Growing the UK Economy

Lord Fox Excerpts

Monday 3rd February 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, the Government have told us that growth is their number one mission. That is the promise they have repeated again and again, and, given the difficult circumstances the country faces, that is sensible. That being the case, I am afraid that the Government’s statements—both that of the Chief Secretary to the Treasury to Parliament and the speech given by the Chancellor—do not measure up to the scale of what is required.

Above all, we need a recognition that the first steps of this Government—spreading pessimism; rewarding recalcitrant unions with large pay increases without them being tied to productivity increases; increasing stifling regulation, particularly on employment and renting; and increasing taxes—are precisely what should be avoided. Instead, we need an optimistic mindset—seizing the issue, and shaking up those who are not contributing and could do more—and a determination to make real progress, not a flabby wish list with no indication of how it will be achieved in practice.

Last week, Lloyds Bank announced 1,600 job cuts after the CBI warned of a “significant fall” in business activity in the private sector, and the normally robust supermarkets announced large job losses. This is before we start to feel the effects of the Government’s most burdensome measures, which come into force in April. Businesses are fearful, and consumers are showing caution in case they lose their jobs or face price rises that affect their families.

That does not mean to say the Government’s proposals are not welcome, up to a point, if they contribute to stability and growth as we hope. The expansion of Heathrow seems to be central to the Government’s plans to “unlock further growth”, but this will take well over a decade to come to fruition and seems to be highly contentious in the Cabinet. Will the present proposal outlive the Chancellor? It seems doubtful.

The Chancellor highlighted the importance of the life sciences sector and referenced AstraZeneca. It must have been embarrassing for the Government to hear of its decision not to go ahead with the much-needed new vaccine manufacturing plant in Speke—a £450 billion investment. I know that the value for money rules are not straightforward, but could matters not have been managed to secure a better outcome?

Having studied the discussion in the other place, I would be interested to know more about how the growth package will help Northern Ireland and how the Office for Investment will provide a line of sight to opportunities across the country.

We agree with the Chancellor that we must focus on removing barriers to growth, and that that means cutting regulation. It also means reversing the way in which the public sector has started to crowd out the more productive private sector since its necessary expansion to a wartime footing during Covid, yet the Government seem determined to do the opposite. Can the Minister explain what assessment the Government have made of the impact of their extra regulations on economic growth?

I am particularly concerned about energy. History shows that cheap energy is vital to growth. Our businesses in the UK already have to cope with the highest energy prices in the developed world, and that is set to get only worse. That is terrible news for industries such as steel, cement and ceramics. I am sure the Government will come to regret their decision not to support the Rosebank field and the punitive tax on oil and gas, alongside the delays in nuclear rollout and grid connections. I would not want to be the Energy Minister when the lights start to go out.

This is not a debate about welfare, but it is clear that more needs to be done to get people off welfare and into work as part of the growth mission.

Perhaps I could end on some positives. I am glad to see the plans for new investment in reservoirs. Successive Governments have been slow to meet that need. The Thames Tideway tunnel has been an early success in the water area, on time and largely on budget, in an impressive partnership with the private sector.

The Government are right to press ahead with more housing and to lift some of the regulatory constraints, although they should be doing more in the London area, where the pressure of population is worst. I am particularly pleased to see the new focus on building around railway stations, a recommendation of the Meeting Housing Demand report by the Lords Built Environment Committee, which I chaired at the time. How do the Government propose to report progress in this area?

[Lord Fox (LD)]

My Lords, I thank the Minister for sharing the Statement.

In a Janus-like switch from the gloomiest person in Whitehall, the Chancellor was all smiles last week. To cap that change in mood, she gave her much-heralded growth speech. The most notable feature, as far as I was concerned, was what was not in the speech.

We all know that committing the UK to a genuinely closer and more efficient trading relationship with the EU would be the quickest and most effective way of driving growth. That is why the Liberal Democrats have suggested a customs union as the most significant route to growth. If the Government do not believe us, they should commission the Office for Budget Responsibility to analyse the impact that a customs union with the EU would have on the economy and public finances, and then we could discuss the numbers.

Instead, the Statement was, in essence, a list of projects—some of them interesting, some of them less so. I believe they were intended to communicate as much a mood as actual projects. To cap the message was an exclamation mark: the announcement on Heathrow. I suppose the point of that was to suggest that the Chancellor and the PM were such growth ultras that they would even allow Heathrow an extra runway. Even though that is patently the wrong thing to do, seemingly the Chancellor was using Heathrow as a badge of her serious intent on growth. However, as we discussed just now in the previous Question, it is so far into the distance that it is growth window dressing. The numbers that are used are highly selective, and the estimated timings hopelessly defy reality when it comes to projects of that scale.

I think it was the former Chancellor George Osborne who coined the phrase “shovel-ready”, implying that some projects could start immediately. This is rarely the case, so it would be good to get an idea of the start time for some of the projects that the Chancellor listed. For example, when will we get the announcements on Gatwick and Luton, and how shovel-ready are they? When does the Minister expect those expansions to have any effect on our economy? Similarly, the suggestions that talks may be reopened regarding Doncaster Sheffield Airport are welcome, but is that idea backed by any central government investment or is it just talks with cash-strapped local authorities?

With such a heavy emphasis on air travel in the Statement, it was inevitable that, by way of some sort of offset, the Chancellor would talk about sustainable aviation fuel. Can the Minister tell your Lordships’ House the Treasury’s estimate for what the percentage and volume of SAF used for air travel departing the UK will be by 2030? How effective will its implementation be?

Finally, on the Oxford-Cambridge growth corridor, I can understand how some would see this as a great idea, but how will the idea be made flesh? The noble Lord, Lord Vallance, is to be the champion, but what is he championing? Your Lordships will be aware that the journey between the two university sites passes through many local authorities. Each, I am sure, will have their own idea and vision of what this corridor would or could be. Will the ministerial champion have any powers to compel a joined-up plan? Will he have any money to cajole authorities to bend to his will, or is this corridor a possible railway link for some time in the future, with a few road works?

Meanwhile, the bird has flown. As we just heard, AstraZeneca, Britain’s biggest public company, has pulled out of its proposed £450 million investment in a new vaccines plant, reportedly after “protracted discussions” with the Government. It is now no longer pursuing its plan for Speke. The implication is that the Government not only reduced the money on the table but did so very slowly. I do not want to hear from the Minister that the previous Government had not funded the offer. We know that they did not fund the offer; they funded virtually none of it. What I want to know is what thinking in the Treasury stopped the present Government funding this project? While having a Chancellor announcing airport expansions might make the odd headline, what delivers an effective message to future investors in this country is an announcement of the start-up of a project such as that.

As a result of this failure, can the Minister tell your Lordships’ House that he now recognises that it is the job of politicians much more positively to drive negotiations such as those? It is politicians who have to step in and remove administrative barriers, and it is up to them to make projects like this happen.

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

My Lords, I am grateful to the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Fox, for their comments and questions. As noble Lords will know, and as the Chancellor reaffirmed in her speech last week, growth is the number one mission of this Government. Without growth, we cannot cut hospital waiting lists, put more police on the streets or improve the lives of working people.

The noble Baroness, Lady Neville-Rolfe, spoke about our growth mission. As she knows, there was no bigger failure of the previous Government than their failure on growth. With their austerity, their disastrous Brexit deal and their Liz Truss mini-Budget, the combined effect was devastating. Had the economy grown by the average of other OECD countries over the past 14 years, it would be more than £150 billion larger today. We did not hear much humility for that record from the noble Baroness, and there has still been no apology for it to the British people.

As the Chancellor said last week, low growth is not our destiny, but growth will not come without a fight. While this country has incredible potential, the structural problems in our economy run deep; the low growth of the past 14 years cannot be turned around overnight.

The strategy that this Government have consistently set out is to grow the supply side of our economy, recognising that, first and foremost, it is businesses, investors and entrepreneurs that drive economic growth, alongside a Government who systematically remove the barriers that they face. Our strategy is based on three elements: stability, which is the basic condition for secure growth; reform, which makes it easier for businesses to trade, raise finance and build; and investment, the lifeblood of economic growth.

On stability, the noble Baroness, Lady Neville-Rolfe, spoke about the Budget. It was this Government’s duty in October last year to fix the foundations of the economy and repair the £22 billion black hole in the public finances that we inherited. We have always been clear that there are costs to responsibility—the increase in employers’ national insurance contributions will have consequences for businesses and beyond—but the costs of irresponsibility would have been far greater. I think the noble Baroness knows that, which is why we have still heard no alternative put forward by the Conservative Party: no alternative for dealing with the challenges we face, no alternative for restoring economic stability and, therefore, no plan for driving economic growth.

The noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Fox, both asked about AstraZeneca. Government funding must demonstrate value for the taxpayer; a change in the investment proposition by AstraZeneca led to a reduced government grant offer being put forward. We remain closely engaged, though, with AstraZeneca on work to develop our new industrial strategy and our thriving life sciences sector, which is worth £108 billion to the economy and provides more than 300,000 highly skilled jobs across the country.

