are there are deposits of lithium. There's a company called Cornish Lithium already set up to exploit that. There's Tata and Agatha's building, the biggest electric vehicle battery factory in Europe. In Somerset, there's Altium in Devon, recycling spent EV batteries and recovering 95% of the rare metals from them. And then there's the Camborne School of Mining, part of the Exeter University, which is at the forefront of research and innovation in these areas.

These are just emerging factors, but you can see there the beginnings of the circular economy, and that will drive economic growth, environmental sustainability and national security and all of that is possible without setting foot out of the southwest of England. But we can only see that happen if we have stability. So that's my first point. Stability is essential to getting the necessary investment and relationships. My second point is about education and skills, and this has already been mentioned in the debate and is fundamentally important.

Actually, we should celebrate in this country the big improvement in our education system over the last 50 years. 50 years ago this year, Jim Callaghan made the famous Ruskin speech, drawing attention to the problems successive governments have built on that all parties and we now have much better education system. But there's more to do, especially in relation to skills in the southwest of England, traditional employment is low skill and low pay. It's agriculture, it's tourism. The economy of the future that's emerging will be high school and high skill and hopefully high wage with tech jobs, engineering jobs, software jobs.

They absolutely depend on ever higher levels of skill in the workforce right across the workforce. Navantia in Devon, Babcock in Devon, Leonardo in Somerset, Agatha's in in Somerset, the spaceport in Cornwall. All of these need detailed engineering jobs. Really, really important engineering and technical jobs. The. Across the UK, the Royal Academy of Engineering estimates we'll need 834,000 jobs over the next five years. 4000 of those will be at the plant in Somerset. That's a very demanding thing, and our education system will need to adapt further and faster to keep up with that demand.

What we're looking for, surely, is a demand led skill system where the employers create the opportunities and the education system empowers the students to seize them. Because education doesn't just create wealth, it spreads wealth. It turns wealth into family income. And, you know, if you want to find out that, talk to the apprentices. There were some in the Palace of Westminster yesterday. Brilliant young people talk to them at the Dyson University in Malmesbury, talk to them at Exeter University. If you want to come and visit us, talk to them at Sheffield University.

They are doing wonderful things and they see the skills that they learn one day applied the following day. So, as noble Lords may be aware, I want to go on to my third message, which is about the speed of decision making in education. We need to go further, faster and deeper, and the government's recent announcements will help us do that, and they're to be welcomed. But generally, speed of decision making needs to be speeded up. Noble Lords will be aware I spent many years in Whitehall trying to speed up the pace and effectiveness of delivery.

I've heard all the excuses for delay. Why don't we do some more research? Why don't we try a pilot study? What about another round of consultation? Just to check? Or before my time? Why don't we try it out in Scotland first? These excuses are well known to the civil servants. I love the civil service. They too smile when they hear the excuses because they're very familiar with them. But the problem is deeper than the civil service. It's about our processes.

It's about our culture. It's about the way we go about making decisions. And it's not just in Whitehall, it's across local government. We need to shift the default in government across the country at every level, from delay to delivery, from process to outcome, and from talk to action. The government's completion, in short order of three major trade deals, actually is a good example that you can get things done rapidly that are very important to the future of the economy. But these things affect the southwest in a very significant way.

We have a number of fantastic small businesses like CMT in Torrington. The last time Torrington was in the news for military purposes was when, in 1646, the royalist Arsenal blew up. But in Torrington, now they're developing the software for military helicopters. I could list a number of others. California has its valley, Shoreditch has its roundabouts, and Devon has its defence innovation ecosystem. All these companies depend on the quality and speed of decision making at the MoD. To conclude, I was fortunate for several years to teach on a course at Harvard with the former Prime Minister of Mozambique, Luis Diogo, a wonderful woman who died recently.

She got 15% growth in a single year in Mozambique. They were coming out of the Civil War. I asked her, how did you get that 15%? What did you do? She said, I didn't do anything. She said the people of Mozambique generated that growth, especially the women. What we did was create the right context. And what I'm saying is stability, skills and speed of decision making will create the right context. And then, to use her concluding words, she said, if you get the context right, you unlock the music in people.

That, my Lords, is our task in the

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years ahead is. My Lords, I shall certainly.

**** Possible New Speaker ****

My Lords, I shall certainly. Miss Lord St John of Bletso around the place with his economic and business acuity. He'll be. He'll be business acuity. He'll be. He'll be sorely missed. A real person in every sense. I shall address only today the so-called Spring Forecast today the so-called Spring Forecast statement. First, and with respect, I cannot ever recall such an empty thing being brought before our
17:31
Lord Patten Portrait Lord Patten (Conservative)
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House by any government at any time. A monument to emptiness, indeed. It reminds me on reading it inexorably, the empty quarter in Saudi Arabia. Nothing much happens there. Nothing much is seen. Nothing comes out of much is seen. Nothing comes out of it. It's remote from all reality. It's totally silent. With one It's totally silent. With one exception, the Saudi government has brilliantly managed to begin to pump well in the middle of nowhere, getting on with the vital task of fuel enrichment.

If only we had the same determination from the government to do something about our neglected North Sea assets, it's shameful. The delays that are happening. What we can be certain of is that a substantial amount of public money was spent by the Treasury and its poor civil servants on producing this pointless exercise. This is a serious issue. It's so in the interests of transparency, I would like to ask the noble Lord Lord Livermore, who is well known in the chamber, for wanting to give the fullest possible answers for maximum transparency and not ducking difficulties.

Just how much, in real terms did it cost to produce? I wouldn't expect him to be able to answer that during his wind up speech, which I look forward, but I would like him to pledge to give a an answer in writing placed in the library. And I also hope that the cost of all the legions, the expensive legions of special advisers can also be taken into account as they fail to come up. I read it with great care anywhere in the speech, with what, in their dark jargon, is called an unmissable.

The only one phrase in the actual statement that caught my eye was the claim, and I quote exactly. We have a state that does not stand back but steps up. That was striking most of all as being a triumph of AI drafting. So please, can we have the costs with no hiding behind claims Minister, that answers can only be provided at disproportionate cost. We can't have everything redacted by this government, whatever. And I've got great sympathy for the civil service, and I've had very excellent help in many places in past years from the civil service, and I admire them that any bright spark contemplating a Treasury Civil Service career at the moment should be a bit cautious.

They're being attacked all the time. Numbers are being reduced. They're being dismissed as categorised as part of an inefficient lot, rightly losing their jobs. That's those people thinking of coming in, of course, at the end of the service, when the great ones of the civil service reach the pinnacle and become a permanent secretary, it's now become, I think, distressing how permanent secretaries and others are risked and being named and shamed in the most cruel and uncaring way. As we've seen when the last.

Permanent Secretary at the Cabinet Office, as he's found out. Secondly, and lastly, as we stare stagflation in the face, stare stagflation in the face, which I think we do, what. My Lords are all these expensively produced spring statement words going to help our economy consider our lamentable productivity as much as one could ever reasonably expect any group of economists to agree on anything, there does seem to be considerable consensus about the reasons. Here's a little list under investment, which is a national disease, our lagging R&D spend, our escalating labour market horrors due to the sparring alleged sickness that we seem to be suffering more and more from.

Well, then the stamp duty issues getting in the way of people wanting to move house to get work, or indeed our poor transport system working against the necessary connectivity to get people to work or arrive on time. Increasing cost. One only has to ask the poor would be traveller. And here I describe a declare. A regional interest would be travellers on South Western Railway, which is a true legend in its own timetable for lateness. So, regrettably, in the last year or so, although I want to travel by rail for environmental and other reasons, my wife and I commute each week by car, which is not what I want to do.

But this is something which the government is not helping. So just why is the government doing so little? Whatever is worth noticing, which I do now that all these reasons together seem to have led the UK, having in 2025 the worst productivity growth in the G7. Nothing in the forecast about that. My noble Lords, I. Should begin by acknowledging, as many of you have pointed out, that we've been living in uncertain times and they have been made considerably more
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Lord Pitt-Watson Portrait Lord Pitt-Watson (Labour)
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uncertain in the last three weeks by the Iran war. But, you know, by the Iran war. But, you know, against that, it seems to me the spring statement is creditable. spring statement is creditable. Growth is returning. That's the government's central mission. Inflation and borrowing are Inflation and borrowing are predicted to go down, and lots of that through government action and that through government action and beginning to balance the books, trade deals, industrial policy planning reform, creating new sources of finance, training, sensible investment and direct investment.

And if I may be a little bit cheeky, it has led to a huge investment in the North Sea in offshore wind, but growth is not in the government's gift. Growth is not generated principally by governments. It's generated by people and more particularly by businesses. I think that is what Lord Bilimoria was drawing our attention to. And Baroness A, Neville Rolfe, a. And indeed, I think that was the point that Lord Barber was making, talking about what was happening in Devon and what Luisa Diogo was saying about the releasing of the music in people in Mozambique.

And it's for that reason that I would like today to address my remarks to the role of business. Some of the measures that this government have taken have been really tough on business. One in a particular is National Insurance, but I haven't heard a business person who says that they don't want the government to balance the books. Similarly, we need good working conditions for people. It's then that the wealth comes from. And again, it's hard if you're a business person and your competitor can undercut you by abusing a zero hours contract.

But it's tough if you're an employer and you have to pay for that. So we should take off our hats to the businesses who are bearing this burden and who underpin our national prosperity. It's in a partnership with them that growth is going to be delivered. But how does business feel? Well, do you know, I was pretty encouraged by a recent interview with Andy Haldane. He's the former economist at the Bank of England and now new chair Lord Bilimoria of the British Chamber of Commerce, which I guess is part of the International Chamber of Commerce, taking over from Baroness Lane-Fox 46% of businesses he said, were expecting to be growing this year from their survey, up from 35% last year.

Businesses, he said, have a pipeline of very investable projects. So I talked to Andy about this a couple of weeks ago. And of course, Iran was a big concern to him, but he was keen that business get on with it, given the economic challenges we face, he said. This is a time for business to step up and lead, not Lord Hobby demonstrating by deed what is needed to fire business dynamism without which there will be no growth. I was delighted by that because he's right.

Without business dynamism, there can be no growth. As some of you know, my own background is in finance, by the way. It's a topic being debated greatly in the house I have sat in since my introduction a couple of months ago on the report of the Financial Services Regulation Committee on how financial services regulator should encourage growth. This week we're debating the pensions Bill, including provisions on how to get the UK pension funds to invest more domestically. So here's some good news.

I was talking to the chief executive of the I c g m the International Corporate Governance Network, Jen Sissons, the ESN, of which I am a former director, represents those responsible for the stewardship and the shares on the stewardship of shares and other securities. Over £50 trillion of them. That is, most of the world's large institutional investors. They were pointing out that international investors overweight the United Kingdom because of its accountable, honest, open capital markets, its history of stable, code based corporate governance.

These long term investment investors are keen that the UK be proud of its position and to think about how they. The international stewardship community representing those big investments could help our country engage business to grow and grow profitably. And what about the new group, the governance for growth investor campaign? £200 billion of British pension funds, 40% of which is already invested domestically, who again, are eager to push for growth. I talked to their chair, Caroline Escort.

Of course we invest significantly in Britain, she said, and want to continue to do so. It's for our returns and it's also good for the beneficiaries of our fund and again, keen to work with the government to see how best they can coordinate in what is a mission for the nation. My Lord, I started by noting that growth was the central mission of this government. I would finish by advocating that if growth is to be delivered, it needs to be a partnership, a national mission, particularly a mission for business.

It needs to sing. And the more uncertain the times, the more important that partnership is going to be. And I know the government already has a strong outreach to the business community. This is something it cannot do enough of, and I am sure that I speak for many members of the House, maybe not just those in my own party. In saying that if we can help in the delivery of the growth mission, we will be more than happy to do so.

Thank you. My Lord. I enjoyed Lord St John speech and I regret.
17:44
Lord Redwood Portrait Lord Redwood (Conservative)
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I've arrived. >> I've arrived. >> In this place too late to hear more of his Lordships wisdom, and I more of his Lordships wisdom, and I wish him every success with his new ventures. The OBR is set up to fail. I think the Treasury asks it to perform an impossible task. As someone who has in past jobs, had to advise and comment on economic forecasts and models, the one piece of advice I would give is never have a spot forecast for something as difficult as a deficit or an inflation rate five years out, and to make sure the OBR fails, the government sets it the task of forecasting without allowing it to make any variations to policy.

Now, we all know over a five year period, there's going to be at least one general election. And sometimes governments get so unpopular that they can be very major change of government with a with a change of policy. We also know that over a five year period in this impatient world, prime Ministers often get fed up with their. Chancellors or parties, often get fed up with their prime Ministers and say there can be changes of personnel, a series of changes of policy from that as well.

So it's a totally unrealistic assumption. So what is the OBR done with its problems this time? Well, the OBR tells us that inflation will be a very timely 2% in every year of the last four years of the forecast. I wish it were so, but I think it is unlikely. Experience as it is unlikely. The OBR says that the oil price will gently gyrate between 62 and $67 over the forecast period. Now I know these are annual averages, so that reduces some of the volatile swings we're seeing.

But again, I think that is a heroic or inaccurate forecast. I would myself suggest there will be considerably more volatility. And if we got an early end to the war and things developed more favourably, you could even end up with considerably lower oil prices. In the meantime, obviously, we're all extremely nervous. The war continues. There is more disruption of oil trade and oil prices will stay very high. One of the things that I fear the forecast is right about is it says that our own production of gas will halve, and I fear it will under current policies.

And I would add my voice to those who already eloquently said that we should stop all this self-harm and we should get our own gas out more better paid jobs, a lot of extra tax revenue, and above all, less world CO2, which is the main preoccupation of the government. What's not to like? And the forecast also says that our oil production will be down by about a third. That, too is subject to the same analysis and would be much more sensible for us to deliver our own oil.

The worrying thing in forecast that has already caused some alarm in this debate is that the OBR thinks that the cost of government borrowing is going to rise in every year of the forecast. Now remember that this is from quite a high base by recent past history, because over the last 15 months, under Chancellor Reeves, the government has been paying a higher rate of interest for longer term borrowing for the whole of the 15 months than the worst days spike under Liz Truss, which they regularly condemn as being unacceptably high levels of interest rates.

And this OBR forecast says that the interest rates are going to be even higher, progressively in a gentle upwards progression over the whole of the forecast, because clearly the OBR is worried, as we all should be, by the weight of debt already issued and by the progressive increase in the amount of debt over the forecast. Which brings me to my advice to the government. I think they should change the remit of the OBR to concentrate on years one and two of the forecast, where there's more chance of getting it right, and to amend their fiscal rules.

Again, I know they're bringing it down from a five year fiscal forecast rule to a three year fiscal forecast rule. But many of the arguments against five year still apply to the three year. The number is invented and won't actually ever take place. Year five or year three never comes because it's a rolling forecast. So effectively there is no control over the deficit. What we need is a control over the deficit in years one and two, which is real and biting, at least by moral shame and preferably by government decision.

Then I think they would find it easier to keep the interest rates under control. There was a touching ceremony in this very chamber last week when the government advanced its legislation to increase income taxation by reducing the generosity of certain pension saving allowances. And the most remarkable thing about that piece of legislation we were asked to approve was the date of introduction. And the date of introduction is to be 2029 to 30. So I asked myself, why choose such a late date? Indeed, it could well be after the next election, and there could even have been a change of government by then, who might not particularly want that piece of legislation.

And I assume it is great Treasury intelligence and cleverness, because that, of course, is the control year they're currently on for controlling the deficit. And so clever people in the Treasury invented a tax increase, which actually has, according to the OBR, the magic property of a large increase in tax in year one. And then it halves for all subsequent years. So you get the maximum deficit braking effect from putting that tax in in year five of the forecast, probably neatly after the general election.

This I think is creative accounting on a grand scale. And it is a surrogate for the real job of getting that deficit down. So I would suggest to the government, please look again at your fiscal rules. All the years we've had OBR forecasted deficits, fiscal rules, we have seen a mushrooming of deficits and debt under successive governments of all parties. So it is now trebled over the OBR period. So let's have an OBR with a bit of bite.

Let's give it a bit of proper independence. I know it's staffed with civil servants and they work very closely with the Treasury, but it needs to be independent enough to accurately forecast the deficit in years one and two and to help the government control it. Yeah. My Lords, I.

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Think The Economist magazine got it right about the Chancellor's speech on the spring forecast. And speech on the spring forecast. And this is what they wrote. They said that the Chancellor did not announce a single major policy decision that will help Britain break out of its malaise. And the malaise is the OBR's bleak forecasts of economic growth over
17:52
Lord Sherbourne of Didsbury Portrait Lord Sherbourne of Didsbury (Conservative)
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forecasts of economic growth over the coming years. And that's before the current war in the Middle East. And it's no surprise, therefore, that the Right Honourable Wes Streeting did say in one of his WhatsApp messages that the government had no growth strategy at all. So I therefore want to focus my remarks, my brief remarks today on on one subject, on economic growth and on the lack of economic growth. And I want to make really just one point, the ultimate driver of economic growth in an economy comes from people who work in business and in industry and in commerce.

And that, I think, was the main point made by the noble Lord Lord Pitt-Watson in his speech earlier on. Yet all these people and these companies, this is where I disagree with Lord Pitt-Watson. All these people in business and commerce have been hit by the government's stream of anti-business policies. We've had the the jobs tax, the increase in employers, national Insurance contributions. We've had the burdens placed on business by the new employment regulations. We've had the the attacks on private pensions, the attacks on private farms.

And now about to hit the self-employed. We've got new and complex regulations, which means they have to submit five, four tax returns every year instead of one. So the question I ask myself is, are there enough people in government who have any idea how to run a business? I, I grew up in the north of England, and my father ran a small manufacturing company. And so I was brought up like millions of people in this country in, in a business culture, I learned about the risks you take when you invest money.

And it's not just your own money, because chances are you're having to invest borrowed money. You've got no guaranteed revenue, no guaranteed salary. You hope to make a profit, but your margins are tight and you watch your costs like a hawk because you can't afford to go into loss. And you hope at some point to build up some capital. And you don't want to be penalised for success. Now, in this House, we do have a number of Ministers who have got business experience and Lord Stockwood and Lord Moore Lord Timpson are two examples.

