Forthcoming Fiscal Changes

Lord Bridges of Headley Excerpts

Tuesday 25th November 2025 Lords Chamber

[Lord Livermore (Lab)]

As the noble Baroness knows, and as I think I have made clear, I am not going to comment on speculation ahead of the Budget, neither am I going to comment—I never do—on market movements.

[Lord Bridges of Headley (Con)]

My Lords, the Minister just said that the Budget tomorrow will be focused on protecting our NHS, reducing our national debt and improving the cost of living, which the Chancellor has said in one of her many scene-setters are the priorities of the British people. However, back in May, the Prime Minister said that the Government

“see security and defence not as one priority amongst many others but as the central organising principle of government – the first thought in the morning – the last at night. The pillar on which everything else stands or falls”.

Therefore, why is not defence one of the priorities, or has No. 11 not yet got the memo?

[Lord Livermore (Lab)]

I know that the noble Lord thinks that his question is terribly clever, but it is perfectly possible for the Government to have ongoing priorities and for there to be specific priorities for this Budget. Those two things are not in any way contradictory. He will see what we have to say about defence in the Budget tomorrow; likewise, he will see what we have to say about the NHS, growing the economy and the cost of living.

Budget: Press Briefings

Lord Bridges of Headley Excerpts

Tuesday 18th November 2025 Lords Chamber

[Lord Livermore (Lab)]

My noble friend is absolutely right to say that there is always speculation ahead of a Budget. As he knows, I am not going to comment on the bond markets, but he is right to point out that the Liz Truss mini-Budget crashed the economy and sent interest rates soaring.

[Lord Bridges of Headley (Con)]

My Lords, on 10 November, the Chancellor said on BBC Radio:

“It would, of course, be possible to stick with the manifesto commitments, but that would require things like deep cuts in capital spending”.


Does that statement still stand?

[Lord Livermore (Lab)]

As I have said, I am being told by noble Lords opposite that speculation is wrong and now the noble Lord is asking me to speculate. As I have made very clear, I will not be commenting on individual tax measures.

Economic and Taxation Policies: Jobs, Growth and Prosperity

Lord Bridges of Headley Excerpts

Thursday 13th November 2025 Lords Chamber

[Lord Bridges of Headley (Con)]

My Lords, I start by congratulating my noble friend Lord Elliott on securing this debate, his excellent book and all the work he has been doing on jobs. I also congratulate a number of noble Lords who have spoken, especially my noble friend Lady Noakes for her remarks—which I entirely agree with—and my noble friends Lord Young and Lord Harper, who I will return to in a moment.

When thinking about this debate, I happened to read again the lecture that the then shadow Chancellor, now Chancellor, gave at the Mais lecture last year, in which she promised a “fundamental course correction” for the British economy. As the noble Viscount, Lord Chandos, has just said, it is now 379 days since the Chancellor gave her first Budget. So how is this fundamental course correction going? There is, as I am sure we have all read and seen, a growing sense of instability fuelled by speculation, a lack of confidence in the future, and more people worrying about keeping their jobs—and that is just among members of the Cabinet. Out in the country, it is far worse. The Chancellor herself has said that the UK economy feels “stuck”, and today’s growth figures confirm that.

So why are we in this sorry predicament? My noble friends Lord Elliott and Lady Noakes made a number of points as to why this might be, and I will not repeat them in the time I have. At the top of my list is a point that my noble friend Lord Young made: the Chancellor has lost control of spending. Rather than take the right, but tough, decisions to slow down the spiralling cost of welfare—not even to stop its rise—the Chancellor backed down when Labour MPs said no. She did so despite the fact that, as my noble friend Lord Young said, the Prime Minister says the current system is unsustainable. Spending overall has overshot forecasts by over 4% since the spring of 2024. Adding to the pain is the impact of the misguided £25 billion tax rise on employers—referred to by my noble friend Lady Noakes—that is stoking unemployment and making inflation stickier.

