Mansion House Accord

Lord Livermore Excerpts

Wednesday 14th May 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, it is disappointing that UK pension funds now invest only around 4.4% in British assets, in contrast to between 12% and 18% in Canada. That is no longer good value, given the scale of tax reliefs in the UK. Equally, a mandatory backstop, as apparently favoured by the Chancellor, is hard to reconcile with pension trustees’ fiduciary duties to put our millions of savers first. Does the Minister agree that experience in Australia and Canada should encourage us to move forward sensibly? Does he also acknowledge that the task of balancing important domestic investment with the need to invest in the best interests of our savers is actually best left to the providers themselves, and not directed by the Government?

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

I am grateful to the noble Baroness for her questions. I am sorry that she started her remarks with the word “disappointing”, because this is a really important initiative by the industry and one that the Government very much welcome. Of course, it builds on the work that the previous Conservative Government did, which the previous Conservative Chancellor began, so I hope that there is cross-party support for these steps. This is very important to our growth mission, by increasing investment in infrastructure, and it supports better outcomes for savers. As the noble Baroness will know, this is an industry-led, voluntary accord. Pension funds are choosing to do this, because evidence shows that high-growth assets can boost returns over time. We are confident that schemes are moving in the right direction, and this accord shows what government and business can achieve together, when working in partnership. The pension schemes Bill will contain more details about how these developments will be monitored to make sure that change is delivered.

[Baroness Kramer (LD)]

My Lords, we all want to see more investment in the UK’s productive economy, but what protection is to be provided for people with small DC pension pots who cannot risk losses and see their pensions as a savings product, not as an investment, especially if that investment is high-risk and illiquid, as envisaged in the original Mansion House accords?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. This commitment is voluntary and led by the industry, because the industry knows and is choosing to do this—because the evidence shows that higher-growth assets can boost returns to savers over time, as the noble Baroness, Lady Neville-Rolfe, said, in line with international counterparts, such as in Canada and Australia. Their pension funds and the levels of private asset allocation in those schemes is far higher. Pension savers will benefit from this accord through diversified savings, with potentially higher returns.

[Lord Davies of Brixton (Lab)]

My Lords, I thank my noble friend for his replies and for the Statement in the Commons. I understand why my noble friend and the Minister in the Commons avoided tackling the issue of mandation, even though there was clearly a Treasury-inspired leak about the issue on Monday. Does my noble friend understand that with mandation of investment policies, should the Government consider it, comes responsibilities, with effectively the Government having to guarantee the returns or benefits on members’ benefits.

[Lord Livermore (Lab)]

I am shocked that my noble friend uses the word “leak”—I have no idea what he is talking about. As I have said, it is important that this is a voluntary commitment and that it delivers the investment promised for the UK economy. As I say, funds are voluntarily—it is industry led—choosing to do this because evidence shows that high-growth assets can boost returns over time, and we are confident that the schemes are now moving in the right direction. But equally, as I say, the pension schemes Bill will have more details in it about how these developments will be monitored over time to make sure that that change is delivered, because in the end what we all want to see is higher levels of investment.

[Lord Forsyth of Drumlean (Con)]

My Lords, if the Minister is right that this is an entirely voluntary scheme, why is it necessary for the Government behind the scenes to threaten to make it mandatory?

[Lord Livermore (Lab)]

Because it is very important that this voluntary commitment delivers the investment that is promised for the UK economy.

[Baroness Altmann (Non-Afl)]

My Lords, I welcome this initiative. Indeed, I would be pleased to see the Government go even further in ensuring that our long-term pension funds have faith in Britain, invest in Britain and use the £70 billion of taxpayer money that goes into pensions every year to add to contributions made by individuals and employers to benefit Britain, rather than being free to put 100% into overseas markets. But of course we need to make it more attractive to invest in the UK, and I urge the Minister to look into the possibility of using closed-ended investment companies that do exactly that kind of investment, are selling at discounts and have been hit by unfair regulation, which has stopped them being able to raise new capital and provide long-term returns of this nature for pension funds.

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. I know that she has a great deal of expertise in this matter, and I enjoyed the meeting that she and I had with my honourable friend the Pensions Minister on this exact topic—he mentioned her in his remarks in answer to this UQ yesterday in the other place, so she has clearly had a big impact on his thinking. I am pleased, and I welcome the fact, that she welcomes these reforms. She has often called for greater investment by pension funds in productive assets, which I think is exactly what is being delivered. She has called for greater investment by pension funds in UK assets, which is again what is being delivered. Of course, there is always more that can be done; I hear what she says about the campaign that she has led for many months now, and I am sure that my honourable friend will look further at that issue.

[Lord Londesborough (CB)]

My Lords, a number of pension providers have warned that progress will be dependent on

“a steady supply of high-quality UK investment opportunities”.

That is a big pipeline challenge, because our record of financial returns on infrastructure projects is, as we know, suboptimal. Investing in fast-growing start-ups and scale-ups, whether here in the UK or overseas, carries far greater risk. In many sectors such as tech, the failure rate of such start-ups is over 90%. Can the Minister therefore explain how these sorts of investment opportunities sit with the pension funds’ fiduciary and consumer duties to act in their clients’ interests in terms of maximising returns for pensioners without taking excessive risk?

[Lord Livermore (Lab)]

The noble Lord is absolutely right about the importance of the pipeline that he speaks about. The Government are playing our part in that, with £100 billion of additional public investment over the course of this Parliament. Our job as the Government is also to support the pipeline of investable projects, which is why we are getting the country building through our planning reforms; why we have ended the ban on the development of onshore wind; why we have set up the National Wealth Fund; and crucially, why we will be publishing, at the time of the spending review, the 10-year infrastructure strategy and modern industrial strategy.

The noble Lord is also right when he talks about the long-standing problem in the UK economy of the ability for growing firms to get hold of scale-up finance, which this accord will help to address. The accord will provide investment for infrastructure but also provide growth capital to a much wider range of firms. These are often smaller-ticket items, and pension funds will need them to be aggregated to a higher level, which is exactly the work of the British Business Bank.

[Lord Lee of Trafford (LD)]

My Lords, if the Government are keen, quite rightly, to encourage more investment into the United Kingdom, why do they still give tax relief to those with ISAs who invest in overseas equities?

[Lord Livermore (Lab)]

The Government of course want to see more consumers participate in capital markets and benefit from the long-term financial security that investing can provide. We are committed to incentivising greater saving and investment, and we recognise that ISAs play a very important role in helping households to build a financial buffer for a rainy day.

[Lord Balfe (Con)]

My Lords, having spent much of my life as a pension fund trustee, I am aware that this is not a new proposal. Can the Minister give us an undertaking that voluntary will not precede compulsory? What pension fund trustees are concerned about is being ordered what to do with their members’ money, which they are trustees of, not for.

[Lord Livermore (Lab)]

I think I may have covered that several times already. I do not agree with the noble Lord when he says that this is not new. For the first time, we have 17 providers signing an accord, giving a commitment from industry to bring more assets into scope, doubling the target from 5% to 10% and including a specific commitment to investing half of that in the UK. That commitment has not been given before. As I have said, the pension schemes Bill will include more details about how these developments will be monitored to make sure that that change is delivered.

Bank Resolution (Recapitalisation) Bill [HL]

Lord Livermore Excerpts

Consideration of Commons amendments and / or reasons
Monday 12th May 2025 Lords Chamber

Moved by

[Lord Livermore]

That this House do agree with the Commons in their Amendment 1.

1: Clause 1, page 1, line 21, leave out subsection (3)

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

My Lords, with the leave of the House, I will also speak to Amendment 2. I would like to thank noble Lords for their continued interest and engagement in this important legislation. I know that some noble Lords will be disappointed to see the other place overturn the amendment inserted by your Lordships’ House, relating to the scope of the new mechanism, but I hope that I can offer some reassurance today on this matter.

As noble Lords will know, this Bill is intended to enhance the toolkit that the Bank of England has to manage the failure of a banking institution. In particular, it seeks to provide a new source of funding to cover certain costs associated with resolution and, in doing so, to strengthen the protections for the taxpayer, given the importance of protecting public funds in the event that a bank fails.

That said, I do understand the concerns that noble Lords have about any potential costs that would be placed on the banking sector if the Bill’s mechanism were used to support the resolution of some of the largest banks. Here, I would reiterate that it is the Government’s strong expectation that this mechanism would not be used to support the failure of the largest firms.

Noble Lords will recall that the Government published draft updates to its code of practice in October last year, which contained important language clarifying this expectation. I also met with many noble Lords in person during the Bill’s passage to listen carefully to concerns and to seek to explain the Government’s views on this matter.

Ultimately, the other place has taken the view that the scope of the mechanism should not be limited. The Government continue to believe that it is important to retain some flexibility for the Bank of England. I would like to make three further points to help explain that position.

First, as I have mentioned, the Government published draft updates to the code of practice to clarify our expectation that the Bank of England would bail in all readily available MREL that a bank holds, on top of the regulatory capital that must be bailed in, before using this mechanism. The Government therefore envisage that the mechanism would only be used on larger banks as a backstop, and any funds required would be only a top up to these other sources of recapitalisation.

Secondly, allowing the Bank of England the option of using the recapitalisation mechanism on larger banks means that it will be more able to respond to unexpected factors when resolving a bank. While of course the Bank of England works hard to ensure that it is fully prepared for a failure scenario, the manner in which banks fail is always highly uncertain. It is therefore important to ensure that the Bill is not overly restrictive in curtailing the Bank’s ability to use the mechanism flexibly.

As we have discussed in previous debates, there are some circumstances where retaining that flexibility could help to protect public funds. Although unlikely, there are circumstances in which larger banks may not be sufficiently capitalised to self-insure against their own failure, even if the bank in question has been directed to maintain end-state MREL requirements. An example of that might be if the firm was subject to a large redress claim, resulting in larger recapitalisation requirements than envisaged. Similarly, changes in the market value of the firm’s assets over time could result in higher losses than expected at the point of failure, again resulting in higher recapitalisation requirements to manage the failure of the firm in question.

While unlikely, those examples demonstrate a clear benefit in having the flexibility to source additional resources from the mechanism, having already written down the firm’s available MREL. Restricting the scope of the Bill would prevent the mechanism from being available in such scenarios, leaving public funds and therefore the taxpayer exposed instead. The Government therefore consider the theoretical possibility of using the recapitalisation mechanism on a larger bank a prudent step, providing comprehensive protection for public funds.

Thirdly, any levying by the Financial Services Compensation Scheme to recover funds provided to the Bank of England will be subject to an affordability cap set by the Prudential Regulation Authority, which is currently £1.5 billion per year. In line with its safety and soundness objective, the PRA carefully considers the affordability of the FSCS levy for firms, providing an important safeguard against the sector being hit by unaffordable levies to prop up the largest firms.

I hope those points will go some way to reassuring noble Lords, and that they will be able to support the Bill as it now stands. Noble Lords will note that Amendment 2 is a straightforward amendment to remove the financial privilege amendment that was inserted by this House at Third Reading. I beg to move.

[Lord Vaux of Harrowden (CB)]

My Lords, I want to ask the Minister a question that arises from this change. First, though, it is over six months since we debated these amendments. That does seem like an awfully long time for the Bill to disappear into limbo and come back, particularly when other Bills are being rushed through this House.

I wanted to ask the Minister to explain more about whether the resolution process could be used for larger banks, but I think he has actually answered that question. I am not sure his answer gives me an awful lot more confidence or comfort, but I am not going to oppose the Commons amendments. However, in the last six months, various comments have come from the PRA or the Bank of England about the fact that this Act, as it will be, may allow them to take some banks out of the MREL process. I wondered if the Minister might wish to comment on that and whether there are any consequences the other way round.

--- Later in debate ---

[Lord Livermore (Lab)]

My Lords, I again thank all noble Lords for their efforts on the Bill since July last year, and all noble Lords who have spoken in this brief debate today. I am also grateful to all three noble Lords for indicating that they will not oppose the Bill further. I will briefly attempt to respond to the questions and points made in this brief debate.

First, I reiterate what the noble Baronesses, Lady Kramer and Lady Neville-Rolfe, said about the expertise in this House; I was on the receiving end of much of that expertise and it certainly tested me. However, to a large extent, the Bill was improved by the debates we had in this House, and I am grateful to all noble Lords for that.

The noble Lord, Lord Vaux, talked about the gap between Third Reading and us returning today for this ping-pong session. It is somewhat out of my hands, although I do agree that it feels like rather a long time since we last debated these issues. He asked about the circumstances in which this power will be used, and I hope, as he said, that I covered that in my opening speech. He also raised some other questions.

On MRELs, the Bank of England sets MREL requirements independently of government, as he knows, but within a framework as set out in legislation. The Bank of England has consulted on proposals which seek to ensure that the MREL regime remains proportionate and evolves over time. The Government are engaging closely with the Bank of England as it considers its responses to that consultation, and its engagement includes consideration of the impacts on economic growth.

The noble Baroness, Lady Kramer, talked about MREL being used as the first resort. The Government believe there are sufficient safeguards in place to ensure that shareholders and creditors are exposed to losses before the new mechanism is used. These include the principle in legislation requiring the Bank of England to ensure that shareholders and creditors bear losses when a banking institution fails. As set out in the draft updates to the code of practice, the Bank of England would first look to write down or otherwise expose to loss all readily available MREL resources before requiring a recapitalisation payment from the FSCS. Noting these points, the Government believe that specifying the extent of losses that must be imposed before the new mechanism is used would be an unnecessary restriction on the Bank of England’s flexibility.

The noble Baroness, Lady Neville-Rolfe, asked about the FCSC budget and minimising operating costs. It is in fact a legal duty on it to minimise those costs, and I would expect it to adhere to that legal duty. The noble Baroness also spoke about the importance of financial services to the growth of the UK economy, on which I very much agree with her.