I'm sure they understand all of this very well, but dare I say it, we could do with more MPs who have direct business experience on the day of this spring forecast there was published in The times a very interesting article about how the. The profile of the House of Commons has changed and how different it was in the 20th century. There were many more people on both sides of the house, the Labour benches and the conservative benches, who had direct experience of industry and.

The article listed the names of some of those MPs, MPs who had been labourers. They had worked on the shop floor, they'd been stokers, they'd been railwaymen. They'd. Some had risen to become trade union leaders. There were business leaders who'd set up businesses in construction and engineering and manufacturing. And we don't have enough of those people in the House of Commons today. And I think we should certainly welcome, therefore, the addition of a plumber who was recently elected in the by election.

I think she will be an addition to the House's expertise. So I conclude, my Lords, by suggesting, if I may, that it would really help business if there were more people in government who have the outside business experience to shape policy, who understand the impact of those policies on business and companies that would stimulate business activity. And that I say to the noble Lord, the Minister, that would be a real strategy for growth.

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Yes, my Lords, I'm very grateful to my noble friend, the Minister, to my noble friend, the Minister, for his characteristically clear and cogent introduction to today's debate on the Spring statement and debate on the Spring statement and the finance Bill, timed also to allow us to take the Chancellor's maze. A lecture delivered early this afternoon into account as well. this afternoon into account as well. I very much enjoyed and admired the noble Lord Lord St John valedictory speech and pay tribute to his service, and also thank him for his friendship.

I think he was a veteran, aged 24 when I arrived in veteran, aged 24 when I arrived in the house as a new boy of of 29. I strongly support the active and strategic state advocated in the Mais lecture by my right hon. Friend the Chancellor, with its three priorities stability, investments and. And reform, which have guided her and the government's economic strategy since being elected in July 2024. The restoration and promotion of stability has had to be the primus inter pares of priorities for the government.

Over the past 21 months. The legacy from the Conservatives destructive time in office no longer needs enumerating in detail, but a toxic a, B, c combination of austerity, Brexit and concealment has presented a formidably challenging starting point from which to rebuild confidence and stability. Just as that task had been substantially achieved. The latest of a series of geopolitical shocks has posed new challenges. The attack on Iran by Israel and the US, and the indiscriminate response by Iran creating a wider conflict in the Middle East will inevitably impact the global economy, including the UK.

The government is right to be vigilant in calling out price gouging and
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Viscount Chandos Portrait Viscount Chandos (Labour)
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profiteering in the energy and other sectors. As the noble Lord, as my noble friend has mentioned, as my noble friend has mentioned, the rise in gilt yields and consequent increase in government borrowing costs are unwelcome but reflect the financial markets. Recognition in the US and eurozone Recognition in the US and eurozone pretty much as much as in the UK, of potential inflationary pressures of potential inflationary pressures and other risks. The Bank of England will face difficult decisions in relation to interest rates.

Against this background, with increases in energy prices having both inflationary and potentially recessionary implications, I hope and believe the MPC will strike a wise balance in that context. As my noble friend the Minister said, if the government had not made the difficult decisions encapsulated in the finance Bill, which we are debating today, the UK economy would have been less resilient and less able to absorb this latest geopolitical shock, let alone the unprecedented continuing levels of uncertainty and unpredictability that characterise the current US administration.

The government has, in parallel with its restoration of stability, planted the seeds to increase and stimulate investment. This has already begun to bear fruit. As my noble friend Lord Eatwell pointed out, even before the budget statement last November, PwC are predicting and have confirmed since the spring statement, a record increase of 13 billion in public investment in 20 2627, unlocked by the sensible, prudent changes by this government as to how capital investment is treated in the public accounts and the fiscal rules, the OBR applies a factor of 0.3 to the impact of public investment on private sector investment, so 13 billion should catalyse 4 billion of incremental private sector investment.

But it acknowledges that the factor in some circumstances could be as high as two times the quality of public investment is as important as quantity, with policy, governance and management all critical determinants of that. Can my noble friend the Minister say what the government is doing systematically to ensure that these are all pursued to the highest standards, so that both the direct return from public investment is maximised and the indirect return from the highest possible factor of private sector investment being catalysed.

I'd like to end by picking up on one point from the finance bill. The introduction, with effect from 2028 of the EV tax band on the mileage of electric vehicles, reflects a decision to balance the need to encourage the switching to EVs. On the one hand, with the need to replace revenues from fuel duty and ensure that drivers of EVs contribute fairly to the maintenance of the road infrastructure, I support the balance that is being struck in this case, another stimulus for the switch to EVs are the highly concessionary levels of benefit in kind, applied by HMRC to company car drivers.

A 3% of the on road price of the car concern, rising to 5% in 20 2728. This represents a huge tax saving for the drivers, with no cap on the price of the car, to which the benefit in kind applies. By my calculation, a high end driver of an EV may pay a tax rate that is as low as 5% on the true cost of that benefit. Would my noble friend the Minister agree that this is an area.

This is a tax that should be given further scrutiny and at the very least, examine the case for a cap on the value of cars to which the benefit in kind applies.
18:04
Baroness Fairhead Portrait Baroness Fairhead (Crossbench)
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My Lords, I too would like to start by congratulating the noble start by congratulating the noble Lord Lord St John of Bletso for his long. His stylish and his meaningful service to this House, and I wish him well in the future, be he in Africa or frankly, anywhere else in the world. I stand before you. Lordships. As a member of the finance Bill subcommittee and ably chaired by the noble Lord Lord Liddle in his subcommittee chairing debut, and I will restrict my comments to the key findings of the committee regarding the inclusion of unused pensions and death benefits into the scope of IHT from April 2027, and that will make, as he has said, as the noble Lord has said, PR is personally liable for paying any tax due within six months of death or incur a 7.7% increase for interest with minimal exceptions.

I will confine myself to the practical issues the Bill raises, which, in the words of one of the witnesses, Baroness Altmann, speaking in her capacity as an independent pension expert, will create massive chaos and misery to so many people at a particularly difficult time of bereavement. Now, I recognise and I welcome the government's changes, but I do not believe they are remotely sufficient. My Lords, Adam Smith outlined four enduring canons of taxation, which I'll paraphrase as fairness, predictability, ease of payment and cost efficiency.

The current implementation plan fails. Each of these. Firstly, fairness. After listening to the concerns of the pension scheme administrators, the government shifted the burden of payment to PRS not just professional PRS, but also lay PRS, often family members who will undertake the task at a grim time in their lives. Personal representatives will be required to contact the relevant PSAs for information to determine exactly what tax is due. And as today, people retire with on average 8 to 10 pension schemes, the scale of the task is potentially enormous.

In simple cases, six months may be achievable, should be achievable. But in complex cases where probate is delayed, which can take years, it simply is not. Particularly when many PSA will not disclose the information until after the probate is granted. That is a real catch 22, and often personal representatives will not even have the control of the assets of the deceased, which makes it particularly difficult for them to pay on time. Indeed, charging interest to PRS for such late payments could fairly be regarded as a penalty for taking on the task.

Turning to predictability and ease of payments, which I grouped together, many pension assets are illiquid. Their valuation is unlikely to be predictable or certain, given both their complexity and the valuation bottlenecks that must surely arise. For example, the current rules for defined contribution DC and defined benefit DB schemes are both complex and inconsistent. It is possible that schemes with exactly the same financial outcome can lead to the IHT being payable on DC schemes, but not on DB schemes.

And if you think about that, an unintended consequence of that could mean that people are actually discouraged from investing for their retirement through DC schemes, which is counter to policy and the desire of this. And many of the government's. In many cases, the PRS will be will need to recover payment from resistant beneficiaries who have already been paid. These beneficiaries might even come from previous relationships or families of the deceased, and you can imagine the strain that that will put on being able to make that payment within six months.

Many witnesses believe the industry is not ready, and that should the regulations only be laid out just before April next year, the unpreparedness is almost inevitable. Finally, cost effectiveness. The changes will materially increase admin costs. Whether or not IHT is ultimately payable, as PRS are likely to require the support and guidance of advisors, the personal liability and the admin difficulties may well discourage even professional PRS from serving, leaving HMRC to administer even more states. Substantially increasing government costs.

The investment in Saving Alliance described the proposal as like trying to hammer a square peg in a round hole. Given the scale and complexity of the task, this change is being introduced without adequate notice, guidance or communication. There are many ways the government could improve implementation. Safe harbours grace periods from interest, improving access to information or ways of payment. At a minimum, the government should publish timely, step by step guidance to PRS with worked examples and clear guidance to the industry.

I urge the government to do more, and would like to pose a couple of questions to the noble Lord. The Minister. Would the government consider pushing back the timeline until. The most significant of these issues are resolved? And if not, what further actions is the government prepared to undertake to ease this unfair burden on personal representatives?
18:11
Lord Leigh of Hurley Portrait Lord Leigh of Hurley (Conservative)
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Well done. >> It's an honour to follow. >> The noble. Baroness Fairhead and I speak. Also as a member of the I speak. Also as a member of the finance Bill subcommittee of the Economic Affairs Committee. It's a lot of words on a business card, lot of words on a business card, and it was a delight to be able to serve on this again, and I congratulate our chairman, the noble Lord Liddle, on his excellent work, and thank the staff and colleagues on the timely production of this report.

Sadly, we won't get to debate this report separately, so I hope the noble Lords Minister might find some time to comment on some of our proposals today. We were very troubled by the reforms to inheritance tax. We can see that the burden which will be placed on personal representatives as Baroness Fairhead set out, and I agree with every word she says, that will risk dissuading anyone from accepting this role. I know that I personally would be extremely reluctant to accept the job as personal representative, whereas in the past I had accepted it, accepted it.

Taxing pensions with IHT is of course, retrospective tax because people like me and I declare an interest, save money into a pension on the understanding it would be outside of my estate. The government has reneged on that deal, and it's clear from this bill that they simply are only there to to support those on direct benefit schemes and those who are, which is for the benefit of those who possibly have drafted this bill and all public sector employees, but not for those of us earning and saving from our own resources who have been hammered by this bill.

The government has clearly not thought through the complexity of the interaction of BPR, APR and IHT on pensions and as a result, many small family businesses and farmers face acute liquidity problems on the death of a family member in their business. We argued strongly for the government to extend the deadline for payment from 6 to 12 months, and it's not a big ask, and I would urge the noble Lords Minister to have a look at this again. Now, I want to raise one particular issue, which I hope the Minister will not think is political, but it is not been discussed elsewhere.

It has not been raised and it is going to be a major problem. The proposed introduction of inheritance tax on unused DC pension funds and deaths will affect a demographic that is disproportionately female, particularly widows, single older women, lone parents, unpaid carers, disabled older women, early death survivors and personal representatives. Now I know there was an equality statement, but that was based solely on HMRC data, not ONS data. And I've had a look at the ONS data, and it's clear that there is going to be a massive impact on elder women from this.

Typically, women live longer than men and they will suffer as a result of these changes. I'm sure it's not the government's intent, but that is the effect. The government has not published any demographic modelling, so we are unaware of the resultant effect. It is a really serious issue and I think from today that will gather momentum in the national press as people realise this effect will hammer widowers, widows, sorry and women who are themselves going to have to be the personal representatives.

Can he also please look at the basis of valuation for businesses for IHT and BPR on the owner's death? It's a bit absurd, but currently HMRC look at the value of a business the day before the death. Which is completely unfair because for many businesses, the value is dependent upon the owner working in that business. And it's shocking that HMRC won't accept that following the demise of a significant shareholder, that business might be worth considerably less or even nothing but dependence.

Going to have to pay inheritance tax, assuming that the owner was still alive. It's absurd. Turning to other matters, many have particular concerns about the tax advisor registration. The CBI in particular think that this will have a chilling effect on access to advice for retail and business clients from, for example, conveyancers pension providers. And we still don't have clarity on the treatment of in-house tax teams, which is pretty critical. The avoidance legislation in part six and the tax advisers legislation in part seven of the bill is overbroad, risking capturing legitimate tax advisers, acting reasonably and deterring them from acting in areas of uncertainty, uncertainty, but not attacking those tax advisors based offshore.

For both the promoter and the tax advisor registration rules, the best solution to this would be to delay enactment by a year, to allow HMRC to iron out concerns with professional bodies and businesses. There is no loss of tax by doing this, and it allows the further tweaks needed to the legislation to be made. To the surprise of many in this House, can I thank the noble Lords Minister for the changes to the eyes and VCT restrictions, other than, of course, regret the VCT relief reduction to from 30% to 20%.

By the way, the last time investment limits were cut by 10%, it was from 40% to 30% in 206207 VCT funds raised dropped from 780 million to 270 million, a reduction of over 65%. Who knows what's going to happen this time around? I'm sure he will recall me banging on to get more changes through, for example, on limits, company age, relationships, restrictions and families and so on. And I hope that the government will look at this again. Who else is going to be mad enough to back to back a young person other than parents? So why should they not get the same tax relief? It's intensely frustrating to many of us that we only have seven minutes to comment on 500 pages of this bill.

There is an enormous reservoir of knowledge in this House where we have many more business people and advisors than the other place, so it would be great to be invited to a round table sometime to throw out some real world issues and solutions as we see them. In closing, can I bid a very fond farewell to the 22nd 22nd Baron Lord St John of Bletso? I did look the. The title wasn't created at the Norman Conquest, but I know that his ancestors came over at that time.

So his family have served this country well, and we are grateful. He personifies the huge loss of skill and knowledge we will suffer with the departure of the Hereditaries.

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My Lord, can I begin. By sharing my tribute to. Sent

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By sharing my tribute to. Sent to Lord St John of Bletso. I'm a newcomer and so I'm afraid I've not had the benefit of your expertise had the benefit of your expertise on Southern Africa. And I'm sorry about that because it's a region I'm very optimistic about, and I I'm very optimistic about, and I share your concerns about the impact of AI on employment. My
18:18
Baroness Bi Portrait Baroness Bi (Labour)
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impact of AI on employment. My Lords, can I begin by declaring my interest as the chair of Norton Rose Fulbright, an international law firm? Although, of course, I speak today in a personal capacity, you won't be surprised to hear that I strongly support the Chancellor's Spring statement and the finance Bill, together with the Maize Lecture today, they represent a clear and disciplined approach to economic management, one that prioritises stability, growth and long term competitiveness. Over the last decade, businesses have had to navigate an extraordinary succession of shocks from the wars in Ukraine and now the Middle East.

The disruption caused by artificial intelligence and new technologies, the societal changes caused by Covid, and the profound economic and constitutional changes triggered by Brexit, which we're still experiencing in that environment. What globally mobile businesses value above all else is not short term gimmicks or headline grabbing announcements, but political stability combined with regulatory coherence and fiscal predictability. Regrettably, that is not what the United Kingdom consistently offered in the period after 2016. Multiple fiscal events each year, and uncertainty over our long term economic direction weakened confidence and made it harder for the UK to compete for investment.

The damage to our reputation was real, particularly in financial and professional services, where confidence and continuity are paramount. That's why the Chancellor has been right not to make any new tax or spending announcements as part of the spring statement, and to ensure that there is only one fiscal event per year. The spring statement demonstrates that this government understands that credibility is not filled through constant activity, but through consistency. The government's commitment to reducing borrowing, bringing down inflation and improving living standards is essential in an area in an era of geopolitical volatility, including, as we speak, the conflict in the Middle East with its global economic consequences, it is important that the UK is seen as a safe harbour.

Markets will tolerate short term adjustments to forecasts, including those made by the office for Budget Responsibility, provided the direction of travel is clear and the policy framework is stable. That is exactly what this government is now providing in my own sector, international financial and professional services. The United Kingdom remains one of the world's pre-eminent centres. The sector contributes over 12% of our economic output and employs nearly 2.5 million people, with the majority of those jobs outside London. This is not a niche interest or a city concern alone.

It is a national asset that underpins prosperity across the whole of the United Kingdom. At the heart of that success lies the City of London, which continues to evolve as a global hub for capital, expertise and innovation. The recent wave of mergers between leading US law firms and London based international firms is a powerful vote of confidence in the UK's future. As a centre for global business, firms don't make those decisions. Likely they do so because London offers an unmatched combination of expertise, legal certainty, time zone advantage and global connectivity.

Yet we can't afford to be complacent. Our competitors from Dublin to Singapore have been energetic in promoting themselves in the years following Brexit, the UK was not always seen as the obvious place to launch new products or expand new business lines. Left unchecked, that trend would lead to a gradual erosion of the city's position and ultimately to reduce revenues for the exchequer and fewer high quality jobs across the country. That is why the finance Bill matters. Since 2008, layers of overlapping regulation and sector specific taxation have placed the UK at a competitive disadvantage.

What businesses require is not deregulation for its own sake, but clarity, coherence and alignment with international standards combined with a competitive and clear tax regime. That is why, as a capital markets lawyer, for example, I welcome the changes to pillar two and schedule eight of the bill, which address long standing ambiguities in the tax treatment of securitisation vehicles and brings the UK into line with other major European jurisdictions. This is a practical, targeted reform that enhances the UK's attractiveness without compromising standards like Lord Bilimoria.

I also want to address the increasingly vocal attacks on London itself. In recent months, a deeply cynical narrative has taken hold, particularly on social media and among some politicians who otherwise wrap themselves up in the flag and claim to be patriotic. Portraying London as a crime ridden dystopia in decline. This caricature is not only accurate, inaccurate, it is actively harming our national interest. To denigrate our capital for short term political gain is to undermine one of the UK's greatest competitive advantages.

Unfortunately, my Lords, international investors don't distinguish between rhetoric and reality. When headlines travel light, when headlines travel globally. I therefore urge my noble friend, the Minister, to ensure that this government robustly and consistently counters disinformation through a coordinated, cross-government campaign to promote London internationally as the safe and business friendly city that we all know it is looking internationally. I hope financial and professional services will be central to the UK's trade policy, including the reset of our relationship with the European Union.

But while those negotiations continue, we should focus on what we can control, which is to make the UK an easy and attractive place in which to do business. The right. The regulatory divergence now emerging between the United States and the European Union also presents us with a strategic opportunity as the US loosens its regulatory framework and the EU moves towards greater standardisation, we are uniquely positioned to offer a third way, combining high standards with global reach. My Lords, in conclusion, the world is looking for centres of stability, integrity and expertise.

