Spring Forecast Statement

Lord Hintze Excerpts

Tuesday 17th March 2026 Lords Chamber

[Lord Hintze (Con)]

My Lords, let us examine the Chancellor’s Statement from a slightly different perspective. We are told that welfare spending will increase by roughly £18 billion. If I understand the figures correctly, that is approximately 0.63% of GDP. We need always to think about things relatively, and 0.63% of GDP is serious. I would be grateful if the Minister could confirm the precise number for the House.

We hear much from the Government about total GDP growth, which I suspect is political expedience, but total GDP, important though it is, does not tell us whether the people of this country are becoming more successful and resilient. For that, we must look at GDP per capita. If overall growth is 1.1% but population growth is 0.7%, then GDP per capita is rising only by 0.4%. That is the figure that matters for living standards and that is the figure that the current Government prefer not to dwell upon. If prosperity per person is rising by only 0.4% while welfare spending alone is increasing by something closer to 0.6% of GDP, then we are entitled to ask whether the country is moving forward at all or merely moving sideways. The House deserves a serious answer.

I ask the Minister now: why do the Government speak so often about the gross size of the economy yet say so little about the prosperity per head? Do they not accept that the true test of economic policy is whether living standards are rising? Are we, in fact, entering a transfer economy or a growth economy—an economy that supports all or supports the few? If we are entering a transfer economy then we will simply fail in the long term, as many socialist economies have failed previously. If we fail, we will hurt the poor, the vulnerable and the striving middle class disproportionately. By definition, business growth is what can bail them out—not individuals, not Governments and certainly not capital seizure, as we are seeing in some of these confiscatory taxes on pensions.

Of course no one in the House disputes the duty to protect those who are vulnerable. A civilised society must support those who cannot support themselves, but a welfare system should enable people, not simply leave them indefinitely outside the labour market. It should be, as was always intended, a safety net—not a lifestyle or a way of life. That means investment in education, healthcare and mental health support, and incentives to get back into the workforce. That is the real welfare: a job. The answer cannot be to accept even greater levels of long-term economic inactivity as though it were inevitable and simply a feature of modern life to be managed rather than challenges to be met.

At the same time, Governments of all complexions have not used the resources of the state as effectively as is prudent—“squandered” is the word. I would be less troubled by a rising tax burden if it were clearly strengthening the nation and reinforcing our resilience, capabilities and security in this more dangerous world. For years, there has been an ongoing failure to invest adequately in defence capabilities. We can see now how seriously they are required. Not to invest in them is not only dangerous but irresponsible. It weakens the country and us as a nation. I will be very clear—I said this in my maiden speech—that soft power without hard power is no power at all. It is all very well to have the sledgehammer of a nuclear weapon, but not every nail deserves a sledgehammer.

You need growth to maintain these things. Without growth, we simply get poorer. Are we building an economy in which both the nation and its citizens grow stronger together or are we purely establishing a transfer economy? I am sure the Minister understands, because he is a very well-educated man on economics—that is very clear to me—that any transfer has zero economic value. In fact, if you look at it under the transfer theorem, it has a negative value.

If the economy grows but we stymie capital growth and the success and prosperity of individuals, then we are in trouble. If the headlines improve but the lives beyond them do not—if the numbers flatter but the reality does not—then we are witnessing not economic success but an economic illusion. However artfully illusions are maintained for political purposes, they do not have a habit of lasting; rather, they fail and hurt us in our quest for economic effectiveness for the nation. This is not a political point; it is a point of good economics.