Middle East: Economic Response

Baroness Kramer Excerpts

Monday 1st June 2026 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, it is a pleasure to return to the House after such a sunny break and to be able to review calmly the Chancellor’s Statement of 21 May.

It was not a major package. It was a collection of small measures, welcomed by some people as far as it went. As far as I know, the Chancellor did not announce the total cost, but except for the short delay in the increase of 5p on petrol, we are told that it will be covered by the changes to corporation tax on overseas investment and the foreign branch exemption. I would be grateful if the Minister could tell us how much that corporation tax change will cost British businesses and in which tax years.

What investment allowances will be made? As someone who made major investments overseas at Tesco and built up some fine businesses in Korea, Thailand and eastern Europe, I can tell your Lordships that we would not have taken the successful risks we did if early losses had not been allowed against profits at home. How is the Treasury going to avoid this change chilling overseas investment—a beacon of British wealth creation, reputation and strength for centuries?

I read the new list of food, drink, fertiliser and fuel items that will attract zero tariffs until December 2028. I note that they are rightly out for consultation. I have two questions here. First, have the Government had regard to the impact on our aspirations for new trade deals, where the granting of tariff-free access is a major bargaining chip? We know that the new Canada deal seems stuck because it has indicated that there is not much extra we can offer it.

Secondly, while government has tried to avoid lifting tariffs in areas where there is significant UK production in the agricultural sector, many of the items—nuts, fruit and tuna, for example—are substitutes for UK-grown foods and will displace demand for them. Moreover, we have a vibrant and important food manufacturing industry now facing stronger competition in areas such as confectionery, biscuits and processed foods. What is the Government’s estimate of the impact on them and the vital jobs that they support? Is this a further nail in the coffin of our manufacturing industries?

This brings me neatly to the third area of concern, which also affects food manufacturing—the high energy costs in the UK. They have been made worse by the Middle East war, but the main reason for them is the Miliband obsession with a drive to net zero. This obsession is doing very little for climate change, as the UK is responsible for less than 1% of global emissions. The Official Opposition have repeatedly made clear, sometimes with some welcome support from the Minister, that we must make full use of the North Sea—not only with tie-backs but with an early go-ahead for Jackdaw and Rosebank. This becomes more urgent by the day, given that there seems little chance of an early opening of the Strait of Hormuz. When can we expect an announcement on these two licences?

Our high electricity prices are also a cause of wider de-industrialisation. I welcome the support for the ceramics industry. Stoke-on-Trent’s five towns were the Silicon Valley of Britain in their day, and I am an avid collector of Staffordshire pottery. However, something more fundamental is needed on energy to preserve our shrinking industrial base.

Given that the Statement was about the impact of war in the Middle East, I was surprised that it was so light on defence. I ask the Minister again: when will the defence investment plan be published? He used to say “in due course” but in the King’s Speech debate he said “shortly”, which offered more hope.

That brings me on to my final area of concern: the gravity of the wider picture of inadequate and crumbling defence forces because of lack of proper funding or a proper defence investment plan; the country’s finances in a mess; troubling social policies and divisions; and anaemic growth—the lack of that magic which makes governing so much easier. This is not surprising given the avalanche of taxes and business costs that we have experienced—national insurance, minimum wage hikes, the Employment Rights Act, a new visitors’ levy on our hotels, packaging taxes and vicious rates revaluations that, according to the weekend’s papers, risk closing down yet more of our country’s pubs. Further, only today I see that it is proposed to reduce checks on those claiming disability benefits. This would be going in precisely the wrong direction. Is the report correct?

To understand the damage that these policies have caused, we need only look back at the OBR’s March 2024 forecast for 2026. At that point, shortly before we left office, having navigated enormous challenges—not least the unprecedented inflation following the outbreak of the war in Ukraine—the OBR forecast UK GDP growth of 2%, unemployment at 4.2% and inflation at 1.6%. After Labour’s tax rises and spending spree, the OBR now forecasts UK growth at 1.1% in 2026, unemployment at 5.3%—and tragically much more among the young—and inflation of 2.3% for 2026. This is all in the wrong direction over those Labour years.

We face many serious problems in this country, and we on these Benches believe that we need a greater sense of urgency and a much better plan from the Government, especially on growth and productivity, defence, energy and debt reduction. Sadly, the latest package is another bit of unexciting incrementalism, mostly focused on lesser issues and badly managed, as we saw from the outcry of all experts on the proposal to fix supermarket prices. We can do better.

[Baroness Kramer (LD)]

My Lords, till sales at UK supermarkets slowed to growth of just 0.2% in the three weeks to mid-May. Families do not know how they will cope with higher fuel costs, higher council tax and expected inflation. I am sure the Minister will tell us that the Government have tried to ease costs on the most vulnerable, and I support those actions. But with no relief in sight from the consequences of Trump’s Iran war, will the Government look seriously at the emergency £2 billion transport relief package proposed by my colleagues, to be funded by the Treasury’s unforecast boost in tax receipts: a cut in fuel duty by 10%, a slash in bus fares to £1, a slash in rail fares by 10% and a cut on VAT on public EV charging to 5%?