The Bill plays a vital role in upgrading the UK’s toolkit to manage bank failures, strengthening protections for taxpayers and financial stability which are, in turn, key to the Government’s number one priority of economic growth. I look forward to the Bill’s enactment and I hope noble Lords will join me in supporting the amendments made in the other place. I beg to move.

Motion on Amendment 1 agreed.

Moved by

[Lord Livermore]

That this House do agree with the Commons in their Amendment 2.

2: Clause 8, page 6, line 1, leave out subsection (5)

Inheritance Tax: Impact on Rural Businesses

Lord Livermore Excerpts

Thursday 1st May 2025 Lords Chamber

[Baroness Rock (Con)]

My Lords, I beg leave to ask the Question standing in my name on the Order Paper and draw attention to my interests as set out in the register.

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

My Lords, the Government have taken difficult decisions on welfare spending and on tax necessary to repair the public finances and rebuild public services. This includes measures to better target agricultural property relief and business property relief. These measures mean that, despite the difficult fiscal context, we are maintaining significant levels of relief from inheritance tax beyond what is available to others, and that almost three-quarters of estates claiming agricultural property relief and business property relief will not pay more inheritance tax. The independent Office for Budget Responsibility does not expect the reforms to have a significant macroeconomic impact.

[Baroness Rock (Con)]

I thank the Minister for his Answer, but these changes are already stifling investment. A Farmers Guardian and Tenant Farmers Association joint survey reports that 55% of tenant farmers will invest less in their farms and 25% of tenant farmers expect their landlords to take back land for non-farming purposes and reduce their investment. Furthermore, over half say their mental health is suffering. They fear eviction. I have had many heartbreaking messages from farmers who fear they just cannot go on. Is the solution not to follow the recommendation in the Rock review to allow landlords letting land for eight years or more to be able to include the value of that land as part of the zero-rate threshold for inheritance tax?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. I fully recognise that she has a great deal of expertise in this area and I pay tribute to the work that she has done, particularly on behalf of tenant farmers. I do not accept the premise of her question. I fully respect the commitment that has gone into the survey that she spoke of but do not necessarily accept its conclusions. Our commitment to tenant farmers remains steadfast, which is why we are investing £5 billion in farming over two years, the largest budget for sustainable food production in our country’s history.

I take seriously what the noble Baroness says about mental health. Mental health is of course an issue that the Government take extremely seriously, which is why we are working to improve mental health services across the country, including through plans to recruit an additional 8,500 mental health workers. We fully understand the strength of feeling on this issue, and we urge people to make sure they use the correct data to prevent further inflaming the debate.

[Baroness Foster of Aghadrumsee (Non-Afl)]

My Lords, the nature of farming across the UK varies greatly. For example, in Northern Ireland the size of family farms is smaller but the price of land is a lot higher per acre. Given that that is the case, and given that families in Northern Ireland are concerned about the incoming changes, will the Minister commit to looking at an impact assessment not of the macro situation in the UK but of the different regional variations?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. As she may know, as is standard practice, we will publish a tax information impact note alongside the draft legislation before the relevant Finance Bill. My honourable friend the Exchequer Secretary has engaged extensively with stakeholders in this area, including with the Ulster Farmers’ Union. We have fully listened to the issues that the noble Baroness raises. However, it is worth saying that individuals will still benefit from 100% relief for the first £1 million of combined business and agricultural assets, and above that amount there will be 50% relief, meaning that inheritance tax will be paid at a reduced effective rate of up to 20%. That is considerably more generous than in any other part of the economy.

[Baroness Kramer (LD)]

My Lords, the problem is not just the damaging inheritance tax changes but delinked payment reductions, as we debated yesterday, sky-high energy bills, a botched trade deal and extreme weather. Defra anticipates that 7% or 8% of farms will not survive, and most people accept that that is on the optimistic end of the scale, and the sale will be to corporates that have no real link with, and put very little into, the local economy. In the analysis that the Minister says is coming, will there be a broader analysis of the state of the rural economy—not just macro-level analysis, and not even regional analysis, but something that genuinely focuses on the rural economy because it needs different solutions?

[Lord Livermore (Lab)]

It is worth saying that the Government are investing £5 billion across this year and next year to support the transition to a more sustainable and productive sector, including the biggest budget for sustainable food production and nature recovery in our history. I do not necessarily accept the characterisation that the noble Baroness seeks to put forward of what is going on and what this Government are doing. As I say, there will be a full impact assessment at the time when the legislation is published, and I am sure it will cover many of the things that the noble Baroness asks about.

[The Lord Bishop of St Albans]

My Lords, there is no doubt that there is some sort of mismatch between the assurances being given and the experiences of some of our smaller farmers, who are deeply concerned at what is going on. What consideration have His Majesty’s Government given to having some sort of clawback clause? If assets were disposed of within, say, seven years after a death, that would deal with the problem of the tax loophole whereby some people are using land simply to get out of paying tax.

[Lord Livermore (Lab)]

I am grateful to the right reverend Prelate for his question and I pay tribute to the work that he is doing with the communities that he is discussing. The Government believe that introducing a clawback mechanism such as he describes could still result in some of the wealthiest estates paying less inheritance tax than under the proposed reforms. That would raise considerably less money, and therefore would not go towards repairing the public finances and supporting the public services in the way that we seek.

[Baroness Butler-Sloss (CB)]

My Lords, I own a farmhouse in Devon, which, like Northern Ireland, has very small farms. My house is worth over £1 million as a farmhouse, and all the farmhouses around me, with small farms of 100 or 150 acres, are worth at least £1 million. Does the Minister appreciate that? You are at the £1 million situation even before you look at the cost of the land.

[Lord Livermore (Lab)]

I am grateful to the noble and learned Baroness for her question. As I say, individuals will benefit from 100% relief for the first £1 million of combined business and agricultural assets, but that £1 million sits on top of the existing reliefs and all other spousal exemptions and nil-rate bands. Full exemptions for transfers between spouses and civil partners will continue to apply; therefore a couple with agricultural or business assets can typically pass on up to £3 million-worth of assets without paying any inheritance tax at all. That is considerably more generous than in any other part of the tax system.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, did my noble friend notice that, when the farmers blocked Whitehall with their tractors—sparkling, new, expensive tractors—they did not look very poor? Has he noticed that, when the Tories talk about tax, they always want to make the rich even richer?

[Lord Foulkes of Cumnock (Lab Co-op)]

They do. Will my noble friend confirm that, when poor people get tax deductions, they spend money on food and other essentials, and that helps growth?

[Lord Livermore (Lab)]

It is incredibly important that the decisions we take make the tax system fairer and more sustainable, and I believe that is absolutely what we are doing. Despite a very tough fiscal context, we are maintaining considerably more generous reliefs in this sector than exist anywhere else in the tax system.

[Baroness Neville-Rolfe (Con)]

The Government claim that family farms are safe from the changes to IHT. However, they have set the threshold too low, as subsequent examination has clearly demonstrated. It was also chilling to see the CBI’s economic analysis, which showed a net fiscal loss from the changes to business property relief of £1.26 billion over five years, with the tax revenue of £1.4 billion trumped by the loss of tax on production, spending, income and NICs. Has the dismay across the countryside at this mistaken policy been reflected in the responses to the very narrow HMRC consultation of 27 February? Will the Government think again before the changes take place next April?

[Lord Livermore (Lab)]

No. The analysis undertaken by CBI Economics is not robust nor representative. It is based on a self-selecting survey from members of groups campaigning against these reforms. The independent Office for Budget Responsibility certified the costing at the Budget in October. The reforms to agricultural property relief and business property relief are forecast to raise a combined £520 million in 2029-30. If the noble Baroness would like to tell me where she would get the £520 million that she would like to remove, I would be very interested to hear it.

Tax: Changes

Lord Livermore Excerpts

Tuesday 29th April 2025 Lords Chamber

[Lord Leigh of Hurley]

To ask His Majesty’s Government what assessment they have made of the loss of tax revenue from wealthy individuals leaving the country following recent tax changes.

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

My Lords, the OBR has certified that the non-dom reforms the Government have implemented will raise £33.8 billion in total revenue over the five-year forecast period. That figure accounts for some non-doms who are ineligible for the new regime choosing to leave the UK in response to these reforms. The Government will continue to work with stakeholders to ensure that the new regime is internationally competitive and focused on attracting the best talent and investment to the UK.

[Lord Leigh of Hurley (Con)]

The ideologically driven decision to include overseas assets in IHT for both non-doms and former non-doms is described in the national press as Rachel Reeves’s biggest mistake. Despite what the OBR says, capital gains tax receipts have fallen by 10% and, as we heard on Friday, the national debt is ballooning. Does the Minister agree with me that, given that 30% of income tax receipts come from 1% of taxpayers and they are leaving in droves, it is a question not of whether this policy is reversed but of when? It is time to put country before party.

[Lord Livermore (Lab)]

I do not agree with the substantive bulk of the noble Lord’s question. He mentions the capital gains tax figures. The latest outturn data for capital gains tax relates mainly to capital gains tax liabilities in the 2023-24 tax year, so pre-dates the announcement of non-dom reforms by the previous Government and this one. This Government’s tax reforms to the non-dom regime and to capital gains tax keep the UK an attractive place to live and to invest, while ensuring that everyone who is a long-term resident pays their taxes here, helping to fairly fund our public services. The UK’s main rate of capital gains tax is lower than in any other European G7 country, as is our corporate tax rate, and our new residence-based regime is simpler and more attractive to new arrivals than the non-dom regime it replaces.

[Lord Rooker (Lab)]

Given the answer that my noble friend has just given, the best estimate I have seen is that the top 10% of taxpayers pay about 34% of their income in total tax while the bottom 10% pay 47% of their income in tax. Should we not be looking at the inequalities of the tax system a little quicker?

[Lord Livermore (Lab)]

I agree with my noble friend that it is important to look at inequality right across the tax system and across our society. This Government are of course committed to reducing that through measures such as the minimum wage increases we have seen recently. Of course, successful businesses and entrepreneurs who create jobs and wealth are the engine of economic growth in our society. We will support them to succeed while ensuring that the wealthiest pay their fair share towards the public finances.

[Lord Lilley (Con)]

My Lords, are the Government trying to prove the truth of the law first articulated by the late lamented Lord Harris of High Cross that punitive taxes on the rich do not redistribute income but redistribute people, to the immense loss of the Treasury in this country?

[Lord Livermore (Lab)]

No, we are not. The UK’s main rate of capital gains tax is lower than in any other European G7 country, as is our corporation tax rate. Our new residence-based regime is simpler and more attractive to new arrivals than the non-dom regime it replaces—the regime put in place by the party the noble Lord supported for 14 years.

[Baroness Kramer (LD)]

My Lords, my eldest granddaughter is a British subject and an American citizen. She lives in the UK and has started to earn some money, only to find that she cannot avail herself of something like an ISA because it would be taxed from day one in the US and vice versa. This is one of anomaly after anomaly and Catch-22 after Catch-22 that the UK Government have refused to address. Does the Minister understand that, with non-dom status gone, this is becoming a major problem and driving out people who are tax resident in more than one country?

[Lord Livermore (Lab)]

I absolutely understand the point the noble Baroness is making, but I do not necessarily agree that it is driving out the people she describes. I completely understand her point, but I am not sure I agree with the conclusions she is reaching.

[Lord Sikka (Lab)]

My Lords, the richest fifth pay 30% of their gross household income in direct taxes; the poorest fifth pay 16%. The richest fifth pay 11% of disposable household income in indirect taxes; the poorest fifth pay 27%. Altogether, the poorest pay a higher proportion of income in taxes than the richest. The Government can promote tax justice and stimulate the economy by cutting taxes for the poorest and eliminating the tax perks of the richest. How quickly can we expect action from the Government?

[Lord Livermore (Lab)]

As my noble friend will know, the UK’s approach to wealth through taxes on capital gains and inheritance generates substantial revenue for the Government and is on a par with other G7 countries. The OECD has said that capital gains and well-designed inheritance taxes can act as a more efficient and less administratively costly way of addressing wealth inequality than wealth taxes. Of course we want to ensure that we increase the incomes of the poorest people in society, which we have done, for example, through increases in the minimum wage.

[Baroness Penn (Con)]

My Lords, can the Minister confirm whether his Government agree with another of the OBR’s assessments, which anticipates that the Employment Rights Bill will have a net negative economic impact?

[Lord Livermore (Lab)]

The noble Baroness will know that the OBR has not included an assessment of that Bill in its latest forecast, because it has not yet progressed through Parliament.

[Lord Boateng (Lab)]

My Lords, does the Financial Secretary agree with the Chancellor of the Exchequer who said that

“it is not fair that people live in this country for very long periods of their lives benefit from our public services and yet operate under different tax rules from everyone else”.—[Official Report, Commons, 8/7/15; col. 325.]

Does he agree with that statement? Was that not in fact the statement of George Osborne, the Tory Chancellor of the Exchequer? If that is the case, is there not a lot of hypocrisy and cant being shoved at this from the other side?

[Lord Livermore (Lab)]

I agree with much of what my noble friend says. The previous Government resisted taking action in this way for many years, but then did a screeching U-turn and implemented a series of reforms. Their reforms raised £21 billion in revenue. Our reforms will raise an additional £12 billion in revenue.

[Lord Wallace of Saltaire (LD)]

My Lords, do the Government remember the distinction made by the previous Conservative Government between people who were from somewhere and people who might be from anywhere? It was made with the clear intention of saying that people who liked going abroad were somehow not fully loyal to England; they were more European or something else. Given that distinction, which the previous Conservative Government and their Prime Minister made, is it not now a little hypocritical to say we need to defend those who might easily move away to Dubai, Thailand or Monaco, rather than the interests of people who are committed to this country?