The noble Baroness, Lady Neville-Rolfe, asked about job figures. The OBR forecasts that, over the course of this Parliament, employment will rise and unemployment will fall. Our announcement last week about the third runway at Heathrow could create 100,000 new jobs. The investment zone that we announced in Wrexham and Flintshire with JCB and Airbus could create 6,000 new jobs and the investment by Prologis at East Midlands Airport 2,000 jobs. There are plenty of reasons to be optimistic about the ability of our economy to grow and to create jobs.

The noble Baroness also spoke about business sentiment. In the Budget, we capped the rate of corporation tax and extended capital allowances for the duration of this Parliament. I hope that she will have seen the reaction of business leaders to the Chancellor’s speech last week. A business survey, which came out straight after the speech, suggested that two-thirds of businesses now feel more confident about our country’s growth prospects because of what the Chancellor announced. Rain Newton-Smith of the CBI said that businesses will welcome the Chancellor

“grasping decisions that have sat on the desk of government for too long”,

showing that the Government are serious about growth and prepared to take the tough decisions necessary. Shevaun Haviland of the BCC said that

“these proposals can light the blue touchpaper to fire up the UK economy”,

and Tina McKenzie of the FSB said:

“The positive energy in today’s speech … has our backing”.


The noble Baroness spoke about an optimistic mindset; I hope that she will respond by showing some of that same positive energy when it comes to the country’s and our economy’s prospects.

The second element of our strategy is reform. The noble Baroness, Lady Neville-Rolfe, spoke about welfare reform. We published our Get Britain Working White Paper at the time of the Budget to begin to tackle the unacceptable levels of inactivity that we inherited. We will publish a further welfare reform Green Paper this spring to begin to correct some of the incentives in the system.

The noble Lord, Lord Fox, asked about reform of our relationship with the EU. I know that he and I agree very much in our analysis of Brexit, and on the fact that the previous Government’s disastrous Brexit deal permanently reduced GDP by 4%, so we have to reset our relationship with the EU—our nearest and largest trading partner—to drive growth and support business. He will have seen that the Prime Minister is in Brussels today to meet European Union leaders for the first time since Brexit.

The noble Baroness, Lady Neville-Rolfe, spoke about regulatory reform. We know that business has been held back by complex and unproductive regulation, which is a drag on investment and innovation. We have already issued new growth-focused remits for our financial services regulators and announced a new interim chair of the CMA. We will publish a final action plan in March to make regulation work better for our economy. On her question about a specific assessment, as she will know, the OBR sets out the economic consequences of all our policies.

The third pillar of our growth strategy is investment. As noble Lords will know, at the international investment summit, we saw £63 billion of additional private sector investment committed to our economy. In the Budget, we announced an additional £100 billion of public sector investment, which the IMF has been clear is vital to unlocking high levels of growth.

The noble Baroness, Lady Neville-Rolfe, asked about energy prices. I completely agree with her that that is one of the biggest contributions that we could make to our growth prospects. It is why the transition to clean energy is so important in driving those energy prices down. I am grateful for her support on our housing policy.

We are seeing some encouraging signs in the British economy. The IMF has upgraded our growth prospects for 2025—the only G7 country outside the US to see this happen—which gives us the fastest growth of any major European economy this year. A global survey of CEOs by PwC has shown that Britain is now the second-most attractive country in the world for businesses looking to invest, the first time the UK has been in that position for 28 years. This is all welcome news, but we are, of course, not satisfied with the position we are in. We know that we need to go further and faster, which is why the Chancellor made the announcements that she did last week.

Whether it is the third runway at Heathrow, the Oxford-Cambridge growth corridor—creating Europe’s Silicon Valley here in the UK—the new stadium at Old Trafford, investment in Teesside in sustainable aviation fuel, or reopening the airport in Doncaster, all of these things are the next steps of our ambitious plan to grow our economy and make working people better off.

The noble Lord, Lord Fox, asked specifically about the Oxford-Cambridge growth corridor, and the role of my noble friend Lord Vallance. My noble friend absolutely is there to join up all the different bodies that exist. The noble Lord, Lord Fox, asked about the specific powers that my noble friend has. Obviously, the Government have many specific powers in this respect and it is my noble friend’s job to bring what is needed to the attention of the Deputy Prime Minister and the Chancellor so that they can use their considerable powers to do what is necessary to achieve the objectives that we have set out.

The noble Lord, Lord Fox, asked a specific question about Heathrow and sustainable aviation fuel. I will have to write to him on that point if he does not mind. I disagree with him overall in respect of his position on Heathrow, as I think he would expect. I see it as absolutely central to our growth prospects. The noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Fox, asked about the timescale of the third runway expansion. We have asked Heathrow to come forward with plans by the summer. We then want to grant a development consent order in this Parliament. We will have spades in the ground at Heathrow in this Parliament, not years and decades into the future.

The noble Baroness, Lady Neville-Rolfe, also asked about Gatwick and Luton expansion. Decisions on those are both due to be made very shortly, but I cannot say more at this point about a specific timescale. She asked a question about Northern Ireland, about which I will also write to her if she does not mind.

We are making progress towards our number one mission of economic growth but, of course, we are not satisfied. We must go further and faster, so that we can put Britain on a better path and deliver for the British people.

Register of Overseas Entities (Protection and Trusts) (Amendment) Regulations 2025

Lord Fox Excerpts

Monday 3rd February 2025 Grand Committee

[Lord Vaux of Harrowden (CB)]

My Lords, I welcome the noble Baroness to her post, as it is the first time I have been across the table from her. She was not here when we were debating the two economic crime Bills, but I am sure she is aware that the subject of the use of trusts to obscure the beneficial ownership of UK property on the ROE and obscure ownership of UK companies, which this instrument does not cover, was one of the major areas of our debates at the time.

These regulations are a small step to improve transparency around the use of trusts to own UK property. I understand the balance around the protection of minors and others at risk, so I welcome the regulations, but slightly question how much difference they will make in practice. At least the progress is in the right direction.

I will ask a couple of questions about some general, related areas, if I may. I could not resist this opportunity. First, the latest information that I could find indicates that the true identity of the beneficial owner of UK properties owned by overseas entities—there are 152,000-odd—is not published in about 70% of cases, at the moment. For about 35% of cases, the true beneficial ownership is not known even to law enforcement agencies. There may be a number of reasons for that, including simple non-compliance, which accounts for about 10% in the last numbers I saw; the use of opaque corporate structures, which claim no beneficial ownership, or the use of nominees; and the use of trusts, which is the biggest one, particularly in our overseas territories. Transparency International’s latest numbers identify about £6 billion worth of suspicious transactions in UK property coming through our overseas territories, using trusts.

Could the noble Baroness provide up-to-date statistics on both level of compliance with the rules and the number of properties where the ultimate beneficial ownership remains unknown, for whatever reason? I am happy for her to write, if necessary, if she does not have the numbers to hand. Is she happy with the level of identification of beneficial ownership as it stands? What impact does she think these regulations will have on that? What further steps are planned to make sure that we know who beneficially owns the properties? In particular, what plans does she have to make the information from our overseas territories more transparent? The British Virgin Islands, in particular, appear to be the jurisdiction of choice for obscuring beneficial ownership, at the moment.

Of those entities that have not complied—10% was the number that I saw, which is about 15,000 entities—how many have been fined? Of those, how many have paid those fines and gone on to comply subsequent to payment? How many charges have been taken against the properties in relation to non-payment of the fines? In other words, does Companies House have sufficient powers to deal with non-compliance, and is it using those powers effectively?

Secondly—and I hope that the noble Baroness will forgive me for going slightly off-piste—another way to hide beneficial ownership is through the use of nominee shareholders. I notice the noble Lord, Lord Fox, smiling; I hate to be predictable, but there we go. This is particularly true for UK companies, where the persons with significant control or PSC rules can be sidestepped by the use of nominees. An entire industry has built up around that. The previous Government accepted that there was an issue around the use of nominees for this purpose and agreed to include a power in the Economic Crime and Corporate Transparency Act 2023 to take further action against the use of nominee shareholders and the industry that supports them, if they felt it was necessary. This is now Section 790IA of the Companies Act 2006. I want to take this opportunity to ask what assessment this Government have made of the use of nominees in that respect and whether they intend to make use of the powers they have under the Companies Act to address it.

[Lord Fox (LD)]

When the discussions were had with the noble Baroness about her becoming a Peer, I wonder whether they mentioned that she would be in the Moses Room presenting statutory instruments. I bet they did not. But I welcome her, and thank her for the clear explanation as well as the Explanatory Notes, which worked very well. To some extent, the Minister is at a disadvantage—or perhaps it is an advantage—in that the three speakers in this debate are the old gang getting together. We were all involved very extensively in both this and the predecessor Bill that came though.

--- Later in debate ---

[Lord Sharpe of Epsom (Con)]

My Lords, the register of overseas interests—the ROE—was introduced under the Economic Crime (Transparency and Enforcement) Act 2022, which, if I may say, is an excellent Act. I know this to be true because I took it through the House of Lords with considerable advice and assistance from the noble Lords, Lord Fox and Lord Vaux—I have been looking forward to saying that, if I am honest.

