(1 day, 16 hours ago)
Lords ChamberMy Lords, like my colleagues in the other place I welcome this strategy, which if well managed can significantly improve the UK’s potential for growth. My colleague, the MP Sarah Olney, who responded to this Statement in the other place, focused very much on the absence of a serious discussion of skills in the paper. She did not get a very satisfactory answer. I hope that we will hear something more from the Minister today, because that is the Achilles heel of a great deal of this Statement. However, I am going to focus not on the specific projects or on the issues that were covered in the other place but on some critical aspects of the financing.
As the noble Baroness, Lady Neville-Rolfe, indicated, the strategy proposes an updated version of public/private partnerships. I was recently privileged to chair a round table. Under Chatham House rules, I cannot tell you who was there by name, but there were leading developers, contractors and, basically, the money. To my amazement, and completely in contrast to most public statements, everyone started out by arguing against such a flawed model. Through an hour’s discussion, we identified some conditions under which a PPP could work. I will happily share that report, when it is prepared, with the Minister. The most significant condition was that the public sector has to field an educated buyer team with world-class negotiating skills, with world-class engineering, legal and financial knowledge in support. According to the people we talked to, such teams have not been in evidence.
The second most significant condition was that the projects must be specified in very fine detail, far more so than for a conventional financing and, especially if outcomes-based, allowing only for minimal variances. This condition, which many people will agree is essential for successful PPPs, seriously limits the eligible projects. I would like to hear from the Minister how much of a gap this might mean if these issues are pursued, as I hope they will be.
My second finance issue is specific to London, which will not receive government funding for much new infrastructure, even though it drives the national economy. If that is to be the case, London needs to be able to go directly to the financial markets at scale, to raise money against future value added, to build projects—and without the constraints associated with the current tax increment financing schemes, which are heavily laden with Treasury control. Once refined, this could extend to other parts of the country. I stress the urgency of dealing with this issue. London is the UK’s golden goose.
My last issue is to warn the Government again against abusing the regulated asset base as a mechanism to finance small modular nuclear reactors. In the Conservative era, the estimate that we were given on the Economic Affairs Committee for the then Government’s plans was an £80 increase to annual energy bills for ordinary people—£10 for each of eight SMRs. It was clearly an underestimate then and would be even more so now.
Does the Minister agree that the ordinary bill payer must not be treated as the stuffee—believe it or not, that is the common-parlance term—who must carry the risks and costs while others take both the immediate and future profits?
I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their comments and questions, and for their broad support and welcome for this strategy.
The noble Baroness, Lady Neville-Rolfe, began in her non-partisan mode, which I will try to replicate if I can. She talked first about the low rate of investment, and she is absolutely right. When we came into power, we saw the lowest rate of private sector investment as a share of GDP in the G7; we clearly have to turn that around. We saw public sector investment repeatedly cut, which is one of the reasons why we changed the fiscal rules in the way that we did, to incentivise capital investment and try to protect it from being cut to subsidise day-to-day spending. I am very grateful to the noble Baroness for her support for that investment and for the plan that is in front of us.
I am grateful to her for welcoming the maintenance fund. As we speak, there is a £46 billion backlog in the public sector maintenance of our schools, hospitals, prisons and courts. As part of this plan, we are putting £5 billion into the maintenance backlog for the NHS, £3 billion into our schools by 2030, and £600 million into courts and prisons. That is really important, so I am pleased that there is cross-party support for it.
The noble Baroness, Lady Neville-Rolfe, talked about governance and delivery capacity. I completely agree with her on the point about delivering value for money. Obviously, the strategy is not just about giving long-term certainty of investment, in terms of the numbers—she is quite right to say that—but what sits beneath them. The strategy is about trying to do things differently and to make sure that we get the strategic planning behind the investment that we are making.
That is the insight that sits behind the creation of NISTA, the National Infrastructure and Service Transformation Authority. It brings together under one roof infrastructure expertise combined with the policy and strategy insight of the National Infrastructure Commission and the delivery specialism of the Infrastructure and Projects Authority. Every two years, it will do a report into the delivery of this strategy. It will give Ministers real-time advice and expertise on specific projects. I hope that that goes a long way to solving some of the issues that the noble Baroness talked about.
The noble Baroness also talked about where the money is coming from. The announcements, as part of the spending review envelope, were fully funded and fully costed as part of that process and are within the current fiscal envelope. Beyond that, we have said that we will guarantee that investment spending will grow by at least inflation for the period beyond the spending view for a total of 10 years, which gives people certainty about the level of infrastructure investment that we are making.