[Lord Livermore (Lab)]

I remember the “citizens of nowhere” comment that the noble Lord refers to. I think that, like much of what the previous Government did, it was not an encouraging thing to say. But let us remember that it is not for me to justify what the previous Government did. This Government are committed to addressing unfairness in the tax system so that everyone who makes their home in the UK pays their taxes here. I think that is absolutely the right principle from which we should proceed. Both the previous Government and this Government increased taxes on non-doms because it is necessary to raise revenue to repair the public finances and fund our public services. That is the fairest way of raising the necessary revenue while ensuring the UK remains an attractive place to live and invest.

[Baroness Neville-Rolfe (Con)]

My Lords, last Friday there was an important debate here about the serious threat that the current and increasing level of national debt poses for the UK. The Chancellor has failed to give herself enough headroom, and her fiscal rules are flawed. Hence, every reduction in tax receipts ought to be met by further spending cuts or by an increase in taxes elsewhere. Now we hear that tax revenue from wealthy people, such as non-doms, is going down sharply as many flee the country because of the Government’s policies. There is a clear tipping point. Will the Government reverse their non-dom policies? If not, which taxes will they increase to compensate for the loss of revenue?

[Lord Livermore (Lab)]

No is the answer. The noble Baroness says that taxes should rise or spending should be cut. I ask her the same question: she says repeatedly that we are raising the wrong taxes, but she never says which taxes we should be raising. She says repeatedly that we should cut spending, but she never says what we should cut spending on. The OBR’s March forecast shows that the Government meet our fiscal rules with the same headroom as at the time of the Budget, thanks to decisive action to reduce spending and to grow the economy. Average borrowing over the next five years will be 2.6% of GDP, compared with 5.6% of GDP over the previous 14 years. There is now a significant fiscal consolidation during the course of this Parliament, taking borrowing as a share of GDP from 4.5% to 2.1%, achieving the biggest current budget surplus in over 20 years.

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

Lord Livermore Excerpts

Friday 25th April 2025 Lords Chamber

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

My Lords, it is a great pleasure to respond to this debate on the Economic Affairs Committee’s report on the national debt, and a privilege to do so alongside so many distinguished and genuinely expert noble Lords. It has been an incredibly impressive and well-attended debate, and I thank all noble Lords for their contributions.

[Lord Forsyth of Drumlean (Con)]

I am most grateful to the Minister. He is a former member of the Economic Affairs Committee, and he is right to pay tribute to the importance of the subject. Will he make representations to his colleagues who are responsible for the business of the House? It really is not acceptable to have a debate on a committee report such as this on a Friday when people are limited to four minutes to speak.

[Lord Livermore (Lab)]

I absolutely hear what the noble Lord says and will of course pass those comments on.

I congratulate the Economic Affairs Committee on its report and the committee’s chair, the noble Lord, Lord Bridges of Headley, on his excellent opening speech, which achieved the extraordinary feat of summarising in just 12 minutes such a wide-ranging and in-depth report. As the noble Lord, Lord Forsyth, just mentioned, I had the privilege of serving on the Economic Affairs Committee under his chairmanship, so I know the amount of time and effort that go into producing reports such as this. As the Chancellor did in her response to the committee last November, I thank all members of the committee and the committee staff for producing this thoughtful and considered report.

As the report rightly recognises, and as the noble Lords, Lord Bridges, Lord Razzall, Lord Lamont and Lord Londesborough, highlighted, the UK’s national debt has risen rapidly over recent years, from around 64% of GDP in 2010 to over 98% in August last year, the highest level since the 1960s. Latest figures to the end of March this year show public sector net debt at 95.8% of GDP, which still remains high by recent historical standards. As the noble Baroness, Lady Wolf of Dulwich, said, debt interest payments alone now stand at £105.2 billion this year—that is more than we allocate to defence, the Home Office and justice combined.

The title of the report speaks of “tough decisions” to prevent national debt from being on an unsustainable path. The Government agree. That is why in the Budget last October, we took action to fix the foundations of our economy and repair the public finances, as the noble Lord, Lord Horam, observed. That included repairing—and noble Lords would expect me to say it—the £22 billion black hole in the public finances that we inherited. That meant making difficult choices. They were not easy decisions, but they were the right decisions.

Since the committee’s report was published in September last year, and then the Budget in October, as many noble Lords have rightly said today, the world has changed further significantly. As the noble Lords, Lord Burns and Lord Forsyth, and the noble Baroness, Lady Kramer, observed, new tariff barriers are now disrupting global trade. Borrowing costs have risen in all major economies; volatility in global markets has seen bond yields rise, including in the US; and growth has been downgraded across the world, with the IMF now predicting global growth to be 0.5% weaker than it was expecting as recently as January.

Of course, the UK has not been immune to these challenges. As the noble Lord, Lord Bridges, said, the OBR downgraded the UK’s growth forecast for this year at the Spring Statement, reflecting the worsening global outlook, and earlier this week the IMF did the same. In this context, maintaining sustainable public finances is a shared challenge for major economies right across the globe.

Against this backdrop, the decisions we took in the Budget to fix the foundations look ever more necessary. Imagine if we were now facing this global economic uncertainty with that black hole still in the public finances. What confidence would that have given to the Bank of England to cut interest rates? What signal would that have sent to investors about the stability and resilience of our economy?

The OBR will produce an updated forecast in the autumn, and despite the kind invitation of the noble Lord, Lord Bridges, I will not speculate now on the impacts of recent global events on the fiscal outlook ahead of that. But, as the committee’s report rightly concludes, global instability underlines the need to put debt on a sustainable trajectory and build resilience to future shocks. It also reaffirms the importance of stability as the foundation of our approach.

That is why, as the noble Lord, Lord Bridges of Headley, asked about, in the Spring Statement we again took tough decisions so that we continued to meet our non-negotiable fiscal rules, even when they were tested. That meant restoring in full the headroom against the stability rule, maintaining a surplus of £9.9 billion in 2029-30. It is why we continue to work with international partners, as the Chancellor has done at the IMF spring meetings this week, to make the case for free and open trade.

The noble Lords, Lord Bridges, Lord Burns and Lord Lamont, and the noble Baronesses, Lady Noakes and Lady Cash, all mentioned the importance of economic growth. It is why we are doubling down on our growth agenda of stability, investment and reform, including £13 billion of new capital spending in growth-generating projects announced at the Spring Statement, as well as support, for example, for a third runway at Heathrow and a new Oxford-Cambridge growth corridor, as my noble friend Lord Liddle spoke about.

As the noble Lord, Lord Griffiths, mentioned, this week’s IMF report makes it clear that the “landscape has changed” and has downgraded the growth prospects of all G7 nations. However, the UK remains the fastest-growing European G7 country, and the IMF has recognised that this Government are delivering reforms which will drive up long-term growth in the UK. Our upcoming modern industrial strategy, mentioned by the noble Baroness, Lady Kramer, and spending review will say more about how we intend to drive long-term sustainable investment and boost productivity.

The committee’s report includes a number of key recommendations, central to which is the committee’s call for an “overhaul” of the UK’s fiscal framework. The Government’s thinking was clearly along very similar lines, and in the Budget in October, we implemented the most significant change to the fiscal framework since 2010—as my noble friend Lord Wood said. I congratulate him on becoming the new chair of the Economic Affairs Committee, and I look forward to working with him.

The new framework we have put in place is designed to support long-term growth, by ensuring the UK’s debt is put on a sustainable path and by prioritising sustainable public investment. First among these reforms are the Government’s non-negotiable fiscal rules, the embodiment of our unwavering commitment to economic stability. The first rule, the stability rule, moves the current Budget into balance, so day-to-day spending is met by revenues, and ensures that the Government will borrow only for investment, which the noble Lord, Lord King of Lothbury, questioned. This rule differs from the previous Government’s borrowing rule, which targeted the overall deficit rather than the current deficit and created a clear incentive to cut investment that is detrimental to growth, as the IMF has made clear.

The noble Lord, Lord Lamont, asked about the primary surplus, which the OBR forecast to move from a deficit of 1.9% of GDP in 2024-25 to a surplus of 1% by 2029-30. The Government understand and respect the argument made by the committee in respect of the fifth year. However, the Government’s position is that targeting the third year of the forecast provides a strong anchor for fiscal sustainability, while providing the necessary flexibility to respond to macroeconomic shocks in the short term.

Our approach is supported by the OECD, which recommended that the UK should

“shorten the time horizon of fiscal rules”.

Similarly, the Institute for Fiscal Studies has made it clear that a fiscal rule targeting debt falling in the fifth year of the forecast is

“more arbitrary and gameable than most”.

The second rule—the investment rule—ensures net financial debt falls as a proportion of GDP. This keeps debt on a sustainable path, while allowing the step change in investment our economy needs.

The noble Baronesses, Lady Wolf of Dulwich and Lady Noakes, and the noble Lord, Lord Forsyth, raised the issue of definitions. Net financial debt is an accredited official statistic that has been measured by the Office for National Statistics since 2016 and forecast by the Office for Budget Responsibility since that date. It recognises that government investment delivers returns for taxpayers by counting not just the costs of investment but the benefits.

The noble Lords, Lord Burns and Lord Howell of Guildford, spoke about the importance of investment to economic growth, as did my noble friends Lord Wood, Lord Liddle and Lord Davies of Brixton. As a result of this second fiscal rule, we were able to increase capital investment by over £100 billion in the Budget in October, boosted by an additional £13 billion announced at the Spring Statement. The OBR has confirmed that we are meeting both fiscal rules, and borrowing is forecast to fall in every year of the forecast—from the 5.3% of GDP that we inherited to 2.1% in 2029-30.

In addition to our fiscal rules, the Government’s Charter for Budget Responsibility contains a further serious of measures to improve certainty, transparency and accountability in our fiscal framework.

[Lord Lamont of Lerwick (Con)]

I am very grateful to the Minister for answering my question about primary surplus. He said that the OBR is saying that there will be a surplus in 2029-30. Am I not right in saying that that refers to the current Budget, but of course might mean that there was, overall, a primary surplus? By itself, it does not mean a primary surplus. Can the Minister indicate whether there would be an overall primary surplus, which many people are saying is necessary to alter the debt-to-GDP ratio.

[Lord Livermore (Lab)]

I am very happy to check that point and I shall write to the noble Lord.

The measures set out in the Government’s Charter for Budget Responsibility implement many of the recommendations in the committee’s report and provide important guard-rails to ensure that capital spending is good value for money and drives growth in our economy. The IMF has called these important reforms to strengthen the fiscal framework. They include a commitment to hold one major fiscal event each year, giving families and businesses stability and certainty on upcoming tax and spending changes. The noble Lord, Lord King, suggested moving to just one forecast, a point echoed by the noble Lord, Lord Macpherson.

We introduced the fiscal lock through the Budget Responsibility Act, ensuring all major fiscal announcements are subject to an independent assessment by the OBR. Spending reviews must now take place every two years, setting departmental budgets for a minimum of three years. According to the IMF, this will

“improve the credibility of the medium-term fiscal framework”.

The Government have accepted all 10 recommendations in the OBR’s review of the March 2024 forecast for departmental expenditure limits, to ensure that no future Government can conceal unfunded spending pressures from the OBR, as the previous Government did.

The committee’s report sets out a number of recommendations relating to the nature of UK debt and how it is managed. The report argues—and the noble Lord, Lord Bridges, made clear—that it is the trajectory of debt, rather than the level, which should be the principal consideration when assessing debt sustainability and that debt levels become unsustainable if there is an insufficient buffer to absorb future economic shocks.

The Government agree with this analysis, which is why the Chancellor rebuilt in full the buffer against the fiscal rules at the Spring Statement—which was mentioned by the noble Lords, Lord Bridges and Lord Burns, and the noble Baroness, Lady Manzoor—and why our investment rule requires net financial debt to be falling in 2029-30. Building this resilience is key to protecting the UK against global shocks.

The committee’s report recognises that the UK is not currently an outlier in the overall stock of debt but notes the relatively high share of index-linked gilts. Issuing index-linked gilts has historically brought cost advantages, and analysis shows direct savings of around £90 billion in total from the issuance of index-linked gilts. However, it is right that the Government keep the proportion of index-linked gilts under review to balance the benefits and risks.

Separately, the noble Lords, Lord Razzall, Lord Lamont, Lord Forsyth, Lord Macpherson and Lord Weir, noted that the report argues that quantitative easing has increased the sensitivity of government borrowing costs to short-term movements in interest rates. However, it remains the case that the average maturity of the Government’s wholesale debt continues to be consistently longer than the average across the G7 group of advanced economies. This helps to limit how quickly changes in interest rates affect debt interest costs. Other countries also face significant effects because of quantitative easing. Quantitative easing is now unwinding, which will increase the effective maturity of the UK’s debt, all else being equal.

The last concern raised by the committee in this section of the report relates to the UK’s reliance on debt purchases by overseas investors, which my noble friend Lord Liddle and the noble Lord, Lord Forsyth, mentioned. The Government deliberately maintain a varied gilt-issuance strategy, to promote a well-diversified investor base. Overseas investors help maintain a diversity of gilt investors, keeping demand for UK debt strong and ensuring that the Government are not overly reliant on any one type of investor.

The committee’s report covers the longer-term challenges of getting debt to fall—the noble Lord, Lord Bridges, referred to these as the “Ds”. These include the impact that demographic shifts, such as an ageing population and a rising dependency ratio, will have on the public finances, as my noble friends Lord Davies of Brixton and Lord Browne of Ladyton said. The Government recognise these challenges, including the rising cost of care, which is set to double in the next 20 years alone. That is why, for example, we have established an independent commission, led by the noble Baroness, Lady Casey, to develop a new national care service, able to meet the needs of older and disabled people into the 21st century. We are taking immediate action to stabilise the care sector and invest in prevention, carers and care workers.