The aim of the Act was to increase transparency regarding overseas entities, as has been noted—and let me thank the noble Baroness for her extensive introduction to these regulations. The primary objective was to ensure that beneficial ownership information was accessible, so that the public and authorities could better understand who owns land in the UK. However, as we consider these regulations and whether these measures truly enhance transparency or complicate the process and introduce further risks, we have a couple of concerns that are legitimate to raise.

The Government justify these amendments as a means to protect individuals at risk of violence or intimidation, while simultaneously permitting greater access to information on trusts. The reality is that these changes appear to broaden the scope of who can apply for protection as the noble Lord, Lord Fox, noted. That would make it easier for individuals to hide behind the shield of protection, even when they do not necessarily have a legitimate interest. It reads as if it is potentially an invitation to game the system. So I ask the Minister: are the Government convinced and happy that these regulations, as currently drafted, are robust enough to prevent that potential risk?

Additionally, the amendments propose new mechanisms to address trust information, but the conditions for such access, especially in bulk applications, also raise concerns about the potential for misuse. While the intention might be to make certain information available to those with a legitimate interest, the Government have only partially clarified what constitutes a legitimate interest, which we think leaves room for exploitation and, potentially, unnecessary legal battles.

There is also an application question as, again, the noble Lord, Lord Fox, mentioned. How will the registrar judge things such as how the disclosed information will be used? What criteria will they use to judge legitimacy? For example, is it okay if it was the Times of London asking and would it not be okay if it was some obscure online publication? How exactly will that situation be resolved? It is something I will come onto in a second, but will it be explained in greater detail in the explanatory guidance that will be published shortly?

These measures are proposed to expand the category of individuals who can apply to Companies House to have their information protected, where it may be disclosed under the register of overseas entities. It would also enable trust information on the register that is currently restricted from public inspection to be accessed by application if certain conditions are met.

A significant measure is that of the protection of information. Although expanding the categories of individuals who can apply for protection may sound like a good way to shield vulnerable persons, we are concerned that it risks creating opacity in the system where more people, beyond those in positions of risk, can hide their information from the public eye. The original purpose of the economic crime Act was to shed light on overseas ownership and its implications; we worry that that is now at risk of being undermined by this expansion.

As I and other noble Lords have noted, the Act aimed to simplify and enhance transparency, but these proposed changes seem to introduce additional layers of potentially complex bureaucracy. The process for accessing and protecting information could become more complicated, adding unnecessary burden both for the authorities responsible for managing the data and for the public. Will these changes create a more efficient system in the end, or will they merely add unnecessary red tape to an already complex regulatory landscape?

The Explanatory Notes say:

“Guidance will be made available”.


Can the Minister tell us when it will be made available and whether it will address some of these concerns, such as by going into considerably more detail on the definition of and circumstances surrounding “legitimate interest”? We agree with the Explanatory Notes that, if this measure is to work, extensive and expansive communications are absolutely key.

Broadly speaking, we support these regulations, of course, but we have legitimate questions. The noble Lords, Lord Fox and Lord Vaux, also asked legitimate questions, including about exactly how these regulations will be applied and so on.

[Lord Fox (LD)]

I have one further question, which I meant to ask earlier. The Minister talked about national security interests in the context of legitimate interests. How can national security interests be reflected in Companies House when it is almost certain that nobody there will have sufficient security clearance to be told what the national security interest is in order to apply it in its decision-making process? Clearly, it will not forward every single application to someone who does have security clearance, so how on earth will this be mechanically organised?

--- Later in debate ---

[Lord Fox (LD)]

I asked whether judicial review is applicable. If the Minister is able to write to me on that, that would be helpful.

[Baroness Gustafsson (Lab)]

I absolutely will write to the noble Lord to follow up on that.

I was asked whether Companies House is equipped to deal with this volume of applications and what the administrative burden will be of undertaking a lot of these reviews. It is important to note that most applications for disclosure are going to be fairly straightforward and will not require the demonstration of legitimate interest. This requirement is required only for specific types of requests, such as those involving minors or bulk data, which we talked about. In those cases, applicants must provide evidence that they are investigating money laundering, tax evasion, terrorist financing or sanctions, and must explain the intended use of the information.

Companies House will draw on mechanisms similar to those used by HMRC, where applicants demonstrate a legitimate interest in disclosures from HMRC’s trust registration service. The registrar may request additional information or evidence to determine an application or refer a question to another party who they consider may be able to assist in determining the application. With extensive experience in handling sensitive requests, Companies House is well prepared; it has contingency plans to manage any surge in applications promptly and efficiently. I note that a nominal fee will be required of applicants to make sure that this is cost-neutral with regard to the Government. I think that covers most of those questions, but do correct me if I am wrong.

I shall now move on to the questions asked by the noble Lord, Lord Sharpe, about what legitimate interest is, how it is pursued and followed up, and what the application process is. To apply for access to information about a specific trust, applicants must provide their personal information, the name of the trust related to the relevant protected trust information, and the overseas entity’s name and ID. Applicants seeking trust information related to minors or bulk access—that is, applying for information on more than one trust in a single attempt —must demonstrate a legitimate interest, such as investigating money laundering, tax evasion, terrorist financing or a breach of sanctions imposed by regulations under the Sanctions and Anti-Money Laundering Act 2018. They must provide a statement to Companies House that they are requesting the relevant protected trusts’ information to further their investigation and a statement of how they plan to use the information. Companies House is not obliged to disclose the information if it could prejudice an ongoing criminal investigation or adversely affect national security; if it involves a pension scheme; and where the individual has applied for protection.

With regard to how someone will show that they are investigating money laundering et cetera for the legitimate interest test, applicants are expected to provide comprehensive details of the investigation that they are undertaking, supported by evidence to demonstrate the legitimacy and seriousness of their request. This will help ensure that applications are valid and that the process is not misused.

--- Later in debate ---

[Baroness Gustafsson (Lab)]

I think that you talk to the problem at hand, which is how you balance off disclosure from harm. There will often be legitimate reasons for wanting to access this information, but there are also legitimate reasons why you would not want someone to have that information. I do not think that this is a policy where you can describe a single selection, or parameters, that will defend both sides, which is the exact reason for this process, I believe.

The applicant who requires the information has to give full and detailed information as to their identity and why they would need the information, and the individual whose details are being disclosed has the opportunity to write and say that this is information that could cause them harm were it to be disclosed—and proactively make that statement, so that the registrar has the ability to protect those interests. Then it is the registrar’s role to take that information and ensure that they are getting that balance right. They have the information about the applicant, and they can make that judgment based on whether something is a legitimate interest and this is not a bulk access—someone trying to get the full list of all the trustees so that they can sell their local accountancy advice, or whatever that motivation is. On the other hand, they also have the register for people who believe that interest would be detrimental to their personal ability. Their role is to balance the two, providing that transparency but also protecting them from harm.

[Lord Fox (LD)]

I am sorry to labour the point, but the way in which it is being depicted is as if people will accept the registrar’s ruling and say, “Oh, yeah, right, I understand why you’re not letting me do this”, or, “I understand why you’re letting this person look at my identity”. It seems to me that human nature will operate in exactly the opposite direction and that there will quickly be a huge backlog of people who do not agree with the registrar’s decision, one way or the other. There does not seem to be a defined appeal process. If it is all getting lumped into judicial review, we all know how long that takes and what it leads to—and if there is no system and it all ends at the registrar, there is huge pressure on the registrar to be right every time, which will be extraordinarily difficult. While I can understand how it is being described, my sense is that it will be a lot messier than that.

[Lord Vaux of Harrowden (CB)]

Just to add to that, I cannot see anywhere in the regulation where the registrar has to inform the subject of the application that an application is being made. I can see that they can, but I do not see that they have to.

EU Law

Lord Fox Excerpts

Tuesday 28th January 2025 Lords Chamber

[Baroness Gustafsson (Lab)]

We are resetting the relationship with our European friends to strengthen ties, secure a broad-based security pact and tackle barriers to trade. We are working with the EU to identify areas where we can strengthen co-operation for mutual benefit, such as the economy, energy security and resilience. There will be issues that are difficult to resolve as well as areas that we will stand firm on, and we have been clear that there will be no return to freedom of movement, to the customs union or to the single market. We will work together and with respect to international law and shared institutions.

[Lord Fox (LD)]

My Lords, I am glad the Minister mentioned the reset. Have the Government responded formally to the offer by the EU’s chief trade negotiator that the EU is interested in discussing with the UK the prospect of the UK joining the pan-Euro-Mediterranean convention?

[Baroness Gustafsson (Lab)]

I thank the noble Lord for that question. That is something that we are willing to discuss.

Competition and Markets Authority Chairman

Lord Fox Excerpts

Monday 27th January 2025 Lords Chamber

[Baroness Gustafsson (Lab)]

I thank my noble friend for that question. He is right; regulation and growth need not be mutually exclusive. This is about creating sustainable long-term growth that protects not only consumers but businesses, so that they have a fair, competitive and open ground on which to compete.