Does he also recognise that this is not a short-term crisis? The Government will have to find ways to reverse or offset the national insurance increase to small employers, especially in hospitality and leisure. They must break the link between electricity prices and the oil price, intensify the move to contracts for difference to spur on renewables, provide an effective programme for individuals and small businesses to install energy saving, and overhaul business rates at least to exclude all new business investment in energy saving from business rate consequences. Can he take this series of actions, which would make a significant difference?

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

I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their comments and questions. The noble Baroness, Lady Neville-Rolfe, ended her remarks with her usual doom and gloom and talking down the British economy. Unfortunately, she did not mention any of the positive economic news that we have heard in the last few weeks.

She shares with us a belief in the importance of growing the economy and knows that that is our number one objective. She did not mention the fact that last week’s figures confirmed that Britain’s economy was the fastest growing in the G7 for the first quarter of this year. She did not mention that we beat the OBR’s spring forecast, with economic growth at 0.6% in the three months to March. She did not mention the fact that, because of the resilience in our economy, last week the IMF upgraded Britain’s growth forecast for this year.

She also did not mention the positive news on public finances that borrowing last year was £20 billion lower than in the previous year and is falling in every year of this Parliament. She did not mention the fact that the IMF backed our economic plan, saying that the Government’s fiscal framework strikes

“a good balance between deficit reduction and growth-friendly spending”.

She did not mention any of the things that we are doing to ease the cost of living, including that interest rates have been cut six times since the election, that real wages have continued to rise in every month of this Government and that inflation fell in April faster than expected, making the UK the only G7 economy where inflation fell last month. She did not mention any of those things, and I think that continuing to talk down the economy when we are doing all that we can to help it through this difficult period, with the war in the Middle East, does not benefit anyone.

She talked about the cost of the measures that we are introducing and about the foreign branch profits. I hope she will agree with us that, when a country faces challenges because of higher oil and gas prices, we must ensure that those who benefit from increased prices and volatility pay their fair share.

She will remember that, in our first Budget, the Government extended and increased the energy profits levy, last year we announced a new permanent windfall tax regime for oil and gas price shocks, and last month we increased the electricity generator levy, alongside further action to weaken the link that the noble Baroness, Lady Kramer, mentioned between high gas and electricity prices.

Now, the Government are making specific changes to the taxation of foreign branch profits, changing how companies are taxed in relation to their overseas activities. The noble Baroness will know that, until now, some businesses have structured their affairs with taxable branches to pay little or no corporation tax on UK profits. The change that we are introducing removes the ability to achieve disproportionate relief for overseas costs without UK taxation or future profits. The change, from 1 September 2026, for oil and gas-extracting UK resident companies will ensure that the UK continues to have a robust and effective corporation tax regime in line with international best practice and will ensure the effective taxation of profits attributable to UK activities.

The noble Baroness talked about the cost. She is absolutely right to say that we expect these reforms to raise hundreds of millions of pounds per year and that they will fully fund the package of measures announced by the Chancellor. The costings will be certified by the OBR forecast in the usual way at the next fiscal event.

The noble Baroness talked about zero tariffs and rightly said that they are out for consultation. Obviously, that is the case and I am pleased that she agrees with that. She mentioned the impact on trade deals. These are temporary suspensions to tariffs and so will lapse long before any trade deals are negotiated. So I think we will be able to see immediate improvements in the cost of living, and perhaps over time there will be trade deals that achieve that more permanently.

The noble Baroness talked about high energy costs and blamed them on the drive to net zero. I think we had an Oral Question in this House when the IMF put out its previous forecasts, and she will know that the IMF said that we faced higher energy costs in this country exactly because the previous Government had failed to take action to make the UK more self-sufficient in energy. So blaming the solution to the problem and saying it is the problem itself is a little perverse. The problem for the UK is that we are too exposed to imports of energy and we are, as she knows, taking action as a Government to reverse that.

The noble Baroness knows I agree with her when it comes to oil and gas production from the North Sea and how important and valuable that is. She asked me specifically about two fields, Jackdaw and Rosebank. She will know that the development proposals are a matter for the North Sea Transition Authority and the Offshore Petroleum Regulator for Environment and Decommissioning. I am unable to comment on the specifics of any individual project while the regulatory process is under way, or on the investment decisions of individual operators. As I understand it, the Secretary of State for Energy Security and Net Zero will be making a decision regarding the environmental impact assessments of these projects in the coming months.

I am pleased that the noble Baroness welcomed the support for the ceramics industry. She is right to say that there are far longer-term issues at play in terms of the competitiveness of many of our industries: the foundational sectors so important to the industrial strategy. That is why we have already increased support for our most energy-intensive companies through the British industry competitiveness scheme that we announced a couple of weeks ago.