The reason the Chancellor may have to raise income tax for the first time in 50 years—50 years—breaking Labour’s promises, is her “fundamental course correction”. But, as my noble friend Lord Harper just said, the Government refuse to accept any blame or any fault for the situation we are in. As he said, they are blaming everyone but themselves. Everyone knows this is nonsense. Last autumn, the Economic Affairs Committee, of which I was then chair, published a report warning that the Government must rebuild the nation’s fiscal buffer, given the global volatility and risks we face. The Chancellor’s reply assured the committee:

“The Budget took the necessary difficult decisions to put the public finances on a sustainable path—setting realistic plans”—


realistic plans—

“for public spending while raising revenue—to create the conditions for growth”.

She clearly thought she had done enough to rebuild our fiscal defences. She said she had built a fiscal buffer, but, in reality, it has turned out to be a wafer.

A tragedy is therefore unfolding in front of us. With an enormous majority, this Government have the ability to take tough decisions to reform our public services and cut welfare, but they have ducked those tough decisions. The Prime Minister and the Chancellor mouth the right sentiments about growth, stability and security, but their actions undermine those aspirations. What do we see 379 days after their cataclysmic Budget? The fundamental course correction the Chancellor has given us is taking us deeper into the mire. There is insecurity, instability and stagnation—the reverse of everything they promised. The fear is that it will require things to get even worse for the Prime Minister, the Chancellor and the noble Lord to do what they promised last year and give us the fundamental course correction this country really badly needs.

--- Later in debate ---

[Lord Livermore (Lab)]

I do not think I have misrepresented the situation in any way, shape or form. The OBR forecast that around two-fifths of the 4% impact had already occurred by the time the EU-UK Trade and Cooperation Agreement came into force and that GDP will be 2.7% lower by 2025, with the remaining reduction occurring by 2030, meaning the economy will be over £100 billion smaller than it otherwise would have been.

As I was saying, we have also heard from some of the most enthusiastic acolytes of Liz Truss about how to grow the economy, despite the Liz Truss mini-Budget crashing the economy and sending mortgage rates spiralling. I think we have long since abandoned any hope of an apology to the British people from the party opposite for its record on the economy over 14 years, but what is still shocking is its inability to show even the slightest hint of self-awareness for the damage it did to the British economy over the past 14 years or any awareness that that damage continues to scar our economy today, as my noble friend Lord Davies of Brixton clearly set out.

The reality of that record over 14 years is stark, as my noble friend Lord Liddle said. First, there was austerity, mentioned by my noble friend Lady O’Grady of Upper Holloway, which took demand out of the economy at exactly the wrong moment and cut investment, undermining the economy’s ability to grow, and left us ill-prepared for the future. Then a disastrous and tragically misjudged Brexit deal—interestingly, not mentioned by the noble Lord, Lord Elliott, in his opening speech—imposed new trade barriers equivalent to a 13% increase in tariffs for manufacturing and a 20% increase in tariffs for services, reducing total trade intensity by 15%. As a result, as I have said, the economy will be over £100 billion smaller by 2030.

The combined effect of these costly mistakes was devastating. Had the UK economy grown by the average of other OECD countries over those 14 years, it would be more than £150 billion larger today. The previous Parliament was the worst ever for living standards. Inflation hit 11.1% and was above target for 33 months in a row. The noble Baroness, Lady Noakes, mentioned business investment. She may recall that, under her Government, the UK had the lowest private investment levels in the whole of the G7, productivity growth entirely stalled and output per worker grew more slowly than in nearly every other G7 country.

These policy errors, chronic instability and low levels of investment have left deep scars on the British economy, as my noble friend Lord Eatwell set out. As mentioned by the noble Lord, Lord Harper, alongside the forthcoming Budget, the Office for Budget Responsibility will set out the conclusions of its review into the supply side of the UK economy. I will not pre-empt those conclusions today, but the OBR may downgrade the historic assessment of the UK’s productivity and may conclude that the productivity performance we inherited from the previous Government was even weaker than previously thought.

[Lord Bridges of Headley (Con)]

Can the Minister clarify that his argument is that the Government have made no policy errors regarding their economic management over the last year?

[Lord Livermore (Lab)]

I am only five minutes into my speech; let us hear my whole speech before we conclude on that.