[Lord Fox (LD)]

My Lords, whether you characterise the change in chairmanship of the CMA as a sacking or not, all the government statements are clearly designed to create a change in behaviour within the CMA. If this change of behaviour had been applied for the past two years, say, could the Minister tell us which decisions the CMA made would have been different? How much more growth would we have had over those two years, had the CMA been applying the Government’s new strictures?

[Baroness Gustafsson (Lab)]

I come back to a prior answer; this is not about how we look at independent tactical decisions on a case-by-case basis and reflect on what would or could have been. This is about no longer accepting dormant growth within the economy, viewing our regulators through the lens of how we create long-term sustainable growth and making sure that we are aligned with that. To that end, we are consulting on a new strategic steer regarding the CMA, which is expected soon.

Reporting on Payment Practices and Performance (Amendment) (No. 2) Regulations 2024

Lord Fox Excerpts

Monday 13th January 2025 Grand Committee

[Lord Fox (LD)]

My Lords, it is useful to have heard from the noble Lord, Lord Aberdare, and the noble Baroness, Lady Neville-Rolfe, as they have made it their business to address this issue over a number of years. I am pleased that they view this instrument with some positivity and I am happy to concur.

For too long, we have seen large companies use the cash flow of small companies to bolster their own cash flow. This happens not just in the construction sector, but it has been particularly apparent there. Of course, in some famous cases, such as Carillion and others, it became an industry unto itself and the core purpose of the organisations seemed to be to run cash flow on other people’s profit and loss accounts.

We have moved on some way, but I call into question the Minister’s comment—I also welcome her to her place—that it enables companies to make informed decisions about whom to trade with. In many cases, these companies already know what treatment they will get from those they trade with. They do not have a choice about with whom they trade, if they wish to continue in business. Sanctions and whistleblowing on those companies becomes an issue, as they dare not call foul because they will not get contracts in the future. That is the nature of the relationship: it is an abusive relationship, almost literally, between the contractor and the lead company. We need to understand the nature of that relationship to put into context some of the things we are talking about here.

Without wishing to sound nerdy, the average payment time can hide an awful lot of sins. Standard deviation could be more useful—as the noble Baroness will understand—because companies can be played against others.

I also wonder, rather suspiciously, whether retention becomes something else. It would be easy to look at this from the other end of the telescope, call it a completion bonus and retain that instead. We have to be a bit careful about naming things rather than describing them.

I was happy to be reminded of those halcyon days when we were working on the Procurement Act and of the mercurial rise of the noble Baroness from critical Back-Bencher to Front-Bench proponent. I ask a simple question: would it be legal, under current procurement regulations, for me as a local authority to refuse to take on a contractor which was in all other factors equal to a competitor bidder but had reported poor retention and payment numbers? Is it legal for me to turn it down on those terms?

[Lord Sharpe of Epsom (Con)]

My Lords, I join other noble Lords in welcoming the Minister to her place. The construction sector in the UK is not only one of the largest but one of the most vital industries underpinning our economy, as both noble Lords noted. In 2022, the sector achieved a turnover of £487 billion and employed over 3 million individuals, representing about 8% of the UK workforce. Its contributions are therefore fundamental in driving economic growth, fostering innovation and advancing development throughout the nation.

However, the sector is also characterised by considerable fragmentation. There are over 444,000 businesses engaged in a broad spectrum of work, ranging from contracting and product supply to associated professional services. The fragmentation is compounded by complex, multi-tiered supply chains, as major projects often involve 50 or more firms working collaboratively.

This brings us to the topic of retention sums, which are a long-standing practice in the construction sector. Retention—as it is still called for now—sums serve as a financial safeguard and ensure that work meets the required standards. Typically, half of the retention is released upon project completion while the remaining portion is withheld until the expiration of the defect’s liability period, proving additional assurance that all specifications are met. That, at least, is the dictionary definition of retention.

Given the current practices within the sector, we need to focus on the amendment introduced by these regulations. They all come into force on 1 March 2025 and apply to the financial year starting on or after 1 April 2025. The changes impose specific reporting requirements for qualifying companies and limited liability partnerships operating within the sector. The amendment extends existing reporting regulations and requires qualifying companies to disclose detailed information about their payment practices, policies and performance in relation to retention clauses in construction contracts.

Companies will be required to report on whether retention clauses are included in their contracts, the percentage of retention withheld and the procedures followed for releasing these sums. Additionally, businesses will be asked to disclose the contract value thresholds under which no retention clause applies and outline the standard rate of retention typically applied in their agreements. By 1 March 2025, qualifying businesses will be obliged to publicly report on their payment practices, specifically concerning retention clauses in construction contracts.

It is important that this amendment acknowledges the significant challenges caused by fragmentation within the construction sector, which of course affects businesses of all sizes. We understand that the aim of these regulations, as the Minister noted, is to enhance transparency by requiring businesses to report not only the inclusion of retention clauses but whether their retention practices align with industry standards or are more onerous than typical practices. Furthermore, companies will be required to provide clear descriptions of the processes that they follow to release retention sums, which is intended to ensure greater clarity and fairness for all parties involved. However, there are several important points on which further clarification is needed.

These amendments are said to provide increased transparency, fairness and clarity within the construction sector, but can the Government explain the mechanisms by which the regulations themselves will be enforced? How will compliance be monitored and what penalties will be applied to businesses found to be in breach of the new requirements? Additionally, while the new regulations seek to promote fairer payment practices, can the Government elaborate on how they plan to ensure that large companies are not able to exploit their market position, despite the new transparency measures? Will there be any safeguards in place to prevent larger firms imposing even more burdensome retention clauses on SMEs?

The regulations are presented as a solution to the ongoing issue of delayed payments, which have long caused a financial strain on SMEs, yet how will the Government measure the effectiveness of these changes? What evidence is there to suggest that requiring businesses to disclose their retention practices will have a significant impact on the cash-flow issues faced by smaller companies? As an aside, the noble Lord, Lord Fox, has raised an important point about how we will judge these companies in future, based on these particular metrics. These are not, of course, the only things by which one should judge a company or its potential to complete a project successfully and efficiently, so will there be some way of measuring that as well? If that has not been considered, it is something that should be.

While these measures are presented as steps towards promoting better cash-flow management and financial security for smaller businesses, we would urge the Government to further clarify how the regulations will be implemented and monitored to ensure that they achieve their intended outcomes. Will there be a review process to assess whether these regulations are having the desired effect on industry practices and the broader economy?

[Baroness Gustafsson (Lab)]

My Lords, I am grateful for the support for these regulations from across the Committee. I thank the noble Lords and noble Baronesses present for their constructive comments on this measure. Allow me to try to address each of the questions that they asked in order.

First, we heard from the noble Lord, Lord Aberdare. He asked a number of questions, the first of which was: have the previous regulations come into effect yet? The answer is yes; they came into effect and required a report as of 1 January 2025.

The noble Lord’s second question was about how the regulations will be enforced and how the accuracy of the data will be monitored. For that, the Department for Business and Trade will implement a more visible compliance and enforcement approach with non-compliant businesses going forward. Businesses that do not take action to meet their reporting obligations will be prosecuted.

We had a question, supported by the noble Baroness, Lady Neville-Rolfe, about why we would not just abolish retention payments altogether—that is, why are we taking this measure forward and not abolishing it in its entirety? The Government are aware of the impact that retentions have on the supply chain. We are very committed to going further to tackle poor payment practices: in September 2024, we announced our plans to consult on new legislative measures. Now, as part of that consultation, we intend to consult on measures that will address poor payment practices.

Moving on, I refer to the questions asked by the noble Lord, Lord Fox: does defining retention create a potential loophole for companies? Will they suddenly be redefined as completion bonuses? This is one of the arguments in favour of taking this sort of measured, proportionate approach, because we will be able to identify any unintended consequences of some of this legislation, but a key aspect of addressing the naming convention is that it is very clearly defined in a schedule not by what it is called but by the behaviours that it exhibits. Of course, we will monitor this and make sure that, if it requires an update, we will do so accordingly.

The noble Lord, Lord Sharpe, asked what the penalties are for failure to comply. The penalty for a breach of the 2017 regulations is an unlimited fine where a company fails to report or makes a false report.

Lastly, the noble Lord, Lord Fox, asked about sanctions, whistleblowing and the imbalance of power in the supply chain. I say in response that the imbalance of power in the construction supply chain is an ongoing challenge; that is widely understood and acknowledged. However, through the introduction of payment reporting measures for retentions and the enforcement of them, we will be able to create an incentive for firms to improve their payment practices in relation to retentions, as has happened following the introduction of the payment reporting regulations. As I talked about in my introduction to this instrument, we have seen the number of businesses paying within 60 days improve from 82% to 96%, so we should be encouraged that we are supporting correct behaviours with regard to policy.