The noble Baroness asked me about defence spending. As she knows, the defence investment plan is the first zero-based review of defence spending in almost two decades. It will set out the MoD’s plans to ensure that resources are directed effectively to meet its priorities. The Government are working hard to facilitate this and to ensure that the plan delivers the outcomes the UK needs for defence and for taxpayers. I shall repeat what I said previously: it will be published shortly.

The noble Baroness asked about supermarkets, finally. As she knows, it is quite right that we have discussions with supermarkets, as we have with fuel retailers and high street banks, to discuss ways we can work together to ease the cost of living on households. But, as I said to her, I think in a previous Private Notice Question, this is not about price caps, as some speculation has suggested; we would never advocate for that, and it is not for us to tell supermarkets how to run their businesses.

The noble Baroness, Lady Kramer, focused primarily on quite a long shopping list of support that her party would like to see introduced. Obviously, we did introduce some support last week, as the Chancellor set out, but I am not convinced that the funding that the noble Baroness thinks is there for her package of support actually is. Unfunded commitments are not the way to ease the cost of living crisis. We saw exactly that with the Liz Truss Government, and we saw exactly that with the previous Conservative Party Government. Introducing unfunded support now would mean higher inflation and higher interest rates in the long term, meaning that the very people we are trying to help now would pay more for their rent, bills and mortgages in the long term. I do not believe that is a sustainable way to help people with the cost of living crisis.

Higher Earners: Emigration

Baroness Kramer Excerpts

Thursday 21st May 2026 Lords Chamber

[Lord Livermore (Lab)]

As the noble Lord says, the data is not available, so I am not sure that he can make the conclusions that he seeks to make. The data will not be available until we have the January 2027 self-assessment data, which is the most reliable data. The costings that were certified by the OBR for the previous Government’s and this Government’s reforms account for a potential behavioural response. They factor in an assumed level of migration from non-doms, just as they did for the previous government reforms. The OBR has said that there is no evidence to change the estimated impact of the reforms on migration. This has always been a highly mobile population. For example, in 2023-24, there were 9,100 arrivals and 9,500 leavers, so the noble Lord knows that this is nothing new. The reforms to the tax treatment of non-doms have been designed specifically to make the UK competitive, with a modern, simple tax regime that is also fair.

[Baroness Kramer (LD)]

My Lords, I have a personal interest in this. Do the Government recognise that outdated tax treaties are driving away talent that the UK wants, especially in life sciences and AI? Many overseas nationals, especially Americans, end up paying significantly more tax than any equivalent UK-only citizen. It is not a non-dom issue but a failure to modernise relief to deal with tax savings such as ISAs, investments in mutual funds and the complexity of death duties. Will the Government get to grips with this?

[Lord Livermore (Lab)]

The new residents-based regime is more competitive for new arrivals than the previous rules. It is more attractive than the previous approach. They can bring their foreign income and gains into the UK without attracting an additional tax charge. These changes will encourage individuals to spend and invest these funds in the UK.

VAT Relief: Business Donations

Baroness Kramer Excerpts

Tuesday 19th May 2026 Lords Chamber

[Lord Livermore (Lab)]

I very much agree with the noble Lord. I think we may have discussed this once before, and I agreed with him then as well. As I understand it, HMRC is absolutely cracking down on this type of behaviour.

[Baroness Kramer (LD)]

My Lords, most foods subject to VAT are high in fat, salt and sugar and are often ultra-processed. Is there a danger that VAT relief will increase the donation of such foods to food banks and charities, putting people already at high risk of obesity and diet-related illnesses at even higher risk? Will the Minister consider excluding HFSS foods, at the very least, from VAT relief?

[Lord Livermore (Lab)]

I am aware of the concerns set out by some, including the noble Baroness, about the inclusion of foods high in fat, salt and sugar within the scope of this relief. The work that many of these companies, such as the Company Shop Group, do to support local communities is crucial, and it is important that the new VAT relief does not undermine their ability to do this work. We have not yet been presented with sufficient evidence to justify carving out from the relief foods high in fat, salt or sugar, but Treasury officials will monitor the situation carefully and maintain an open dialogue with the sector.

Defence, Security and Resilience Bank

Baroness Kramer Excerpts

Tuesday 19th May 2026 Lords Chamber

[Lord Livermore (Lab)]

The scale and precise focus of the mechanism remain to be determined, but the scope of those activities would include lending to sovereigns and to the sector and providing loans to supply chains and loans for capacity expansion. We anticipate that it will make a material contribution to defence spending and investment across those involved. The intention is that this mechanism will be established as an independent international financial institution underpinned by an international agreement and with sovereign countries as members in the first instance. As with other international financial institutions, paid-in capital will be expected to leverage in private sector funding by a multiple of that initial contribution.