With the right policy framework and the approach set out in the Spring Statement and the finance Bill, the UK can and should be that place.

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My Lords, the spring statement has been overshadowed by the escalating conflict in the Middle East. There was a significant East. There was a significant chance that the new forecast is out of date before the ink is even dry. Worn down to Wishart of Berenberg Bank. However, even before this, the UK economic forecasts were the UK economic forecasts were looking grim. Growth was looking stagnant and downgraded to 1.1% for stagnant and downgraded to 1.1% for this year, whilst 2027 and 28 forecasts were raised.

Paul Dacre of Capital Economics warned that this could be overoptimistic. Helen Miller, director of the Institute of Fiscal Studies, said the economic outlook and therefore the outlook for borrowing could shift more materially between now and the budget in the autumn. The conflict in the Middle East is already pushing up commodity prices and expectations for interest rates. It could yet cause more far reaching economic disruption. On the inflation front, Mr. Dacre also predicted that the leap in energy prices, if remaining for a medium term period, will mean UK inflation will be higher than the office for Budget Responsibility is predicting.

According to David Miles, a senior OBR official and think tank, the
18:26
Lord Northbrook Portrait Lord Northbrook (Non-affiliated)
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NIC ESR, the rise in global energy prices, if sustained, will lead to prices, if sustained, will lead to a 1% increase in inflation. As a result, the Bank of England will have much less scope for lowering have much less scope for lowering interest rates as this rise will take inflation well beyond its target of 2%. Moving on to the statements comments on taxation, the OBR said that taxes would hit the OBR said that taxes would hit 38% of national income in 2030 31, a depressing post-war record after the Chancellor's decision to increase the employer's rate of National insurance and freeze income thresholds.

Revenues as a result of these measures will increase by 25% in the next five years. Welfare spending is out of control. The government's welfare bill, including spending on pensioners, is poised to soar by 23% over the next five years. The number of people claiming disability benefit will rise by 2.3 million over the same period. The numbers claiming incapacity benefit will also increase. This category will be up by 18% over the next five years. However, the OBR said this could be an underestimate as it's assuming that new incapacity benefit claimants will rise at a slower rate than previous years.

Overall, welfare expenditure was predicted to cost the country 11.2% of total GDP by 2030. A very worrying figure, and even the government believes something serious must be done to control its increase on unemployment. The OBR predict almost 2 million people will be jobless by the end of the year, surpassing the highs of employment last seen during the Covid epidemic. They forecast the unemployment rate will be up to 5.3% from 4.75% last year, according to The times. Has presided over Labour, according to The times, has presided over almost 30% rise in unemployment since it came to power.

The OBR warns that higher unemployment could become structural and persistent, with new technologies such as AI permanently displacing workers. Looking at the UK economic situation, clearly the government could not have anticipated the Middle East turmoil. However, they've done things domestically that had been foolish. The lack of business and financial experience on the House of Commons frontbench has led to poorly thought through decision making. The increase in employers National insurance is a classic example, seen as an easy way to raise tax.

The consequences were not considered sufficiently in a difficult economic climate anyway. It has led to businesses laying off staff rather than having to pay the extra tax. Then there is the issue of the minimum wage. Both major parties have made the same mistake. Here it is in theory, good to give pay increases above inflation. But in practice, especially when the wage for younger people is raised to such an extent, it affects the profitability of particularly businesses dependent on employing this category of workers.

Combined with the Employers National Insurance increase, these two measures have had a devastating effect on businesses. When we looked at a third problem, it can see what a hammer blow has hit, particularly smaller businesses. This is the issue of business rates. The government failed to realise the effect of the revaluation of properties, and particularly leisure businesses and small shops, which has led to unfair rate increases on many of them. I make no apology for referring to three areas of tax change which, if implemented, could give a major boost to the economy.

Firstly, there is the issue of non-domicile tax changes, relying on mistaken forecasts of extra tax on these individuals, governments of both parties have decided to frighten them away from the UK. These non-doms paid much more via Paye and VAT than the potential extra tax claimed would be raised by their status changed. This is because they employ people, use hotels and restaurants, spend money in shops to name but a few areas. The non-dom legislation should be scrapped yet the next area is duty free shopping.

Again, governments of both parties have foolishly made and kept the abolition of this. Again. It is very short sighted and based on erroneous overall calculations of tax loss. It has not factored in as to what extra money could be spent by these shoppers, who instead go to other European airports instead. Finally, I turn to inheritance tax. This should be fundamentally changed or abolished. I'd like, for a start, to see the UK adopt the American threshold of nearly 14 million USD before the tax is due for.

The government should consider the example of socialist Sweden, where the tax was abolished. It is a pernicious double tax. As a wise friend from Bexhill, with extensive business experience, has pointed out, it prevents small businesses from expanding for fear of the tax and from passing them on to the next generation. It cuts back potential spending also by the next family business descendants. It encourages non-domiciled individuals to leave the country. Guess who returned when Sweden abolished the tax? It is so disappointing that both Conservative and Labour governments have done nothing about it, except in the case of Labour, who made it needed.
18:32
Lord Elliott of Mickle Fell Portrait Lord Elliott of Mickle Fell (Conservative)
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By Lord Rose. face as a country. Between investing in economic inactivity versus investing in work. A theme versus investing in work. A theme my noble friend Lord Northbrook also spoke about, the Work and pensions Secretary announced pensions Secretary announced yesterday a £1 billion investment to incentivise employers to hire young people from long term unemployment. Welcome news given almost a million people are not in education, employment or training, each of those NEETs faces losing out on £1 million in lifetime earnings with a further £1 million cost the state, i.e.

to all of us as taxpayers in welfare payments are lost tax revenue. What struck me, though, is that this £1 billion incentive to employers is far less than the £8 billion increase for non pension related welfare payments announced in the spring statement. The government has therefore made an active choice, the wrong choice, in my view, to spend eight times more on paying people to stay out of work than getting people into work. To put that in context, with £8 billion, the government could fund almost 900,000 apprenticeships or give a tax break of £10,000 to 800,000 businesses to employ someone out of long term unemployment or indeed immediately increase our defence spending to 3%, according to table five of the appendix to the OBR's report, the Treasury will collect £331 billion in income tax in the current financial year.

But according to table 4.6, we will spend £333 billion on welfare, a sum which is almost as big as the combined GDP of Scotland, Wales and Northern Ireland. In other words, we are now spending more to facilitate people not working through raising income tax from people working. This comes at a cost, a cost which falls on us through taxation, but also on the next generation, through an increased national debt. In the year 2000, the national debt per person was in today's money, 11,500 pounds.

Today, the share of the national debt for every child born is over £41,000. This is their inheritance and the trajectory is not improving. According to page 70 of the OBR's report, total welfare spending will rise this year, just this year, by £18 billion, further contributing to the national debt. This £18 billion increase is the equivalent to the entire annual budget of NSA. An organisation is literally sending people around the moon this year, thanks to the work of NASA, we have GPS navigation, satellite weather forecasting, cameraphone sensors, infrared thermometers, cordless power tools, and even memory foam technology to improve the lives of billions of people and which underpin trillions of dollars of economic activity.

This is where the choice between investment in jobs and so-called investment in welfare comes in. The Chancellor opened her 2024 budget by declaring that, I quote, the only way to drive economic growth is to invest, invest, invest. I agree with her. The question is invest in what? Because after her 2025 budget, she went so far as to describe welfare spending as investment by Lord Balfe. Additional welfare spending is investment. It's investment in keeping people out of work rather than giving them the joy of a job and the exchequer a windfall.

President John F Kennedy once said, we chose to go to the moon in this decade and do other things not because they're easy, but because they're hard. And so I urge the government to make the hard choices to put any additional money they have into getting people into work, rather than increasing welfare spending. As the Chancellor once said, and again, I quote, we are not the party of people on benefits. We don't want to be seen and we're not. The parties represent those who are out of work.

Labour are the party of working people, formed for and by working people. But my Lords, the spending choices in the spring statement speak louder than words. £8 billion is a bigger figure than £1 billion. I urge the government to make getting people into work a higher priority than keeping them out of work, to put more focus on making the country neat zero rather than net zero, and to go back to being, in the words of the Chancellor, the party of the worker rather than the party of people who are out of work.
18:37
Lord Davies of Brixton Portrait Lord Davies of Brixton (Labour)
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I'd like to start by paying >> I'd like to start by paying tribute to Lord St John. So I don't know if you don't mind me mentioning, but we recently mentioning, but we recently discovered that we share one thing in common, maybe others. But one thing is that we're both stammerers and he is wonderful testimony to the fact that it's not a life changing condition. In some ways, it can be life enhancing because it forces you to do things you might not otherwise do.

The first issue I want to raise in relation to the spring statement, a number of speakers have mentioned the fact that obviously the war in the Middle East is affecting the figures. Another thing that's going to affect the figures are the sweeping immigration reforms announced by by my hon. Friend, the Home Secretary, earlier this month, extending the default settlement period from 5 to 10 years, introducing an asylum visa break and reducing refugee protection grants to 13 months now, if they achieve the effects, which we're told is clear that they will have significant implications for the Obrs projections.

Now, the fiscal consequences of lower migration are, on balance, unfavourable to public finances. Oxford Economics, for example, has pointed out the falling that falling migration I'm quoting threatens growth, strains public finances and leaves productivity carrying the burden. More specifically, they estimate that if net inward migration dips below 100,000, that's their expectation for the current year, the cumulative effect would leave the UK population 1.5 million lower than the projection by 2030. So my question, if is if the OBR is is going to adjust its assumptions in respect of the proposed changes, what is the effect on potential output for 2009 30? Oxford Economics estimate a reduction of one percentage point, implying that the government borrowing would be 19 billion higher and hence wipe out most of the Chancellor's so-called headroom.

Now, the aggregate picture, of course, is much more complicated than that. But I still ask my noble friend, the Minister, to ask whether the Treasury is engaged in this debate, whether the proposals from the Home Office are set in stone, and is there a chance of the Treasury explaining the potential impact that the proposals will have on the economy? Now, the second issue I wish to raise is inheritance tax on our new unused pension pots, and the number of speakers have explained in detail some of the administrative and personal difficulties will arise, and I hope my noble friend will be able to reply to those points.

But let's not lose sight of the central fact, which is. Personal estates not used for pension purposes should be subject to inheritance tax. They're part of the deceased individuals estate and so they should be subject to the inheritance tax, which is due. We're in this situation because of what I think was the ill judged adoption of the so-called policy of freedom and choice, which effectively shift the focus of provision from pensions to savings.

Now, if you're going to provide a tax advantage method of providing pensions, that's what it should do and it shouldn't be used for the second purpose, for the separate purpose of sheltering payments that you want to make to other people. Now, it's a bit puzzled by the comments of the noble Lord.

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No, no, no.

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No, no, no. I live of. Blind spot. Sorry. I always listen with great interest always listen with great interest to what he says. We take part in many of the same debates, and I have to say, I didn't really understand his suggestion that understand his suggestion that widows would be the the main people to suffer from this policy, and I'm happy to give up 15 seconds of my seven minutes. If you could just clarify, are you saying they're going to have to do the PR work? Are you saying there that their pensions are going to be taxed.



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As the noble Lord has advised me to intervene? I will. The point is that women live longer than men, that women live longer than men, and it's much more likely that if a if a person passes away, it's going to be the man leaving the women to pay to be the PR and to pay the tax.

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pay to be the PR and to pay the tax. Well, that's only true if the widow doesn't get a pension. And my widow doesn't get a pension. And my whole point is that that arrangement should be providing pensions and not providing capital sums to the widow. If the deceased does not want to place that burden on their widow or the widower, it works both ways. They have to ensure that the money isn't unused. It's used to provide the dependent of spouse with the pension.

It's only the lump sums which will be taxed in the way it is. And to me that seems like a proper because it's part of the deceased's estate. And of course, there's the normal tax free allowances. So we're here because pensions are the purpose of these arrangements. They're not for the purpose of estate planning. And yet, since the introduction of freedom of choice, that is what they have become. Just to pick up a point made by noble Lord Lord Elliott of Mickle Fell, I wasn't quite sure you you he mentioned the total welfare bill.

Of course, the main part of the welfare bill is pensions. I wasn't entirely sure. Was it suggesting that we take the pensions away from pensioners and advise them to get a job? Was that

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his suggestion? Lord True tribute to Lord Davis

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Lord True tribute to Lord Davis and to Lord St John of Bletso, who made an excellent valedictory made an excellent valedictory speech that I had no idea that both of them had a stammer. I might also of them had a stammer. I might also tell them that Nye Bevan had a stammer as well, but that's probably rather high level of probably rather high level of eloquence to aspire to. But nonetheless, he did. I heard him speak once upon a time. There are three.

During this extraordinary period of history, we're living
18:45
Lord Horam Portrait Lord Horam (Conservative)
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through very troubled times. The three authoritarian regimes we face. three authoritarian regimes we face. I'm thinking of Iran, Russia and I'm thinking of Iran, Russia and China all have extremely serious economic problems. In the case of Iran, for example, it's not simply Iran, for example, it's not simply that they pauperised their population who have been revolting population who have been revolting as we know they actually cannot pay the Revolutionary Guards, which to them apparently is even more serious problem than revolt amongst the ordinary people.

In the case of Russia, for example, they they also pauperised the population outside Leningrad and Moscow, but they. Now the public sector is 40% of its. Consumed by war, by war means. And prices are rising between 20 and 40%. In the case of China, we have 40%. In the case of China, we have a debt which is 95% of our GDP. China. It's 340%. That is 340% of their GDP. They're trying to grow at a rate of 5% a year.

Most economists think they can only manage 2%, but to achieve 5%, they're producing stuff like throw panels and electric cars, which no one actually wants, which are therefore, and they can't sell locally. So they're having to dump them overseas. As a result, no less than 40 countries throughout the world have imposed tariffs, restraints on Chinese imports. They are unsustainable situation. Now, the reason for this, of course, is that in all three countries which are authoritarian dictatorships.

Policy politics has triumphed over economics. That's the fact they've all been able to put through because of their dictate being dictatorships policies. In the case of Iran, for example, expanding Islamism throughout the Middle East and so forth, and funding proxies in various countries. In the case of Russia, as we know, invading Ukraine and wishing to deal with the their paranoia about invasion from NATO in the case of China, rather interestingly, they want to, as a result, see, Ping's personal ambition is to be the size of the GDP of China should be the size of America by 2035.

It is largely thought this is because he will still be alive and therefore able to celebrate the great victory of the Chinese Communist Party. Communism by Chinese means as a result of that. So all these things are politics triumphing over simple economics. And to be fair to the government, they put in their manifesto the simple point that they want to maximise economic growth. And I applaud that. It's quite clear that in the situation we face, it is essential that we improve our economic growth and we live in a liberal democracy, and therefore we should be able to adjust policies in a way that is impossible where you have a dictatorship.

The problem is the execution. The execution of that aim has been defective because they have not been able to to keep out the political problems which they face. For example, just to take one small example, in the wider scheme of things, the Chagos decision, you can argue it either way, that the government argued one way about the legal situation. We argue another. I quite accept there are different points of view, but what shocked me was that the government is actually spending not just £100 million a year over 99 years, which is what is in the popular prints, but actually 120 £145 million a year in rent, plus £45 million a year in in development aid, £210 million a year going out from this country to Mauritius.

Unnecessarily astonishing. Why do that? In a year when public sector situation is so tight? Then again, welfare, the existing situation where you have a two child benefit for two, child benefit for two children and has been like that for several years, it's popular. 60% of the people population support. Only two children are being supported from child benefit. But nonetheless, they've spent £3 billion a year on extending that to all children. As my normal friend Nawaf Northcorp pointed out, the OBR is pointing also to additional welfare provisions that will follow over the next few years unless something is done.

Then finally, of course, energy prices. You know, we should take account of climate change. It's obviously something we do care about. Young people particularly care about is an issue, but we contribute 0.8% of the of the international problem. And yet we are we have as a result of the policies that Miliband got the highest energy costs of any country in the Western world. Astonishing that degree of of zealotry must be surely not cost benefit in any sensible way.

And that is going to get worse as a result of the failure to exploit North Sea oil. Therefore, I think that the problem which we've got, as the OBR pointed out in their forecast tax, will go from a general average of 32% historically of GDP to 38.5%, which is entering a whole new area. The debt will remain at 95% a year. That will not come down. And as a result, growth, which averaged 2%, nearly 2% for the last decade, will come down to 1.5%.

That is really bad. It's extremely disappointing. Unless there's a change of approach, we will be subject to further disappointment.

**** Possible New Speaker ****

My Lords, Lord St John eloquent speech this evening reminded me yet again of what this House is losing by chucking out its hereditary by chucking out its hereditary peers. My Lords, I want to take advantage of the slightly longer time allowed backbenchers to make a time allowed backbenchers to make a technical point about language, before going on to the question of
18:52
Lord Skidelsky Portrait Lord Skidelsky (Crossbench)
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before going on to the question of policy. Now, whether intended or not, most of the OBR's prose is unnecessarily unintelligible to the ordinary person, unnecessarily so. For example, paragraph 112 Labour market conditions continue to loosen and making facing entrance into the labour force with subdued hiring demand. What this means is unemployment continues to rise, with school leavers finding it harder to get jobs. Now. Why not say that? And what is meant by subdued hiring demand? What is Unsubdued hiring demand? Even in this August House, I doubt whether many peers would be able to give an accurate answer to what Unsubdued hiring demand means.

There's a whole battery of theoretical assumptions behind that sort of phrase, which needs to be unpicked. My general point is that the OBR should spell out their theoretical positions so that the reader can grasp intuitively whether they make sense to to them. Now we have another issue here. There's the there's the problem of forecasting, to which Lord Redwood referred. And other Lords have also mentioned. This arises from the obfuscation in OBR prose of the distinction between risk and uncertainty.

In OBR speak, those two terms are identical, but they're not actually. Risk gives you a probability of a set of probabilities. Uncertainty means you haven't got the foggiest what's going to happen now. The whole business of forecasting outcomes over five years, and then protecting oneself against inevitable failure by invoking stochastic shocks seems to me completely fraudulent. The biggest stochastic shock around at the moment is President Trump, and yet you don't find any any effect that he has on the smooth undulations of the five year forecasts presented by the OBR.