This Government are committed to making sure that we tackle late and long payments. We want the UK to be the best place in the world for both large and small businesses to thrive. This work on retention payments aligns closely with the department’s wider policy on late payments and will strengthen the existing payment reporting regulations. It will provide for enhanced transparency in relation to the practice of withholding retentions—a practice that, as we have heard, is all too often unfair to small businesses and can, of course, be subject to abuse. It will also provide information to small firms and the construction supply chain about the policies and performance of firms that they are considering working for, enabling them to make better-informed decisions and to secure the payment of moneys due.

[Lord Fox (LD)]

Before the Minister sits down, I asked a very specific question around public procurement. I ask it again: if I am a public procurer and two bidders are more or less the same—or exactly the same—in their bid, but one of them has late payment, am I legally allowed to use late payment as the reason for not accepting that bid? Secondly, developing that question, if the late payer has the cheapest bid, can I also use late payment and retention payments as a reason for not awarding to that bid?

[Baroness Gustafsson (Lab)]

I apologise for not addressing that specifically. My understanding is that this information will help support a party in a commercial negotiation and will, ultimately, form part of its decision-making. As regards the technicality of whether one could legally use that as a way in or out of a contract, I will make sure that we write to the noble Lord on the specifics of that.

[Lord Fox (LD)]

It is really important because we are seeing, not necessarily under the Procurement Act but under the NHS, major legal tussles over the misapplication of the assumed rules of contract awards—not least in clinical waste disposal, where another six or seven health authorities are being taken to court. This is expensive; it will cost the public and the Exchequer. So it is important that we and public procurers understand from the outset whether this is window dressing or material to the procurement process.

[Baroness Gustafsson (Lab)]

I acknowledge that. I agree wholeheartedly with the noble Lord about the importance of getting that clarification; we will be sure to write to him in that regard.

Public Finances: Borrowing Costs

Lord Fox Excerpts

Thursday 9th January 2025 Lords Chamber

[Lord Livermore (Lab)]

I am happy to say to the noble Lord that the Government are absolutely committed to working in partnership with business to grow the economy and to doing what is required to do so. As he knows, the Government are committed to economic and fiscal stability. We have put in place those robust fiscal rules, and there is a significant fiscal consolidation during the course of this Parliament, taking borrowing as a share of GDP from 4.5% to 2.1%. If achieved, this would be the biggest current budget surplus in over 20 years.

[Lord Fox (LD)]

My Lords, the growth of which the Minister speaks will need investment and, given the state of the public finances, a significant proportion of that investment has to come from the private sector. In my experience, that sort of investment requires not just a realistic analysis of the present but a persuasive picture of the future. The Minister has rehearsed the analysis of the present, but does he agree that the Government have to step up and better articulate their vision of the future in order to attract the investment that this country so desperately needs?

[Lord Livermore (Lab)]

I agree with a lot of what the noble Lord says. He and I are both strong supporters of an industrial strategy. The Government’s new modern industrial strategy is a core component of what the noble Lord is asking for. We are introducing a new industrial strategy that will give the private sector the guidance it requires about the sectors that we would like to see investment coming into. We are doing planning reform, which is one of the biggest reforms that we can possibly do to unlock new levels of private sector investment in the economy. We are doing pension reform, which the Chancellor set out in her Mansion House speech. We are doing skills reform—another key component of unlocking investment in our economy. All those things will significantly boost growth in our economy, but none of them is yet included in the OBR’s forecast.

Economic Productivity

Lord Fox Excerpts

Thursday 5th December 2024 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to my noble friend for his support for the policies we have announced for small businesses. He is absolutely right that we protected small businesses in the recent Budget. SMEs are, of course, an essential part of a growing economy. We set out clear plans for small businesses in our manifesto and we will deliver on those in the coming months.

[Lord Fox (LD)]

My Lords, the Minister was right to mention skills being central to bringing productivity up. Both our parties had large chapters on skills in our manifestos and, since coming into office, the Government have announced initiatives, consultations and suchlike. Will the Minister tell your Lordships’ House when the first cadre of employees who have benefited from any of the skills measures that the Government intend to bring in will reach the workplace?

[Lord Livermore (Lab)]

The noble Lord is correct to say that both parties are absolutely aligned on the importance of skills reform, which is why we have announced Skills England. We will be increasing the number of people in training and they will enter the workforce as soon as they graduate.

Exports to the European Union

Lord Fox Excerpts

Wednesday 20th November 2024 Lords Chamber

[Lord Livermore (Lab)]

In the recent Mansion House speech, the Chancellor said that we will always stand up for

“free and open trade, especially with our most economically important partners. That includes the United States”,

obviously—it is one of our most important destinations for financial services trade, for example—and that there is great

“potential for us to deepen our economic relationship on areas such as emerging technologies”.

[Lord Fox (LD)]

My Lords, renewing—or rekindling—the relationship with Europe is very important. Does the Minister agree that one of the ways to make that harder is for UK product regulation to diverge from EU product regulation? Can the Minister confirm that we will work hard on the Product Regulation and Metrology Bill to make sure that we have an avenue to stay close to that EU market?

[Lord Livermore (Lab)]

I agree with much of what the noble Lord says and agree wholeheartedly with the sentiment behind his question.

Autumn Budget 2024

Lord Fox Excerpts

Monday 11th November 2024 Lords Chamber

[Lord Fox (LD)]

My Lords, it is a great pleasure to speak in this debate and to welcome the noble Lord, Lord Booth-Smith, to his place and the noble Baroness, Lady Penn, back to her place.

The noble Lord, Lord Johnson, is taking his new job as party co-chairman very seriously. Clearly, to entertain his troops, he has turned up the rhetoric to 11. However, for all the huff and puff we have just heard, His Majesty’s loyal Opposition have no moral authority to criticise those who are picking up the mess they left. The parlous state of the economy, the near collapse of public services and the sheer level of financial mismanagement that we saw from the former Government was a disgrace.

One of the benefits of your Lordships getting to debate this Budget somewhat after it was released is that its effect is starting to crystalise, and I suspect that the Minister may be disappointed by the way it has been received. Then again, as he is a seasoned Treasury hand, I would ask him whether he was surprised by the reception the Budget got. OBR data and that of countless other analysts shows that UK households, which are still struggling to absorb the shocks from the pandemic, inflation and the energy crisis, will now be hit by the tax increases in this Budget, one way or another. Meanwhile CPI inflation is expected to rise above previous expectations and interest rate cuts will probably slow. So it cannot really be a surprise that the Chancellor failed to inspire a mood of national cheer.

Nevertheless, we are glad that the Chancellor listened to Liberal Democrat calls for more investment in the NHS in order to start repairing the damage done by the Conservatives. We will now hold the Government to account on delivering their promises, so that people can, for example, see a GP or dentist when they need to. However, we must ensure that this money is not used to paper over the cracks. Structural reform is needed, but more than that, the Government are still ignoring the elephant in the room: the social care crisis. In fact, it is likely that they are making the situation worse, because the employer national insurance increase will hit social and primary care.

Thousands of private care providers are now facing increased costs, forcing them to reduce services and increase charges or even pushing them into collapse. GPs, who are already stretched, will also be hit by this tax change. GPs and social care providers cannot afford these tax rises and you cannot fix the NHS without fixing primary and social care. We urge the Government immediately to sort out the challenges facing these health providers. They must also start cross-party talks on the long-term future of social care and get on with reforming it.

Having boxed themselves in during the election from using big tax opportunities, the Chancellor could have done what we campaigned for: reverse Tory tax cuts in the bank tax, implement an increased tax on betting companies and levy the digital giants. Instead, the Chancellor turned to business to raise a spectacular amount of tax. As a result, the UK tax take is set to rise to a historic high. This was a tough Budget for employers to swallow, particularly small and medium businesses, social enterprises and charities.

SMEs have had a tough time for years, struggling with rising energy prices, Covid loans, high interest rates and rocketing input costs. They were hammered by the previous Conservative Government, who broke their promise to reform business rates and tangled them up in red tape. Given their importance to our economy, it is wrong to hit them like this. The burden of this Budget should fall on the likes of big banks, social media giants, gambling companies and oil and gas firms—not small businesses.

Added to increased NIC costs, the living wage increases will have a big effect. Leaders in the hospitality and retail sectors told the Business Secretary that the tax bill for employing a part-time worker had increased by 73% as a result of lowering the threshold for national insurance contributions. This sort of rise cannot be absorbed in these low-margin sectors. Then there are the changes in agricultural and business property relief. Your Lordships will likely hear today—and already have—how these changes threaten the generational chain of family farm ownership. I add my voice to that. As someone from Herefordshire, I know the effect this is already having on rural communities.

Less publicised is the possible plight facing family businesses. Will the Minister say how these businesses will be valued when they are taxed? How does the introduction of this liability encourage family firm entrepreneurs to grow their business? I note that these changes raise little more than £500 million overall. Given the individual anguish they are already causing in our communities and the political trouble they are causing him, I wonder whether the Minister would rather have increased the betting tax instead.