The OBR’s productivity assessment will be a look in the rear-view mirror, but the past mistakes of the previous Government do not need to determine our country’s future. While the record of the past 14 years may be even worse than previously realised, it underlines the importance of delivering higher and more sustainable economic growth, which has been the defining mission of this Government since we entered office. The noble Lords, Lord Elliott, Lord Harper and Lord Bridges, and the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, mentioned today’s growth figures. While they are, of course, lower than any of us would want to see, they confirm that the UK was the fastest growing economy in the G7 in the first half of this year and show just how much more there is to do.

We will move further and faster with our growth strategy, set out clearly many times and built on the three pillars of ensuring economic and fiscal stability, reforming the economy and increasing investment. It is welcome that the IMF has said that this strategy focuses on the right areas to increase productivity. This strategy recognises that growth comes not from government but from businesses and investors and that there is a role for a strategic state, not to step back and let businesses fend for themselves, but to act in partnership with business by systematically removing the barriers to growth that it faces.

The first pillar, stability, is the foundation all else is built on. That began with the Government’s first Budget last October. The noble Lords, Lord Harper, Lord Swire and Lord Leigh of Hurley, could not help but mention the £22 billion black hole in the public finances we inherited, which the previous Government sought to conceal from the OBR, but once again—

National Insurance: Partnerships

Lord Bridges of Headley Excerpts

Monday 10th November 2025 Lords Chamber

[Lord Bridges of Headley (Con)]

My Lords, may I ask the Minister a very simple question? In terms of his definition of a working person, is a partner in a law firm a working person?

[Lord Livermore (Lab)]

I applaud the noble Lord’s attempt at his question. I am not going to comment on individual tax measures right now.

Taxes

Lord Bridges of Headley Excerpts

Tuesday 15th July 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. It was premised on a hypothetical, and I am not going to speculate on the next Budget now. I absolutely understand the issues that she is raising, and I am very happy to take those points back to my colleagues in the Treasury.

[Lord Bridges of Headley (Con)]

My Lords, the Minister has said several times in this Chamber that the Government have no present plans to introduce a tourism levy. Will he repeat the same pledge about a wealth tax?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question, and I should start by wishing him a very happy birthday. I have said what I have said on tax. I am not going to give a running commentary on the fiscal forecast, nor am I going to speculate on tax rises now. As I said, we will do things in the usual way. The Chancellor will ask the OBR to produce a new forecast in the autumn for the annual Budget and will take decisions on that based on that forecast.

Tax on Imports under £135

Lord Bridges of Headley Excerpts

Monday 14th July 2025 Lords Chamber

[Lord Livermore (Lab)]

The Department for Business and Trade has set out our measures to try and prevent that from happening, and it will continue to monitor it, as you would expect it to.

[Lord Bridges of Headley (Con)]

My Lords, broadening the topic on taxation a little, at the weekend the Transport Secretary said that in Labour’s manifesto it committed not to put up taxes on people on modest incomes. Can the noble Lord tell us the Treasury’s definition of a modest income?

[Lord Livermore (Lab)]

The Government have pledged not to increase taxes on working people, which is why we are not increasing income tax, national insurance contributions or VAT.

National Debt: It’s Time for Tough Decisions (Economic Affairs Committee Report)

Lord Bridges of Headley Excerpts

Friday 25th April 2025 Lords Chamber

Moved by

[Lord Bridges of Headley]

That this House takes note of the Report from the Economic Affairs Committee National debt: it’s time for tough decisions (1st Report, HL Paper 5).

[Lord Bridges of Headley (Con)]

My Lords, it gives me great pleasure to open this debate. Let me start by thanking everyone who has come in on this lovely sunny day, and, in particular, the members of the committee for their hard work and commitment over the years in which I was chair. Sadly, I no longer chair the committee, but I have passed the baton to the very capable hands of the noble Lord, Lord Wood, who we look forward to hearing from later. Before I move on, I thank the committee’s clerks, both past and present, our policy adviser and our specialist adviser, Isabel Stockton, and all those who gave evidence to this report. This report showed this House, as I think of it, at its best. It was a great cross-party effort—a team effort—and I thank everyone for all that they did.