Other spending pressures discussed in the report include migration, the green transition and defence. The noble Lord, Lord Macpherson, made an interesting suggestion about debating annually the OBR’s fiscal sustainability report.

On migration, the report concludes that high net migration cannot be the solution to debt sustainability, as many noble Lords mentioned today. The Government’s position remains that we value the contribution that legal migration makes to our country, and will continue to strike a balance between ensuring that we have access to the skills that we need, while encouraging businesses to invest in the domestic workforce. Further detail will be set out in the forthcoming immigration White Paper.

The noble Lords, Lord Horam and Lord Weir, mentioned the green transition. The Government believe that early and ambitious climate action is vital to delivering long-term economic growth and enabling a cost-effective transition to net zero. As the Chancellor said earlier this year:

“Net zero is the industrial opportunity of the 21st century, and Britain must lead the way”.


On that point, I agree with the comments made by the noble Baroness, Lady Kramer.

The noble Lords, Lord Forsyth and Lord Tugendhat, and my noble friend Lord Browne of Ladyton spoke about defence spending. The committee’s report was published before the Government’s announcement that defence spending will rise to 2.5% of GDP next year, which represents the biggest sustained increase in defence spending since the Cold War. This new funding, delivered within our fiscal rules, will deliver the stability that underpins economic growth and unlock prosperity for working people, through new jobs and opportunities.

Finally, the report considers the impact of productivity improvements in the context of the projected rise in government expenditure. The Government’s view is that tackling the UK’s historic weak productivity performance is central to delivering higher economic growth. The OBR estimates, for example, that every 0.1% increase in productivity growth will reduce the rise in the debt-to-GDP ratio by 25 percentage points over the next 50 years. It is for these reasons that we are pushing ahead with vital reforms to cut waste and bureaucracy, including in the planning system, and to make the state leaner and more efficient.

I once again sincerely thank and congratulate the Economic Affairs Committee on its work on this important report. The Government share the committee’s view that tough decisions are required to put debt on a sustainable path. That is why in the Budget last October we fixed the foundations of our economy and, at the Spring Statement this May, took the action needed to meet our fiscal rules, even when they were tested. The global instability we have seen over recent weeks demonstrates why this approach was necessary. It is only by delivering sustainable public finances that we can maintain resilience in the face of global shocks. The approach we are taking will continue to put debt on a sustainable path. It will provide certainty to families and businesses in an ever-changing world, and it will generate the long-term investment we need to grow our economy.

Basel 3.1

Lord Livermore Excerpts

Thursday 3rd April 2025 Lords Chamber

[Baroness Kramer]

To ask His Majesty’s Government what assessment they have made of the impact of delaying the implementation of Basel 3.1 on measures by the Prudential Regulation Authority and the Treasury to address base erosion and profit shifting.

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

My Lords, the Prudential Regulation Authority, in consultation with HM Treasury, decided to delay the implementation of the Basel 3.1 reforms in the UK until 1 January 2027, taking into account competitiveness and growth considerations, given the current uncertainty around the timing of their implementation in the US. The delay to Basel 3.1 has no bearing on the base erosion and profit shifting policy agenda, where the Government are committed to ensuring that multinationals pay their fair share of tax in the UK.

[Baroness Kramer (LD)]

My Lords, seven mega US tech companies avoid some £2 billion a year in UK corporation tax by using base erosion and profit shifting. The 2% digital services tax clawed back £800 million of that this year, and it is due to be replaced under Basel 3.1, as agreed by the OECD, G7 and G20, with the undertaxed profits rule, put into UK law in the Finance Act last week. It would claw back significantly more. Can the Government tell us if they are prepared to abandon the DST and mothball the UPR at the behest of the Americans? How can UK companies compete when their US rivals are permitted in the UK to avoid at least two-thirds of the tax that UK companies have to pay?

[Lord Livermore (Lab)]

My Lords, as the Chancellor has said clearly, we will continue to make sure that businesses pay their fair share of tax, including businesses in the digital sector. The UK’s digital services tax is a fair and proportionate approach to taxing business activities undertaken in the UK, and it remains the UK’s intention to repeal it once a multinational solution is in place. We will continue to work with the US to understand its concerns and consider how these can be addressed in a way that meets both countries’ objectives. I will not give a running commentary now on those discussions.

[Baroness Neville-Rolfe (Con)]

My Lords, the removal of the SME support factor when Basel 3.1 is implemented will lead to higher capital charges for loans to our vital small and medium-sized companies. Can the Minister update the House on the Government’s assessment of the implications for small business, especially for those ready to take entrepreneurial risk, which is needed for the growing economy that he mentioned?

[Lord Livermore (Lab)]

We very much support small businesses, and we will do all that we can to support them in this economy. We will come forward soon with a small businesses strategy that will set out this Government’s approach. I do not think that the delay to Basel 3.1 is directly relevant to that issue. It is about ensuring that we have a level playing field and that we maintain the competitiveness and growth objectives that we have set out.

[Lord Purvis of Tweed (LD)]

My Lords, further to my noble friend’s question, this will apply to businesses that are making more than €20 billion in profits, operating within the United Kingdom and not paying their fair share of tax here. Why are the Government asking another country—under the Trump Administration—to have a veto over how we tax businesses that are operating in the UK for our benefit?

[Lord Livermore (Lab)]

Quite simply, we are not.

[Baroness Wheatcroft (CB)]

Could the Minister reassure the House that simply not wanting to pay any more tax would not be a reason for renegotiating?

[Lord Livermore (Lab)]

I am happy to give the House that assurance.

[Lord Blunkett (Lab)]

I ask my noble friend the Minister a googly question, as Donald Trump would say: as difficult as these matters are, is there not a good rule of thumb for the Government to decide whose side they are on?

[Lord Livermore (Lab)]

Yes, and this Government are absolutely clear: we are on the side of working people.

[Baroness Kramer (LD)]

My Lords, I will come back to the Minister, who has been trying hard to answer these questions without telling us too much. He will be aware that there have been different comments within his own Administration about whether the digital service tax is indeed in the mix in the trade negotiations that are apparently taking place with the States. We understand that there is great hope from the UK Government that there will be a positive outcome of those negotiations within the next two weeks. Is he telling us that the DST and the mothballing of the UPR are not on the table as part of that discussion?

[Lord Livermore (Lab)]

As I have said already, we will continue to make sure that businesses pay their fair share of tax, including businesses in the digital sector. We want the best deal for the UK, so I am not going to undermine negotiations by commenting on the talks or on what is or is not up for negotiation. The Prime Minister has been clear that we will only agree to a deal that is in our national interest.

[Baroness Neville-Rolfe (Con)]

My Lords, as there is a little bit of time, I also wish the House and the Minister a happy Easter and come back to him on the question of small businesses and Basel 3.1. There is a concern that when that comes in it could affect lending to the smaller businesses. I hope the Minister will have a look at that. I note that it has been delayed, but when it comes in, we want to make sure that our small businesses, and indeed our smaller banks, are not discriminated against.

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her comments. I wish her and the whole House a happy Easter as well.

I continue not to agree with her on Basel 3.1’s impact. Basel 3.1 is an update to the Basel III regulatory framework, aimed at further strengthening bank capital requirements and risk management by refining the calculation of risk-weighted assets and enhancing transparency. I am not sure it is about what she is saying it is.

[Lord Lilley (Con)]

In the pre-Easter spirit, I offer the Minister a point where he is likely to agree with me for once. He could have reminded the Liberal Democrats that, had we followed their advice of rejoining the customs union, we would face twice the level of Trump tariffs we currently face and have no prospect of negotiating a free trade deal with the United States. I am glad that he is exploiting the Brexit benefits.

[Lord Livermore (Lab)]

If the noble Lord makes that claim, then we are going to have to see his working, because I am not sure he is including the permanent 4% reduction in GDP from his Brexit deal.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Livermore Excerpts

Consideration of Commons amendments and / or reasons
Monday 31st March 2025 Lords Chamber

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 1B, to which the Commons have disagreed for their Reason 1C.

1C: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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

My Lords, I will also speak to Motions B, C and D. On Motions A, B and C, the other place has disagreed with Amendments 1B, 5B and 8B as they would interfere with public revenue. The other place did not offer any further reason, trusting that this reason is deemed sufficient. On that basis, I hope that noble Lords are content not to insist on Amendments 1B, 5B and 8B.

I turn to Motion D. The other place has disagreed with Amendment 21B for the reason that the Government and the OBR have already outlined the impacts of this policy change. I have no doubt that the amendments tabled at previous stages of the Bill by the noble Baronesses, Lady Neville-Rolfe and Lady Noakes, and the noble Lord, Lord Londesborough, were well intentioned, and I am grateful to them for ensuring that these important matters have been properly addressed during our debates.

More broadly, I assure all noble Lords that giving careful consideration to and properly assessing the impact of the Bill is a priority for this Government. I commit on behalf of the Government to continually monitoring and assessing the impacts and effects of these policies.

Specifically with regard to special educational needs and disability, which has been the subject of several such amendments, the Government recognise the challenges within the SEND system, where outcomes for children and young people are often poor. The Government understand that change is urgently needed and we are committed to delivering long-term, sustainable change.

On the issue of SEN transport, while the Government do not expect the changes to national insurance to have a significant impact on home-to-school travel for children with SEND, I can commit that all these issues will be fully considered as part of the forthcoming spending review. On that basis, I hope that noble Lords will be content not to insist on Amendment 21B. I beg to move.

[Baroness Neville-Rolfe (Con)]

My Lords, I simply thank the Minister and, again, all who have been involved in the passage of this difficult Bill, especially those who have supported me and my noble friend Lord Altrincham. We have had seven days of debate in the House and nine successful votes, in collaboration with other Benches. That demonstrated the serious concerns about this Bill, right across the House.

There is a strong feeling, echoed externally in our hospices, in hospitality, on the high street and in many other places, that the Bill is not the best way to meet the challenges that the country faces, and that it will endanger the growth we need so badly. However, this is a House of scrutiny, and the other place has taken a different view. As a responsible Opposition, we will not seek to defeat this Bill, no matter how deeply we feel about it. His Majesty’s Government must be able to set their tax policy, and of course we respect that.

I should add that I am grateful to the Minister for his closing words, especially in relation to SEND transport, and for his undertaking to monitor—as I think he said—the impacts and effect of the Bill going forward. We will hold him to that. Moreover, he knows that I and one or two others will continue to encourage the Treasury to learn from all of this and experiment with fuller sectoral assessments in the future.

--- Later in debate ---

[Lord Londesborough (CB)]

My Lords, I too thank the Minister for his comments. It is with regret that I will neither insist on my Amendment 8B nor plan to add any further amendments. The other place has played its financial privilege card for the second time, even though this amendment had been radically and pragmatically modified to simply provide the Treasury with the option of a statutory instrument to reverse the big drop in the NICs thresholds for small businesses. It will discover this in the economic damage that this Bill will potentially do to employment and growth.

In the meantime, I simply thank noble Lords—almost 300 of them—for voting for my amendments. I especially thank the noble Baronesses, Lady Kramer and Lady Neville-Rolfe, for their unflagging and invaluable support. I thank the Minister for his patience and for at least listening; I appreciate that he had little or perhaps no room for manoeuvre. I support the Government wholeheartedly on their overriding mission of economic growth, but I remain baffled, bemused and bewildered by their policies.

[Lord Livermore (Lab)]

My Lords, I am grateful to all noble Lords who have spoken today and all noble Lords who have taken part in all stages of this Bill for their careful scrutiny; I thank them for their thoughtful contributions. I thank the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, specifically for indicating that they will not be insisting on their amendments today.

As I have set out, the other place has disagreed with Lords Amendments 1B, 5B and 8B, as they interfere with public revenue. They did not offer any further reason, trusting that this reason is deemed sufficient. The other place also disagreed with Amendment 21B for the reasons I have set out. On this basis, I hope noble Lords are content not to insist on these amendments.

Motion A agreed.

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 5B, to which the Commons have disagreed for their Reason 5C.

5C: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 8B, to which the Commons have disagreed for their Reason 8C.

8C: Because the Lords Amendment interferes with the public revenue, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 21B, to which the Commons have disagreed for their Reason 21C.

21C: Because information has already been published about these matters and a further review is not necessary.

Spring Statement

Lord Livermore Excerpts

Thursday 27th March 2025 Lords Chamber

[Baroness Kramer (LD)]

My Lords, when I listened to the Chancellor yesterday, the only thought that kept chasing through my head was that this is someone who is completely out of touch with the real experience of people today. The whole Statement glossed over a halving of the growth forecast for this year to 1%, and the reality of benefit cuts. These and ongoing high inflation—an average of 3.2% forecast for this year—are pains that people will experience in their daily lives.

The average loss for an individual on PIP is £4,500 a year. According to the Resolution Foundation, a couple on universal credit, where one is disabled and the other is a full-time carer, could lose £10,300 a year.

We all agree that people need to work if they can, but this is not primarily a back-to-work programme; it is a cutting programme. It does not just hit vulnerable individuals; it hits their communities and will have a knock-on effect particularly in disadvantaged areas of the country. It looks to me as though the cuts are very much front-loaded and back-to-work support is back-loaded. Can the Minister tell me if that is correct?

As a result of the cuts, a quarter of a million people of working age will now fall into poverty, and worse, 50,000 children—I am using the Government’s own numbers. Was this really Labour’s goal? Should this not have been the time to revive the bank levy, raise tax on online gambling, close capital gains loopholes and increase the digital services tax? I will say more on that tax in a moment.