The noble Baroness, Lady Neville-Rolfe, talked about PPPs, and the noble Baroness, Lady Kramer, also talked extensively about this. I agree with a lot of what she said and respect her great expertise on this matter. She talked about the criteria for success, and lessons clearly need to be learned from our previous experience of PFIs and PPPs. The Government are absolutely committed to that. There are several reports now available to us; the NAO’s lessons learned report, for example, provides vital information on what we can do differently and can do better.
The noble Baroness, Lady Kramer, said that, once you apply those criteria, it severely limits the number of projects for which you can use PPPs. To answer the question from the noble Baroness, Lady Neville-Rolfe, I do not think that this is about huge, widespread use. We clearly want a widespread degree of private sector capital coming in and financing infrastructure, and we want to continue to invest alongside the private sector and the private sector to step up and fund things.
We see a role for PPPs but in a very limited way and where their role will clearly be appropriate. We have said specifically that we will explore the feasibility of using new PPPs—learning lessons and applying the right criteria—for taxpayer-funded projects in very limited circumstances where they could represent value for money. We have given two specific examples where we think they could do that. One good example is Euston—the HS2 station—where we will investigate the use of PPP models for user-funded infrastructure. The other is the Lower Thames Crossing, where, again, we think there is the potential for the criteria that the noble Baroness mentioned to apply. There are a limited number of examples but those are two where there is a clear case to be made.
On housing, I completely agree that 1.5 million new homes is a stretching target. It absolutely remains our commitment and we think we are on course towards achieving it. We put a record amount of funding—the greatest for several generations—into social housing. The noble Baroness is clearly right that the potential occupiers want that housing now, which is why that funding has gone in. She wanted reassurance, and I can say that we firmly believe that we are on course towards that housing target.
Both noble Baronesses talked about skills, and I completely agree. It is good that we are in the spirit of consensus and cross-party thinking here. Obviously, with these commitments, it is absolutely right that we need people to build the things that we want built. Clearly, we can always do more, but we have made a strong start. We have made a record commitment to invest in skills—£1.2 billion of additional investment per year by 2028-29 to support current and future workforce needs.
I know that we are in a cross-party mood, but I have to reflect the fact that the degree of underfunding that we inherited was substantial. We had to put in significant amounts of money—billions of pounds—just to stand still and just to plug the gap that existed between needed provision and the funding that was there. Having to plug that gap limits the extent to which we can move forward.
However, we have provided funding to support over 1.3 million 16 to 19 year-olds to access high-quality training—some 65,000 additional learners per year by 2029. The spending review has delivered £625 million to train up to 60,000 construction workers. In the industrial strategy yesterday, we announced that we will introduce new short courses for priority skills as part of the growth and skills levy, continue to roll out foundation apprenticeships and deliver a targeted package for engineering skills. We have specific packages for engineering and construction, both of which are priority occupations in the infrastructure strategy and the industrial strategy.
How do we choose the investment? We always talk about growth, and I think noble Lords can see that much of this investment is targeted towards the sectors that will, I hope, really drive our growth agenda—transport, energy and housing just to name three.
On the questions about London from the noble Baroness, Lady Kramer, I cannot give any commitments today on the future financing model, but I completely share her support for London and her reflection of it as the golden goose. Future investment in London will be central to driving the economy.
My Lords, I join the cross-party consensus on the issue of skills. The Minister referred to the 16 to 19 year-old skills requirement age group. Does he also accept that, if we are going to successfully get investment into sectors such as the energy sector, which is a key part of the development the Government have in mind, the university sector must also get the resources that are needed? In view of the cutbacks that have taken place in the university sector over recent years, can the Government, in co-ordination with the devolved Governments in Cardiff and Edinburgh, look particularly at this sector in order to get the resources in? We need action now. It will take three to five years before those people come out the other end, and we need them desperately to drive the scheme forward.
I completely agree with what the noble Lord said about the importance of that sector. He mentioned the example of the energy sector and, as I said, we have, in the industrial strategy, made an investment into engineering skills, which are particularly important in that sector. I hear what he is saying and we will keep driving towards what he wants us to achieve.