Now, for now, for a breath of fresh air, the OBR ruminates. If unemployment fell more sharply and returned to its equilibrium rate in 2027, a two years earlier than our central forecast, borrowing would be lower by 16 billion a year on average from two 2026 onwards. In plain English, if unemployment were lower, the budget deficit would be smaller. A striking thought then why not make unemployment lower? Well, there are many ways of how one might do it, but I'll just refer to one.

In 1929, the Liberal leader, Lloyd George, pledged to cut unemployment by half within a year by means of a £250 million investment programme. He never got the chance, but it may be of interest to, translated in today's terms, as a share of GDP, 250,000,000 in 1929 is equivalent to 80 to 90 billion today. The noble Lord. Lord, living, living has talked of an additional £120 billion program that this government has authorised over, over, over this, over the length of this Parliament.

But my understanding is that this is only 20 billion more than what the Conservatives had planned and the stimulus of 1 billion to 2 billion in the next year is vanishingly small. If I'm I may be wrong and I'd be happily corrected if I am. But what I say is that one really needs to be clear about what stimulus the government is actually giving the economy at this time. It will be argued that the output gap today is much lower than it was in 1929.

But is this true? Output gap estimates depend heavily on unemployment rate. The higher the rate, the larger the gap. With headline unemployment only 1% above the equilibrium rate, the output gap seems very small, less than 1%. But is this a proper measure of spare capacity in the economy? Of course it isn't. Our current headline unemployment rate of 5% excludes 3.3%. Involuntarily unemployed, involuntarily employed part time workers, people who say they'd want to work longer but haven't got the chance.

So if we put those two together, we have something like a spare capacity accurately measured by 8 or 9% underemployed underemployment. I'd like the OBR. Maybe the treasurer could instruct them to put two charts side by side. The unemployment rate and the underemployment rate. And then we could really see what the extent of our output gap actually is. And my last point, unemployment is not the only measure of spare capacity. There are the NEETs young people between 16 and 24, not in education, employment or training.

There are a million of them. The Chancellor's Youth Guarantee Scheme only guarantees 55,000 places after 18 months unemployment. What is needed, though, as Paul Nowak, general secretary of the TUC, has often said, is a genuine youth employment training guarantee on a far larger scale covering organised locally as well as nationally. And so the jobs and training reflect the differing needs of different communities. My Lords. We're told we can't do any of this because of the fiscal rules.

Well, my answer to that is what Keynes said in 1931. Look, after unemployment and the budget will look after itself. Well, that may be too bold for our rulers today, but I would say to the Chancellor, one needs to dare to do something. If one wishes to gain, if one wishes to gain anything, one needs to dare in order to gain something. The real risk is to do nothing and be overwhelmed by events. My Lords, the key takeaway from the Chancellor's speech is that the great plan for growth has now been
18:59
Lord Massey of Hampstead Portrait Lord Massey of Hampstead (Conservative)
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supplanted by the more modest objective of stability. However, there are a couple of claims in the there are a couple of claims in the Chancellor's speech that do need challenging. The Chancellor claims challenging. The Chancellor claims that inflation is down but does not provide a time frame. But the reality is that inflation is higher reality is that inflation is higher today than when Rishi Sunak left office, 3% versus 2%. She also says office, 3% versus 2%. She also says that interest rates are down, referencing the six cuts in base rates, which is true, but if you look at longer term gilt prices, as Lord Redwood mentioned, a very different picture emerges.

The ten year gilt when Sunak left office was 4.1%. It is now 4.5%, and that figure was prior to the Iran war. The 30 year gilt is now trading at 5.3%, higher than in the aftermath of the Truss mini budget, when the long gilt hit 5%. The market's message is clear they are more worried about long term inflation and debt levels today than under Liz Truss, and much more worried than under Rishi Sunak. So since July 24th, it is indeed the case that inflation is up.

Longer term, interest rates are up and unemployment, which was barely mentioned in her speech, is at the highest level since Covid. It is surprising that unemployment is only referenced once in the speech, as it is becoming a major issue worthy of more extensive consideration, especially the worrying growth has been mentioned by many speakers tonight in youth unemployment. Overall unemployment has risen by 400,000 to 1.9 million since July 24th, which must be a major concern for a Chancellor who came into politics.

As she says in her speech, to stand up for working people. She referenced the OBR forecast that unemployment will peak this year and revert to lower levels later in the parliament, but it is noticeable that this forecast is much more optimistic than the Bank of England's and the average external forecast, so should be treated with some caution. And indeed, if you read the small print, the OBR does warn of the significant risks facing the labour market in the event of even a modest downturn, unemployment levels could rise to 7%, which is 2.3 million people, and we still don't know the effects of the NI increases or the employment impact of AI, which could both, of course, make the situation worse.

Youth unemployment now runs at 16% with nearly a million NEETs, and this could be headed higher. The government is very aware of this, and I commend the measure announced yesterday by the Secretary of State for Work and Pensions, introducing financial incentives to employers to hire young people who have been out of work for six months or more, using incentives in this way is the right financial path. I also agree with the theme of his speech that we need to change from being a welfare state to a working state.

We need to make it easier and cheaper to employ young people. But recent government measures, as have been mentioned on the minimum wage and I increases and extended employment rights, have made it more expensive and indeed riskier for business to hire new people. We are now seeing a decline in graduate employment prospects, with AI eating into entry level jobs. As mentioned by Lord St John of Bletso in his excellent valedictory speech, a study by Stanford researchers in the US found that the hardest hit areas affected by AI are entry level occupations, with workers aged between 22 and 25.

They are experiencing a 16% relative decline in employment. It is likely that this trend will be repeated in the UK, so help for this graduate cohort would be also very welcome indeed. We have exempted the under 21 seconds, earning less than five £50,000 from employers and I. And I'd like to ask the noble Lord, the Minister, if the government would consider extending this exemption to 24 year olds as graduate job creation also needs a kick start. My Lords, the Chancellor's objective from day one was to grow our way out of the headwinds of rising public spending and rising debts, but increasing benefits, promoting the interests of trade unions and raising taxes on wealth creators is simply not going to deliver that growth.

It is just going to crowd out investment, stifle employment and demotivate entrepreneurs. As mentioned by Lord Pitt-Watson and Lord Sherbourne, only business and employment friendly policies will work because at the end of the day, only business can generate growth and jobs. Trying to achieve growth by bloating the state will simply not work. And we're witnessing this now in real time. The government wants to be generous, and we saw their delight at the lifting of the two child benefit cap.

But these measures are being funded by borrowing and serve to make worse, less financially attractive than living on benefits. As Lord Lamont and others have said, the welfare bill grew by £16 billion last year and is on a trajectory to £400 billion in the OBR forecast. It is one of the areas of public sector spending that grows the most over the next five years. My Lords, the government faces a dilemma. It has to choose between advancing its political agenda and its aspiration to improve our balance sheet and generate growth.

It can't achieve both, and the sooner it accepts that, the sooner it accepts that reality, the better for our country.

**** Possible New Speaker ****

Yes. My Lords. This year's spring forecast is

**** Possible New Speaker ****

This year's spring forecast is not just an economic and an accounting exercise. It provides clarity alongside the latest forecasts from the OBR, it's encouraging to see the forecasts of encouraging to see the forecasts of steady growth and falling inflation, resulting the UK having the fastest resulting the UK having the fastest growth of any G7 country in Europe.
19:06
Baroness Gill Portrait Baroness Gill (Labour)
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This will give the households and businesses greater confidence for businesses greater confidence for the coming years. However, in a world facing real turbulence and uncertainty with the wars in Ukraine and the Middle East that Ukraine and the Middle East that have implications for energy prices, inflation and global trade, it is particularly important that this government is focusing on sustainable growth, which will mean that we will be sheltered from the worst of the energy shocks. Building on the government's successes in entering trade agreements with India, the US resetting our relationship with the European Union.

It shows that by working constructively together with our nearest neighbours and other partners, the UK is in much better place than many others. The Chancellor has already outlined the foundations on which this government is building a responsible and strong economy. In the other place, the main components of which are stability in our public finances, investment in our infrastructure and emphasis on the growth agenda. These are already reforming Britain's economy. She has clearly set out plans that support working people and children, encourages investment and keeping our public finances sustainable.

The Chancellor's focus on digital AI economy, regional devolution, creating opportunities and fiscal discipline demonstrate that this government is determined not only to manage today's pressures, but also build a stronger economy for the future. These measures will be vital in securing growth, particularly in the regions and sectors looking to expand and innovate. It is reassuring to see a clear plan that supports working people, strengthens public finances and encourages investment in our economy that needs to thrive.

Yet growth is not driven by domestic policy alone. The UK's future prosperity is closely linked to strong and pragmatic economic partnership with our European neighbours. There is enormous potential for deepening trade, attracting investment and collaboration on cutting edge innovation from green energy and low carbon technologies to digital infrastructure and financial services. Constructive EU engagement can also help secure supply chains, reduce costs for businesses and open new markets for UK exporters, creating jobs and opportunities across every region in the UK, the biggest price is with the EU.

As the Chancellor stated today in her lecture, deepening partnership with the EU is the right thing to do. Britain should align with EU regulatory standards where it is in our national interest. It is a quick win that will reap benefits to businesses and households. So could my friend the Minister explain how the improved economic outlook, as highlighted by the OBR, together with the reforms in the finance Bill, will drive investment at home, but also allow the UK to fully seize the growth opportunities offered by a stronger cooperation with our European partners.

My Lords, this is a time we must put country before party. Militarily and economically, we can have our differences on detail and on numbers. But at this point in time, this House needs to come together in the national interest to safeguard our country's economic future. In the same way as I've heard this House celebrate the contribution of Lord Singh John of Bletso. I arrived too late to see my noble Lords work in this house, but nevertheless I wish him well in

**** Possible New Speaker ****

his continuing endeavours in Africa. Yeah yeah yeah yeah. Well, here we are again, my

**** Possible New Speaker ****

Well, here we are again, my Lords. Another spring, another statement. In autumn 2024, the OBR forecast 2025 GDP growth would be forecast 2025 GDP growth would be 2%. The reality ended up at 1.3%. 2%. The reality ended up at 1.3%. Never mind spring 2025. The OBR forecast 2026 GDP growth would be
19:12
Lord Moynihan of Chelsea Portrait Lord Moynihan of Chelsea (Conservative)
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1.9%. In Order, order 2025, it downgraded that to 1.4%, and now downgraded that to 1.4%, and now it's reduced it again to 1.1%. Yet it's reduced it again to 1.1%. Yet actual growth in January, actual growth in January, seasonally adjusted upwards, was 0%. And in the unlikely event that the And in the unlikely event that the OBR forecast of 1% growth for 2026 is actually achieved. Do we understand, my Lords, how appalling that is? It would mean that GDP per capita growth would be near to zero, which is a dog eat dog world.

Each individual in this country can only become better off by the end of the year, at the expense of someone else becoming worse off year after year. The OBR waxes confident about what the future brings. Always jam tomorrow, as my noble friend Lord Redwood pointed out, yet none today. Why do the OBR predict 2027 2829 growth will be better than it has been for the last few years and this year. Do they or the government have any validated theory of what creates growth? Numbers are not the government's strong suit.

The Chancellor says increasing people's wages is the number one mission. She claims wages are up in the past year. Well, noble Lords, yes, to an extent. Public sector wages went up because the government gave them lots more of our money. Did wages rise in the private sector? Nope. Inflation adjusted wages in the private sector went down last year, increasing private sector wages requires growing the economy. And that's not happening every year we talk about growth. But as speaker after speaker this evening has said, when offered growth promoting measures, the government relies reliably allows sentiment to prevail over logic feelings.

If you like to prevail over facts, they love to attack the private sector as greedy employers, they allege profiteering at the petrol pump. Yet there is always another petrol station in a free market economy 500 yards down the road to undercut you if you were to raise prices by even a few p per litre, while on the other hand, the government take is 55% of the petrol price, ten times the retailer's gross margin with crude goes to $100.

Of course, pump prices go up, but who profits most from that? Why is the government charging an extra 20% VAT on the uplift? With no petrol station 500 yards down the road to be found with lower fuel duty or lower VAT? How ridiculous, how anti-growth to accuse business of profiteering when you, the government, snatch a windfall £1 billion a year from citizens as they go about their business, trying to make ends meet. In the US, petrol is half the price that it is here.

The triumph of sentiment over logic pervades the government's economic approach. Large public sector wage increases with no improvement in productivity, a failure to address the ballooning size of welfare payments and. And no, noble Lord, Lord Davis, as I think you know well, neither the noble Lord, Lord Elliott, nor I refer there to pensioners racking up the minimum wage, thus increasing unemployment, especially for youth. An oncoming avalanche of regulation from the Employment Rights Act, appointing as that Act's regulator, a former Stonewall board member, trans activist and career civil servant from the Environment Agency.

Someone who will know nothing about running a business with the power to enter premises, seize records, run wide ranging and costly investigations whenever they feel like it. This, my Lords, is crazy. Nowhere is the government's logic free approach more evident than in its disastrous net zero policy devastating the economy, threatening key future energy intensive sectors such as AI, which depends on cheap electricity, devastating household budgets with electricity costs among us, noble Lords have said the highest in the world.

Our reliance on intermittent renewables requires plenty of gas, which in addition will always have hundreds of different uses across our entire economy. The cheapest, the lowest carbon footprint source for us of gas is the North Sea. As my noble friend Baroness Neville-Rolfe said, jobs could be created, emissions reduced, energy security transformed, large sums of tax, money paid. Yet this government wages war on North Sea gas. Fantasising sentiment over logic. The overwhelming evidence is that you don't get decent economic growth.

My Lords, without small government, low taxes and minimal and helpful regulation. Instead, the size of our government of taxes and of growth destroying regulation, evasion, mushrooms, individuals in even the poorest parts of America can earn twice as much in salary as we do here for the same job. Exactly. Because the shape of the US economy promotes economic growth and ours doesn't. To conclude, my Lords, I respectfully urge this government to reverse course, make it easier for entrepreneurs to start companies up to hire people without fearing they'll be stuck with the employees for life.

There's my noble friend Lord Sherbourne and and the noble Lord Lord Pitt-Watson rightly said, growth comes from business, not government. Close down those growth destroying regulators and quangos. And with what you save, stop taxing enterprise so much. Make it more attractive for investment to come to this country, get the cost of electricity down by abandoning the destructive net zero initiative so as to run companies more cheaply, make home heating less expensive, make it cheaper to drive to work or on business.

If you do this, there may be a chance that growth will gradually recover. And who knows, you might even rescue some of your popularity with the electorate.

**** Possible New Speaker ****

My Lords, what a heroic task this chamber has undertaken in the this chamber has undertaken in the seven minutes to explore 560 pages of the finance Bill, 481 pages of explanatory notes, 131 pages of the explanatory notes, 131 pages of the related OBR analysis, 152 pages of Treasury statements and related Treasury statements and related policies. And then on top of that, there's the spring statement and related documentation. And if you can get through the legalistic jargon, you're doing very, very
19:19
Lord Sikka Portrait Lord Sikka (Labour)
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well. I actually welcome the abolition of the two child benefit cap, but would like to see greater emphasis on lifting parents and families out of poverty. Sustained families out of poverty. Sustained economic growth can't be achieved without good purchasing power for without good purchasing power for the masses. The perpetuation of the conservative policy of freezing annual income tax, personal annual income tax, personal allowances for another three years will actually create more poverty. The number of basic rate taxpayers has increased from 26.6 million in 20 21 to 30 point 4,000,000 in 20 2526.

These are the very people facing a cost of living crisis. The number of people over the state pension age paying income tax has jumped from 6.47 million to 8.72 million, some 25.3 million individuals live below the minimum living standard. There is no such thing as trickle down economics. The rich have gobbled it all up, and people at the bottom just by worry beads. That is about all they can do. 120,000 people a year die in fuel poverty, despite the triple tax and triple lock and pension age benefits, almost 1 in 6 pensioners die in poverty.

It would be helpful to hear the government's plans for equitable distribution of income and wealth. It is also disappointing that a regressive tax system remains in place. Wages are taxed at the marginal rates of 20% to 45%. In addition, National Insurance contributions starting at the rate of 8% on eligible wages are levied. In contrast, despite the changes, dividends are taxed at the rate of 8.75% to 39.35% and capital gains at the rate of 18% to 32%.

And the super rich don't pay any national insurance on either of those two elements. The poorest 20% pay a higher proportion of their income in direct and indirect taxes than the richest 20%. Can the Minister explain why the poorest are paying a higher proportion of their income in taxes than the richest? Is that equitable? The student loan system remains a maze of confusing interest rates, repayment thresholds and repayment rates. It is disappointing that the repayment threshold for plan two student loans will remain frozen at £29,385 until April 2030, or maybe even longer.

By then, it will be closer to the minimum wage and way, way below the median wage. More graduates will be forced to repay earlier, leaving less for those wanting to buy home, start a family or a business. Graduates with modest earnings of £31,000 a year, which is way below median wage, face a deduction of at the marginal rates of 42%. At the moment, that is 20% income tax, 8% National Insurance, 9% loan repayment on income above the repayment threshold, and a modest 5% contribution to a pension scheme.

Does the Minister think that this rate of marginal taxation is conducive to economic growth, or would it not really be better to stimulate the purchasing power of people by abolishing tuition fees and finding a way of writing off the student debt? HMRC own estimate of tax gap suggests that between 2010 and 2024, it failed to collect around £500 billion of taxes. Whilst alternative models put the figure at £1,400 billion. Therefore, it is good to see that the government is focusing on tax avoidance.

However, at the same time, the government is creating opportunities for tax avoidance by taxing capital gains and dividends at lower rates than wages. The government is perpetuating tax avoidance opportunities. The tax avoidance industry will inevitably arbitrage, help super rich to convert income to dividends and capital gains. I welcome the National Insurance and related tax relief changes on employer salary, sacrifice, pension contributions and would urge the government to crack down on employer national insurance avoidance, especially by limited liability partnerships.