[Baroness Kramer (LD)]

My Lords, I am now completely bewildered. I would have thought that, with the state of the gilts market, the Government would be leaping at the opportunity to find AAA financing for their defence expenditure, and on a multilateral basis. Are we dealing with the underlying problem of a Treasury that basically says, “not invented here”, rather than looking at an opportunity that has been virtually handed to it?

[Lord Livermore (Lab)]

No, and I do not quite understand why the noble Baroness is confused, because we are doing exactly what she says. We are setting up—or being part of—a proposed multilateral defence mechanism. I thought the noble Baroness would share a similar worldview in terms of wanting to see greater amounts of co-operation and procurement among a core group of EU allies and NATO allies and partners. What she is asking for is exactly what the Government are exploring.

Middle East: Economic Update

Baroness Kramer Excerpts

Tuesday 28th April 2026 Lords Chamber

[Baroness Neville-Rolfe (Con)]

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

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

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

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

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

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

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

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

[Baroness Kramer (LD)]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Online Challenger Banks

Baroness Kramer Excerpts

Monday 27th April 2026 Lords Chamber

[Lord Livermore (Lab)]

I thought I was going to be able to agree with everything the noble and gallant Lord said—right up until the last sentence. I agree with 99% of his question, and I absolutely agree that access to finance for defence firms is incredibly important. The instances that he cites are troubling, and I share his concerns about them. Access to finance is a significant issue for defence firms, particularly SMEs. No company should ever be denied access to financial services solely on the basis that it works in the defence sector, and the banking sector should never take a blanket approach to any one sector. The Government are actively engaging with banks to ensure that they understand the importance of the defence sector and the FCA’s work to understand why banks might close or reject accounts. Where it has found areas in which firms need to improve customer outcomes, the Government expect firms to consider the FCA’s findings.

[Baroness Kramer (LD)]

My Lords, does the Minister find, as I have done, in conversations perhaps not dissimilar to those with the noble Lord, Lord Ranger, that the challenger banks and fintechs are largely serving the same group—although perhaps more efficiently—that is served by the high street banks? Therefore, will he look much more seriously at the potential not just of banking hubs but of community development financial institutions and a way to combine them, so that small businesses can finally get access to the loans and services they need and that individuals who remain excluded finally have access to the banking sector?

[Lord Livermore (Lab)]

I agree in large part with what the noble Baroness says. As she will know, as part of the small business strategy, the Government have introduced a range of measures to remove barriers to accessing finance for SMEs. She will know, too, that access to banking services is vital for businesses across the UK. While provision of financial services to companies is largely a commercial matter, the Government of course believe that all customers should be treated fairly.

On access to banking for consumers and banking hubs, we have set out an ambition to have 350 banking hubs. Cash Access UK will deploy a banking hub wherever the industry co-ordinating body responsible suggests that one is appropriate.

World Economic Outlook: UK Growth and Inflation

Baroness Kramer Excerpts

Wednesday 22nd April 2026 Lords Chamber

[Lord Livermore (Lab)]

I am very happy to agree with the noble Lord on the first part of his question: as I have said already, GDP per capita at the time of the spring forecast was forecast to rise by 5.6% over this Parliament. That compares with a fall of 0.2% in the previous Parliament—the worst Parliament on record for living standards. On welfare spending, as he knows, the previous Government increased welfare spending by £88 billion.

[Baroness Kramer (LD)]

My Lords, the Government keep looking in the rearview mirror. The IMF report and today’s inflation numbers are telling us that forecasts made in January essentially now go into the bin, and what we need are policies to deal with uncertainty and provide resilience. The new BICS provides energy-intensive industries with some benefits, but no money will flow for a year. When will firms know what that money will be and when they will get it so that they can plan? Is anything going to be put in place for food and agriculture? We are seeing a real rise in food prices and potential food shortages. Small businesses are, frankly, on the brink. Are there new policies to come forward that will provide the resilience we need?

[Lord Livermore (Lab)]

The noble Baroness is absolutely right to point to the need for economic resilience. As she knows, we must do more on economic security so that the UK does not continue to be more exposed to energy price shocks than our counterparts are. Since the election, we have invested in clean homegrown energy—renewables and nuclear. Yesterday, the Chancellor announced steps to go further, harnessing our domestic supply of oil and gas production from the North Sea, further removing barriers to new renewables investment, and reforming our energy system by further weakening link between high gas prices and electricity prices. The noble Baroness asked specifically about BICS; she will know that the consultation on scheme design and eligibility was published last week.

Credit Institutions and Investment Firms (Miscellaneous Definitions) (Amendment) Regulations 2026

Baroness Kramer Excerpts

Wednesday 15th April 2026 Grand Committee

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

My Lords, I ask that the Committee considers two statutory instruments made under the Financial Services and Markets Act 2023: first, the Credit Institutions and Investment Firms (Miscellaneous Definitions) (Amendment) Regulations 2026; and, secondly, the Capital Requirements Regulation (Market Risk Transitional Provision) Regulations 2026. The purpose of this legislation is to ensure that the UK’s capital framework remains agile and responsive for banks and investment firms. I will first set out the context in which this legislation is being delivered.