With all this, the Chancellor looked to sweeten the pill. The Minister set out those measures very well. The message is that, in return for the pain, there will be progress: an industrial strategy, infrastructure investment, including accelerating the drive to net zero, and investment in people and skills. These Benches say “bravo” to that, and I congratulate the Chancellor on continuing the industrial strategy put in place by Vince Cable on and investing in key sectors. Capital-intensive sectors have also welcomed the commitment to long-term political stability, be it through the corporation tax road map or the full expensing regime, but what new ideas can we expect?

On infrastructure and net zero, it is all about delivery. The startling thing about the Chancellor’s projections is the very low level of growth over the next five years: 2% or less is not a good return on the investment the Government say they will make. It should also be noted that this Budget is very front end-loaded. The money going into public services in years four and five dwindles spectacularly. The Government are hoping that actual growth will increase beyond current projections to bail out those last two years. That requires delivery.

We want this Budget to succeed. The list that the Minister just rattled off was full of important things that this country needs, but we have no time to waste. We will be strong on chasing delivery. I for one worry whether the UK has the capacity to absorb investment on the scale the Government intend, not least because they are moving slowly on the skills sector. The Minister mentioned Skills England, but when will any results of that start to affect how investment is delivered? Where is the workforce going to come from to deliver the growth we need, and how will investment be delivered?

We await the Government’s 10-year infrastructure strategy. What will the vision be for infrastructure investment? How will projects be prioritised? Can the Minister please clarify how the new national infrastructure and service transformation authority will improve delivery, and when will we see all of this?

Of course, there is a golden opportunity to boost growth. If the Government are serious about growth, they have to materially fix our relationship with the EU. That means beginning the work that will set us forward towards future membership of the single market.

In summary, burdening small businesses, GPs and small care providers with a jobs tax is wrong. Small businesses have had a very tough time for years and countless small care providers are on the brink. Making things even harder for their workers is not right.

Family farms have experienced one shock after another in recent years, from spiralling energy, fertiliser and feed prices to the Conservatives’ terrible trade deals. This Government should not have dealt them another blow, especially when they are making real-terms cuts to the Defra budget. We will be standing up for family farms.

We are also calling on the Government to exempt social care providers and GPs from the employers’ national insurance tax rise, and we will continue to speak up for those struggling with the cost of living crisis, holding the Government to account on their decisions to cut the winter fuel payment and to increase bus fares. I look forward to hearing from your Lordships in the debate.

--- Later in debate ---

[The Earl of Clancarty (CB)]

My Lords, I, too, congratulate the noble Lord, Lord Booth-Smith, on his excellent maiden speech. I will speak on the arts and creative industries. I thank the Campaign for the Arts and the Authors’ Licensing and Collecting Society for their briefings. There is, of course, a one-hour debate on the effect of the Budget on this sector on Thursday, but this area is certainly important enough that both the Treasury and the DCMS should be addressed on the concerns that this sector has, not least because the Budget is a mixed bag for the arts and creative industries. Perhaps worse than that, the areas where funding is most urgently needed after so many years of underfunding have not been addressed and indeed could go backwards, which is disappointing for a Government who say they will support the arts.

There is good news, hopefully, for the national museums and galleries, but questions remain: how much additional funding will be made available and when will this happen? Will the Government further help other struggling arts and cultural organisations— the plight of Welsh National Opera immediately springs to mind—through the Arts Council and other funding bodies? I thank the Government for listening to concerns about VAT on specialist performing arts schools and confirming that courses covering the Music and Dance Scheme and the Dance and Drama Awards scheme will not attract VAT. I think that will be music to the ears of the noble Lord, Lord Berkeley.

[Lord Fox (LD)]

Literally.

[The Earl of Clancarty (CB)]

Literally—yes, indeed. However, as the Campaign for the Arts says:

“Realising the full ambition and potential of”


Labour’s growth plan, including for the creative industries,

“will take a level of resourcing and commitment beyond that which we have seen at this Budget”.

Starting with the noble Lord, Lord Fox, earlier in this debate, we have had numerous references to concerns about the survival of SMEs. Will the Government promise to keep an eye on, or even formally assess, the effects of their measures on SMEs? This is hugely important for the creative industries after being hit so hard by both Brexit and Covid.

The director of the Museums Association, Sharon Heal, said that

“the urgent needs of local and regional museums and galleries have not been addressed in this budget”,

and the Minister should be aware that the situation for civic museums is sufficiently urgent that a programme of emergency funding was asked for before the Budget. Birmingham Museums Trust said that

“this budget leaves us worse off and we are already in a dire financial situation in Birmingham”.

Similar arguments can be made about our libraries across the country, as the noble Lord, Lord Shipley, referred to, and I agree with everything that the noble Lord, Lord Whitty, said about a new basis for local authority funding. For authors, there is disappointment that the public lending right has not been addressed, seeing that there has been no increase in PLR in the last 10 years. Our own £6 million fund pales in comparison to Germany’s £14 million annual pot. Will the Government increase the fund to ameliorate these significant discrepancies?

The Government intend to cancel levelling up culture projects affecting the International Slavery Museum, the National Railway Museum, V&A Dundee and Venue Cymru. Why do the Government not consider these investments to be sufficiently, in their own words, “focused on the growth mission”? Have they assessed the impact of cancelling these investments?

The reduction in business rates relief will adversely affect the arts. The Music Venue Trust has calculated that this reduction will place an additional £7 million burden on 350 grass-roots music venues, put at risk more than 12,000 jobs and cost more than £250 million in economic activity. I understand there will be a consultation on business rates reform in 2026, but this will not help the hundreds of already struggling music venues that will undoubtedly be lost unless the Government rethink their decision or intervene with a ticket levy on big arena gigs that can help the small venues. While of course it is good news that the arts tax reliefs remain unchanged, it is disappointing that this has not been extended to choirs. Will the Government look again at this?

Finally, Creative Europe was a huge help to our arts and culture, yet we have never had any proper replacement for that funding; indeed, we ought to rejoin Creative Europe, which the rules allow us to do. On top of that, we now hear that the UK shared prosperity fund is to be reduced and phased out. Have the Government assessed the impact of this? Why is it happening before reforms have been completed?

--- Later in debate ---

[Lord Livermore (Lab)]

My Lords, it is a privilege to close today’s debate on the Budget. I am grateful to all 75 noble Lords for their insights, differing perspectives and expertise. I join others in congratulating the noble Lord, Lord Booth-Smith, on his excellent maiden speech, bringing his valuable first-hand experience of government and policy-making to your Lordships’ House. I look forward to his further contributions in debates such as this.

This was a Budget to fix the foundations; to restore stability by repairing the public finances; to rebuild our public services after years of neglect; to choose investment, rather than decline; and to keep our promises to working people. It was a Budget notable in scale, but commensurate with the challenging inheritance that we faced.

The noble Lord, Lord Johnson of Lainston, in his opening speech for the Opposition, began by denying the need to rebuild the public finances and the need to restore stability to our economy. He failed yet again to say sorry for the past 14 years, in particular for the disastrous Liz Truss mini-Budget. What he went on to defend was, in itself, very revealing. He defended second homes being bought up by foreign owners, pushing up prices for first-time buyers. He opposed reintroducing a reduced rate of inheritance tax above £3 million. He opposed VAT on private school fees, cutting £1.7 billion from state schools. He defended tax-relief pensions being used not as a retirement vehicle but as a tax-planning tool. It was very clear where the party opposite’s priorities lie, and the choices that it would make, and they would certainly not be for working people or public services.

Several noble Lords spoke in positive terms about this Government’s economic inheritance, including the noble Lord, Lord Lamont of Lerwick, and the noble Baronesses, Lady Finn and Lady Lea of Lymm. The reality is that, over the past 14 years, the UK’s economic performance was poor, as my noble friends Lord Hannett of Everton and Lord Bach, and the noble Baronesses, Lady Wheatcroft and Lady Kramer, said. Had the UK economy grown at the average rate of other OECD economies, our economy would have been £171 billion larger. Inflation peaked under the previous Government at 11.1%, as my noble friend Lady Crawley said, and was above target for 33 months in a row. It was the worst Parliament for living standards ever recorded. The UK was the only country in the G7 to have a lower employment rate and a higher inactivity rate than before Covid. As my noble friend Lord Eatwell said, public services were pushed to breaking point, with sewage in our rivers and our schools literally crumbling.

Some noble Lords focused on this Government’s fiscal inheritance and the £22 billion black hole, including the noble Lord, Lord Johnson of Lainston, who seemed to be confused by the fact that the numbers went up over time. It was mentioned also by the noble Lord, Lord Lamont of Lerwick, and the noble Baronesses, Lady Finn and Lady Lea of Lymm. The Treasury has provided to the OBR a line-by-line breakdown of the previous Government’s unfunded commitments—260 separate pressures. Noble Lords need not just listen to the OBR and the Treasury; they need look only at the outturn data. Central government current expenditure published by the ONS shows that, for the six months since March, the outturn is £11.8 billion higher than forecast. That is £11.8 billion over six months, well on course for £22 billion over the year.