Companies pay employer National Insurance on director salary, the role and position of LLP partners is no different from that of a company director, but they receive a share of profits instead of salaries. They are the. Therefore, the firm does not pay employer National Insurance. This perk enables the firms effectively its partners to dodge around £148,000 of National Insurance for every £1 million of profit shared by partners in 2024. Big four law firms in the City of London dodged £4 billion of employers, National insurance.

Billions more are dodged by other Llps drivers and other staff at companies such as Amazon. Every E career are treated as self-employed, even though they receive almost all of their income from one source and instructions from the same source, as well as self-employed workers, they are responsible for their own tax and national insurance. But one consequence is that through such arrangements, companies escape payment of employers. National insurance altogether. Can the Minister explain why the government tolerates this kind of organised national Insurance avoidance? And when a crackdown will begin? I think the noble Minister ought to get my friend a job in HMRC.

And I've got some connections there too. I start, however, with paying a great tribute to my good friend and associate, with whom I spent many hours together over the years. I wish his club well, Chelsea, and I
19:26
Lord Brooke of Alverthorpe Portrait Lord Brooke of Alverthorpe (Labour)
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wish him and his family long and happy enjoyment and many, many years ahead and thank him greatly for the service he's given to the for the service he's given to the House. I'm pleased the spring statement was low key and that to a statement was low key and that to a degree we've achieved some some degree we've achieved some some stability compared to where we were in 2024. We still have a lot left to do. Without any doubt.

And the Middle East and Trump, as the Nobel Skidelsky inferred, with the great many people unemployed, if you count the total or on part time employment, we do have a whole series of problems facing us and unemployment could grow as well, much bigger than we've seen. But in any event, noble Lord Saint Stephen referred to AI. The changes which are coming with AI to employment and the changes in attitude which are already taking place with younger people, many of whom will do not want to be going into work.

Very substantial numbers there. If you spend time with them, with a different view of life entirely to what we had, we're going to have to start looking at issues, I think, from a quite different angle to what we've done so far. But for the moment, we look at what we've got, I will, contrary to the great criticisms which the Ministers had to bear, I'm going to say a few words of gratitude to him. The one thing that the Tories achieved between and the Lib Dems with them between 2010 and 2024, was that we had growth with great growth around the waist and on the wage scales.

When we got on them and we saw particularly amongst our children, we had the biggest growth taking place that we've seen for a long time. This young man has done some work with sugar taxes, and I congratulate him for the quiet work he's done in the background in making a number of changes, and more are to come, which will reduce the element of sugar, which we have, or certainly raise taxes on that sugar, which will be to the benefit of the youth and their health in the future.

And I thank him for the work he's done on that. I think he should keep the manufacturing, food and drink industry in trying to persuade them and induce them to change many of the products, the composition of those products and make them healthier. And I suggest to him, again, we have a look at an inducement of using instead of sugar using stevia, and that they might think about offering tax reliefs to encourage people to switch away from sugar to that which is much healthier and in the long term would be a great benefit to the young people, but in particular to the tax which we have to raise to run the National Health Service.

I come back to, to, to growth and investment. We had a debate last week with Lord Hannett complaining that we don't have enough investment in the country. And then the following day, we had a big debate about, please do not take our money from our pensions and put it into home investment. Yes, like to see the voluntary agreement agreement working, but if it doesn't work, I think we should be trying to persuade people more strongly that they need to put money into the UK.

And from the government's point of view, I think we should be exploring how we can offer tax incentives so that that money, if people are not voluntarily, willingly to do it, that we should be offering incentives which will see more capital going into investments. And I come then to my repeated subject about opportunities for investment, which exist in another lady opposite shares my view to agree on this, that we have simply not done the work yet, that we should do on public private partnerships.

And Lord Macpherson was not present today, but has spoken acts ahead of the Treasury that we need to review the old arrangements, not PFI. This is changing. Extend how we define the public. Extend how we define the private. And the real winner for us in election terms, would be to extend the private to include the public. Joe Bloggs investing on a scale that we saw in some of the periods of Margaret Thatcher, and that will be a very useful means of attracting political support, political support, but more particularly, raising cash that is needed for infrastructure.

In the UK. There is money around there to be found for investment. If we simply use our heads and start offering investments, rather than perhaps being seen to be hitting people. So I hope that that will be looked at by my noble friend. I got no financial interest in it, but I'm linked to some dentists and some American capitalists who are just waiting to put money into the UK. Want to open up 40 A&E centres for people with dentistry problems, yet we can get no movement now.

I don't see any reason why we shouldn't be innovative there and that we look to involve the public itself, investing in such ventures attached to the NHS to remedy some of the great problems that we have with dentistry, particularly amongst youngsters. So there is much to be done. I would hope that we might have more consensus. As a lady friend spoke earlier across the House in finding solutions to these problems, because what we're going to be hit with, I believe with the changes taking place in the world and with climate change, that we need to come closer together and work on solutions commonly, rather than spend so much time banging each other over the heads when there is so much to be gained from working together rather than disagreeing.
19:33
Lord Hintze Portrait Lord Hintze (Conservative)
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My Lords, let us examine the Chancellor's statement from a slightly different perspective. We are told that welfare spending will are told that welfare spending will increase by roughly £18 billion. If increase by roughly £18 billion. If I understand the figures correctly, that is approximately approximately 0.63% of GDP. And we need to always think about things relatively 0.63% of GDP is serious. I would be grateful if the Minister could confirm the precise number for the House. We hear much from the government about total GDP growth.

Political expedience, I suspect, but total GDP. Important though it is, does not tell us whether the people of this country are becoming more successful and resilient. And for that we must look at GDP per capita. If overall growth is 1.1%, but population growth is 0.7%, then GDP per capita is rising only by 0.4%. That is the figure that matters for living standards. That is the figure that governments prefer, that current government prefers not to dwell upon. And if prosperity per person is rising by only 0.4%, while welfare spending alone is increasing by something closer to 0.6% of GDP, then we are entitled to ask.

And the House deserves a serious answer here. Whether the country is moving forward at all, or merely moving sideways. Yeah. So I asked the Minister, now, why does the government speak so often about the gross size of the economy, yet say so little about the prosperity per head? Does the government not accept that the true test of economic policy is whether living standards are rising? Are we, in fact entering a transfer economy, transfer economy or a growth economy? An economy that supports all or supports the few? Because if we are entering a transfer economy, we will simply fail.

In the long term, we'll fail in the long term as many socialist economies have failed previously. And if we fail, we'll hurt the poor, the vulnerable and the striving middle class disproportionately. Because by definition, business growth. Business growth is what can bail them out. Not individuals, not governments, and certainly not capital seizure, as we're seeing in some of these confiscated taxes on pensions. And of course, no one in the House disputes the duty to protect those who are vulnerable.

A civilised society must support those who cannot support themselves. But a welfare system should not enable, should enable people not simply leave them definitively indefinitely outside the labour market. It should. It should be, as is always intended, to be, a safety net, not a lifestyle, not a way of life. That means investment in education, health care and mental health support, and also to give incentives to get back into the workforce. That is the real welfare, a job.

The answer cannot be to accept even greater levels of long term economic inactivity, as though it were inevitable, as though they were simply a feature of modern life to be managed rather than challenges to be met. At the same time, governments of all complexions, of all complexions have not used the resources of the state as effectively as is prudent, squandered, squandered is the word. I would be less troubled by a rising tax burden if it were clearly strengthening the nation, reinforcing our resilience, our our capabilities and our security in this world, in this more dangerous world.

And for years, there has been an ongoing failure to invest adequately in defence capabilities that that we can see now how seriously they are required not to do so is not only dangerous, it is indeed irresponsible. It weakens the country, it weakens the country, it weakens us as a nation. And I'll be very clear, and I said this in my maiden speech, so this is my maiden maiden speech, soft power with no with soft power. Without hard power is no power at all.

It's all very well to have to have the sledgehammer of a nuclear weapon, but not every nail deserves a sledgehammer. You need to maintain growth. You need growth to maintain these things. And without growth, we simply get. Without growth, we simply get poorer. So. So are we building an economy in which both the nation and its citizens grow stronger together, or are we purely establishing a transfer economy? And as I'm sure the noble Lord the Minister will understand, because he's a very, very well, well, well, well educated man on economics, I that to me is very clear.

Transfer. Any transfer has got zero economic value, zero. And in fact, if you really look at it under the transfer theorem, a negative value, zero economic value. Because, my Lords, if the economy grows but we stymie capital growth and the success and prosperity of individual individuals, then we are in trouble if the headlines improve, but the lives beyond them do not. If the numbers flatter, but the reality does not, then we are certainly not witnessing economic success.

We are witnessing an economic illusion, an economic illusion, an illusions. My Lords, however artfully maintained and I believe for political purposes, however maintained for political purposes, have the habit of not lasting and indeed failing and indeed hurting us in our tracks. In our quest for economic effectiveness for the nation. This is not a political point. This is a point of good economics.
19:39
Baroness Kramer Portrait Baroness Kramer (Liberal Democrat)
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Yeah. the tributes to Lord St John of Bletso. We don't often get to speak in the same debate, so actually, I'm delighted he couldn't speak in the space debate and joined us today. But his speech was both gracious. But it was also extremely profound. And that is a voice that we are very much going to miss in this House. So thank you and all the best from all on our benches. My Lords, this has to be one of the most frustrating debates I think I've participated in.

And I say that despite the fact that there were so many good speeches and we're talking about the finance bill number two, but of course we can't amend it. The Chancellor today made her maiden speech setting out political strategy, but too late for any of us to do any significant analysis of it. I did pick up one thing that I will raise with the Minister, which is that looking at graduates burdened with a crisis in student loans, she apparently told them they were going to be at the back of the queue for a rescue.

And if that is true, frankly, that is a bad decision. But but then we're left with the spring statement, and I can't criticise the. It's a different scheme. I say to Lord Wilson go back and look that. Can I just say that, you know, with the spring statement, it's clearly. We can't blame the Chancellor for the fact that the Iraq war broke out on that day, but obviously, I mean, it's thrown a real wrench into the program that she tried to lay out in her spring statement.

So I'm going to do my best answer and start with the spring statement that because we might as well deal with the world as it was prior to the Iraq War, as we had no clue as to what it's going to look like as that works its way through. Now, the OBR's downgrading of the growth numbers, and I'm not the first to say this one, that we got this from Lord Skidelsky the downgrading of growth numbers to 1.1%. That's in 2026 is obviously bad news for all of us.

But what leapt out to me from the numbers was actually the medium term growth in real GDP per capita. And Lord Hintze just talked about the importance of per capita, but that's growing at 1.1% a year, and it depends on recovery from persistently low productivity growth, which the OBR itself confirms is a very uncertain premise. But we're looking now at the sustained weakest growth in a century. If we exclude crises like World War Two and Covid, we've got unemployment, as Lord Skidelsky said, at 5%.

But it's the 1 million of young people who are NEETs not in education, employment or training that I think have us all very concerned and worried older people who have left work, that economically inactive group in the older end are actually returning to the workforce. But that is not happening with younger people. And I've talked, as I suspect Lord Skidelsky has done, because he raised this point with businesses about the youth Guarantee scheme and the other schemes, and the answer is always they're too small to deal with the problem, and they're not sufficiently sustained to provide the long term support that people who have been trapped in this particular case, that have much more individual support, is needed to get them to the relevant skills that can take years, net migration.

And I'm picking up a point that was made by Lord Davies of Brixton. Net migration is weaker than the previous forecast, both because of a drop in immigration and a rise in the numbers emigrating. And as he said, it could be pushed lower by the new skilled migration regime. Now, I recognise that that drop in migration is great news to the political right, and it may be to this government's Home Office, but frankly, to the rest of us trying to focus on the fact that we have an ageing population, when we look at the demographics, that drop in migration is a serious barrier to medium and long term growth.

Now, even the good news that was in the spring statement is fragile. Lower inflation and lower interest rates are vulnerable to any kind of systemic shock. And, you know, here we are right in the middle of the Iraq war with its impact on oil prices. So we can see that the impact is already beginning to work its way through. But I was more concerned that the additional headroom, and I was glad at first to see there was additional headroom, but much of it came from higher than expected tax receipts, largely due to a rise in equity prices, leading to higher capital gains tax.

And that, as surveys have shown, is very likely to be temporary. We've had a steep loss in business confidence that's in the more recent period. And the Federation of Small Business is warning that SMEs, the bedrock of our economy, are saying that cost burdens have already started producing growth plans, cash flow and job creation in our local communities. I think businesses in real fear of the surge of new burdens, which are actually going to land in April and a sort of death by a thousand cuts.

So it's really a warning sign. We have to respond now. We continue to face fundamental uncertainties. Can we meet the target of raising defence spending to 3.5% by the end of this Parliament? If we continue to spend on the current trajectory on the NHS, and I think we have no choice to do but to do that because productivity is very slow to rise. What will happen to the unprotected public sector departments and to local government services, and how will people feel? Many of the tax rises now locked in will continue to increase the tax take, even with no improvement to living standards, and people will notice it.

Lord Sikka talked about the freezing of income tax and other thresholds. It's a major player in this additional tax take that's been built in with, you know, the government need take no action. It is now now part of a impact that people will learn about the hard way. And my colleague Daisy Cooper in the other place pointed out that 600,000 pensioners on state pensions currently not paying income tax are in for a really big shock when they discover that they've been captured.

And I say to the government telling people they're better off and the poorest will have £1,000 more in their pockets, isn't washing. People's expectations are not being met. That's a I'm picking up a point that Lord Lamont made. It's middle income families are feeling the stress, as well as people who might have before been. The group on which we could exclusively focus because they were at the poorest end. That's. And we now know from the OBR forecast that any improvement in living standards.

And there have been improvements coming from wage growth and the lifting of the two child cap. But the forecast is that that is temporary and will be followed by a period of stagnation and even falling living standards. My Lord's family, farmers have lived with a year of anguish after the original budget announcement of changes to inheritance tax relief for agriculture, and thankfully, they've been partly rolled back. But I want to pick up the point Lord Alli made about many people who saved through pensions and now feel really stupid as they realise that 73% of their savings will go to the Treasury unless they quickly give away that contingency pot that they set aside for a care home.

And it is particularly women who have followed that behaviour, who have kept assets in case they needed to be in a care home with the thought that they could then pass them on to the next generation if they didn't. And I can tell people now because many of my friends are involved in this particular situation, the advice to them is give that money away and let the state take care of you when you need care home. And that is where a place where none of us want to see this ending up.

And when the Minister argues that £1 million is shelter from inheritance tax, he assumes that everyone is in a couple and owns a home, and many are just not in this advantageous position. So because of the tax rises and the bill, investing in your own business can become one of the least tax friendly decisions. You can make. Property price tax rises will price onto rents. I really think we've got to get somehow. Someone's got to get a grip on Treasury. That's a.

It seems completely incapable of aligning its choices with either the strategy for growth or with the industrial strategy, all with pension building. And that's why my party has called for a Department for growth to counterweight Treasury and actually make them main focus driving the economy forward. We accept that the government will need more money to achieve all of the programs that it has, but it just makes us, frankly, furious that we can see setting up a UK, EU customs union would actually deliver £25 billion more a year into Treasury, and that is within reach.

It is a prize to be grabbed and it's more than just the reset. There are many small reliefs that the government could enact to deal with the worst of the administrative horrors and Lord Liddle that, and Baroness Fairhead talked about those administrative horrors. My colleagues in the Other place tried, even on report, to amend the finance Bill to assist bereaved families dealing with the sheer administrative challenge from new inheritance tax rules and to protect family, businesses and farms from being hit with the loss of inheritance tax reliefs multiple times within ten years, which is a real possibility, and to at least assess the cumulative impact, including the increase in alcohol duty in this bill.

But on the already beleaguered hospitality sector, and the government should recognise that this sector is in an emergency condition and we call again for a temporary cut in VAT to get this sector through. But at this time of extraordinary pressure in my Lords, ultimately we need to hear what the government will do to cushion families if we don't soon see a de-escalation in the Iraq war. I think the government's announcement yesterday on heating oil is welcome, but it's far from the proper cap that we've called for.

And I say to the government, a strategy of wait and watch really isn't sufficient. When energy prices could surge after June. And we're in a situation where many family budgets are already close to breaking.
19:51
Lord Altrincham Portrait Lord Altrincham (Conservative)
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My Lords, I thank the noble Lord, the Minister, for his patience and the Minister, for his patience and his care in listening to this debate and declare my interest as a director in South Molton Street Capital, and also thank the noble Lord Lord Shinkwin for speaking in our debate this evening, for his work for this House and his work for our country. We are privileged to have the Minister with us, because he's been very central to the government's economic policy and his words carry weight.

He has been extremely active from the beginning of this session. I remind everybody that the first bill of the session was the bill to strengthen the powers of the OBR. That's when the OBR sort of before my noble friend Lord Redwood joined, joined us. That OBR was quite popular then, both with the government and possibly with Parliament. Maybe that's not so true anymore, but we took that through as the first bill. The session and this timing of this evening's debate is quite interesting, because we're towards the end of the session and we can take a view amongst us about where the government's economic strategy is, and it'll be particularly interesting to have the noble Lords responses to the questions and topics raised this evening.

But you don't really need to be in this debate in the House of Lords to know that unemployment is moving up quite a bit. All noble Lords will have members of their family, children and grandchildren, nephews and nieces, maybe friends and neighbours. Everybody will know that people in their 20s are seeing a dramatic fall away in jobs at the moment, and we might start there because some of that is part of this NEETs problem that went back into the previous government and seems to have started growing around the time of Covid.

But some of it is a new area of of graduate unemployment. People in their 20s unable to start work, unable to start in their careers. It's a very profound economic challenge because if they're not starting in their careers, they may never start in their careers. And there may be a huge economic consequence from that. So I'd start by asking the noble Lord for the Minister to comment to us and give us some insight into what to say to people in their 20s who are failing to get a job at the moment, maybe what to say to their families and what the government might be able to do about that.

And perhaps we all share some responsibility for this situation. The government would tend to tend to blame the previous government, but in a sense, in doing that, it's implicitly to acknowledge that government policy affects employment and the sheer scale of the government. Even before we get to the important point that government needs to work with the private sector, the private sector creates jobs. But just putting that aside for a moment, the sheer scale of the government in this country at the moment is quite important, where we have tax to GDP.