The sustainability of our national debt is, in my mind, a central issue of our time. How we manage it and ensure that it remains sustainable touches on almost every aspect of our economy and our way of life. Between the turn of the century and March last year, public sector net debt, excluding the Bank of England, trebled to just under 100% of GDP. This rise was turbocharged by successive Governments’ responses to the financial crisis, to Covid and then to the energy shock. In the past, such a sustained increase happened only during wartime. This time, as our debt grew, so did the conspiracy of silence about it. None of the major parties wanted to confront head-on the economic and social consequences of this rising tide of red ink. Therefore, at the start of last year, the Economic Affairs Committee decided to give this issue the attention it truly deserved by asking a very basic question: how sustainable is our national debt?

Before I go any further, let me define what the committee meant by sustainability. Debt sustainability depends on tax and spending policies which credibly align with expectations for economic growth and the cost of borrowing. It is the trajectory, rather than the level of debt, and our ability to service our debt which should be the principal considerations when assessing debt sustainability. A debt level risks becoming unsustainable if there is an insufficient buffer to absorb future economic shocks, or if a Government’s approach to fiscal policy creates a long-term trajectory of increasing debt service costs.

Looking at our nation’s debt through this prism, our findings paint a very dark picture of our nation’s finances. Our core conclusion was that, without an appropriate fiscal policy that addresses the challenges the UK faces, there is a risk of the debt becoming unsustainable. We stated that if we wish to maintain the level and quality of public services and benefits that we have come to expect, we face a choice: taxes will need to rise, or the state will need to do less. Addressing this will demand clarity as to the responsibilities and role of the individual versus that of the state. Muddling through is not an option. If this choice is ducked in this Parliament, the UK risks being on a path to unsustainable debt.

Why did we come to this conclusion? First, the trends that helped us manage and bring down our debts in the past have been thrown into reverse. We now face what I call the Ds: higher defence spending; the pressure of demographic change; decarbonisation and the green transition; dependency, especially around labour market inactivity and welfare costs; and, of course, the cost of servicing debt itself.

Another reason for our concern was growth. If real interest rates exceed the growth of national income, there must be a primary surplus. In other words, government expenditure, net of interest payments, must be less than government revenue to prevent the debt ratio rising. With growth anaemic, we heard evidence of how the UK risks being sucked into a debt trap. Furthermore, we pointed out that while high net migration has boosted GDP growth, it cannot be the solution to debt sustainability, for it has made little impression on GDP per head.

The third reason for our concern was the structure of our debt. Successive rounds of quantitative easing have seen long-term debt exchanged for short-term debt, and a greater proportion of debt is index-linked and held by overseas investors. This has made the cost of servicing the UK’s debt more sensitive to rises in interest rates and inflation, as well as to sudden changes in investor sentiment. Given today’s geopolitical risks, the Government need a larger fiscal buffer if they are to weather future economic shocks.

Finally, we were concerned about the fiscal rules. We said that rules should hold Ministers accountable for reducing debt steadily, as a proportion of GDP, over time. The concept of a rolling target for debt creates a misleading impression as to the true state of the public finances and hides the need to take difficult decisions to secure debt sustainability in the medium to long term.

Since the report’s publication, we have had a Budget, we have had a Spring Statement, we have seen the impact of other challenges created by another D—this time Donald Trump—and we have received the Government’s written response to our report.

In that response, for which I am most grateful, the following passage stuck out. Let me quote it:

“The government agrees with the … Report that difficult decisions are required to avoid the UK’s debt being on an unsustainable path. The Budget took the necessary difficult decisions to put the public finances on a sustainable path—setting realistic plans for public spending while raising revenue—to create the conditions for growth. This will be supported by the government’s new fiscal rules”.


Let us dissect this passage. First, on the difficult decisions, tax as a share of GDP is going to rise to an historic high in 2027 and remain at that level for the rest of this Parliament. I do not think any of us would dispute that raising taxes to an historic high counts as a difficult decision, but has it put our public finances on a sustainable path and is this course of action creating growth, as the Chancellor’s letter stated?