Even at the end of the forecast period, despite all the pain, borrowing is expected to be £3.5 billion higher than forecast in October, and the Chancellor will be faced with very little headroom—only £9.9 billion. Can the Minister tell us how much of that headroom disappeared just last night with Trump’s tariff announcements? The headroom also relies on very uncertain expectations of a major increase in productivity. In other words, uncertainty about tax rises and spending cuts will continue; they were not ended by this Statement. That uncertainty will further undermine any possible growth scenario.

Since the focus of this Statement was supposed to be growth, why was there nothing in it for small businesses, which face a crunch in just a few days as the rise in employer NICs kicks in? It is no wonder that the Federation of Small Businesses reports the lowest levels of confidence post-Covid. When the Chancellor spoke of cutting red tape, she could at the very least have focused on the endless Brexit red tape. If she had announced negotiations on rejoining the customs union and removing the current trade barriers, small businesses would be quickly planning a return to exporting and recovery of their roles in European supply chains.

And there was nothing in the Statement to shore up social care, GPs, dentists, hospices and all the services which are crucial to the NHS and to the return-to-work project, but which are making cuts now as higher employer NICs hit home.

I conclude by pressing the Government on the digital services tax. This exists not as some kind of windfall tax or as a special punishment for tech companies; it is a modest attempt to claw back a portion—some £800 million this year—of aggressive tax avoidance by the mega US tech companies. We have just voted into law with the Finance Act an undertaxed profits rule, which would let us claw back much more of that money lost to tax avoidance by this group, in the range of £2 billion to £3 billion a year. However, the Government are now hinting that the digital services tax will be cancelled and the undertaxed profits rule mothballed if they offend the Americans—I refer the Minister to a Treasury press release on 17 January.

The Chancellor spoke, as she should, of reducing tax avoidance by British people and companies, but why should American firms be exempted? Will the Minister give me an answer? Are the Government going to turn a deliberate blind eye to aggressive tax avoidance by the US mega tech companies in the faint hope of winning favour with President Trump, while at the same time they slash benefits to disabled people, burden social care and small businesses, eviscerate overseas aid and need to increase spending on defence?

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

My Lords, I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their questions and comments. Let me start with economic growth, this Government’s number one mission. The noble Baroness, Lady Neville-Rolfe, spoke about the global context in the Spring Statement, and the Chancellor yesterday quite rightly pointed both to the rapidly evolving global threat and to a global economy which is becoming much more uncertain.

The OECD recently downgraded its forecast for every G7 economy this year, and yesterday, the OBR revised down its growth forecast for 2025 from 2% to 1%. The noble Baroness, Lady Neville-Rolfe, blamed this on the decisions taken in the October Budget, which wiped the slate clean and repaired the public finances from the mess that we inherited. They were not easy decisions, but the truth is that they were the right decisions. Imagine if we were now facing this global economic uncertainty with a £22 billion black hole still in the public finances. What confidence would that have given to the Bank of England to cut interest rates? What signal would that have sent to investors about the stability and the resilience of our economy? What flexibility would that have provided for the Government now to increase defence spending in the face of this changing world?

The noble Baroness, Lady Neville-Rolfe, said that we need stability, but she opposes any action to get it. I am afraid that it simply is not credible to say that we should not have repaired our public finances nor rebuilt the foundations of our economy. Are we satisfied with the growth forecast? No, of course, we are not, which is why we are taking the serious action needed to grow our economy in the future and to go further and faster to invest in infrastructure with the Planning and Infrastructure Bill—which the party opposite opposes—and a third runway at Heathrow, increasing investment with pensions reform and a new national wealth fund, and dismantling red tape and burdensome regulation in every sector of our economy. This is a serious plan for economic growth with the right long-term decisions.

The noble Baroness, Lady Neville-Rolfe, focused on future growth, but she did not mention the pleasing fact that the Office for Budget Responsibility yesterday considered and scored one of the central planks of our plan for growth, concluding that our planning reforms will permanently increase the level of GDP by 0.2% by 2029 and by 0.4% of GDP within the next 10 years. That is the biggest positive growth impact that the OBR has ever reflected in its forecast for a policy with no fiscal cost. Again, the noble Baroness, Lady Neville-Rolfe, did not mention that the Chancellor was able to confirm yesterday that the OBR has upgraded its growth forecast next year and every single year of the forecast thereafter, so that by the end of the forecast, our economy is larger now compared to the OBR’s forecast at the time of the Budget.

The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, asked about tariffs. As they will know, we are pursuing an economic agreement with the US, and we are discussing what this means for the UK. That is our focus. We will continue to stand up for free and open global trade, because tariffs would damage both our economies. Those conversations continue. I am not going to give a running commentary, but we should see where we get to in the next few weeks.

The noble Baroness, Lady Kramer, asked me about the digital services tax. The Chancellor said very clearly yesterday that it is up to the UK Government to set tax policy for the UK economy. The digital services tax was intended to be temporary until there was a global agreement as part of pillar 1 and 2 of the OECD agreement, but we believe that companies should pay tax in the countries in which they operate. This is why we introduced the digital services tax in the first place, and our views on that have not changed.

The noble Baroness, Lady Neville-Rolfe, spoke about living standards, but she did not mention that living standards will now grow this year at double the rate expected at the time of the Budget and will rise twice as fast in this Parliament compared to the last. The noble Baroness, Lady Kramer, asked about inflation. Having peaked at over 11% under the previous Government, the OBR forecasts that CPI inflation will average 3.2% this year, falling quickly to 2.1% next year and meeting the inflation target of 2% from 2027 onwards. The noble Baroness, Lady Neville-Rolfe, asked about employment. The OBR expects employment to increase by 1.2 million over this forecast period and unemployment to fall to 4.1% by 2029.

Yesterday, the Chancellor also set out the consequences that increased global uncertainty has had on our public finances, and the noble Baroness, Lady Neville-Rolfe, spoke about the fiscal rules. I was disappointed to hear her follow the Liz Truss path of criticising the Office for Budget Responsibility. The fiscal rules are the embodiment of this Government’s unwavering commitment to ensuring economic stability, because we saw in the Liz Truss mini-Budget what happens when a Government lose control of the public finances. Mortgage rates soared, for which working people are still paying the price. That is why our fiscal rules are non-negotiable and why we will always deliver economic stability.

The Chancellor yesterday restored in full the headroom against the stability rule, moving to a surplus of £9.9 billion in 2029-30. The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, said that this was insufficient, but it is considerably higher headroom than the £6.5 billion headroom left by the previous Government, and we are of course not now carrying a £22 billion black hole in the public finances. We believe that we have got the balance right, and nobody should be in any doubt about how seriously we take the fiscal rules.

The noble Baroness, Lady Neville-Rolfe, asked about the savings from our reforms to welfare. When the Secretary of State for Work and Pensions set out the Government’s plans, she rightly said that the final costings will be subject to the OBR’s assessment. The OBR has said that it anticipates the package will save £4.8 billion in the welfare budget.

The noble Baroness, Lady Kramer, in her assessment ignored the fact that we are investing £1 billion to help people back into work. She also knows that the impact assessment that she referred to does not take into account in any way the consequences of that £1 billion investment; it does not take into account the consequences of anyone getting back into work. She will rightly know that the OBR will do that assessment and come back in the autumn with updated figures.

The noble Baroness, Lady Neville-Rolfe, asked about our spending plans. She said spending was too high, so I would be fascinated to know now where she intends to cut that spending from. The Spring Statement confirms that day-to-day spending is growing in real terms in every single year of the forecast period—by an average of 1.2% a year, in real terms, from 2025 to 2029. The spending review envelope is fully protected. That means we are spending £50 billion more on day-to-day spending in 2028-29 than the previous Government’s plans. I would be interested to know what, of that £50 billion, the noble Baroness, Lady Neville-Rolfe, would like to cut.

In the Budget last October, we increased capital investment by £100 billion over the course of the Parliament, including investing in transport, beginning the delivery of 1.5 million homes, supporting new industries and protecting record R&D funding. The OBR has looked at the growth impact across a decade; it is clear that particularly our capital investments—which the party opposite opposed—will lead to a significant 0.4% increase in growth. We are not cutting capital spending, as the party opposite did time and time again, because that choked off growth.

The noble Baroness, Lady Neville-Rolfe, asked about tax. I know she would not expect me, even if I could, to write the next Budget now. The Government are delivering on the fiscal strategy set out at the Budget last October, and we are going further and faster on growth because our planning reforms show that changes to tax and spend policy are not the only way to strengthen the public finances.

Over the past nine months, this Government have restored stability to our economy, giving the Bank of England the confidence to cut interest rates three times since the general election. We have begun to rebuild our public services with record investment in our NHS, bringing waiting lists down for five months in a row. We have increased the national living wage to give 3 million people a pay rise from next week. The backdrop to this Spring Statement was a world changing before our eyes. The responsible decisions we have taken mean that we can now act quickly and decisively in this more uncertain world to secure Britain’s future and deliver prosperity for working people.

[Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)]

My Lords, I have doubled the time available for Back-Bench questions to 40 minutes. The House wants short, sharp, succinct, to-the-point questions, not speeches. We will go around the Chamber, seeking to get as many noble Lords in as possible. Please note that, when a noble Lord asks a question, it is unlikely that the next question will come from the same Benches.

[Lord Lamont of Lerwick (Con)]

My Lords, is the Minister aware that there is considerable support on this side of the House for the aims of the Government’s welfare reforms? We agree that the programme is unsustainable and that there are perverse incentives, but if changes are to be made, do they not need to be made on a targeted and very sensitive basis? Will the Minister therefore tell us—this was raised by the Liberals but not really answered by the Minister—why, as a result of these reforms, 250,000 will go into poverty? It has also been reported by many MPs that people unable to wash the lower half of their body will be deprived of all benefits, and that people who cannot go to the toilet without assistance will lose all benefits as well. If, as the Minister says, this is being done on a targeted basis, why are these the results? Can the Minister actually convince us that this is a programme that is being done on a targeted basis and not just the cobbling together of some cuts at the last minute in order to make the books balance?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question and for his concern and compassion in the examples he sets out. I will set out our three principles when it comes to welfare. First, the state should always be there to support people when they need it, and I think the reforms set out in the Green Paper deliver on that point. Secondly, the system should better incentivise work, and everyone who can work should work. Thirdly, we need a system that is sustainable, so that we have a welfare state that is there for generations to come. As I said in my answer earlier, the impact assessment that has been published today does not take into account the £1 billion being reinvested into the system from the £4.8 billion of savings. It is very clear that that £1 billion will help people get back into work. As we know, and I am sure he knows, work is the best route out of poverty.

[Noble Lords]

Oh!

[Lord Livermore (Lab)]

The noble Lord’s question is about the impact assessment, and I am answering that. The impact assessment takes no account of the extra £1 billion being invested. The OBR will look at that £1 billion over the summer and will come back with an updated impact assessment at that point.

[Lord Pitkeathley of Camden Town (Lab)]

My Lords, the UK continues to lag behind many EU countries in overall productivity—something that cannot be explained solely by differences in how the French choose to measure theirs. Could the Minister outline which specific measures in yesterday’s Statement are designed to boost productivity both within the Civil Service and across the wider economy?

[Lord Livermore (Lab)]

I am grateful to my noble friend for highlighting a very important point. The Governor of the Bank of England, in his speech last week, highlighted the link between productivity growth and living standards, so we know how important it is to increase productivity. Public sector productivity is one of the few issues that the noble Baroness, Lady Neville-Rolfe, and I agree on: I know that she, too, is focused on increasing public sector productivity. The difficulty is that the previous Government spoke about it but never took any measures to do anything about it. Yesterday, the Chancellor announced a £3.25 billion transformation fund to increase the productivity in our public sector, so that we can spend more money on the front line and get money in public services where it is needed. In terms of the private sector, in answer to my noble friend’s question, the thing I would point to most in yesterday’s Statement, is the importance of capital spending. We know that continual cuts to capital spending, under the previous Government, seriously restricted our productivity growth. The IMF consistently said to us that lack of public sector investment was a serious barrier to growth in our economy, because it is a serious barrier to productivity. Protecting, yesterday, £100 billion of capital spending, that we put in the Budget, is a central point for getting productivity up in our economy. The other thing I would point to is skills investment; we know that we need the higher-skilled workforce in order to do the construction work we are setting out.

[Lord Bilimoria (CB)]

My Lords, would the Minister agree that neither the Autumn Budget nor the Spring Statement mentioned trade at all? I have been appointed as the chair of the International Chamber of Commerce—the ICC UK—and we have just unveiled that we could unlock £25 billion in trade growth, £224 billion in efficiency savings and £22 billion in SME working capital by digitising trade and cutting transaction times, from two to three months to one hour, and reducing trade transaction costs by 80%. So why do the Government not run with this, full steam? With the trade and tariff wars emanating from the United States of America in full flow, digitising trade is the way ahead; modernising trade is the way ahead.

[Lord Livermore (Lab)]

The noble Lord is quite right to focus on trade and the importance of trade to growth. I think he is wrong to say that neither the Budget nor the Spring Statement mentioned trade; I think both did, because clearly trade is a big part of our growth strategy. We want to increase our trade flows with our nearest neighbours and biggest trading partner, the European Union, through our reset of our relationship with the EU. The Chancellor has been to visit China, the third largest economy in the world, which I think the previous Government had not engaged with it at all since 2019. We are engaged in trade negotiations with India and the GCC, and we have just acceded to the CPTPP, so trade is absolutely at the heart of it. Of course, many of the conversations already have revolved around our trading relationship with the United States, which again is a very incredibly important trading relationship to us. On digitising and streamlining trade, he is absolutely right. The Government have an agenda in that respect, but it is very expensive and we need to move ahead when fiscal conditions allow.