As mentioned by my noble friend Lord Horam, at 36% of GDP and the spend of the government is over 40% of GDP, the government is crowding out the private sector to an extent and therefore the. What the government does and whether the government creates the kind of economic demand that sometimes is referred to on the government side as coming from public spending, whether that is actually true and can happen, or whether, in fact, government creates a tremendous amount of of waste and misallocation of resources, potentially in healthcare, potentially in energy or wherever.

What the government does is extraordinarily important because of its scale. But in addition to that, the government has chosen policies with important objectives. But the short term outcomes have been unemployment. The government has chosen one one after another. Bills that have an important element of job destruction, whether that's in worker's rights or minimum wage or national insurance increases. So the government is choosing a form of policy driven unemployment. It's almost like the government has a revealed preference in unemployment at the moment, and that does need an important response.

And it's only barely being responded to at the moment by the government. But it's the numbers are moving quite fast. They're moving up. Now, the government might hope that unemployment is cyclical. And so, you know, it's a blip. There's a few things going on around the world, a few problems in energy and the rest of it. But the OBR, who, as I say, were rather popular but are now not so popular and have chosen to make some observations that are really quite unhelpful.

The OBR has chosen this delicate moment to say that perhaps unemployment at the level we have at the moment is structural. This is a huge issue. This if unemployment is suddenly becoming structural at 5.5%, they use language. As Lord Skidelsky points out, you do have to kind of read the stuff twice to try and understand what they're saying, because they talk about equilibrium levels of unemployment. What that really means is this is the minimum level baseline of unemployment, and we've reached a structural change, and we need to work on unemployment from here.

A specific question then, for the Minister is to respond, is this the government's position as well? Does the government believe that unemployment is the current level? Is the structural level? And could the government also comment on the OBR's forecast? And I'm not expecting them to agree with the OBR. So not to worry about that. But could they comment on the OBR forecast? Unemployment is going to pass 7% and assure us that's not the case and is not in their in their plans? My Lords, all of this feeds directly into the wider economic decline highlighted today in this debate.

Energy costs are rising and hence, my friend Baroness Neville-Rolfe mentioning the North Sea, but also noble Lord Redwood, Patton and Lamont. We will need to address what happens in oil and gas. Unemployment is rising. Mentioned by Lord St John Bilimoria Lord Skidelsky. The welfare bill is spiralling, mentioned by Lord Horam. Growth is stagnant, mentioned by Lord Massey. And yet we have a Chancellor who delivers a spring statement really devoid of any measures to turn this around and compared.

Can't resist mentioning it again. The spring statement was compared by my noble friend Lord Patten to the empty quarter in Saudi Arabia. Well, that's a very unkind way of putting it, but I think we all know what he means. And, my Lords, this picture is set to worsen looming economic headwinds driven by the deeply uncertain and escalating situation in the Middle East, the fast approaching. Yet the response from the Treasury remains complacent, falling far short of the seriousness this moment demands.

And I would agree with the comments made by my. By the noble Baroness Hayter Kramer about the Treasury. At the moment my Lords are borrowing. Now exceeds that of Greece. Debt is set to rise in virtually every year of the. Of the forecast period. In the forecast period we are living on borrowed money, paying a mounting premium simply to service our debts, while what limited resources remain are channelled into areas that do little to drive growth or productivity. Worse still, instead of backing enterprises and rewarding work, this government is increasingly choosing to subsidise inactivity, paying more and more people to remain outside the workforce.

Several noble Lords made comments on savings and pensions, and it is important that we touch on this, albeit that this is running in parallel bills in this timetable at the moment. But it does have a profound importance to us because of the enormous amounts of unfunded pension liabilities that we have at the moment. My Lord, the government are not merely making life harder for those trying to begin their careers, they're also making it harder for those trying to secure dignity and security in retirement.

As many noble Lords will know, the Government's Pension Schemes Bill does nothing to confront the fundamental challenges of pension adequacy. At the same time, the National Insurance Bill actively discourages pension saving. But the picture becomes even more troubling. From 6th of April 2027, as described by Lord Liddle and Baroness Fairhead. And this. This was a central piece of the Finance Bill subcommittee's report. Most unused pension funds and certain death benefits will be brought within the scope of inheritance tax.

It's worth pointing out, incidentally, a marker for the extraordinary work of of of Lord Liddle on the pension, on the on the finance Bill Sub-Committee that the agricultural and Business Property Relief issues were dealt with earlier in the subcommittee's work. And there was a quiet word from the chairman of the committee, possibly in Cumbria, to senior people in the government, and there were adjustments were made, but unfortunately we didn't get to the inheritance tax stuff till later on and maybe that was why they still are outstanding.

But the chairman of the committee was remarkable in escalating the issues from the committee through our work on the finance Bill Sub-Committee, serious concerns have been raised about the consequences of this change. It risks deterring long term pension saving and could create a deeply punitive practical effects, forcing executives to use estate cash or sell assets or even borrow simply to meet inheritance tax liabilities. Auto enrolment has been one of the great policy successes of recent decades. The noble Lords Minister has recognised this.

The noble Baroness, Lady Sherlock, has also recognised this. But as the Institute for Fiscal Studies has made clear, the system only works if people contribute beyond the statutory minimum. Without doing so, many will simply not accumulate enough to live on in retirement. Yet the government has brought forward a pensions bill that says nothing about adequacy, a National Insurance bill that discourages saving and inheritance tax changes that penalise those who have saved responsibly throughout their lives in order to secure a decent retirement.

And the and just to remind everybody that the inheritance tax changes come in in April next year, and they will cause tremendous disruption and unhappiness. In other words, those who do the right thing, those who work, save, and plan responsibly for the future are the very people this policy framework ends up punishing, and this policy framework is one which the government has chosen to create. Perhaps the noble Lord, the Minister could comment on the government's attitude to pension savings, and we look forward to his response to our debate.
20:01
Lord Livermore Portrait Lord Livermore, The Financial Secretary to the Treasury (Labour)
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Lord Altrincham. forecast and the Second Reading of the finance Bill. I am grateful to all noble Lords for their contributions, which I have enjoyed listening to this evening. May I begin by paying tribute to the noble Lord Lord St John of Bletso for his valedictory speech and for his service to your Lordships' House over many years. It was a wide ranging speech spanning Nelson Mandela, energy policy, AI, amongst other issues. In this, it was a perfect representation of the experience he has brought to our debates.

I wish him very well for the future. My Lords, upon taking office, this government inherited three major crises a crisis in the public finances, a crisis in our public services, and a crisis in the cost of living. That is why we have repeatedly taken the action necessary to bring stability to the economy. Welcome by my noble friend Lord Barber of Chittlehampton. The choices we made were the responsible ones, and the spring forecast showed that the economic plan we've been driving forward since the election is the right one.

I agree with the noble Lord Lord Sherbourne of Didsbury that growth comes from businesses and from investors. That is why our economic plan is built on three pillars. As my noble friends Viscount Chandos and Baroness Gill reminded us, stability in our public finances, investment in our infrastructure, and reform to Britain's economy. My noble friends Baroness Bi and Lord Brooke of Alverthorpe rightly spoke about the importance of just one fiscal event a year and the stability that that brings. The OBR forecast, published last month, showed that our plan is working and that we enter this period of global uncertainty with the fundamentals of our economy strong.

As my noble friend Lord Barbour said, the noble Lady Baroness Neville-Rolfe spoke about inflation neglecting to mention inflation hit 11% under her government. We have cut inflation standing now at 3%, a lower base than at the outset of Russia's illegal war on Ukraine. She also mentioned interest rates, forgetting not only to mention the fact that interest rates have been cut six times under this government, but that they were set soaring by the Liz Truss mini budget. We have prioritised growth to drive up living standards.

The OBR forecast showed GDP per head set to grow more than was expected at the budget, with growth of 5.6% over the parliament. And as my noble friend Lord Pitt-Watson said, we have stabilised the public finances, having already reduced the deficit by £20 billion this year from 5.2% to 4.3% of GDP. The noble Lady Baroness Neville-Rolfe, a noble Lord Lord Moynihan of Chelsea, spoke about the growth forecast. Average growth over the next five years is broadly unchanged, with slightly lower growth this year and slightly higher growth next year and the year after that.

Lord Hintze spoke about the importance of GDP per head, as did the noble Lady. Baroness Kramer GDP per capita is now set to grow faster than was forecast in the autumn, with growth of 5.6% over this parliament. GDP per capita is £2,300 higher in the last year of the forecast compared with the first. My noble friend Lord Davies of Brixton spoke about the potential for falling migration to impact OBR forecasts going forward, as did the noble Lady Baroness Kramer. As my noble friend Baroness Gill said, Britain was the fastest growing G7 economy in Europe last year.

That is why we have the right economic plan to deliver higher long term economic growth. The noble Lord Lord Skidelsky spoke about the language used by the OBR to describe unemployment, which I'm afraid I'm not responsible for. Many noble Lords, though in this debate did talk about unemployment. The noble Lady Baroness Wolf Neville-rolfe Lord St John of Bletso Lord Bilimoria Lord Lamont of Lerwick Lord Elliott of Mickle Fell Lord Northbrook Lord Altrincham Lord Massey of Hampstead and the noble Lady Baroness Kramer all focussed their comments on unemployment.

Unemployment is historically high. There are only two peacetime years out of the past 150 years, when the average annual employment rate has been higher than it was in 2025. Forecasts from the OBR show that unemployment will peak later this year, and then fall progressively for the remainder of the parliament, ending the parliament lower than it was when we took office. There is, though, of course, action needed to address particularly the number of young people out of work, something that has been focussed on by the contributions of many noble Lords.

That is why we're providing £2.5 billion across the Youth Guarantee to tackle youth unemployment and through additional investment in the growth and skills levy, to reform apprenticeships and prioritise young people. This will support almost 1 million young people and help deliver up to 500,000 opportunities to earn or to learn. Noble Lords Lord Lamont of Lerwick and Lord Hintze spoke about living standards while the last parliament was the worst on record for living standards, living standards are now rising. GDP per capita is set to grow more than was forecast in the autumn.

Real wages have grown more in the first year of this government than in the first ten years of the previous one. The noble Lady Baroness Wolf spoke about inflation. We have cut inflation, which now stands at 3%, a lower base than at the outset of Russia's illegal war on Ukraine. The OBR forecast last month that inflation would fall faster than predicted in November, and will return to target this year rather than next. Clearly, these forecasts took place before the current conflict in the Middle East began.

Movements on energy markets we have already seen are likely to put upward pressure on inflation in the coming months, but as the government has demonstrated, we will take the necessary action to help families with the cost of living and protect the public finances. My noble friend Lord Pitt-Watson talks about the need to build growth in partnership with business, something I agree very much with. Lord Sherbourne also talked about that business experience, and I think he referenced this government's, what he described as lack of business experience compared to the previous government.

We did, of course, inherit an economy from the previous government, where UK, where the UK was the only G7 country with private sector investment levels below 20% as a share of the economy. Since this government came to office, we've secured a record £360 billion of private investment. Retail sales are rising in the S&P global PMI rose to a 17 month high in January. As several of my noble friends have said, business confidence comes from stability and that stability underpins our economic plan.

I also very much agree with my noble friend Baroness Bi on her comments about the value of London and the international importance of the City of London in terms of financial and professional services. And I agree with my noble friend Lord Brooke Alverthorpe, about the importance of public private partnerships. Lord St John of Bletso spoke about procurement, the role of AI and the potential consequences of AI on the labour market. All timely points following the Chancellor's Mais lecture this lunchtime, which focussed on all of the points that the noble Lord raised.

I completely agree with him on the importance of using procurement wisely, and we have set out reforms today to do exactly that on AI and the labour market. The Chancellor announced. We will establish an AI economics institute to develop policies exactly along the lines that the noble Lord mentioned in his speech. I agree very much with what my noble friend Baroness Gill said about the benefits of deepening our economic relationship with the European Union as something the Chancellor has set out in her Mais lecture today, the noble Lord Lord Patten asked about the cost of producing the spring forecast.

The Treasury does not calculate or record a standalone cost for producing the spring forecast. It is delivered using existing departmental resources across policy and analytical teams and forms part of routine fiscal and economic reporting obligations. As such, no additional or exceptional spending is incurred beyond normal staffing costs. My Lords, several noble Lords, including Lord Bilimoria, Lord Lamont Lord Redwood, my noble friend Lord Davies of Brixton. The noble Lady Baroness Kramer spoke about the impact of the conflict in the Middle East on the OBR's most recent forecasts.

The forecasts on the OBR of course, predate the current conflict in the Middle East, and clearly the full economic impact of that conflict will depend on its severity and its duration. The movements of energy markets we've already seen are likely to put upward pressure on inflation in the coming months. Our economic approach will be both responsive to a changing world and responsible in the national interest. As the government has demonstrated time and again, we will take the necessary decisions to help families with the cost of living and to protect the public finances.

Any forecast is, of course, inevitably, inevitably subject to uncertainty, particularly when global events are moving quickly or we don't yet know how long this conflict will last. It does underline the importance of building a stronger, more secure economy, able to withstand whatever instability we may face. In the budget. Last November, we took £150 of costs off of energy bills. Yesterday, the government announced immediate support for vulnerable heating oil customers, providing £53 million for those households that are most exposed. Lord Lamont of Lerwick endorsed the view that any support should be targeted.

The noble Lady Baroness Neville-Rolfe asked about fuel duty. The UK benefits from strong and diverse security of energy supplies. The decisions we have taken since the budget in 2024 will save the average motorist over £90, or 8 to £0.11 per litre, compared to the plans that we inherited from the previous government. As my noble friend Viscount Chandos said. The Chancellor has written to the Competition and Markets Authority saying it must remains, asking it to remain vigilant across heating oil prices and recommending the act to tackle unjustified price increases.

The government is clear we will not tolerate profiteering or unfair practices, and we urge customers to share any evidence of price manipulation with the CMA. I agree with what many noble Lords said about the importance of the North Sea, including including the noble Baroness Neville-Rolfe noble Lords. Lord St John of Bletso, Lord Bilimoria, Lord Lamont and Lord Redwood. Domestic oil and gas must continue to have an important role in the energy mix for decades to come. That is why the Chancellor has met with North Sea industry to discuss the consequences of this uncertain period.

I also endorse what my noble friend Lord Barber said about critical minerals. The noble Lady Baroness Neville-Rolfe spoke about increasing defence spending. We are delivering the biggest uplift in defence spending since the end of the Cold War. That equates to over £270 billion invested over the spending review period. Defence spending will rise to 2.6% of GDP next year, a level not seen since 2010, and we are committed to spending 3% in the next parliament when economic and fiscal conditions allow. My Lords, while we don't yet know how long this conflict will last, it underlines the importance of building a stronger, more secure economy able to withstand whatever instability we face.

The strength of our economy and of our public finances are possible only because of the budget last year and the measures contained in this finance Bill before us today. May I pay tribute to my noble friend, Lord Liddle, for chairing the finance Bill, subcommittee of the Economic Affairs Committee, as well as to other members of that committee. Noble Lord Lord Altrincham and the Lord Leigh of Hurley, and the noble Baroness Baroness Fairhead. The noble Lord Lord Lamont of Lerwick and the noble Baroness, Lady Neville-rolfe asked about the impact on working people from further free to National Insurance thresholds.

The government is not increasing, as I'm sure noble Lords know. The headline rates of income tax, National Insurance or VAT in line with our manifesto. But we are clear that the decisions made in the budget in November do involve asking people to contribute more. In reference to the points made by my noble friend Lord Sikka, this Finance Bill raises revenue in a fair way, reforming the system to ensure those with the broadest shoulders pay their fair share, while limiting what we ask from ordinary workers.

My noble friend Lord Liddle focussed in his comments his concerns around the inheritance tax, treatment of unused pension funds and death benefits focussed on two by the noble Lady Baroness Fairhead and my noble friend Lord Davies of Brixton. This was a point also mentioned by the noble Lady Baroness Kramer. This measure removes distortions resulting from changes that have been made to pensions tax policy over the last decade, which have led to pensions being openly used and marketed as a tax planning vehicle to transfer wealth, rather than as a way to fund retirement.

As a result of these changes, more than 90% of estates will still pay no inheritance tax each year, and most estates will also not pay inheritance tax on the pension. Wealth and income tax is only due from beneficiaries on inherited pensions in certain circumstances. My noble friends Lord Liddle and Lord Davies of Brixton, the noble Lady Baroness Fairhead and the noble Lord Lord Leigh of Hurley raised the issue of Personal Representative's personal representatives, who are already responsible for administering the rest of the estate will be liable for reporting and paying inheritance tax on any unused pension funds and death benefits from the 6th of April 2027.

This is the same as the current process for non-discretionary pension schemes and other assets, which do not pass directly through the estate but are in scope of inheritance tax. Since the announcement that the liability for paying inheritance tax on pensions will sit with personal representatives, officials have been engaging directly with tax and legal industry professionals to fully understand their concerns. Budget 2025 announced that where personal representatives reasonably expect inheritance tax to be due, they can direct pension scheme administrators to withhold 50% of the taxable benefits for up to 15 months from the date of death.

Personal representatives can then direct pension scheme administrators to pay the inheritance tax due to HMRC, before releasing the rest of those benefits to pension beneficiaries. If the instruction is withdrawn or the period ends, the remaining funds can be paid out. This will not apply to exempt benefits funds under £1,000 or continuing annuities. Personal representatives will also be discharged from liability for pensions discovered after they have received clearance from HMRC. My Lords, we are also reforming the tax system to ensure it keeps pace with the fast changing economy.

We're going further to close the tax gap to ensure that everyone pays the tax they owe. And having listened carefully to feedback from the farming community and family businesses, this bill also raises the 100% rate of relief on Agricultural Property Relief and Business Property Relief, from £1 million to £2.5 million. My noble friend Lord Liddle and the noble Lord Lord Leigh of Hurley spoke about these reforms to Agricultural Property Relief and Business Property Relief. The status quo is not sustainable and there is a clear need to reform Agricultural Property Relief.

A very small number of claimants benefit from a very significant amount of agricultural property and business property relief. The increase in the planned allowances from £1 million to £2.5 million, further reduces the number of states forecast to pay more inheritance tax, and further reduces the liability for many of the remaining estates, meaning a couple can leave £5 million completely free of tax. On top of the usual reliefs and allowances. My noble friend Lord Liddle also spoke in favour of taxing wealth.

