Spring Forecast Statement

Lord Altrincham Excerpts

Tuesday 17th March 2026 Lords Chamber

[Lord Altrincham (Con)]

My Lords, I thank the Minister for his patience and care in listening to this debate. I declare my interest as a director at South Molton Street Capital. I thank the noble Lord, Lord St John, for speaking in our debate this evening, and for his work for this House and our country.

We are privileged to have the Minister with us, because he has been 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 to strengthen the powers of the OBR—that was before my noble friend Lord Redwood joined us, when the OBR was quite popular with the Government and possibly with Parliament, though maybe that is not so true anymore. We took that through as the first Bill of the Session. The timing of this evening’s debate is quite interesting because we are towards the end of the Session and we can take a view among us on where the Government’s economic strategy is. It will be particularly interesting to hear the Minister’s responses to the questions and topics raised this evening.

You do not 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 family members—children, grandchildren, nephews and nieces—and maybe friends and neighbours, and will know that people in their 20s are seeing a dramatic fall away in jobs at the moment. We might start there. Some of that is part of the NEETs problem, which goes back to the previous Government and seems to have started growing around the time of Covid, but some of it is a new area of graduate unemployment, with people in their 20s unable to start work and their careers. It is a profound economic challenge, because if they are not starting in their careers then they may never start in their careers, and there may be a huge economic consequence from that. I therefore start by asking the Minister to give us some insight into what we can say to people in their 20s who are failing to get a job at the moment, and to their families, and to comment on what the Government might be able to do about that.

Perhaps we all share some responsibility for this situation. The Government would tend to blame the previous Government, but, in doing that, it is implicitly to acknowledge that government policy affects employment. Putting aside the important point that government needs to work with the private sector and the private sector creates jobs, the sheer scale of government in this country at the moment is important. Where we have taxed GDP, as mentioned by my noble friend Lord Horam, at 36% of GDP, while the spend of the Government is over 40% of GDP, they are crowding out the private sector to an extent. Therefore, whether it is that the Government can create the economic demand that is sometimes referred to on the government side as coming from public spending or whether in fact the Government create a tremendous amount of waste and misallocation of resources—potentially in healthcare, energy or wherever—what the Government do is extraordinarily important because of their scale.

In addition to that, the Government have chosen policies with important objectives, but the short-term outcomes have been unemployment. The Government have chosen, one after another, Bills that have an important element of job destruction, whether in workers’ rights or minimum wage or national insurance increases. The Government are choosing a form of policy-driven unemployment. It is almost as though the Government have a revealed preference for unemployment at the moment. That needs an important response, but it is only barely being responded to at the moment by the Government, while the numbers are moving up quite fast.

The Government might hope that unemployment is cyclical or a blip, given that there are a few things going on around the world and a few problems in energy and all the rest of it. But the OBR—which, as I say, was rather popular but is now not so popular, and has made some observations that are really quite unhelpful—has chosen this delicate moment to say that perhaps unemployment at the level we have currently is structural. If unemployment is suddenly becoming structural at 5.5%, that is a huge issue.

As the noble Lord, Lord Skidelsky, pointed out, you have to read the stuff twice to try to understand what the OBR is saying. It uses language such as “equilibrium” levels of unemployment. What that really means is that this is the minimum level baseline of unemployment and we have reached a structural change and need to work on unemployment from here. A specific question for the Minister is whether this is the Government’s position as well. Do the Government believe that unemployment at the current level is the structural level? Could the Government comment on the OBR’s forecast? I am not expecting them to agree with the OBR—they do not have to worry about that—but could they comment on its forecast that unemployment is going to pass 7% and assure us that that is not the case and is not in their plans?

All of this feeds directly into the wider economic decline highlighted today in this debate. Energy costs are rising, hence my noble friend Lady Neville-Rolfe mentioned the North Sea, along with my noble friends Lord Redwood, Lord Patten and Lord Lamont. We need to address what happens in oil and gas. Unemployment is rising, as mentioned by the noble Lords, Lord St John, Lord Bilimoria and Lord Skidelsky. The welfare bill is spiralling, mentioned by my noble friend Lord Horam, and growth is stagnant, mentioned by my noble friend Lord Massey, yet we have a Chancellor who delivers a Spring Statement devoid of any measures to turn this around. I cannot resist mentioning it again, but the Spring Statement was compared by my noble friend Lord Patten to the empty quarter in Saudi Arabia. That is a very unkind way of putting it, but I think we know what he means.

The picture is set to worsen, with looming economic headwinds, driven by the deeply uncertain and escalating situation in the Middle East, fast approaching, yet the response from the Treasury remains complacent, falling far short of the seriousness that this moment demands. I agree with the comments made by the noble Baroness, Lady Kramer, about the Treasury at the moment. Our borrowing now exceeds that of Greece and debt is set to rise in virtually every year of the OBR’s 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 enterprise and rewarding work, this Government are increasingly choosing to subsidise inactivity, paying more and more people to remain outside the workforce.

Several noble Lords commented on savings and pensions. It is important that we touch on this, albeit this is running in parallel Bills on the timetable at the moment, because it is of profound importance due to the enormous amounts of unfunded pension liabilities we have. The Government are not merely making life harder for those trying to begin their careers; they are 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 will do 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 6 April 2027, as the noble Lord, Lord Liddle, and the noble Baroness, Lady Fairhead, described—and it was a central piece of the Finance Bill Sub-Committee report—most unused pension funds and certain death benefits will be brought within the scope of inheritance tax.

Incidentally, as a marker for the extraordinary work of the noble Lord, Lord Liddle, on the Finance Bill Sub-Committee, it is worth pointing out that the agricultural and business property relief issues were dealt with earlier in the sub-committee’s work. There was a quiet word from the chairman—possibly in Cumbria—to senior people in the Government and adjustments were made. Unfortunately, we did not get to inheritance tax until later, which may be why that is still outstanding. The chairman was remarkable in escalating those issues. 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 deeply punitive practical effects, forcing executors to use estate cash, sell assets or even borrow simply to meet inheritance tax liabilities.

Auto-enrolment has been one of the great policy successes of recent decades, as the Minister and the noble Baroness, Lady Sherlock, have recognised. However, as the Institute for Fiscal Studies has made clear, the system works only if people contribute beyond the statutory minimum. Without doing so, many will simply not accumulate enough to live on in retirement. Yet the Government have 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 to secure a decent retirement. I remind the House that the inheritance tax changes come in from April next year and will cause tremendous disruption and unhappiness. In other words, those who do the right thing—who work, save and plan responsibly for the future—are the very people whom this policy framework, which the Government have chosen to create, ends up punishing. Perhaps the Minister could comment on the Government’s attitude to pension savings. We look forward to his response.