[Lord Fox (LD)]

My Lords, when I was sponsoring the Carer’s Leave Bill through your Lordships’ House, I saw how much unpaid carers benefit our economy, providing free services that would otherwise cost the state. That is why I was disappointed that the spending review will leave many unpaid carers struggling with financial hardship and increased care-giving demands without adequate support. Does the Minister not recognise that this is a false economy? These people give to the community their services. If they do not, and they are not adequately supported, those services will end up costing us.

[Lord Livermore (Lab)]

I agree with much of what the noble Lord says: supporting carers is very important. He talked about the spending review leaving them unsupported. Of course, the spending review has not yet taken place; it will take place in June of this year, and I think perhaps we should wait until the spending review reports to see what it has to say.

[Baroness Coffey (Con)]

Some 250,000 more people will be plunged into poverty, including 50,000 children. The OBR forecasts lower employment as a direct result of Labour’s welfare announcements, with unemployment rising overall and even more applications for PIP with changes to the UC health element. We will face the worst of all worlds, with arbitrary cuts and the Government dismissively discarding the previous Government’s proposals. Over 1 million people will be impacted; they face fear every day. When will the Government communicate to those people individually how they will be impacted, so that we do not see a rise in the genuine distress that people are facing right now?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her concern. She talks about employment, but, according to the OBR, it will rise by 1.2 million people over the course of the forecast, so I am not sure that what she is saying there is correct. As I have said repeatedly during this Question, the impact assessment she refers to takes no account of the £1 billion investment in helping people get back into work, so I am afraid that the impact assessment figures she is using are not correct. The OBR will look at the additional £1 billion over the course of the summer and come back with an updated impact assessment that takes it into account.

[The Lord Bishop of Leicester]

My Lords, I appreciate the work that the Government are doing to stimulate the economy and to get people back into work. I understand the dilemma that the Government face with the spiralling costs of welfare. But I am left to wonder: how is it that the DWP’s own impact assessment, which I understand includes the £1 billion investment that the Minister referred to, does also state that 250,000 people will be pushed into relative poverty, including 50,000 children? How can the Government of one of the richest countries in the world justify policies that push people into poverty?

[Lord Livermore (Lab)]

I hate to contradict the right reverend Prelate, but I am afraid that the impact assessment does not take account of the dynamic effects of the £1 billion invested from the £4.8 billion of savings—the OBR has said that very clearly. It will look at that and come back with its assessment of what the impacts will be. He asked me how I can justify reforming the system. I do not know how we can justify a system where one in eight young people is not in employment, education or training. I do not understand how we can justify a system that writes off an entire generation and leaves them consigned to a life on benefits. I do not understand how we can have a system that writes off people and does not give them the support to get them back into work. I think that is the moral thing to do.

[Baroness Hayter of Kentish Town (Lab)]

My Lords—

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[Baroness Hayter of Kentish Town (Lab)]

I congratulate the Government on grasping the nettle of the security challenge caused by Putin to the integrity of both Ukraine and the UK, and on repairing the damage that the party opposite did to our Armed Forces and growing it now for new challenges. Does my noble friend the Minister agree that our own national security and economic stability are absolutely linked? Does he also agree that we need a strong, resilient economy independent of global uncertainty and that the welcome increase in defence expenditure will boost jobs and growth across the whole of the UK?

[Lord Livermore (Lab)]

I am grateful to my noble friend for the points that she makes. I of course agree very much with her. As she knows, it was announced yesterday that we are increasing the defence budget by £2.2 billion in 2025, taking additional spending on defence to over £5 billion since the Autumn Budget. She is absolutely right that defence spending is a huge contributor to the future growth of our economy. That is why in the industrial strategy we have set out eight sectors that we believe will fuel the growth of the economy in future, and defence is one of them. Shortly in the spring, we will publish an industrial strategy for defence, which will set out how we can get highly skilled jobs throughout the UK as a result of the increase in spending that we are carrying out.

[Lord Lansley (Con)]

When the Government came into office, the disability employment gap was 28.6%. With the £1 billion return-to-work funding that the Minister has referred to repeatedly, what is the Government’s target for reducing the disability employment gap by the end of this Parliament?

[Lord Livermore (Lab)]

I am afraid that I do not know what that target is. If there is one, I will find out for the noble Lord and write to him.

[Lord Londesborough (CB)]

I will follow up on a key point raised by the noble Baroness, Lady Neville-Rolfe. While the OBR forecast for growth has halved to just 1%, which I think many would argue still looks optimistic, it is forecasting that we will see a net gain of 400,000 people joining the workforce and becoming economically active this year, even though unemployment is forecast to rise. Can the Minister shed any light on this forecast? Specifically, how many jobs will be created in the public sector and how many in the private sector?

[Lord Livermore (Lab)]

I do not know whether the OBR has set that out in it forecast, but I will be happy to go away and look at that for the noble Lord, if that is helpful. Clearly, a central part of our growth strategy is investment, which creates jobs right across the country. We have already seen many jobs being created in this economy, since we came to office, as a result of various investments right across the country. As I have discussed already, the additional investment in defence spending will see very highly skilled jobs created across the country. However, I will happily find out the specific breakdown for the noble Lord.

[Lord Razzall (LD)]

My Lords, there are clearly a number of lessons to be learned from the Spring Statement, but I will draw two quite serious ones: an omission and a failure of communication. Turning first to the serious omission—noble Lords who know me will expect me to say this—this was an opportunity to attempt to improve our relations with the European Union, given the benefit that it would have for trade and growth, as my noble friend Lady Kramer indicated. I would welcome the Minister giving somewhat more extensive comments on that when he responds.

The second is the failure of communication. There is no doubt whatever that the problems around the Welfare Reform Act in this area have become far too high. The Economic Affairs Committee of your Lordships’ House, on which I have the honour to serve, looked at that several months ago and concluded that the structure and incentives are wrong and that something needs to be done about it. How did the Government manage to implement a potentially very successful reform in such a disastrous manner? They have all the disability charities down their throats and the noble Lord, Lord Lamont, complaining about it. How did they manage that?

[Lord Livermore (Lab)]

I am not sure that I liked the last part of the noble Lord’s question there. On our relationship with the EU, I am not sure that the Spring Statement is necessarily the place in which you update every single part of the Government’s policies. The Government are engaged in a reset of our relationship with the European Union. Anyone who has heard me speak in this House will know that I have very clear views on the economic impact of the previous Government’s Brexit deal; it reduced our GDP permanently by 4%. So, when we have a conversation about growth, we have to take that into account. That is exactly why the Government are engaged in resetting our relationship with the European Union. We have set out ambitious proposals for increasing our trade relationships and improving our security co-operation with the European Union. This Chancellor was the first to address European Finance Ministers since Brexit and this Prime Minister was the first to address his European colleagues since Brexit. This is a very serious set of proposals and we are taking it forward at pace. We are ambitious, even though we know that it will take time.

The welfare reforms were set out by the Secretary of State for Work and Pensions in the House of Commons last week. She said that the figures were subject to final costings by the OBR. The Chancellor came to the House yesterday and updated those costings.

[Lord Wigley (PC)]

My Lords—

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[Lord Wigley (PC)]

My Lords, is the Minister aware that in a Radio Wales interview this morning on yesterday’s Spring Statement, the Chancellor of the Exchequer did not seem to be aware that the First Minister of Wales, Eluned Morgan, had written to her two weeks ago about the serious financial issues facing Wales and still had not had a substantive reply? The Chancellor also did not seem to be aware that housing is a devolved matter in Wales or of how many new jobs her announcement about Newport will generate. In these circumstances, will the Government appoint a Welsh MP to a ministerial role in the Treasury explicitly to deal with matters relating to Wales?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. I am not in charge of the Chancellor’s correspondence unit, so I cannot say whether that letter has been replied to. I am also not responsible for appointing MPs to ministerial positions, so I cannot answer that point either.

What I can tell the noble Lord is that, as a result of the measures announced in the Spring Statement yesterday, £58 million of additional Barnett consequentials will be provided to the devolved Governments in 2025-26, £16 million of which will go to the Welsh Government. The UK Government have already made considerable progress on growth in Wales, including by confirming the Wrexham and Flintshire investment zone and designated tax sites in both the Celtic and Anglesey freeports, and by supporting steel communities through the Port Talbot Tata Steel transition board and providing £25 million of additional funding to the Welsh Government to keep coal tips safe.

[Lord Davies of Brixton (Lab)]

My noble friend will be aware that the two key figures projected in the OBR report are the future course of income in the form of taxation and expenditure. There is a high degree of uncertainty about both those projections, and yet under our fiscal rules, the Government are using the difference between those two highly uncertain figures as the control variable, causing an incredible degree of uncertainty. That is what the rules require. Does my noble friend share my surprise that using this highly uncertain figure is an appropriate basis on which to take away benefits from hundreds of thousands of people and put them into poverty?

[Lord Livermore (Lab)]

I hope my noble friend is not following the path of Liz Truss and the party opposite by criticising the OBR, because that is not a sustainable basis on which to build economic policy. The Chancellor has been clear that the fiscal rules are non-negotiable, and the OBR has confirmed that the Government are on track to meet them. On the wider policy of welfare reform, as I have said before, the system was unsustainable. It had the wrong incentives, and it is important that we get people back into work, because that is the best route out of poverty.

[Baroness Gohir (CB)]

My Lords, the welfare cuts will push women, children, the disabled and ethnic minorities further into poverty and lower their living standards. Surely, this is discriminatory and in breach of equality and human rights laws. Can the Minister tell us what consideration was given to equality laws? First, it was pensioners, now the disabled—why are this Government targeting the most vulnerable in society?

[Lord Livermore (Lab)]

They are not, and I am sure that the policies are fully in line with all equality laws, because that would have been signed up to before the policies were published. On what we are doing for working people, we saw yesterday that wages are now rising faster than prices, and that in this Parliament living standards will rise at twice the rate they did in the previous Parliament.

[Lord Bellingham (Con)]

During the Minister’s main response, he mentioned small businesses, SMEs, job creation and deregulation a number of times. Can he give the House the names of any SMEs that support the Employment Rights Bill?

[Lord Livermore (Lab)]

No, I do not have a full list of all SMEs in front of me, and I am not sure that that is a sensible question to ask me, if I am honest. Everyone is clear that we have a very clear small business strategy. We are helping small businesses to expand and grow, and to trade with the European Union.

[Baroness Winterton of Doncaster (Lab)]

My Lords, the fact is that areas such as South Yorkshire suffered from years of economic mismanagement and underinvestment by the previous Government. This Statement shows that, by stabilising the economy and investing in construction, defence and clean energy industries, the Government, with a hands-on approach, can create highly skilled, well-paid jobs and stimulate growth. But can my noble friend the Minister assure me that there will be a laser-like approach to areas such as South Yorkshire, which have been neglected for too long?

[Lord Livermore (Lab)]

I am grateful to my noble friend for that question and yes, I absolutely can give her that assurance. The Chancellor’s construction skills announcement yesterday—referred to by the noble Baroness, Lady Neville-Rolfe, in her opening comments –shows that, over this Parliament, the Government are funding a £625 million package to boost skills in the construction sector. This is expected to provide up to 60,000 more skilled construction workers to support the Government’s plans to deliver 1.5 million homes and progress vital infrastructure projects right across our country.

My noble friend talks about the importance of regional growth in areas such as South Yorkshire. As she knows, growth is the central mission of this Government. Through the growth mission the Government are restoring stability, increasing investment and reforming the economy in order to drive up prosperity and living standards across every single region of the UK—in our cities, our towns and our communities. So far, we have done a considerable amount of work to increase growth and living standards throughout the country, but I am very aware there is a lot more to do.

[Lord Skidelsky (CB)]

My Lords, do the Government believe that we have a shortage or a surplus of labour? The question arises because the OBR has calculated an output gap of 0.5%, closing by 2027, which suggests that we actually have full employment, yet that flies in the face of common sense. We have 1.5 million people, or 4%, unemployed; 8.4 million, or 20%, working part-time; 2.3 million, or 5%, on disability benefit; 3.3 million, or 8%, on incapacity benefit; and 4.2 million, or 10%, drawing sickness benefit. I am not suggesting that they are all available to work—of course that is not true—but some of them are. Can the Minister ask the OBR to make clearer the basis of its calculations of capacity and output gaps? On those depends the whole success of the Government’s economic strategy.

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question and his expertise on this matter. He rightly highlights one of the most important challenges facing this country, which is inactivity. We have far too many people who are economically inactive. We are the only country in which inactivity has not reduced to pre-pandemic levels at this point, and that clearly is not a sustainable situation. A lot of our policies are driven towards ensuring that people can re-enter the labour market, exactly as he says. On speaking to the OBR, I am more than happy to make that point to my colleagues.

[Lord Forsyth of Drumlean (Con)]

My Lords, the Minister is a man of integrity whom I hold in great regard and respect. So could he just be straight with the House and acknowledge that further cuts in public expenditure or more tax rises are absolutely inevitable, given the impact of the Budget on growth?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his very generous comments; I hold him in equally high regard and have enormous respect for him and his expertise in this matter. I do not think, however, that what he says is in any way inevitable. He talks about the impact of this Budget on growth. As he will know, yesterday the OBR upgraded its growth forecast from 2026 onwards for every single year of the forecast. For the first time, the OBR has recognised one of the major planks of our growth strategy—the planning and infrastructure work we are doing. It says there will be a permanent increase in growth of 0.2% by 2029, and 0.4% over the course of the decade. So the impact on growth of yesterday’s Spring Statement was positive.