The Financial Services and Markets Act 2023 revoked assimilated law in the UK related to financial services, to bring it in line with the UK’s domestic model of regulation. The UK’s domestic model—the Financial Services and Markets Act model—was first established through the Financial Services and Markets Act 2000. That model prioritises the setting of regulatory standards by expert, independent regulators, working within an overall policy framework set by the Government and Parliament. This approach maximises the use of expertise in the policy-making process by allowing regulators with day-to-day experience of supervising financial services firms to bring their real-world experience into the design of regulatory standards. It also allows regulators to flex and update those standards to ensure that regulation responds to emerging developments.

One area of financial services regulation where the Financial Services and Markets Act model will apply is capital requirements regulation. Capital requirements regulation is an existing body of assimilated law that covers the detailed and technical capital rules that apply to credit institutions, such as banks and building societies, and larger investment firms. Applying the Financial Services and Markets Act model in this area means replacing the existing capital requirements regulation in three ways.

First, some of it is being replaced by rules set by the Prudential Regulation Authority. This includes rules in relation to Basel 3.1, the final set of post-crisis reforms designed to strengthen the resilience of the UK banking system. Secondly, provisions relating to prudential equivalence, also contained in the capital requirements regulation, are being replaced by a new overseas prudential requirements regime in legislation. Thirdly, important definitions in the capital requirements regulation are being restated in new legislation because they are essential for ensuring that the system of prudential regulation continues to operate as intended.

The statutory instruments that we are debating relate to the first and third of these areas: the replacement of rules by the Prudential Regulation Authority, specifically in respect of Basel 3.1, and the restatement of key definitions in the existing capital requirements regulation. They do not relate to the new overseas prudential requirements regime, which will be legislated for separately.

The first statutory instrument that I will address is the Credit Institutions and Investment Firms (Miscellaneous Definitions) (Amendment) Regulations 2026. The sole purpose of this instrument is to restate important definitions from the existing capital requirements regulation in law. For example, the definition of what constitutes an investment firm is being restated so that it remains in legislation, rather than being defined by the Prudential Regulation Authority rulebook. This is necessary to ensure that the Government and Parliament remain in control of what activities should be regulated.

This instrument does not introduce new regulatory requirements, neither does it make any substantive change to the scope or effect of the definitions being restated. Its purpose is simply to maintain legal continuity and ensure that the prudential framework continues to operate as intended, as we complete the move to the Financial Services and Markets Act model.

I turn to the second statutory instrument, the Capital Requirements Regulation (Market Risk Transitional Provision) Regulations 2026. This instrument relates to the first part of the capital requirements regulation reform process—namely, the replacement of certain capital requirements regulations with rules set by the Prudential Regulation Authority, specifically in respect of Basel 3.1. Most of the work to deliver Basel 3.1 has already been completed and, following extensive consultation, the Prudential Regulation Authority has published the new rules that will apply to credit institutions and larger investment firms. These rules will ensure that the UK banking system is well capitalised, while protecting the ability of firms within scope to support economic growth, including the ability to provide finance to small businesses and infrastructure projects.

The UK remains committed to the full and consistent adoption of the Basel reforms. The Prudential Regulation Authority intends to implement most of the new Basel 3.1 rules from 1 January 2027, which will give UK-focused firms the regulatory certainty that they need to plan for the future and invest in the real economy. The timing of implementation in other major jurisdictions, however, remains unclear, particularly for certain market-risk requirements affecting banks that use internal models. This is particularly relevant for internationally active firms with cross-border trading activity. Implementing those specific requirements in the UK ahead of clarity elsewhere risks causing unnecessary operational complexity for internationally active firms, including the need to run different systems and processes in parallel across jurisdictions.

That is why the Government, in conjunction with the Prudential Regulation Authority, have decided to build in flexibility to the UK’s approach. The Government announced last year that implementation of new international model market risk requirements—the element of Basel 3.1 that will most affect the ability of UK banks to compete in international markets—will be delayed until 1 January 2028.

This instrument gives effect to that approach by disapplying the updated international model market risk rules during the transitional period from 1 January 2027 to 31 December 2027. During that period, firms will continue to apply the existing requirements. This will apply only to a small number of internationally active firms. This limited delay will allow the UK to flex the new internal model requirements for market risk, should that prove necessary, to ensure that the UK remains competitive with other major jurisdictions.

The instrument also provides the Treasury with the ability to extend the transitional period by making further regulations if international developments warrant it. Any such extension would be time-limited, subject to parliamentary scrutiny and used only if necessary to respond to material international developments.