This Government’s number one commitment is to economic and fiscal stability. That is why we support the fiscal framework, the OBR and the independence of the Bank of England, which the noble Lord, Lord Altrincham asked about. It is also why we have established robust fiscal rules, which put the public finances on a sustainable path while allowing a step change in investment to drive long-term growth. The stability rule brings the current Budget into balance so that we do not borrow to fund day-to-day spending, as my noble friends Lady Crawley and Lord Murphy of Torfaen said.

The noble Baroness, Lady Penn, mentioned borrowing. Borrowing as a share of GDP falls over this Parliament, from 4.5% to 2.1%, as we achieve the biggest current Budget surplus in over 20 years. Over the past 14 years, borrowing averaged 5.6% of GDP. Over this Parliament, it will average 2.6% of GDP. However, while being tough on spending, we must create the space for investment.

As the IMF has said, more public investment is badly needed in the UK, so the investment rule, as set out in our manifesto—despite the claim made by the noble Lords, Lord Lamont and Lord Bridges of Headley—will target debt falling as a share of the economy. It will be defined as net financial debt. I am grateful to the noble Lord, Lord O’Neill of Gatley, for his welcome of this move. He stressed the need for the guard-rails we have set out and the importance of what this investment is spent on. I am grateful, too, for the support of my noble friends Lord Liddle and Lord Chandos, the noble Lord, Lord Young of Cookham, and the noble Baroness, Lady Wheatcroft. As my noble friend Lady O’Grady of Upper Holloway pointed out, the previous Government planned to cut public investment, a recipe for continued decline.

To address the points made by the noble Lord, Lord Johnson of Lainston, and the noble Baroness, Lady Penn, these rules are actually tougher than those of the previous Government. To stop fiscal commitments being endlessly deferred for five years, this is the last year when the fiscal rules will target the fifth and final year of the forecast. The rules must be met by 2029-30 at this Budget, and until 2029-30 becomes the third year of the forecast, at which point both rules will target the third year of the rolling forecast period. This is a much tougher constraint than the previous Government’s borrowing rule: to borrow up to 3% of GDP by the fifth year of the forecast.

To repair our public finances and rebuild our public services, the Budget raised taxes by £40 billion. It was therefore a very significant Budget, as the noble Baroness, Lady Penn, set out. It was, though, commensurate with the challenges that we faced. The noble Lord, Lord Lamont of Lerwick, described it as bold; it was of course the most fiscally significant Budget since his Spring Budget of 1993. The Budget meant taking difficult decisions, to address the point made by the noble Lords, Lord Burns and Lord Lamont. As a result of those decisions, we have now wiped the slate clean, meaning that we never have to do a Budget like this again. We have set tough fiscal rules, which we meet two years early, and set the envelope for the second phase of the spending review, which we will stick to.

The noble Lord, Lord Johnson of Lainston, helpfully quoted our manifesto, as mentioned also by the noble Baroness, Lady Penn. Let me be clear: this Budget keeps every single manifesto commitment we made to working people—to not increase their income tax, their national insurance or VAT. We went further by freezing fuel duty, on which I disagree with the noble Lords, Lord Londesborough and Lord Young of Cookham, and my noble friend Lord Whitty, who said that it should have been raised during a time of cost of living pressures. I also disagree with the noble Lord, Lord Londesborough, who said that we should have increased employees’ national insurance.

The choice made by the previous Government was to freeze income tax thresholds, costing working people nearly £30 billion. We could have extended that freeze but instead, from 2028-29, personal tax thresholds will be uprated in line with inflation once again. The noble Lord, Lord Sherbourne of Didsbury, mentioned how many more people had been pulled into tax.

This Budget does, though, involve some very tough decisions. Several noble Lords, including the noble Lords, Lord Burns, Lord Bilimoria, Lord Londesborough, Lord Oates, Lord Shipley, Lord Gadhia, Lord Razzall and Lord Northbrook, and the noble Baronesses, Lady Wheatcroft and Lady Penn, focused on the increase in employers’ national insurance contributions by 1.2 percentage points to 15% from April 2025. We of course recognise that this involves asking businesses to contribute more. We have acknowledged that the impacts of this measure will be felt beyond businesses too, as set out by the OBR.

The noble Lords, Lord Fox and Lord Northbrook, the noble Earl, Lord Devon, and the noble Baroness, Lady Kramer, mentioned small businesses and their importance to the economy. We are protecting the smallest companies by increasing the employment allowance from £5,000 to £10,500, meaning that 865,000 employers will not pay any national insurance at all, and that more than 1 million employers will now pay the same or less than they did before. The Federation of Small Businesses said in its Budget response:

“Against a challenging backdrop, today’s Budget shows a clear direction in business policy now for the whole of this Parliament to target support at small businesses … prioritising everyday entrepreneurs working in local communities in all parts of the country”.


Some noble Lords raised the issue of compensation, including the noble Lord, Lord Fox, and the noble Baronesses, Lady Tyler of Enfield and Lady Kramer. The Government have chosen to compensate the public sector with £5.1 billion to ensure there is sufficient funding to support our vital public services, including the NHS. We will work with departments to ensure that the funding set aside is allocated appropriately. The Department of Health will confirm funding for GPs for 2025-26 as part of the usual GP contract process later in the year, including through consultation with the sector. The spending review includes an investment of £100 million. The Government also provided a significant funding top-up to local government, which can be used for pressures including adult social care.

The Government of course recognise the need to protect the smallest charities. Like any other eligible business, they will benefit from the significant changes to the employment allowance, which mean more than half of businesses with NICs liabilities either gain or see no change next year. Charities will still be able to claim employer NICs reliefs, including those for under 21s and under 25 apprentices, where eligible.

The noble Lord, Lord Dobbs, asked about the impact on employment. Following the Budget, the Bank of England now expects that rather than unemployment increasing, as it had previously forecast, unemployment will now fall. According to the OBR, employment will grow over the forecast period by 1.2 million.

The noble Lord, Lord Bilimoria, and the noble Baroness, Lady Penn, asked about the impact on living standards. The last Parliament saw living standards stagnate and was the worst Parliament for living standards ever recorded. The OBR forecast shows that real household disposable income will increase by an average of 0.5% in real terms each year. That is a world away from the stagnating living standards we saw under the last Government, and in the context of a Budget where we had to take some very difficult decisions to clean up the mess that we inherited.

Many noble Lords focused their contributions on economic growth. As several noble Lords mentioned, there was no bigger failure of the previous Government than their failure on growth. My noble friend Lord Whitty and the noble Lord, Lord Skidelsky, mentioned their austerity, their Brexit deal—which permanently reduced growth by 4%—and their disastrous mini-Budget, which, as my noble friend Lady Liddell rightly said, crashed the economy.

My noble friend Lord Liddle, the noble Lords, Lord Fox, Lord Razzall and Lord Shipley, and the noble Baroness, Lady Kramer, were right to reinforce the importance of this Government’s European reset to address the trade barriers that businesses now face.

When last week the Bank of England cut interest rates, it forecast that the Budget would add 0.75% to growth next year. Over the course of this Parliament, the OBR says growth is largely unchanged. The noble Lord, Lord Johnson of Lainston, said this Budget did nothing for growth, but over the longer term the OBR says that this Budget will permanently increase GDP by 1.4% due to the investment that his party is opposing. The noble Lord, Lord Lamont, also opposed that investment but called for more growth.

As the noble Lords, Lord Burns and Lord Young of Cookham, and my noble friend Lord Liddle said, we need to go further and we need to go faster. That is why economic growth remains this Government’s central mission.

The noble Baroness, Lady Neville-Rolfe, rightly focused on GDP per head and productivity. She raised an interesting suggestion which I will happily look at.

The noble Lord, Lord Bridges of Headley, mentioned debt. The OBR shows that the best way to make debt sustainable is to increase productivity.

As my noble friend Lord Eatwell set out, long-term reforms are vital. We have set out extensive planning reforms, a new national wealth fund and a modern industrial strategy, and created Skills England. I totally agree with my noble friends Lord Liddle and Lord Monks on skills and that we must go further.

We will shortly publish the “Get Britain Working” White Paper to tackle inactivity, and the Chancellor will set out pension reforms—which the noble Lord, Lord Howell of Guildford, asked about, and the noble Lord, Lord Gadhia, commented on—in her Mansion House speech later this week. All of these things will significantly boost growth, and none of them, as the noble Lord, Lord Gadhia, observed, are yet included in the OBR’s forecast.

The right reverend Prelate the Bishop of Newcastle and my noble friend Lord Sahota spoke about the importance of regional growth. In the Budget we set out the first steps in our approach to spreading growth across the country through devolution, investment and reform. We gave mayors greater control of their budgets by announcing the first integrated settlements for the West Midlands and Greater Manchester from 2025-26. We invested in major railway projects, and we confirmed funding for investment zones and freeports.

The noble Lords, Lord Fox, Lord Gadhia and Lord Forsyth, spoke about inflation and interest rates. The OBR is forecasting that inflation and interest rates will fall over the course of this Parliament. That is very different from the previous Parliament, when inflation peaked at 11.1% and was above target for 33 consecutive months, and when mortgages rose by an average of £300 a month following the Liz Truss mini-Budget.