The noble Lord talks about the risks. Of course there are risks. The OBR set out various scenarios for various risks, but the planning upgrade shows that there are also upside risks, as it were, in terms of growth. It shows that tax and spending is not the only way of meeting our fiscal rules; we can use growth to meet them, as yesterday’s planning announcement shows. It reduced the deficit by £3 billion in 2029 and as a result, there was growth of 0.2%. So I do not take what the noble Lord says as an absolute. Of course there are risks, and we are planning for those. We have rebuilt the headroom and eliminated the black hole in public finances, as he knows. That is an incredibly important way to set us up for the future.

[Lord Lemos (Lab)]

My Lords, the OBR forecasts that the Labour Government will meet two of the fiscal rules earlier and will be within touching distance of their new homes pledge. Can the Minister comment of those areas of progress on delivering growth, particularly the new homes pledge?

[Lord Livermore (Lab)]

I am grateful to my noble friend. Yesterday, the OBR said, as I have just outlined to the noble Lord, Lord Forsyth, that the Government’s planning reforms will increase our economic growth and, most importantly, will put us within touching distance of meeting our 1.5 million homes pledge. The OBR said that we will get to 1.3 million homes purely on the reforms we have introduced in the first nine months of this Government. Clearly, those additional homes are incredibly important. At the same time, we announced a major programme of construction skills works, so that we have the skilled workers necessary to build the homes we need.

[Lord Evans of Rainow (Con)]

Further to the question asked by the noble Baroness, Lady Kramer, regarding American corporations paying tax to the UK, what assessment has the Treasury made of the Republic of Ireland and its ability to attract American corporations? That is due to a combination of things—the corporation tax is half that of the UK’s, and there are lots of other tax incentives that are taken directly out of the UK economy. I appreciate that the Minister may not be able to answer this in full here, but can he write to me if there is an assessment? The Irish economy has been transformed by attracting American inward investment. Perhaps we could learn a thing or two from them.

[Lord Livermore (Lab)]

It is right to focus on inward investment. That is a very important aspect of our growth strategy. On corporation tax, we have set out clearly that we will cap it for the duration of this Parliament. If there is a competitive threat then we will act. That contrasts with the previous Government, under whom corporation tax rose and fell constantly, which did not give businesses the stability that they need. Inward investors tell us that planning is the number one barrier to bringing money into this country—it gets tied up in planning for years, with horror stories of planning applications lasting 13 years or more. Our planning reforms are vitally important, as they will raise skills to create that skilled workforce. The number one thing inward investors are looking for is stability. I genuinely believe that the Budget last October, in wiping the slate clean and repairing the public finances, provided an incredibly important platform of stability to allow such investment to take place.

[Lord Scriven (LD)]

The Minister believes in compassion and fairness. A couple in a non-disabled house receiving universal credit will be £370 a year better off with the reforms announced yesterday, but a couple on universal credit, where one is disabled and the other is a full-time carer, will lose £10,300 a year due to changes to PIP and the carer element of universal credit. How is this compassionate and fair?

[Lord Livermore (Lab)]

The noble Lord asks me what is compassionate and fair. I do not believe that one in eight young people not in employment, education or training is compassionate or fair. I do not believe that writing off an entire generation is compassionate or fair. I do not believe that 1,000 people coming into PIP every day is compassionate or fair. Is the noble Lord saying that we do not need any reform to our welfare system? I just do not believe that that is the case.

[Lord Rosenfield (Non-Afl)]

My Lords, as has been highlighted, the core fiscal judgment of the Chancellor is that the policy measures announced yesterday will maintain the fiscal headroom of £9.9 billion. If that is a balanced judgment, the risk of that headroom growing or shrinking in the near future should be broadly equal. However, in the light of the significant downside risks—tariffs, weak growth, policy risk—does the Minister agree that the risks are weighted to the downside? Although spending cuts and tax rises might not be inevitable, the implication is that it is more likely than not that further tax increases or spending cuts will be required to maintain that headroom.

[Lord Livermore (Lab)]

I thank the noble Lord for his question. I was lucky enough to work with him in the Treasury when he was an official there, so I know that he knows what he is talking about. Clearly, there are risks, as I set out to the noble Lord, Lord Forsyth. The job of the Government is to mitigate those risks and pursue a growth policy to ensure that we have sufficient growth and are resilient to the challenges that we are going to face. We have to get our public finances in order so that we have that resilience. We have to pursue stability, investment and reform. We are doing all those things to ensure that we have resilience. On tariffs, we are engaged in a conversation with the United States Administration, so we are doing what is necessary. We have rebuilt the headroom in full and we have, I think, provided the resilience needed to cope with an ever-changing and uncertain world.

[Baroness Penn (Con)]

The Minister has repeatedly cited figures on living standards. What impact will yesterday’s Statement have on the living standards of the poorest half of our population?

[Lord Livermore (Lab)]

The impact assessment that has been done so far does not include the £1 billion re-investment, so I am not sure that we can look at those figures right now. On real household disposable income, living standards will now grow this year at double the rate expected at the time of the Budget. The noble Baroness was a Treasury Minister when we saw the worst ever Parliament for living standards in history. Living standards will rise twice as fast in this Parliament compared with the last.

[Baroness Bousted (Lab)]

My Lords, the noble Baroness, Lady Neville-Rolfe, said that we all want growth. She will perhaps have seen the comments of the shadow Chancellor. He admitted that the party opposite’s approach to defining its economic policy is a

“blank sheet of paper exercise”.

There have been reports of Conservative Party researchers scouring their archives for policy inspiration. Is that not why we had no growth under the last Administration and why this Government need to correct the course, through the Autumn Budget and the Spring Statement?

--- Later in debate ---

[Lord Livermore (Lab)]

My noble friend very well draws attention to two key problems with the party opposite: the first is its record and the second is its future plans. Its record on growth is an absolute catastrophe. We saw austerity, followed by Brexit, followed by the Liz Trust mini-Budget. Growth was one of the biggest failures among a whole litany of failures of the previous Government. Looking forward, it has absolutely no plan for growth. All it can do is oppose. It has no plan of its own. It has no alternative policies. It opposes our measures to get stability, to get investment into the economy and to reform our economy. All it wants to do is criticise and talk down the economy. If the party opposite is going to criticise, it must come up with an alternative plan.

[Lord Vaux of Harrowden (CB)]

My Lords, the Minister has mentioned several times this £1 billion re-investment, which is not included in the OBR forecast. Can he confirm that the impacts of the Employment Rights Bill, which we are soon to discuss, are also not included in the OBR forecast, including the £5 billion cost to business that it will create? The OBR says that:

“Employment regulation policies that affect the flexibility of businesses and labour markets or the quantity and quality of work will likely have material, and probably net negative, economic impacts on employment, prices, and productivity”.


Does he agree with that?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. I hate to correct him, but I did not say that the £1 billion is not included in the OBR’s forecast. I said that it is not included in the OBR’s impact assessment; that is something different. The £1 billion is included in its forecast, and he is right to say that the Employment Rights Bill is not. The OBR gives a commentary on it, which he quotes from, but the Employment Rights Bill is not included in the forecast because it is still working its way through Parliament—it has its Second Reading today. We are confident that the Bill will result in ordinary working people having more money in their pockets and the security to spend that money by not having to worry, from week to week, whether they will be in work or how many hours they will get.

[Lord Purvis of Tweed (LD)]

My Lords, last week, the Development Minister told this Chamber that it was government policy to return ODA to the legally required 0.7% when the fiscal circumstances allowed—meaning when the Government’s fiscal tests are met. However, yesterday, the Green Book showed a pound-for-pound cut in ODA, linked with another policy expenditure. Can the Treasury Minister be very specific that, if the Government’s fiscal tests are met within this Parliament, we will return ODA to 0.7% in this Parliament?

[Lord Livermore (Lab)]

I am grateful to the noble Lord. The two statements that he makes are perfectly consistent with each other. We are absolutely committed to returning ODA to 0.7% when the fiscal conditions allow and we are currently switching ODA spending into defence spending. Those two things are perfectly consistent.

[Viscount Younger of Leckie (Con)]

My Lords, the Government have had difficulty in scoring the £1 billion that has been mentioned and predict that there will be 16,000 fewer jobs as a result of the welfare changes. How have the Government come to this huge sum, where is it going to help and how many people are predicted to be helped? The Government must know this before the OBR revert in September. If they do not, why not?

[Lord Livermore (Lab)]

I am grateful to the noble Viscount; he has far greater expertise in these matters than I do. The Secretary of State, when she presented the package of reforms to Parliament, said that the costings that she was setting out were subject to final costings by the OBR. The OBR has now set out its final assessment of costings and confirmed that this welfare package will reduce welfare spending by £4.8 billion in 2029-30. Following the OBR’s final assessment of the welfare savings from the package, taking account of the £1.4 billion of investment the Government are putting towards the reforms, including the £1 billion of employment support, the net welfare savings of this investment is around £3.4 billion.

[Viscount Stansgate (Lab)]

Can my noble friend confirm that the Statement’s provision for capital spending is crucial if the UK is to sustain and safeguard its research and development budget and infrastructure, such as data centres, that will be vital for future growth? Does he agree that we will need a combination of our world-class universities, entrepreneurs, emerging AI companies and others not only to start up but to scale up businesses in this country? As your Lordships’ House’s Science and Technology Committee is now investigating, it is the scale-up that is the real challenge.

[Lord Livermore (Lab)]

My noble friend is right. The Autumn Budget increased capital investment by £100 billion over the Parliament, including investment to protect record R&D funding, which, as my noble friend said, is vital for growth. The OBR has looked at the growth impact of that investment across a decade and it has been clear that those capital investments—which, incidentally, the party opposite opposed—will lead to a significant 0.4% increase in growth over the longer term. Not cutting capital spending, which the party opposite did time and again, was one of the most significant growth measures that the Chancellor outlined in her Statement.

My noble friend also talked about start-ups and scale-ups. He knows that I agree with him 100% on that. This country is extremely good at start-up; it is much less good at scale-up. Getting the necessary capital to those scale-ups is one of the most important things that we can do.

[Lord Howell of Guildford (Con)]

My Lords, if the Government want to reduce the size of the Civil Service significantly, as I believe they do, will the Minister advise the Chancellor to go a long way back and look at the period 1970-82, when we succeeded in cutting the central Civil Service by a third, from about 800,000 to 500,000 people? Will he remind her that this was done not entirely by administrative efficiency, although there are always gains to be made there, but by removing whole functions, industries and services from the bureaucratic sector and putting them into the regulatory or competitive sector? Will he also remind her that it takes a very long time and very careful planning to do that?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his expertise and experience in this matter. I am more than happy to look back at the period that he mentioned. The world has perhaps moved on a bit since then. Most importantly, he will see in the transformation fund that the Chancellor set out yesterday the importance of AI tools, for example, to modernise the state. Clearly, these types of technology did not exist at the point he spoke about. Using modern technology to help us get productivity savings in the public sector, in the Civil Service and more widely, will be an important part of the modernisation programme.

[Lord Katz (Lab)]

My Lords, I thank my noble friend the Minister for the Statement. In the run-up to the Spring Statement there was a lot of guff, frankly, about a so-called return to austerity. Although there have been some difficult decisions to make, is it not the case that, far from delivering the ideological austerity that we saw under the noble Lord, Lord Cameron of Chipping Norton, the Government are delivering real-terms increases in day-to-day spending, as well as much needed capital investment?

[Lord Livermore (Lab)]

I am grateful to my noble friend for making that point. The Spring Statement confirms that day-to-day spending is growing in real terms in every single year of the forecast period by an average of 1.2% a year. The spending review envelope is fully protected. This means that we will spend £50 billion more on day-to-day spending in 2028-29. I remind the House that the noble Baroness opposite said in her opening remarks that she thinks spending is too high, so I am looking forward to hearing what she would like to cut from that £50 billion the next time we have a debate.

Strategic Priorities Statement: Defence

Lord Livermore Excerpts

Tuesday 25th March 2025 Lords Chamber

[Lord Jackson of Peterborough]

To ask His Majesty’s Government why the Chancellor of the Exchequer did not specifically include the defence industry among the priority sectors in her Statement of Strategic Priorities to the National Wealth Fund, published on 19 March.

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

My Lords, consistent with the Government’s manifesto, the National Wealth Fund supports the growth and clean energy missions, prioritising investment in advanced manufacturing, digital technologies, clean energy and transport. Recognising the need to adapt to a rapidly changing world, the statement of strategic priorities set out that the National Wealth Fund will also invest in dual-use technologies which support the UK’s defence and security, and will support the wider industrial strategy, including in defence.

[Lord Jackson of Peterborough (Con)]

My Lords, the EU has apparently taken the decision to shut the UK out of its €150 billion defence fund unless we acquiesce on a new fishing agreement. Clearly, the Macron Administration and the EU seem to care more about fish than our collective defence. In addition, domestic pension funds like NEST and the People’s Pension have refused to invest in defence firms on so-called ethical grounds. Given these acute challenges, does the Minister agree that the Chancellor’s decision further weakens and undermines a crucial sector? Will he implore his ministerial colleagues to reconsider their priorities so that there is proper consistency in government?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question, but I am not sure he listened to the first Answer I gave. I very clearly said that the statement of strategic priorities sets out how the National Wealth Fund will invest in defence. It says very clearly that it should invest in

“dual-use technologies and … support supply chain resilience across these priority sectors, to better support the UK’s defence and security”.

It also says that the National Wealth Fund

“should consider the role it can play in supporting the delivery of the wider Industrial Strategy, including in defence”.

That wider industrial strategy absolutely achieves many of the things the noble Lord is talking about. The strategic aim of the defence industrial strategy is to make sure that the imperatives of national security and a high-growth economy are fully aligned.