These statutory instruments are limited in scope and carefully targeted. They restate important provisions in the capital requirements regulation which need to remain on the statute book to ensure that the system of prudential regulation continues to operate as intended. They also enable a flexible and pragmatic approach to Basel 3.1 implementation, minimising disruption and protecting the competitiveness of UK firms while uncertainty over implementation remains in other jurisdictions.

Taken together, these limited changes will help to deliver an agile and responsive prudential regime for banks and investment firms. I beg to move.

[Baroness Kramer (LD)]

My Lords, the definition of a statutory instrument is very technical, and I frankly have nothing to add to it. The capital requirements SI, in that it provides the temporary flexibility to see how other jurisdictions will behave, seems understandable and we on these Benches oppose neither. However, I have some questions for the Minister on the changes that underlie these SIs.

The Minister will know that undue risk taken in their trading activities by internationally active institutions played a significant role in the depth and complexity of the 2007-08 crash and the economic stagnation that followed. I have always been concerned that the regulators will be persuaded by their competitiveness and growth objective to relax the risk requirements on this sector, and these SIs seem to confirm that that is indeed the direction of travel. Am I right?

The finance industry, which is keen to get profits from risk so long as the losses fall on taxpayers, has certainly been calling for scope to take more risk, always assuring us that its genius means that risk is not really risk. The Treasury is strongly encouraging risk-taking in the name of growth, but its view is very short-termist and again there is very little understanding of the way in which risk takes impact.

This SI refers constantly to competitiveness with other jurisdictions, particularly the US and the EU. What assurances can the Minister give me that we have not now entered the world of the lowest common denominator, which of course has been the greatest fear of many of us as we have seen regulation continuously softened?

Some I have talked to have said that the regulator is easing capital requirements, as this SI illustrates, to help the big conventional institutions counter the surge in private credit as the lesser of two evils. Is that correct? Some have said that the reduction in the risk requirement is to counter the pressures that will flow from the EU capital requirements directive 6, which could significantly restrict the ability of non-EU banks to provide core banking services to EU clients from outside the EU, thereby encouraging the further relocation of operations and staff from London to EU locations. Is it correct that this is an anticipative countermeasure to what the Treasury sees coming?

Others are saying that President Trump’s determination to significantly deregulate US banks and financial activities means that we have to enter and accept an era of high-risk banking and serious financial volatility. I am very cautious when the risk profile of British banking is set by President Trump’s definition of what is risk and what is not, but is it the view of the UK Government and regulators that we have to adjust to be competitive with President Trump’s perspective on what risk should be undertaken in the financial sector? I am most concerned that increases in risk across the piece in the financial sector are not being acknowledged and are consequently treated with complacency. The various protections that we have in place are partial, many of them are untested and even those that do exist are consistently being undermined. Does the Minister share my anxiety?

HBOS: Fraud Investigation

Baroness Kramer Excerpts

Thursday 26th March 2026 Lords Chamber

[Lord Livermore (Lab)]

The Government share the frustration at how long processes relating to this issue are taking to conclude. In 2017, Lloyds Banking Group independently launched the Dobbs review to assess the handling of the fraud, what it knew or should have known, and whether it reported it appropriately to the regulatory authorities. The noble Lord mentioned the FCA. The FCA has undertaken an investigation into this matter historically and has taken enforcement actions. The FCA previously investigated and, with the PRA, jointly reported on the failure of HBOS. There was a criminal investigation resulting in six convictions in 2017. The FCA investigated knowledge of these matters with HBOS and its communications with the FCA after the initial discovery of the misconduct. Lloyds Banking Group has informed the Government that it is providing all the assistance and resources that Dame Linda and the review have requested, and that drafting is under way. It has reiterated the point that it will make the findings of Dame Linda’s review available when completed and will co-operate with Parliament. The Government inherited a series of processes that are independent of government and not accountable to us or the FCA. With our having inherited that legacy, it is right that the Dobbs review, alongside the work of Sir David Foskett, is allowed to conclude.

[Baroness Kramer (LD)]

My Lords, I am going to press the Minister to take a stronger position on this issue, which was £1 billion of criminal financial manipulation by HBOS Lloyds. The FCA spectacularly failed to investigate, initiating a report only under strenuous insistence from Vince Cable. It then misrepresented, to this House and others, the conclusions of that report—as was exposed when the original document was leaked to the Treasury Select Committee. Given all that, will the Government now back Dame Meg Hillier, who has demanded that when this report is completed, it is published in full and unredacted, which is not the position that Lloyds appears to be taking?

[Lord Livermore (Lab)]

As I said before, the Government inherited a series of processes that are independent of government and not accountable to us or the FCA. With our having inherited that legacy, it is right that the Dobbs review, alongside the work of Sir David Foskett, is allowed to conclude. Lloyds Banking Group has informed the Government that it is providing all the assistance and resources that Dame Linda and the review have requested and that drafting is under way. It has reiterated the point that it will make the findings of Dame Linda’s review available when completed and will co-operate fully with Parliament.