The government is committed to taxing wealth fairly. That is why in the autumn budget in 2024, we announced reforms to taxation of wealth and the wealthy that will raise over £8 billion, including reforms to non-domiciled tax mentioned by several noble Lords this evening. We are now building on that action by reforming property taxes, so the highest value homes in England pay the most, and addressing reliefs in capital gains tax and inheritance tax that have grown in cost to the benefit of the wealthy. My noble friend is absolutely right.

My noble friend Lord Liddle is absolutely right that we must reward and encourage enterprise, which we are doing, including in measures contained in this finance Bill. My Lords, since coming to office, the government has implemented an economic plan to bring stability to the public finances and to strengthen Britain's economy for the long term. The spring forecast shows this plan is the right one, with lower inflation and borrowing, higher living standards and a growing economy. Britain today is in a stronger position to withstand whatever uncertainty comes our way, but that is only possible because of the action we took in the budget last year and the measures contained in this finance Bill.

They are the right choices to protect families and businesses in an uncertain world, and they demonstrate that this government

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has the right economic plan for Britain's future. I beg to move. Your question.

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Your question. Is that this motion be agreed to, as many as are of that opinion will say content Of the contrary, not say content Of the contrary, not content. The contents have it. Finance (No. 2) Bill Lord Livermore.

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Finance (No. 2) Bill Lord Livermore. I Now read a second time. As many as are of that opinion will say content the contrary, not

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say content the contrary, not content. The contents have it a little more. My Lords, I beg to move that this bill be not committed.

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Question is that this bill be not committed. As many as are of that opinion will say content the

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that opinion will say content the contrary, not content. The contents have it. Third Reading will do more. My Lords, I beg to move that

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My Lords, I beg to move that this bill be now read. A third time. Will be. Now read a third time. As many as have that opinion will

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As many as have that opinion will say content contrary, not content. The contents have it. Lords this bill do now pass.

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Lords this bill do now pass. The question is that this bill do now pass. As many as are of that opinion will say content contrary, not content. The contents have it. I'll just spend a few moments allowing members who want to leave allowing members who want to leave before the next business to do so. before the next business to do so.

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A A few A few moments A few moments so A few moments so that.

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A few moments so that. A few moments so that. They A few moments so that. They have

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A few moments so that. They have expired. National Minimum Wage Amendment Regulations 2026. So long.
20:19
None Portrait Orders and regulations: National Minimum Wage (Amendment) Regulations 2026 - motion to approve and associated motion to regret
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Amendment Regulations 2026. So long. >> My Lords, I beg to move that the House approves the National Minimum
20:19
Lord Leong Portrait Lord Leong (Labour)
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House approves the National Minimum Wage Amendment Regulations 2026. I note the regret motion, a regret amendment tabled by the noble Lord, Lord sharp. To note first the context of this instrument. These regulations were laid before Parliament on the 2nd of February and approved by the other place on the 2nd of March. Their purpose is to increase the national living wage and the national minimum wage rates, subject to approval of this House. The regulations will come into effect on Wednesday, the 1st of April.

The creation of the minimum wage is one of the proudest legacies of the previous Labour government. We will always defend working people and the minimum wage remains a key plank of this government's plan to make work pay. The opposition is wrong to suggest that we are not sufficiently taking into account employment opportunities for young people. These increases are based on the recommendations of the Low Pay Commission, which the government has accepted in full. We are grateful to the Low Pay Commission and extend our thanks to their chair, Baroness Stroud, as well as the fellow commissioners and the supporting officials.

The LPC is an independent and expert body and reaches its decisions through consensus between its employer, worker and independent commissioners and following extensive stakeholder consultation and research. The government recognises and values the Low Pay Commission established track record of balancing a multitude of factors when making wage rate recommendations that deliver for workers and businesses alike. The remit for the 2026 rates asked the LPC to recommend rates that minimize impacts on employment prospects for workers and consider the risks for younger workers.

In addition, the government is committed to helping young people get and retain good jobs, including the recent announcement to reduce the cost of hiring young workers younger workers. The government is also delivering a long overdue reform to rebalance the business rates system and growth boosting support with the Business Growth Service to unlock business potential. Noble Lords will have seen the publication yesterday of the 2026 remit of the Low Pay Commission. The new remit continues to benchmark the National Living Wage to two thirds of median hourly earnings, while also considering the condition of the labour market.

The cost of living, the impact on business and competitiveness and the wider macro economic conditions. The new remit maintains the commitment to removing the discriminatory age bands for adults. We recognise that the national minimum wage and National living wage alignment must be achieved while protecting jobs and supporting labour market stability. The remit gives the LPC full flexibility to use their significant expertise and social partnership model, including employer and worker representatives, to recommend the appropriate pace and timing of aligning the 1820 national minimum rate with the National Living Wage.

We have asked the LPC to provide the recommendations to government by October. The government will then confirm the new National Living Wage and National minimum wage rates to apply from April 2027. Now, turning to the detail of the minimum wage regulations, the national minimum wage, the statutory minimum for workers aged 21 and over, will increase by 4.1% or £0.50, to £12.71 an hour. This represents a gross annual increase of £900 for a full time worker. The national minimum wage for workers aged between 18 and 20 will increase by 8.5%, or £0.85, to £10.85 an hour.

A full time worker on this rate will see their gross national earnings rise by over £1,500, and this continues our progress to closing the gap between the rate and the full adult rate. The regulations will also increase the national minimum wage rate for workers aged above school, leaving age by under 18 to £8 an hour. This increase, equivalent to 45 or 6%, also applies to apprenticeship National minimum wage, which relates to apprentices aged under 19 or in their first year of their apprenticeship.

Finally, the accommodation offset the maximum daily amount an employer can charge a worker for accommodation without reducing their ability to pay for minimum wage purposes will increase by 4.1%, or £0.44 to £11.10. By approving this year's minimum wage increases, we can deliver in the coming weeks a significant and deserved uplift for millions of workers. I refer my Lords to the Comprehensive Impact Assessment, which was published alongside these regulations by the Department for Business and Trade. The impact assessment contains a full equality assessment and received a green fit for purpose rating from the Independent Regulatory Policy Committee.

The government estimates that the minimum wage increases from these regulations will provide a direct pay uplift for approximately 2.7 million workers, while an additional 5.1 million workers may benefit from positive spillover effects. As employers maintain pay differentials. The minimum wage is rightly regarded as one of the most successful and effective economic policies of the last few decades. Since it was introduced, the share of low paid jobs in hourly terms has dropped from 21.9% to just 2.5%, and the value of the national living Wage this year is expected to be 80% higher in real terms than the top statutory rate in 1999.

This progress has been achieved without the negative impact on the economy and employment that was predicted at the time by some members. Indeed, the impact assessment sets out a range of potential economic benefits of this year's uprating, including putting more money in the pockets of the lowest paid workers, greater incentive for people to enter work, and boosting consumer demand. We also recognise the importance of a robust enforcement regime in in upholding workers right to a fair day's pay.

Since the introduction of the minimum wage, the government has overseen the repayment of almost £200 million to 1.5 million workers and issued over £105 million in financial penalties. The annual budget for HMRC has increased to around £30 million, and we are going further with the creation of the Fair Work Agency. The Fair Work Agency will have stronger powers and wider remit, delivering on for exploited and underpaid workers and ensuring a level playing field so that the majority of businesses who already do the right thing by their workers cannot be undercut by the less scrupulous competitors.

My Lords, enclosing it is worth re-emphasising the positive impact that these regulations will have on the lives of millions of working people. When the increases come into effect next month, we will continue in our progress towards our manifesto goals, ensuring a genuine living wage and extending it to all adult workers while safeguarding employers and protecting the employment prospects of younger workers.
20:27
Lord Sharpe of Epsom Portrait Lord Sharpe of Epsom (Conservative)
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The question is that this motion be agreed to. Amendment. Lord Sharpe of Epsom. >> I am extremely grateful to the Minister for explaining and Minister for explaining and introducing this S.I. to which I have tabled a regret amendment. But I'm afraid I take a slightly different view to the. The one the noble Lord has just explained. Once again, we start with an ill thought out, anti-business measure by this government, and it's very interesting to note that the Minister, when he was explaining and introducing the amendment, didn't really talk about the impact on business.

He didn't reference, of course, a number of government agencies which will be enforcing all sorts of fines and whatnot. But I think that's regrettable because, quite frankly, this is going to end up being an anti-worker measure, too, and it's going to price people out of the labour market. My Lords, no one on this side of the House opposes higher pay in principle. Of course, we want people to earn more, but for that to be the case, there must be work to be had.

A wage floor that is set without proper regard to hiring conditions. Business confidence and the fragility of entry level employment does not help the low paid. If it helps price them out of a job altogether. And that's why this s I is so troubling. From the 1st of April, the adult rate will rise to £12.71, while the rate for 18 to 20 year olds 20 year olds rises to £10.85 and the under 18 and apprentice rates rise to £8. Now the government may pretend that there is no trade off here, but everyone outside government understands that there is.

If one sharply compresses the wage differentials. The noble Lord called them discriminatory between inexperienced young, younger workers and older workers. One makes it less attractive to hire those with the least experience, the least confidence and the least established work history. The key word is not discrimination. It's experience. My Lords, that is true not only for those aged 21 to 25 who are entering the workforce, but especially for 18 to 20 year olds, many of whom rely on part time, flexible and entry level work to get that crucial first foothold into the labour market.

Retailers themselves are warning that these local, flexible jobs are often the first step into work for young people, including Saturday jobs and short hours roles around study or caring responsibilities. And my Lords, this is not happening in a Labour healthy labour market. The latest ONS figures show that the overall UK unemployment rate was 5.2% in October to December 2025 and as we heard in the debate on the previous subject, the OBR are forecasting that to rise to 7%. My Lords, for 16 to 24 year olds, the unemployment rate was this 16.1%, according to the latest ONS series.

That's now higher than the EU average. The latest ONS net release shows 957,000 young people aged 16 to 24 are not in education, employment or training, including 411,000 who are unemployed and 547,000 who are economically inactive. Business groups have been warning the government about exactly this. The British Chambers of Commerce said that every above inflation wage increase means higher business costs, lower investment and fewer opportunities. They warned that making employment more expensive risks deepening the jobs crisis among young people.

The BBC also found that labour costs remain the single biggest cost pressure for SMEs, cited by 72% of firms. It's January recruitment survey found that only 23% of firms expected to increase their workforce in the next three months, and 14% expected to reduce it. The chief economist at the CBI warned that when government piles more costs onto employment, those costs feed straight back into hiring decisions. Investment plans and the opportunities that are available to individuals. The CBI says hiring intentions have been negative for 18 months.

That the UK unemployment rate is at a post-pandemic high, and that the higher employer National Insurance, large minimum wage rises and the Employment Rights Act have all made it more expensive and more risky to create jobs. The British Retail Consortium has said that rising unemployment, rising employment costs are already forcing leading retailers to reassess hiring, with 52% of chief finance officers planning to reduce hours or overtime, and 32% expecting to freeze recruitment. That matters because retail remains the largest gateway into work for young people, with around 780,000 retail jobs held by 16 to 25 year olds.

UK hospitality has suggested that the cumulative burden of wage rises, taxes and other employment costs is reducing job opportunities and again, particularly for young people. It has already reported that hospitality employed 8784 fewer people in December 2020 2025 than in November and 20,014 fewer people than in September. And at precisely the time, the sector would usually be staffing up. And what makes this especially striking is that even organisations that are not normally associated with conservative scepticism about minimum wage hikes are now sounding the alarm.

The Tony Blair Institute says the government's plan to abolish the youth rate on a fixed timetable is becoming, and I quote, increasingly risky, that youth unemployment is more sensitive to hiring costs and that any convergence with the adult rate should be conditional on improvements in youth employment outcomes. The Resolution Foundation says the government should pause further convergence of the youth minimum wage with the national Living Wage, until youth unemployment begins to fall. At this point, my Lords, it's hard to resist the conclusion that no one in this Cabinet has any real experience of running a business, and I exempt the noble Lord, the Minister opposite, from that remark.

If they did, they would understand that every additional cost alters hiring decisions in the real world. And what else has the government done recently? In effect, it has admitted the problem, because today the government announced a 1 billion youth employment drive, including a new youth jobs grant, paying employers £3,000 for each eligible 18 to 24 year old they hire. In other words, the government is now telling business we are going to refund employer National Insurance in part. If you hire the very people you currently cannot afford to hire because we raised employer National Insurance.

My Lords, in what sort of fantasy parallel economic socialist universe is that common sense? The language government has used is revealing. They say they hope this programme will create or support 60,000 opportunities. Hope is the key word. So calling it a youth jobs guarantee is frankly misleading. And even when even worse, the scale is nowhere near enough. ONS data for January 2026 show that the number of Payrolled employers was 30.3 million, which was down at 0.4% on the year. That's the equivalent of 134,000 fewer employees than in January 2025.

So not even on its own. Optimistic assumptions with this scheme make up for the jobs already lost. Nor is the wider framework helping Ministers who say they are not banning all zero hours contracts, and formerly workers will be able to stay on them if they wish. But the government's own fact sheet on the Employment Rights Act confirms that employers will have to offer guaranteed hours based on regular patterns. Retailers are warning that if implementation has further cost or rigidity, entry level and short, our roles will be the first to go.

That's precisely the sort of flexible work, part time work on which many younger workers depend. So I asked the Minister, what is the plan? What is the plan for the 957,000 young people who are now not in education, employment or training? What is the plan for small firms already telling us that labour costs are their biggest pressure? What is the plan for sectors like retail and hospitality that provide the first rung on the ladder? And what is the plan for the 18 year old, the 19 year old or the 20 year old who does not need another Whitehall initiative but simply needs an employer willing to take a chance on them? My Lords, the real minimum wage is in fact zero, and unfortunately that is what many young people receive from making it too expensive to hire them.

While this government seems determined to compete with the Greens for the prize of economic illiteracy, businesses are closing. Hiring is weakening, training budgets are being cut, and too many young people are seeing the path into work disappear before their eyes. The country cannot afford that, and young people can certainly not afford that. I beg to

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move here. The original question. The original question was that the regulations laid before the House on the 2nd of February be approved. Since when an amendment has been moved by Lord Sharpe of Epsom at moved by Lord Sharpe of Epsom at the end to insert the words set out on the Order Paper. The question I therefore have to put is that this therefore have to put is that this amendment be agreed to.

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amendment be agreed to. The noble Lord, Lord Sharpe, will not be surprised to hear that I don't agree with his interpretation of the government's announcement yesterday of a major drive to create hundreds of thousands of jobs for young people and to radically transform apprentices, and I would suggest that it demonstrates that this is
20:37
Baroness Carberry of Muswell Hill Portrait Baroness Carberry of Muswell Hill (Labour)
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not a government that is reckless with the youth unemployment market with the youth unemployment market and the economy. And I'd like to reinforce the opening remarks of my noble friend, the Minister, about noble friend, the Minister, about the way that the regulations before the House this evening came about the House this evening came about and without labouring the point. and without labouring the point. This was the product of painstaking examination of evidence by the Low Pay Commission, which has been said is a tripartite body featuring representatives from businesses large and small, as well as labour market economists and experts and representatives of workers.

And I can attest to the thoroughness of that exercise that takes place year after year, because I did it myself 11 times. The commission, as has has been said, is excellently chaired by the noble Lady, Baroness Stroud, and I quote briefly because it's directly relevant to these regulations. From her letter to the government making recommendations to apply from April this year. She said that having comprehensively considered the available evidence base, the Low Pay Commission judge judgment was that the recent National Living Wage increases had not in themselves had a significant negative impact on jobs on young people specifically.

As the noble Lord, Lord sharp, has reminded us, the government had asked, as Lady Stroud recalled, the commission to extend the National Living Wage to 18 year olds, but to do this by balancing concerns about youth unemployment. Lady Stroud's letter said that the Low Pay Commission acknowledged the concerning rise in the rates of young people not in education, employment and training. These were not reckless recommendations. The Low Pay Commission also acknowledged that young people were more likely to work in hospitality.

In retail, where there had been significant falls in vacancies and employee numbers. Realistic assessment they said minimum wage effects were difficult to separate out. However, from other pressures on these sectors, they said that there was not enough evidence to say that previous increases in the minimum rate for 18 to 20 year olds had affected young people's employment overall. That's not me saying it, it's the Low Pay Commission. The commission opted for caution and recommended waiting until 2028 or 2029 to lower the national living wage threshold to 18, and then only subject to economic conditions.

And they were similarly cautious and careful with the apprentice rate, keeping it the same as the rate for 16 and 17 year olds, increasing it to £8 an hour, only £8 an hour. The Low Pay Commission's wisdom and caution is reflected in the regulations before your Lordships House this evening, and I would ask the noble Lord, Lord sharp, to think again about his amendment and to think again about the effects of seeking to deny the lowest paid in our society a few more pounds in

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their wage packets. Yes. My Lords. It is a sad day to be speaking

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It is a sad day to be speaking on the conservative motion objecting to the rise in minimum wage or support, the rise in wage or support, the rise in minimum wage and acceleration of the rate for younger workers who the rate for younger workers who bear the full cost of living. The product of their labour is not sold for lower prices as Starbucks, for lower prices as Starbucks, Tesco or anywhere else. Some 25.3 million people live below the minimum living standard and their voice must be heard.

Last week, the
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Lord Sikka Portrait Lord Sikka (Labour)
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Conservatives promised to reintroduce the two child benefit cap if they ever return to office. cap if they ever return to office. Over 500,000 children and their families will be pushed back into poverty. That lack of empathy is on display again today, as now they are targeting low paid workers and are targeting low paid workers and deprived children and their families of nourishing food, good housing and other essentials. The Joseph Rowntree Foundation estimates that a single person needed to earn £30,500 a year to reach a minimum acceptable living standard in 2025.

A couple with two children needed to earn £74,000, so even after the forthcoming minimum wage increase, millions will be way short of that target. Yet the party opposite is objecting to this. It is striking that they are silent on Soaraway executive pay. A typical FTSE 100 CEO collects average UK wage in just two days and the CEO to work up a ratio is 141 times. Recently, the chief executive of shell got a pay rise of 60%, rising to 13.8 million bp.