[Lord Browne of Ladyton (Lab)]

My Lords, I thank the noble Lord, Lord Jackson of Peterborough, for bringing the attention of your Lordships’ House to this issue and once again encouraging me properly to research a subject. On 19 March, the Chancellor wrote to the CEO of the National Wealth Fund to communicate the Government’s strategic priorities for the fund. That latter document on three occasions explicitly identifies defence as a priority under Investment Principle 2. It also goes on to enjoin the CEO to refer, in assigning priorities, to the Government’s industrial strategy Green Paper, which in turn refers to the importance of the UK’s defence sector no fewer than 38 times. The former Conservative Business Secretary, Greg Clark, described that Green Paper as a serious and substantial document and applauded it for singling out eight sectors, including defence, as priorities. Does the Minister agree with me that it is reasonable to expect the CEO of the fund to read beyond the press release and to examine in depth the correspondence and references to which his attention has been drawn?

[Lord Livermore (Lab)]

I am very grateful to my noble friend for his question. He far more eloquently than me set out what I was attempting to say in my previous answer. He draws attention to the importance of reading the documents that are in your Question before tabling your Question.

[Lord Stirrup (CB)]

My Lords, has the Minister seen the recent piece in the Financial Times setting out the challenges posed to defence companies by the high level of friction within Europe-wide supply chains? This is not just a Brexit issue. Brussels has criticised the overregulation of intra-EU transfer of defence-related products. Does the Minister agree that we and our European partners need to address this issue as a matter of urgency if our defence industry is to develop the high degree of efficiency that is so necessary in the light of the serious challenges we face?

[Lord Livermore (Lab)]

I very much agree with the noble and gallant Lord. I hope those issues will be addressed through the Prime Minister’s work with the European Union on defence and security co-operation, and in the defence industrial strategy and the wider EU reset.

[Baroness Smith of Newnham (LD)]

My Lords, it is clearly welcome that the strategy includes defence. What support are His Majesty’s Government planning to give to small and medium-sized enterprises working in dual-use technology? Are His Majesty’s Government thinking about letting contracts in the short to medium term, so that, as we build up our defence expenditure towards 2.5%, the companies have the certainty of knowing that there will be contracts?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. The issues she raises will be addressed exactly by the defence industrial strategy. One of its key objectives, for example, is procurement—increasing its pace and opening it up to small and medium-sized enterprises, as she said. I hope that there will be more for her to hear in tomorrow’s Spring Statement.

[Baroness Penn (Con)]

My Lords, can the Minister confirm that any defence spending channelled through the National Wealth Fund will not be constrained by the Government’s fiscal rules, specifically the investment rule, as those investments will be scored as net financial assets under the new measure of debt introduced by the Chancellor?

[Lord Livermore (Lab)]

I can absolutely confirm that all National Wealth Fund spending will be within the fiscal rules.

[Lord Foulkes of Cumnock (Lab Co-op)]

My Lords, is the Minister perplexed, like me, by the negativity coming from the Benches opposite? As well as many tens of billions of pounds in the National Wealth Fund, our Government have given billions to infected blood compensation, and next month we will get the triple lock on pensions. Those are three tremendous steps forward. Can the Minister urge the Chancellor to be just a little more upbeat tomorrow?

[Lord Livermore (Lab)]

I will absolutely pass that on to the Chancellor.

[Baroness Neville-Rolfe (Con)]

My Lords, defence is the single most important activity of the state, and it is therefore unfortunate that many ESG funds have excluded investment in defence stocks, hitting our innovative UK companies. Does the Minister agree that the rebranded National Wealth Fund must lead the way more clearly and work with private sector funds to spur significant investment in the UK defence sector, as well as in other priority areas?

[Lord Livermore (Lab)]

I do agree with that, because the noble Baroness described exactly what the National Wealth Fund is there to do: to work closely with the private sector to catalyse more private sector investment in industries that we consider to be priority sectors. As the rest of this Question has shown, defence is very much one of those priority sectors.2

[Baroness Blackwood of North Oxford (Con)]

My Lords, for the National Wealth Fund to crowd in capital at the scale envisaged, it must be empowered to deploy capital against higher levels of risk appetite and against a wide range of products and financial investments. Moreover, it will need to operate at market pace. Whatever the strengths of the Treasury, historically it has not been renowned for its risk appetite or pace. What steps does the Treasury intend to take to ensure that the National Wealth Fund is empowered to act, not only with the appropriate risk appetite but with the necessary pace, to attract private sector investment?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. I do not agree with her criticism of the Treasury, but I agree with what she said about risk appetite. That is exactly why, when the Chancellor wrote to the National Wealth Fund, she specifically said that the

“economic capital limit will … be increased from £4.5 billion to £7 billion, allowing”

the National Wealth Fund to “take on greater risk”, and giving greater “flexibility over its investments” to

“support more projects that struggle to access private finance”.

[Lord Watts (Lab)]

My Lords, does the Minister welcome this Question from the Opposition? Does it not once again demonstrate the problems of Brexit? We hear every week about differences, and today they are complaining about access to aviation and defence. Is it not time that they changed their position and stopped asking questions that give us an advantage?

[Lord Livermore (Lab)]

I am very happy to agree with my noble friend’s assessment of the damage that Brexit has done to our economy.

[Lord Purvis of Tweed (LD)]

My Lords, many of our European partners, particularly Poland, are seeking to diversify satellite technology to overcome the reliance on certain technologies in the context of increased defence expenditure. Surely that would also be the United Kingdom’s ambition. Can the Minister confirm that, as we increase our defence expenditure—which I welcome—there is now the opportunity to work much closer with our European allies, rather than using part of that increased expenditure on Starlink, which is owned by Elon Musk?

--- Later in debate ---

[Lord Livermore (Lab)]

I am very happy to say that, as the noble Lord knows, this Government plan increase defence expenditure to 2.5% by the end of the Parliament. However, it is not for me to set out today exactly how that will be spent.

[Baroness McIntosh of Pickering (Con)]

The Minister referred in his first Answer to the role of Great British Energy in delivering clean energy. How will the Government achieve that if the budget for GB Energy is reduced in the forthcoming spending review?

[Lord Livermore (Lab)]

The noble Baroness said “if”, and I do not in any way accept that. She should wait for the spending review to see what will happen.

Closed-Ended Investment Companies: Cost Disclosure

Lord Livermore Excerpts

Monday 24th March 2025 Lords Chamber

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

My Lords, last year, the Government legislated to reform retail disclosure so that it is fairer and more proportionate. Recognising the concerns mentioned in the Question, the Government also took exceptional action to exempt investment companies from cost disclosure requirements to provide interim relief while the replacement regime is finalised. Operationalising this legislation is now a matter for industry and the regulator.

[Baroness Wheatcroft (CB)]

My Lords, I thank the Minister for that response, but despite the Government’s welcome SI, and FCA emergency guidance last November, some retail platforms continue to ban customers from investing in UK investment trusts that do not disclose their ongoing charging figures, even though those figures are misleading, as the Government accept. Will the Minister hold urgent talks with the FCA to insist that this barrier to investment be removed immediately?

[Lord Livermore (Lab)]

I am very grateful to the noble Baroness for the question. I also pay tribute to other noble Lords, including the noble Baronesses, Lady Altmann and Lady Bowles, for their continued championing of the investment trust sector and for bringing their concerns to the Government’s attention in their Private Members’ Bills in this Parliament and the previous one. As a result of their campaigning, the Government have now legislated to provide the Financial Conduct Authority with tailored powers to deliver a new disclosure regime. The Government have also temporarily exempted investment companies from cost disclosure legislation.

On the specific matter raised by the Question, of requirements by investment platforms for the investments they offer, that is now a matter for the industry and the regulator. While I recognise that the Government may not have gone as far as the noble Baroness would like, we have a shared objective of ensuring that that this reform achieves the right outcomes for investment companies and for the sector as a whole.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, I declare my interest as a director of the London Stock Exchange. As the Minister said, in November, the PRIIPS SI made an immediate policy and legislative change in view of responses to HMT’s CCI consultation, aiming to free the investment trust market from incorrect legislation. Did the Government expect the FCA to reverse that in their December consultation? Will the Government reassert their policy? Will they also assert their policies against duplicative legislation and in favour of growth for consumer investments? If not, how do the Government expect to harness either retail or professional investment in this valuable sector for infrastructure?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. I absolutely recognise the key role that the investment company sector plays in the UK’s economy, as she sets out, representing more than 30% of the FTSE 250 and investing in assets that support the Government’s growth agenda. We have listened to industry concerns and, last year, as the noble Baroness said, we legislated to reform retail disclosure. The FCA launched a consultation on an entire replacement regime in December. The Government look forward to seeing the outcomes of that consultation in due course.

[Lord Forsyth of Drumlean (Con)]

My Lords, what is going wrong when Parliament—and all credit to the Government for acting on this matter—and the Government pass a statutory instrument and the regulator then puts out a consultation document that provides for reversing what the Government have said should happen and what Parliament has decided? I know that the Minister must be aware of the number of Peers and others who have written on this matter. Surely the regulator is accountable to Parliament and the Government and should behave accordingly.

[Lord Livermore (Lab)]

I absolutely recognise the issues that the noble Lord raises. The Government’s view is that now that they have temporarily removed investment trusts from cost disclosure requirements, implementation is a matter for the industry. I recognise that there are some frustrations among the sector, but we believe that operationalising this legislation is a matter for the industry and the regulator.

[Lord Leigh of Hurley (Con)]

My Lords, I declare my interests as an investor in investment trusts and as a senior partner at Cavendish, which has written in to the consultations. It is quite clear that investment trusts offer members of the public the opportunity to invest in assets that would not otherwise be available to them and should be encouraged. The problem is that the rules were set in Brussels, and Europe does not have investment trusts. We now have the opportunity to do something bespoke and specific for us. Does the Minister agree that that will not be possible with the current structure that we have with the FCA and that it is now time that the FCA and, for that matter, FOS, were brought within government so that the situation as my noble friend Lord Forsyth explained it can be resolved?

[Lord Livermore (Lab)]

I do not think I can agree with the second part of the noble Lord’s question, but I absolutely agree that these vehicles do not exist in Europe and do exist in this country, which is exactly why the Government legislated to reform retail disclosure in the way that they did so that it is fairer, more proportionate and more suited for UK markets.

[Lord Watts (Lab)]

My Lords, does the Minister agree that the system needs to be transparent and, quite frankly, there need to be effective rules? If we have effective legislation or rules, and we have transparency, is that not what we are seeking?

[Lord Livermore (Lab)]

Yes, I agree with my noble friend. The Government have provided the Financial Conduct Authority with tailored powers to deliver a new disclosure regime that is fairer and more proportionate and, as I said in the previous answer, tailored specifically to UK markets. I know that the FCA is engaging extensively with the industry and other interested parties as it looks to finalise its rules.

[Baroness McIntosh of Pickering (Con)]

Does the Minister share my concern about what has happened to investment trusts over the past six to 12 months? What is the Government’s policy regarding saving?

[Lord Livermore (Lab)]

Yes, I do share the noble Baroness’s concern, which is exactly why we have done all the things that I have set out so far in this Answer. The Government’s policy regarding saving is that we think it is a good thing and we want to encourage more of it.

[Baroness Neville-Rolfe (Con)]

Does the Minister agree that the most important objective in the savings area is to ensure that sufficient investment opportunities are available, whatever their nature, to allow and encourage UK investors to save and invest, especially in UK stocks? Will he outline how the Government intend to support products that facilitate private investment in important areas such as property and infrastructure, as closed-ended funds are generally well suited to that?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. What she is saying is right; the Government share her view. That is exactly why the Chancellor established the pensions review, for example, in her recent Mansion House speech. Her view is that the pensions review could unlock billions of pounds in additional investment in fast-growing businesses and infrastructure while improving outcome for savers. That is exactly the objective of that policy.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, the Minister must know that some 329 firms and individuals signed a response to the HMT consultation, and there were many other submissions besides. The Government said that, in response to that consultation, they changed policy. How can that policy be changed a month later? This time, 558 firms and individuals have signed the response to the Financial Conduct Authority, with many more similar, separate responses. Does that not tell the Government that the direction of travel is wrong and that if they want this solved in less than another two years, by when this investment opportunity will be gone, they will have to intervene?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness, again, for her question. I am not sure that we are going to agree on this specific point. I have already set out the Government’s position very clearly. I recognise that there are frustrations among some noble Lords and in the sector. It is the Government’s view that operationalising this legislation is a matter for industry and the regulator. The Government look forward to seeing the outcomes of the FCA’s consultation in due course.

[Baroness Bennett of Manor Castle (GP)]

My Lords, in an earlier answer, the Minister said that the Government want to encourage savings and think that saving is a good thing. How does the Minister square that with the fact that the Government are planning to increase the supply of credit to households, regarding that as a way to encourage growth? Despite the obvious risks that increasing household credit brings—and the fact that, as the Economics Observatory noted, consumer confidence remains weak, as it has been since the Brexit vote in 2016, and has declined since mid-2024—how do we square up encouraging savings and encouraging credit?

[Lord Livermore (Lab)]

The Government have a very clear objective of increasing living standards in all parts of the country. We want all households to have more money available to spend and to save.

[Baroness Bowles of Berkhamsted (LD)]

My Lords—

[Baroness Bowles of Berkhamsted (LD)]

Early last week, the Government published another statutory instrument in draft form with a lot of amendments to MiFID. Can we expect that those MiFID amendments to legislation will likewise be ignored by the Financial Conduct Authority in due course?

[Lord Livermore (Lab)]

I think that is a matter for the Financial Conduct Authority.