Middle East: Economic Update

Baroness Kramer Excerpts

Thursday 26th March 2026 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, for the third time in as many weeks, the Chancellor came before the other place on Tuesday and once again delivered a Statement remarkable only for its lack of substance.

I welcome the confirmation respecting nuclear power, including the implementation of the Fingleton review, which should help to accelerate construction. The references to relations with the EU are less convincing. What price will we be expected to pay for these supposed benefits? The Government’s history of giving in unnecessarily to the EU does not give confidence. We are also suspicious of claims about the need for new powers regarding alleged price-gouging. This smacks of playing to a not very well-informed gallery, but what exactly do the Government intend here?

The Chancellor has praised countries such as Norway and Canada for increasing oil and gas production and for playing their part in securing energy supplies during a time of conflict. Yet here at home the Government refuse to do the same. The Energy Secretary continues to block increased production in the North Sea, so the Government applaud others for strengthening their energy security while wilfully weakening our own. That is pure masochism.

We could scarcely be entering this crisis in a weaker position. We face the highest industrial energy costs in the developed world, with consumer prices not far behind. Just today, the OECD has said that the war in the Middle East will hit UK growth hardest of all, with inflation set to accelerate. The Government speak of reducing dependence on energy imports, yet their own actions are driving us in precisely the opposite direction. That is a self-inflicted vulnerability.

This is a dangerous position to be in. I gently say to the Minister that the public will not thank the Government for ideological gestures; they will expect practical action to secure our energy future. It ought not to be beyond the wit of government to expand green energy supplies while also sustaining supply through oil and gas—which we will simply import more of if we do not produce it at home.

I will also briefly mention the defence investment plan. It was very unedifying to see the Prime Minister discomforted when he was asked about it at the most recent Liaison Committee meeting. On Tuesday, the Defence Select Committee heard from industry leaders that without the defence investment plan—which is now well overdue—some defence manufacturers are going bust, while others have been left in “paralysis” and “bleeding cash”. The plan was originally expected last autumn, but it has been repeatedly postponed, despite repeated warnings that our Armed Forces face a £28 billion funding gap. When will we see the plan?

The Chancellor said that her response to the crisis in the Middle East would be “responsive” and “responsible”. What on earth is responsible about this: a refusal to agree a defence funding plan when the MoD faces a £28 billion black hole, British defence firms going under—and all at a moment of acute global instability, when our sovereign territory has been attacked and our citizens are being threatened at home?

Our economic and defence situation is perilous. Gilt yields are at levels not seen since the 2008 financial crisis. Inflation and employment are disturbingly high. Our defences are in a mess. Taxes, borrowing and spending are at record levels and interest rates are going the wrong way. No wonder a respected commentator said this week that he had never been so concerned that the person nominally in charge of the economy—the Chancellor—was manifestly out of their depth. We need better than this.

[Baroness Kramer (LD)]

My Lords, if this war with Iran continues, and especially if the Strait of Hormuz remains closed as we approach autumn, the global economy will be in serious trouble and the crisis will impact severely—directly on energy prices and, more broadly, on the cost of living. There was far too little in the Chancellor’s speech to give ordinary folk, never mind the markets, real reassurance. People are not naive. Simply to repeat the steps that the Government planned for the economy anyway in the pre-Iran war world is not sufficient.

The Chancellor indicated that any support beyond changes that are already in the system would be targeted at those who are most in need. What does that mean? Is it limited to the 6 million people who claim welfare or pension credit? Is it correct that the Treasury lacks the capacity to identify and assist those who do not qualify for those benefits but are still very low earners? What should the earnings threshold be for support? Will the Chancellor act immediately to, at the very least, zero-rate VAT on heating oil and liquefied petroleum gas? Will she introduce a proper price-cap mechanism for off-grid fuels? Will the Government also reverse their senseless cuts to home insulation programmes, which will be important to a wide range of people?

In her speech, the Chancellor failed to recognise the dire position of small businesses. Inflation in January pre-war was at 3%. We have found today that UK business activity is growing at its slowest pace since September, with a huge jump in manufacturing input prices. At such a time, tax, NICs and other blows from the Budget will fall on small businesses in April—a few days away. This Government seem cavalier about loading small businesses with additional costs, even though they are the backbone of our economy and jobs, and sustain our local communities.

The Government know that small businesses face a broken energy market that leaves most of them paying inflated energy prices. Will they now instruct the Competition and Markets Authority to investigate suppliers that are blocking small business access to the best energy deals? Will they now change the business rate system so that small businesses can improve their energy efficiency without facing business rate penalties? Will they adopt the idea of an energy security bank to provide low-cost loans for households and small businesses to invest in energy efficiency?