CEO's pay has doubled to 11.7 million. Her daily pay exceeds the annual median wage of a UK employee at Melrose Industries. The CEO to worker ratio is over 1110 times. We never heard hear anything from the party opposite about such rip offs and inequalities. The party opposite objects to rise in the pay of younger workers, but they have not offered a single suggestion for lifting young adults out of poverty. They could support call for abolition of university tuition fees, abolition of prescription charges, promise free bus bus passes to the under 21 seconds, as they do in Scotland.

But they don't support any of these poverty alleviating measures. Sadly, the opposition to the rise in minimum wage is part of a study, part of a steady decline of empathy for a large section of the population. The political discourse venerates the super rich and scapegoats children, minorities, the poor, disabled, sick and the unfortunate for social problems. Empathy is the glue that holds society together, but it is increasingly being undermined by toxic political discourses. I am reminded of a quote by Hannah Arendt, who said, and I quote, the death of human empathy is one of the earliest and most telling signs of a culture about to fall into barbarism.

My Lords, condemning millions of poverty is barbaric. We must search our souls and aim for equitable distribution of wealth to ensure that every single person in this country can live with dignity and fulfil their life.
20:44
Baroness Bennett of Manor Castle Portrait Baroness Bennett of Manor Castle (Green Party)
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My Lords, it is a great pleasure to follow the noble Lord, Lord seeker, who makes a very powerful point about the fact that there are point about the fact that there are enough resources in this country for everyone to have a decent life, and for us to look after climate and nature. If we share those resources out fairly. Now I want to thank the noble Lord, the Minister, for introducing this SI. And I am, however, going to depart from Lord seeker in agreeing that I regret this.

Si. But in following Lord Chancellor, in saying I agree, I regret this. Si. But 180 degrees opposite direction for the noble Lord on the Tory front benches. Reason for regret. I do also have to pick up. The noble Lord was very, very keen. Lord sharp was very keen to quote the Tony Blair Institute. Well, of course he is quoting an institute that takes its name in leadership from the Prime Minister who saw the wage share. That is the wages as a percentage of the total national income fall very significantly.

From the 60s to the 80s, it was around 60%. In the late 1990s, it fell as low as 51%. Yes, the Blair government did bring in a minimum wage, and then it allowed its real level to decline and workers to suffer. So the noble Lords comments are entirely in line with that Blair approach. But I want to pick up some comments made by the Chancellor in introducing this, that the economy is not working well enough for those on the lowest incomes.

I agree too many people are still struggling to make ends meet. I entirely agree those on low incomes are not properly rewarded for their hard work. Again, I entirely agree. But this SI does not really deal. Take us nearly as far as we need to go in those directions. Where might we actually go? It's interesting that we are talking about this statement, etc. talked about the National Living wage. Well, that term came in when George Osborne actually gave in to the argument of the Green Party and said there should be a real living wage.

And rhetorically, if not in practice, introduced this term. But of course, the so-called National Living wage is not the real living wage. The real living wage is calculated by the real Living Wage Foundation, and that is £13.45 an hour across the UK, compared to the national figure of 1271 and £14.80 in London. Now, I'm sure the benches around me will say, oh, but businesses can't afford to pay this. However, this real living wage is paid by more than 16,000 UK businesses who've chosen to transform their workers lives and raise the bar to a basically decent level of work.

Nearly half a million employees are covered by this, and the range of employers credited with the Living Wage Foundation include half the FTSE 100 big household names, including nationwide, Ikea, Everton Football Club and Aviva, as well as many thousands of small and medium enterprises. Now I do have a direct question for the noble Lord, the Minister, because one of the things that comes with the announcement is that in this is there's a suggestion that the increase in the rate for 18 to 20 year olds may slow in future.

Now, I note that Labour made a manifesto commitment that the so-called National Living Wage equally would apply to all adults by the end of this Parliament is the noble Lord. The Minister prepared to repeat that commitment tonight, and the noble Lord, Lord seeker, has already very powerfully made the point that, of course, 18 to 20 year olds, when they go into Tesco to buy their dinner, when they pay their rent, they can ask for a discount because they're young, but they're astonishingly unlikely to get it.

But more than that, you also have workers who are doing exactly the same job shoulder to shoulder in the warehouse, shoulder to shoulder in the shop, and one of them is paid less than the other simply because of their age. And that simply cannot be right. But my final point is that the real living wage still doesn't take us nearly far enough. The Joseph Rowntree Foundation has, over a long period of time, calculated the minimum income standards. This is enough to ensure that people who are working get enough to basically live a decent life, as identified by the people of Britain.

And I think these are real measures of how the government is not going nearly far enough. This is not going nearly far enough in with the current levels. A couple with two children, where one parent is working full time on the national so-called living wage and the other is not working, reaches 66% of the minimum income standard in 2025, and that is actually worse than it was in 2024. It's a one percentage point decline. A single working age adult working full time on the National Living Wage reaches 76% of the minimum income standard by 2025, compared to 77%.

So again, a one percentage point decrease. We're going in the wrong direction. And just one final point. Now, I'm aware that Jeremy Hunt no longer officially speaks for the Her Majesty's Opposition, but he is, of course, still a Tory MP. And he told radio five yesterday that the kind of measures which we're all looking towards to deal with energy bills, the government helping in this crisis situation is unsustainable, he said. We're going to have to wean ourselves off this habit, but the reality that that fails to acknowledge is that after decades of workers getting less and less of the share of the product of their labors, they haven't got any reserve left for the next shot.

Shock people have been left on the edge. And I'm afraid this see, does nothing like enough to help them

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reestablish the stability and security in their lives. My Lords. Just following on from my noble

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Just following on from my noble friend, Lord Sharpe. May I please ask the noble Lord, the Minister, Lord Liong, who has vast successful business experience, why does he think that? Sir Tony Blair said by think that? Sir Tony Blair said by his institute just two weeks ago that Labour's policies are harming
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Lord Hannett of Everton Portrait Lord Hannett of Everton (Labour)
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the Low Pay Commission is in existence. Every party, every government has accepted not only its recommendations, but have actually said it would be a retrograde step through legislation that protects, and I repeat, protects, the most vulnerable. I often wonder what the rates would be if we never had the Low Pay Commission, if it was left to the generosity of politicians and employers. So it was required, it was needed, and it sustained its value consistently. I should also say that sometimes there's a kind of lack of understanding about how the Commission reaches an agreement, and Baroness K touched on it.

It's a tripartite commission consisting of economists, employers, trade unions, and it never. Space Commission, and I emphasize evidence based. It's not something that you pick a figure because you think it's. What should. People should earn? It has to be argued for in a responsible way. By taking evidence from stakeholders such as employers, from trade unions, from entrepreneurs, and you arrive at a settlement and that commission debates heavily the effect on employment, on youth unemployment. But if we're about anything in politics, it has to be about the values as well.

It has to be about protecting the lowest paid in society who require support. And the reason it survived so long because it's proved its case. Every recommendation has been accepted from the previous government opposite. And if it hadn't been introduced, I wonder, I repeat, what would the rates of pay be? I also hear I can say to the noble Minister, when I listen in the chamber to many of the views being expressed about improvements in regulation that improves the life of the low paid worker, everything is going to be the straw that breaks the camel's back.

I heard this for years when I was on the commission and it survived, and it's gone from strength to strength. So I regret the motion and I concur with everything the noble Minister Thanks.
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Lord Goddard of Stockport Portrait Lord Goddard of Stockport (Liberal Democrat)
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I'll be relatively brief. >> We don't regret the minimum wage going up. We support that. But I think what we do regret is the lack think what we do regret is the lack of government that to support hard working families and indeed businesses. And I have some sympathy with Lord Sharpe of Epsom views on some of this, because clearly increasing the minimum wage is always welcome and it takes 2.5 million people to another level, and that should be encouraged.

We should be able to do that. And I think we had some arguments, the employment bill over weeks and weeks, about months and months, about the effect of some of the employment rights and some of that is coming to fruition now, because, clearly, unless businesses can grow, unless they can do more business and create, then there'll be less businesses and less opportunities for those lower paid people to get a job. And that's the problem. It's blindingly obvious to me that the government needs to make people's money go further.

That's the trick to this. Make the money go further, create more jobs, more opportunities, for instance. And I think reducing energy bills, well, you can say reducing energy bills. And I think you put £58 million in for fuel oil customers. And really what you should be doing is capping the price for fuel oil for domestics. There's no cap on. And I've seen evidence where people are getting being charged £200 now up to £800, so that amount of money you're putting in is scratching the surface for those people, and those people may be employing someone else, a low paid worker, or they might not be able to do that.

Now, I think you can go further by talking about the high streets. Why don't you cut the VAT on hospitality till 2027, make a real do something that encourages the economy, the high street to employ more people on, and we should be going, perhaps diverging a bit from Lord Epstein. We should be doing for growth with better deals with Europe. We should have closer ties with Europe. We should be doing more influence there and reversing the. And I see contributions these these are measures that would actually put more money in people's pockets.

And so the minimum wage is, is welcome to be increased. And it should be increased because it's the right thing to do. And I've listened to trade union leaders over months, and I totally agree with that. And it's taken too long to do and it's in the right direction, but you have to couple that up with how you actually then stimulate the economy to employ those people. I think that's where the argument on the regret motion is. So I can't support the regret motion, but the government just needs to be mindful that it's a two edged sword.

And I think in the employment bill, there was an argument that it was tilted a bit too much towards the employment and employment laws, and I think that is coming to fruition now. Sadly, we need a better balance. We need to be reasonable and responsible. I think was used the words we were using because it goes hand in glove. It's as almost as if the minimum wage goes up, what the employers pay for it. This isn't new money. This money comes out of, out of the entire pot of the economy.

And so we need to really don't want to kill the golden goose that's laying the egg that pays the minimum wage to go up. And that's my concern that we need to do more to put money in people's pockets to keep more. That's how we stimulate growth, and that's how you make the economy get stronger, and not just by increasing the minimum wage and then putting tax and tax and tax on people. That makes it disappear. Thank you.
20:58
Lord Leong Portrait Lord Leong (Labour)
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My Lords. I'm grateful for the support for the National Minimum support for the National Minimum Wage Amendment Regulations 2026, and respect the thoughtful and respect the thoughtful contributions from across the House. My Lords, first, may I thank my noble friend, Baroness Cadbury for her support for the instrument and note with thanks her own service on the Low Pay Commission. And I also thank the noble Lord, Lord, my noble friend Lord seeker for support and insightful comments. My Lords, let me hit the nail on the head about the Tony Blair's Institute of Government.

Tony Blair's government created the LPC and we trust their judgment to balance competing factors including businesses, the economy and growth on growth. In 2025, the UK was the third fastest growing economy in the G7, behind only the US and Canada. And to declare an interest, I'm a personal friend of Tony Blair. There are a lot of things. I agree with him on this matter. I totally disagree with him. My Lords, contrary to the motion to table, the government is committed to helping young people get and retain good jobs.

The Low Pay Commission was specifically asked to consider the impact of the minimum wage increase on youth employment and participation in education. After thorough consultation and analysis of labour market evidence, the Commission has found no clear indication that recent increases in the national minimum wage have led to a decline in employment among young people. The government remains committed to ensuring that work pays, while making sure that any future adjustments to youth rates do not harm employment opportunities. My Lords, building on the 1.5 billion announced by the at the budget for the Youth Guarantee and changes to the Growth and Skills Levy, the Secretary of State for Work and Pensions has announced an additional package of almost £1 billion investment, unlocking up to 200,000 jobs in apprenticeship opportunities by reducing the cost of hiring young people.

I agree with my noble friend Baroness Cadbury, when she says the Youth Jobs Grant provides an employer hiring incentive worth £3,000. And let's not poo poo that it's money going into employers for employing young people within the age of 18 and 24 who has been on Universal Credit and looking for work for six months. We are delivering an additional £2,000 for SMEs in England when they take on new apprentices aged under 20, and we are expanding the jobs guarantee to 22 to 24 years old, meaning all eligible.

18 to 24 year olds across Great Britain will benefit from a fully funded six month guaranteed paid employment opportunity opportunity. And this gives young people the first step into employment and we should really celebrate that. Furthermore, we refute the notion that the government action is making it hard, harder for small businesses to take on staff. To the contrary, we are delivering a long overdue reform to rebalance the business rate system and support the high street, which will see over 750,000 retail, hospitality and leisure properties benefit from permanently low tax rates.

Moreover, we are going further than any previous government with the most significant package of legislative reforms in 25 years to tackle late payments, unlocking billions of pounds in finance to support businesses to invest, removing unnecessary red tape. We are also revitalising the high street as a place to do business and delivering growth boosting support with the Business Growth Service to unlock business potential. Our new remit recognises the concerns of the Low Pay Commission regarding the youth labour market and strikes an appropriate balance, making progress on removing discriminatory age bands by prioritising employment prospects for younger workers.

My Lords, I mean the noble Lord has also mentioned about the National Insurance. I mean, we recognize the contribution that employers have been making since the changes to employee employer National Insurance in April 2025. The government is making fair and necessary choices on tax so that it can deliver on the public's priorities, where applicable. The employment allowance can be set against eligible employers next liabilities from April 2025. The government more than doubled the employment allowance from £5,000 to the current level of £10,000.

This government is delivering for working people, competitive businesses and a healthy economy. My Lords, Confucius reminds us that harmony among people is the foundation of great achievement. When we work together, employers and employees and success really belongs to all. So on that note, we should be looking at working together and not, as you know, employer versus employees. Now we've committed in 26, 27 to 2029 over £500 million to youth programs and support, including over 80, sorry, £60 million on a richer Young Lives fund to improve access to enriching activities and youth work, £15 million in youth workers, volunteers and other trusted adults.

£70 million to rebuild and improve local youth services, and establishing a network of young futures hubs. The overall cost of the 2026 National minimum wage increase represents 0.1% of the total wage cost. The noble Lord, Lord sharp, also mentioned about the high employment rate. Mine was at 5.2% unemployment rate. The UK still outperforms the average for European Union and remains well below the UK average for about. For the 20 tens of around 6%. I refer to the noble Baroness Baroness point about the genuine living wage.

My Lord, the government continues to dedicate to be dedicated to fulfilling our manifesto promise of a real living wage that people can live on. We responded promptly after election by updating the Low Pay Commission's remit to ensure that the cost of living is accurately reflected in its recommendation. At the same time, improving living standards must align with economic growth and a healthy labour market, ensuring that rising wages are sustainable and do not negatively impact employment.

My Lords, when the lowest paid workers get a pay rise, the monthly the money hardly ever remains unused. It is spent on groceries, transport, childcare and everyday essentials, much of it at local small businesses and services up and down the country. In other words, higher wages flow directly through local economies and support many small and micro businesses. So my Lords, the National Living Wage thus boosts demand in high streets and communities where micro businesses are based, supporting both workers living standards and the vibrancy of the local economy.

My Lords, before closing, I extend my thanks once again on behalf of the government to Baroness Trout and the Low Pay Commission. In closing, I would like to reiterate the positive impact that these regulations will have for millions of young people an annual pay rise of around £900 million for full time worker on the national minimum wage, and one worth over £1,500 for full time worker on 18 to 20 year, 20 years old. Making work pay will be among the proudest legacies of

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this Labour Government. My Lords, I. My Lords, I'm very grateful to

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My Lords, I'm very grateful to the noble Lord, the Minister, for his response as ever. I wasn't expecting Confucius, but of course expecting Confucius, but of course I defer to that ancient wisdom. I listened very carefully to what was said and in particular to Baroness Carberry of Muswell Hill, who I think said, and do please correct me if I'm wrong, that the Low Pay Commission found it difficult to Commission found it difficult to separate out the various cost pressures that was affecting, in particular, the hospitality industry, and that included the effects of higher or rising pay.

I would argue then, therefore, that that is not particularly evidence based. It would seem to me to be based. It would seem to me to be slightly reckless to make that recommendation. If you can't actually determine what the causes of the headwinds are, but I'll park that for the time being. that for the time being.
21:07
Lord Sharpe of Epsom Portrait Lord Sharpe of Epsom (Conservative)
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Perhaps I could recommend to the noble Lord that he takes time to read the Low Pay Commission's report, which sets out in full their reasoning and also the evidence base that they are drawing on. I may have made that point clumsily. I certainly didn't mean to disparage the Low Pay Commission. I was trying to convey their sense, but they found that they did not. They could not find evidence to attribute any negative effects on the labour market for low people.

For young people, specifically to the national living wage as applied in the. The rates for those young people. So they were trying to make an assessment of the extent to which the minimum wage rates were the cause of any detrimental effects on the labour market, and they could not find that it was, in fact, the low pay rates which had that negative effect. But the reasoning is set out in a great deal of detail in that report.

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Well, I thank the noble Lady for that clarification, and I will definitely make a point of reading that and perhaps return to it, depending on what I see. But I would say and make this point to Lord Hanna of Everton. I made some Lord Hanna of Everton. I made some very good points, but I do think the camel's back is already broken when it comes to youth unemployment. when it comes to youth unemployment. It's at 16.1% of point I made in my earlier remarks.

That is higher than the EU average, which is a pretty woeful state of affairs. In answer to the noble Lords question, unemployment? Yes, it's 5.2% now. But as we also heard, and as I reminded the House, the OBR has forecast it to rise to 7%. I'm grateful also to the noble Lady, Baroness Bennett of Manor Castle, for her remarks. I would also point her in the direction of the Resolution Foundation, of course, which has a direct line into the Treasury. It wasn't just the Tony Blair Institute, but I, for the time being, rest my case on green economics.

And my Lords. Lord seeker, well, it's always a pleasure to hear from the noble Lord. I think his argument was, if you agree with me politically, you have empathy. If you don't, you haven't. In which case I would argue that it's empathetic to try and keep people in jobs rather than price them out. That's empathy. Sorry. I beg leave to withdraw my motion.

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Is it your Lordship's president? The amendment be withdrawn? Amendment is by leave. Withdrawn. The question is that the original The question is that the original motion be agreed to. As many of that opinion will say, content, not content. The contents have it. adjourn.
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