Let us start with debt sustainability. On Wednesday, the latest figures showed that net debt as a percentage of GDP remains at levels last seen in the 1960s. Looking ahead, the OBR shows that, from 2025-26 to the end of the decade, debt will rise by an average of almost £11 billion more every year. Although public sector net debt is forecast to fall a fraction next year, it will then rise back to 96.1% in 2029-30. Obviously, the Government have changed the definition of debt that they use for their fiscal rules, but, as the OBR states, whichever of the four definitions of debt one uses, all four show debt remaining at historically high levels within the forecast period and show debt to be higher in 2029-30 than in 2024-25.

Next, are the Government creating the conditions for growth, as the Chancellor states? Growth largely stagnated over the second half of 2024 and is now forecast to be 1% this year—half of the October forecast—and that forecast could itself easily be blown off course. I make one point: were bank rates and yields on gilts issued across the forecast both 0.6% higher—this is less than the 1% volatility in 10-year gilts since early October—that alone would be enough to eliminate the minuscule headroom that the Government have to meet their fiscal mandate.

On tax and spending, the OBR assumes that the fuel duty indexation and the reversal of the 5p cut will take place and that unprotected departments’ budgets will be cut. It flags that the proposed welfare reforms are “very uncertain” and that previous reforms have saved much less than previously expected. Given all these uncertainties, the probability of meeting the fiscal target is 54% and the probability of meeting the debt target is 51%.

That brings me to the fiscal rules. The debt target is pinned to the third year in the forecast—a year that continuously moves forward. The Chancellor’s letter states that this

“avoids the need to make sharp policy adjustments in response to small changes in the forecast or economic shocks”.

I do not buy this argument for rejecting our proposal, which was for debt to hit a fixed target in a given year

“unless there are exceptional reasons”.

In other words, economic shocks would be catered for. If small changes in the forecast mean that the Government cannot meet their rule, this suggests that their plan failed to build in a fiscal buffer.

I highlight this key point: the committee proposed that the fiscal framework should show whether the Government have a sufficient fiscal buffer to withstand an economic shock. The Government’s plans show why this is so badly needed. Look at the buffer for meeting the debt rule—it has a margin of just 0.4% of GDP, or £15 billion, in 2029-30. This is not a fiscal buffer; it is a fiscal wafer, so thin and fragile that it will snap at the slightest tap, let alone an economic shock.

The central question in my mind is not whether the Government have taken tough decisions on our public finances but whether the Government have taken the right tough decisions. Yes, the world has changed since we wrote the report, but, back in September, we knew that defence spending was going to have to rise; we knew the pressures that our public services were under; we absolutely knew that, in a volatile world, we had to build up a fiscal buffer to protect us from unforeseen shocks. We knew this, and the committee said so in the report.

I would like to hear from the Minister some answers to some very basic questions about the Government’s approach. First, given that the Chancellor wrote to me on 15 November, saying that her Budget had put our finances on a sustainable path, why did she then have to rewrite her plans in the Spring Statement, just 131 days later? Next, given that the Chancellor wrote in her letter that her Budget had created the conditions for growth, why has the growth forecast been halved? Thirdly, given that the Chancellor has assured us that her Budget has taken the tough decisions to put our finances on a sustainable path and that she is not going to change her fiscal rules, will the Minister repeat the Chancellor’s assertion that she is

“not coming back with more borrowing or more taxes”?

I have a sneaking suspicion that we will not get clear answers to these questions, confirming my fears that, as our report said, we will continue muddling through and not being honest about the scale of the challenges that we face and the impact that they will have on our tax and spending policies, and therefore the risk of our debt becoming unsustainable will continue to grow.

--- Later in debate ---

[Lord Bridges of Headley (Con)]

My Lords, I thank all noble Lords for an excellent debate and their fantastic speeches. The debate has shown this House at its very best and shown why our committee is able to produce such hard-hitting reports. I thank all noble Lords for their very kind words about me, which were entirely unwarranted—I have had enough compliments to last me for several years.

From this debate, it is clear that it is utterly unavoidable that we are living in a world of extreme change and high volatility, that is becoming more dangerous by the day. That said, what has not changed—a number of noble Lords made this point—are the enormous trends and challenges we face, the Ds: debt, demographics, decarbonisation, dependency and defence. All these challenges were in the report. They are extreme challenges. As my noble friends Lord Forsyth and Lord Lamont, and the noble Lord, Lord Razzall, said, these are challenges that merit much more debate than two hours on a Friday morning.