When the country is anxious, it needs a speech from the Chancellor that recognises and responds to the changed reality. Will someone from the Government please give that speech before anxiety becomes a self-fulfilling prophecy?

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

I am grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their comments and their questions. As it is the last day before Recess, I wish both noble Baronesses a very happy Easter in advance.

The noble Baroness, Lady Neville-Rolfe, began her comments by welcoming what we are doing on nuclear, and I am grateful for her support on that and for her support as we implement the Fingleton review. As she knows, we have already begun to rewrite the story on nuclear for this country: we have begun construction at Sizewell C, we have agreed an extension to Sizewell B and we are due to sign the contracts on the UK’s first small modular reactor in Anglesey in partnership with Rolls-Royce. The Chancellor has also confirmed that we will legislate to implement the Fingleton review on nuclear and wider infrastructure in the next Session and has also written to industry and to regulators to get them to set out their plans to fast-track its implementation.

I was disappointed to see the noble Baroness indulge in some anti-EU rhetoric, which I know she does not actually believe. I think it makes absolute sense at this time of global instability that we deepen our economic relationship with our closest partners. It is clear that that is where maximum growth will come from for this country.

The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, spoke about the Competition and Markets Authority. It has stepped up its statutory monitoring of fuel prices and will publicly update on fuel pricing later this month. It is also working with Government to monitor the cost of household essentials, including groceries, for price rises and disruption. It has launched a market study into heating oil on top of its existing work to identify and tackle breaches of consumer law in the heating oil market. The Chancellor also announced this week that we are going further to make sure it has the bite it needs to detect and crack down on price gouging, bringing in a new anti-profiteering framework and considering time-limited targeted powers for the CMA and other regulators as needed. Yesterday, the Chancellor and the Business Secretary both met and convened the regulators’ council to discuss its work to protect consumers and small businesses, as the noble Baroness, Lady Kramer, mentioned.

On oil and gas, I agree with what the noble Baroness, Lady Neville-Rolfe, said. We will ensure the North Sea oil and gas plays an important role in our economy for years to come. Last week, the Chancellor met with the North Sea industry leaders to discuss their role in jobs, investment, growth and energy supply. The noble Baroness also mentioned energy security. She did not mention the fact that the last Government’s failure to invest in energy was a failure to protect our country. But, through determined long-term action, this Government are taking control of our own energy supply. We are investing in renewables, lifting the ban on onshore wind, streamlining grid connections, bringing the next renewables auction forward to this July and driving forward negotiations on the UK’s participation in the EU internal electricity market. We also ran the biggest ever floating offshore wind auction last year.

As I mentioned already, the noble Baroness, Lady Neville-Rolfe, welcomed nuclear, and we must guarantee that our domestic oil and gas industry can play a crucial role as well for years to come. So we are investing in tie-backs to make the most of existing production facilities. The Chancellor has also announced that she has instructed officials to develop plans to back critical energy projects with indemnities if their planning consent is challenged in the courts, so that we can build the infrastructure that we need.

The noble Baroness, Lady Neville-Rolfe, mentioned the OECD projections out this morning. As she knows, the war in the Middle East is not one that we started, nor is it a war that we have joined, but it is a war that will have an impact on our country. The OECD’s projections are highly sensitive to the duration of the shock and reflect the impact of higher energy prices, which the UK, as she knows, is more susceptible to. But, in an uncertain world, we have the right economic plan. The decisions we have taken have put us in a better position to protect the country’s finances and family finances from global economic instability.

Both noble Baronesses touched on the economic situation that we find ourselves in. The full economic impact of the conflict remains uncertain, but the spring forecast showed that the Government have the right economic plan, that we enter this period of global uncertainty with the fundamentals of our economy strong and that we are more prepared for a more volatile world. We have cut inflation, which now stands 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. The OBR forecast before this conflict showed that GDP per head was set to grow more than was expected at the Budget, with growth of 5.6% over the course of this Parliament. We have stabilised the public finances, having already reduced the deficit by £20 billion this year from 5.2% to 4.3% of GDP—its lowest level for six years and the fastest reduction in the G7. Of course, these forecasts predate the current conflict in the Middle East, but Britain today is in a stronger position to withstand whatever uncertainty comes our way.

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

Finally, both noble Baronesses spoke about energy bills. The noble Baroness, Lady Neville-Rolfe, asked me what “responsible” means. It means that, as we respond to this crisis, we should learn from the mistakes of the past. The previous Government pushed up borrowing, interest rates, inflation and mortgage costs with an unfunded, untargeted package of support under Liz Truss that gave the most support to the wealthiest households. Between 2022 and 2024, under the last Government, households in the top income decile received an average of £1,350 of direct energy bill support. That left us with high levels of national debt—a cheque written then for a bill that is still being paid today. Contingency planning is taking place for every eventuality so that we can keep costs down for everyone and provide support for those who need it most, acting within our iron-clad fiscal rules to keep inflation and interest rates as low as possible.