My noble friend Lord Bradley spoke about the importance of growth to investment, and I agree with the points that he made. As several noble Lords set out, including the noble Lord, Lord Bilimoria, and the noble Baronesses, Lady Finn and Lady Moyo, private investment is a vital part of addressing the growth challenge. That is why this Budget delivers stability by putting on a sustainable path the public finances, which are an essential foundation for growth and investment. To ensure certainty, in the Budget we published a Corporate Tax Roadmap, which confirms our commitment to cap the rate of corporation tax at 25%, the lowest in the G7.

The noble Lord, Lord Londesborough, asked about enterprise. We have extended the enterprise investment and venture capital trust schemes until 2035. We have also taken action on late payments and non-financial reporting burdens. As my noble friend Lady Liddell said, at the recent international investment summit we saw over £60 billion of new investment creating nearly 40,000 new jobs.

I was surprised that the noble Lord, Lord Fox, spoke against the increase in the national living wage.

[Lord Fox (LD)]

I did not speak against the rise in the living wage. If the Minister goes through Hansard, he will find that to be the case.

[Lord Livermore (Lab)]

I will check, but it did sound very much like it to me.

The noble Baroness, Lady Neville-Rolfe, spoke against the plan to make work pay. But, as my noble friends Lady O’Grady of Upper Holloway, Lord Monks and Lord Hallett of Everton pointed out, there is now a wealth of evidence that greater in-work security, better pay, more skills and more autonomy in the workplace have substantial economic benefits. A more secure and productive workforce is good for business and good for working people, because each depends on the success of the other.

Many noble Lords focused on some of the other tax measures contained in the Budget. The noble Lord, Lord Londesborough, asked about stamp duty, which was also mentioned by the noble Lord, Lord Elliott of Mickle Fell. We are reforming stamp duty land tax so that those who buy second homes pay two percentage points more than before. This will support an estimated 130,000 additional people to buy their first home.

Many noble Lords mentioned agricultural property relief. They included the noble Lords, Lord Fox, Lord Forsyth, Lord Bilimoria, Lord Dobbs, Lord de Clifford, Lord Young of Cookham, Lord Empey, Lord Berkeley of Knighton, Lord Northbrook and Lord Shipley, the noble Earl, Lord Devon, the noble Duke, the Duke of Wellington, the noble Baronesses, Lady Mallalieu and Lady Humphreys, and the right reverend Prelate the Bishop of Newcastle. In terms of inheritance tax, currently the largest estates pay a lower effective tax rate than smaller estates. That cannot be right, so we are reforming agricultural property relief and business property relief to reduce this unfairness, while protecting small family farms. Almost three-quarters of estates claiming the relief will be unaffected. It is expected to affect around 500 claims next year.

We should be clear that agricultural property relief is given on top of the normal inheritance tax thresholds. Individuals can pass up to £500,000 to a direct descendant, and then agricultural property relief will provide another £1 million tax-free allowance. This means a couple can pass up to £3 million tax free. Above that, there is a 50% discount on inheritance tax, so it is a rate of only 20% and any liability can be paid in 10 yearly instalments which, to answer the noble Earl, Lord Devon, will be interest free.

The noble Lord, Lord Fox, asked about valuing property for business property relief. There is an established process for valuing business property, which will continue to apply.

On inheritance tax on pensions, the noble Lord, Lord Johnson of Lainston, seemed unsure whether pensions are a savings vehicle or a tax planning vehicle. The fact is, as my noble friend Lord Davies of Brixton said, that these reforms remove distortions resulting from pensions tax policy over the past decade, which have led to pensions being openly used and marketed as a tax planning vehicle to transfer wealth rather than to fund retirement.

Several noble Lords raised the issue of VAT on private schools, including the noble Lords, Lord Johnson of Lainston, Lord Forsyth, Lord Berkeley of Knighton, Lord Moynihan of Chelsea, Lord Lexden and Lord Borwick. This raises £1.7 billion a year—money to benefit the 94% of pupils who attend state schools. The new leader of the Opposition has that said she will reverse this measure, so she will of course need to say where her cuts to state schools will fall. The impact assessment, published alongside the Budget, shows that 35,000 pupils will move to state schools—less than 0.5% of the state school population and lower than previous estimates had suggested.

The noble Lord, Lord Shinkwin, asked about children with special educational needs. Children with the most acute needs, whose places in a private school have been deemed necessary by local authorities, are protected from the VAT impacts because local authorities can reclaim VAT. To improve outcomes for the most vulnerable children and to ensure that the system is financially sustainable, the Budget provided a £1 billion uplift in funding for special educational needs—a 6% real-terms increase.

The difficult decisions this Budget takes are for a purpose—not just to repair our public finances but to rebuild our public services, as my noble friend Lord Bach observed. I happily join my noble friend Lady Thornton in welcoming the work of the Women’s Budget Group.

We have set the envelope for the second phase of the spending review, which we will stick to. That will involve some tough choices on spending. Several noble Lords asked about reform, including the noble Baronesses, Lady Finn and Lady Neville-Rolfe, and the noble Lord, Lord Young of Cookham. Our reform agenda will be central to improving services going forward, including our 2% efficiency target for all government departments.

My noble friend Lady Ramsey of Wall Heath set out the increased funding that the Budget provides to the NHS. The noble Baroness, Lady Tyler of Enfield, asked what the NHS funding pays for—it is for 40,000 more appointments a week, £1.5 billion for new diagnostic scanners and new surgical hubs, and an expansion of mental health support, to name just a few. I think I heard the noble Baroness saying that more should be spent while opposing the increase in employer national insurance contributions that pays for it.

As the noble Baroness, Lady Lea of Lymm, observed, and the noble Baroness, Lady Penn, mentioned, the situation we inherited from the previous Government—the only major economy where inactivity has not returned to pre-pandemic levels—is completely unacceptable. We will publish a White Paper to get Britain working; my noble friend Lord Davies of Brixton asked for a date, and I tell him that it will be later this month. Next year, we will publish a White Paper on sickness benefit reform.

The noble Lord, Lord Desai, spoke about the importance of the welfare state. My noble friends Lady Lister of Burtersett and Lady Wilcox of Newport mentioned that we provided £1 billion to extend the household support fund and discretionary housing payments to help those facing financial hardship with the cost of essentials. We have reduced the level of debt repayments that can be taken from a household’s universal credit payment each month, meaning that 1.2 million of the poorest households will keep more of their award each month, lifting children out of poverty.

As my noble friends Lord McConnell, Lady Liddell, Lady Wilcox of Newport and Lord Murphy of Torfaen said, we are providing funding to support public services and drive growth across Scotland, Wales and Northern Ireland, with the largest real-terms funding since devolution.

My noble friend Lord McConnell and the noble Lord, Lord Oates, spoke about spending on overseas development assistance. ODA budgets have been set for the next two years to enable the UK to spend 0.5% of GNI. I reassure them that the Government remain committed to restoring development spending to 0.7% of GNI as soon as the fiscal circumstances allow.

My noble friend Lord McConnell also asked about the Integrated Security Fund. The ODA programme budget, including the Integrated Security Fund, will increase by 2025-26 to £9.2 million.

I am short of time, so I shall write to my noble friend Lady Warwick of Undercliffe about her housebuilding and social housing questions.

The difficult decisions that we made in this Budget, which have been debated here today, were made for a purpose—to repair the public finances, restore stability, rebuild our NHS, invest in the national interest and protect working people. It was, of course, possible to make different choices, to ignore the problems in our public finances, to not rebuild public services or invest in the fabric of our nation and to fail to protect working people. But we should remember that, at the last election, the country voted for change. As many of my noble friends have pointed out, the British people did not overwhelmingly reject the previous Government because they thought the choices they had made were the right ones. They gave this Government a mandate to fix the foundations of our economy and to deliver change. That is exactly the mandate that this Budget delivers on.

We have made our choices. They are the only responsible choices—to protect working people, restore stability and invest in Britain’s future.

Public Spending: Inheritance

Lord Fox Excerpts

Tuesday 30th July 2024 Lords Chamber

[Lord Fox (LD)]

My Lords, I want to follow up on my noble friend’s comments on the NHS and social care. All of us who were observing the hospital programme could see that it was foundering, costing money and not progressing, so yesterday’s announcement on its future was not surprising. However, the need for new NHS facilities and to upgrade and shore up the NHS estate remains. Communities may well have been sold a pup by the Conservatives, but their needs remain. What are the Government’s plans to pick up and deal with the legacy of a crumbling NHS estate?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his support for the announcements on the hospital building programme yesterday. As he knows, those plans were completely unfunded, behind schedule and overbudget. It is right that we have a full review of them. As I said to the noble Baroness, Lady Kramer, the coming spending review will prioritise the manifesto commitments that we made on public services, including the NHS. We will take forward our commitment to reform adult social care, as he mentioned, and will work towards building a consensus for the reforms needed to build a national care service.