Our approach to them raises enormous questions: ones that fall into the immediate category—those about policy and process—as well as far more fundamental questions of philosophy and belief. Let me briefly touch on what we have covered this morning. On the policies and the processes, as a number of noble Lords said, we face a dire problem with growth and productivity. As my noble friend Lord Forsyth quite rightly said, the responsibility of that falls on this side of the House as much as on anyone else, but we must confront and grapple with these challenges.

Noble Lords spoke about investment in infrastructure. The noble Lord, Lord Horam, spoke about the problems of energy. The noble Lord, Lord Weir, spoke about planning. My noble friend Lord Moynihan of Chelsea spoke about the crushing tax burden and our whole tax system. The noble Baroness, Lady Kramer, spoke about trade. Each one of those is a massive issue. Then there is the fiscal rule, which, as the noble Lord, Lord King, so rightly said, is Augustinian in nature.

Another enormous issue is about how we tackle and treat the concept of borrowing for investment—and today noble Lords could see the kind of debate we have in the Economic Affairs Committee between the noble Baronesses, Lady Wolf and Lady Kramer, and the noble Lord, Lord Davies. There is the question of whether our entire fixation on fiscal rules is overwhelming us and whether we should actually look at the substance of fiscal policy, as my noble friend Lady Noakes and the noble Lords, Lord Macpherson and Lord Burns, said.

Of course, an entirely new approach could have taken: the debt break approach of the Germans and the Swiss, to which the noble Lord, Lord Griffiths, pointed. That leads us on to the role of the OBR. Are we assigning too much importance to the OBR and has it grown too big for its boots?

[Noble Lords]

Yes.

[Lord Bridges of Headley (Con)]

We hear some answers here from our Front Bench, and my noble friend Lord Howell discussed that point. Then there are the further pressures we will face: the noble Lord, Lord Browne, spoke about defence and welfare, and the noble Baronesses, Lady Cash and Lady Grey-Thompson, tackled the intergenerational issues. Each of those points merits debate in itself and deserves to be heard.

What we did not hear today was assurances that taxes will not need to rise further; instead, we heard that the Government are sticking to their course, that they believe that debt is on a sustainable path and that we are able to weather the storm we are in. I dearly hope that I am proven wrong, for I fear that we lack a credible strategy for the problems we face.

That brings me on to the bigger, more fundamental problem of philosophy and belief. If we truly want to tackle these challenges, we need to have a debate about the role of the state versus that of the individual. It boils down to a simple question: do we trust the state to do more to tackle these challenges? In which case, taxes may inexorably have to rise. If so, what will be the impact on our economy, competitiveness and growth? Alternatively, do we take a different course, and do we trust the people? If so, what does that mean for the social contract? Where does the boundary lie between the responsibilities of the state and the individual?

These are enormous questions, which this debate on our report begins to open up. My deep concern is that we will continue to kick the can down the road and not have that debate, because all these challenges—all those Ds—come head-to-head with the other, massively bigger D: the D of democracy. Having this debate—and confronting these challenges—raises the enormous and, at times, tough and unpopular decisions and difficult trade-offs that have to be faced. However, if we do not have this debate, and we continue to try to tackle these problems piecemeal in an incoherent way, I fear that not only will the solutions fail but we will lack the legitimacy to take the action required. As the noble Lord, Lord King, said, we owe it to our children and grandchildren to muster the courage and have the honesty to confront these challenges now, so as to put our debt on a sustainable path before it becomes too late.

Motion agreed.

Competition and Markets Authority Chairman

Lord Bridges of Headley Excerpts

Monday 27th January 2025 Lords Chamber

[Lord Bridges of Headley (Con)]

My Lords, last weekend at Davos, the Chancellor said that growth trumps net zero. If that is the case, will the Government review and revise regulators’ remits to reflect that?

[Baroness Gustafsson (Lab)]

I thank the noble Lord for his question. As I reflect on my experience in driving investment, I do not think the two need to be mutually exclusive. When I reflect on our successes with driving investment, the green energy sector is a region in which we have seen considerable successes. This does not need to be a choice between one or the other. Executed correctly, there is an opportunity for us to drive growth while supporting sustainable energy initiatives.

Autumn Budget 2024

Lord Bridges of Headley Excerpts

Monday 11th November 2024 Lords Chamber

[Lord Bridges of Headley (Con)]

My Lords, I welcome my noble friend Lord Booth-Smith to his place. I very much look forward to hearing his speech and his contributions.

I will pick up on what my noble friend Lord Forsyth and the noble Lord, Lord Burns, said, and I will focus on one word: debt. Taking a step back, global public debt is expected to exceed $100 trillion this year—about 93% of global gross domestic product. As a number of noble Lords have said, our debt here is sky high, and we need to ensure that it remains sustainable and that we can service it while overcoming other challenges. I have spoken of these before, and they also begin with “d”: defence, demographics, decarbonisation and deglobalisation. As the recent Economic Affairs Committee inquiry into the sustainability of our debt concluded, tackling these challenges means that we must take tough decisions this Parliament—I stress that—if our debt is to be put on a sustainable path. The committee also said that

“to maintain the level and quality of public services and benefits that people have come to expect”,

the choice is between tax rises or the state doing less.

Meanwhile, as so many noble Lords have pointed out, we must ratchet up our growth and improve our productivity, as my noble friend Lady Neville-Rolfe just said. That obviously involves choices—about tax, spending and borrowing. So this Budget was, in so many ways, about how we choose to make our debt sustainable. My position is simple: I trust people to decide what is best for themselves and to spend money as they wish. Like my noble friend Lord Forsyth, I believe that Governments do not create growth; people do. Their hard work, inventiveness and risk-taking are what drives us forward and what Governments should reward and support, not crush. This is the best way to get the growth we need, not just to support the public services we want but to put our debt on a sustainable path.

The brutal truth is that, during 15 years of Conservative government, our record on growth and productivity was not as good as it should have been, as my noble friend Lady Neville-Rolfe said. We can all argue why this was so: we can cite Brexit, Covid and the energy shock. But, as the Chancellor said—here, I agree with her—there is no escaping the fact that we have become a high tax, low growth country. Now is decision time: on that we can agree. We have to choose how to make our debt sustainable while supporting growth.

That brings me to the Budget. As the Minister said, Labour has made its choice. It is there—£70 billion higher spending every year, paid for by historically high levels of taxes, and £32 billion more borrowing every year. We can, should and must hold Ministers to account for breaking their manifesto promises and picking their own so-called tax lock on not raising taxes on working people. But more serious, in my mind, are the consequences of this Budget and what it will do to growth. As has been remarked, after an initial sugar rush, it will lower growth in the medium term, between 2026 and 2027. As my noble friend Lord Lamont said, only some time in the next decade will growth perhaps rise to a sustainable level. When I read the Budget, the only growth I can be absolutely sure of is 5,000 more tax inspectors.

Meanwhile, underlying debt, excluding the Bank of England, rises as a share of national income in every year of the forecast. So, unsurprisingly, the Chancellor did what she said before the election that she would not do: she changed the debt rule to find more so-called “headroom”—which is, by the way, an absurd concept, as if money can be whistled up from thin air. But this is the point: even her new rule is forecast to be met by just £16 billion. That would be wiped out entirely if the Government met their commitment to spend 2.5% of GDP on defence, and it would be wiped out entirely if interest rates or bank yields were 1% higher. If annual productivity growth—which, as I said, we have struggled to improve—were just 0.5% lower, borrowing would rise by £40 billion. Put that together and it is not surprising that, just last week, the OBR told the Economic Affairs Committee that the Budget increases the risk of our debt becoming unsustainable.

So we are on a tightrope, which has become even more precarious after last week’s election in the US. How do we finance increased spending if the US pulls back? How would new US tariffs hit growth? President Trump’s plan is forecast to increase debt by a total of $7.75 trillion. Who is going to buy all that?

Labour promised to turn the page on an era of high tax and low growth. We have turned that page and what do we read? Higher taxes, lower growth. The Government promised to kick-start economic growth. Instead, they have kicked growth into touch. Finally, they said that they would build strong national finances. Instead, they have weakened the foundations, increased the risk of our debt becoming unsustainable and made matters worse.