My Lords, the Minister may recall that I spent six years at No. 10 as Tony Blair’s strategy adviser. I spent a year of my time there, with the team of officials, looking at national transport infrastructure—road and rail. We quickly identified that we have by far the worst road and rail infrastructure of any major country; it was very easy to demonstrate. We went further and looked back—I cannot recall the precise term; I think it was 70 years, although it might have been slightly less—at national investment in infrastructure of all kinds over that period. It was the same story: we spent a smaller proportion of our GDP than any major country. Under both main parties, again and again, on every occasion when the economy went into slight reverse, national investment in infrastructure was cut back. Will it be different this time? Does the Minister know what proportion of GDP over this 10-year period is implied by this plan? If he does not, perhaps he will write to us.
I can definitely say yes to one of the noble Lord’s questions, which I am pleased to be able to do. He talked about making sure that this investment is not cut back according to the economic weather, as it were. I completely agree with what he said about how previous Governments did that. That is why the fiscal rules are as they are. That creates the space to ensure that capital investment can continue and is not used to patch up day-to-day spending. That is important for us to appreciate.
The noble Lord is absolutely right that there has been too little investment in transport infrastructure in the past. We have talked before in debates such as this about the importance of connectivity to economic growth and the agglomeration effects that you get from joining up cities with each other, and joining up towns to cities. This ensures that people can live close to where they want to work and can travel to work and, on the skills conversation we have just been having, gets skills into the right place. There are huge growth benefits from transport spending. Some of the money that we are putting in—£15.6 billion into the city regions, £2.3 billion for the local transport grant and £2.2 billion of funding for Transport for London—is vital to what we were just saying. On the percentage of GDP, I do not have that number to hand, but I will write to the noble Lord.
My Lords, the Government’s 10-year infrastructure strategy, and the industrial strategy published yesterday, are essential for future growth. If I had to single out one item in the 10-year strategy, it would be to develop our sovereign compute capacity for the future. I am a member of the Science and Technology Committee of your Lordships’ House, which is looking right now at the problems of scaling up science and technology companies. Can my noble friend the Minister assure the House that the National Wealth Fund will be able to provide vital early-stage development support for companies, because we want them to scale up in Britain for the benefit of Britain?
I am grateful for what my noble friend said. I share his enthusiasm for what we are doing in the innovation landscape, such as putting a record high of £22.6 billion into R&D as part of the spending review. It is exciting that yesterday the industrial strategy talked about allocating £2 billion for AI and £2.8 billion for advanced manufacturing. This is all incredibly important.
What my noble friend said is absolutely part of what the National Wealth Fund is for. My noble friend talked about start-ups and scale-ups. The British Business Bank now has a total financial capacity of £25.6 billion, which will result in a two-thirds increase in support for innovative UK businesses compared with 2025-26, crowding in tens of billions of pounds more in private capital The National Wealth Fund will play that role, but so too will the British Business Bank. That was one of the key announcements in yesterday’s industrial strategy.
My Lords, I shall do my best to comply with the spirit of cross-party consensus day. I should first declare from the register that I am chairman of Make UK, which has more than 20,000 member companies in manufacturing and infrastructure. I commend the Government on this 10-year infrastructure plan and yesterday’s industrial strategy because I did a review for the previous Government on foreign direct investment. Lack of consistency of policy was the number one item, and the others were connection to the grid, planning and other delays.
I want to ask the Minister about monitoring implementation. For the main industrial strategy, the Government have quite correctly set up an industrial strategy council where each sector—life sciences, advanced manufacturing, et cetera—has groups to monitor the implementation of the industrial strategy. The infrastructure plan is very complex; it includes skills, access to finance and, of course, energy and very large things. What mechanism will be used to independently monitor its implementation?
I am grateful to the noble Lord for the positive things that he said. I pay tribute to him and to Make UK for the work that they do. Clearly, the skills conversation that we just had is vital in that sector. Make UK always makes the point to me about the vital importance of engineering skills, so I hope that that is welcome.
The noble Lord did indeed do his review into foreign direct investment. I hope he does not think that it was just for the previous Government; we still talk about it now in this Government. A lot of the recommendations that he made in that review are things that we have been trying to take forward in this Government. That is a good example of the cross-party working that we have been discussing today.
The noble Lord is right that the industrial strategy will be taken forward by the industrial strategy council; that will be put on a permanent footing, which I think is important. His question is about the equivalent for this strategy. That is the National Infrastructure and Service Transformation Authority—NISTA—which I was talking about. It will monitor the strategy and help the Government to implement it. It will do two-year refreshes of this strategy to make sure that it is up to date and doing what it needs to do. Crucially, it will provide real-terms advice to Ministers when it comes to individual projects to make sure that we have the expertise that we need at our fingertips to be able to implement them.
My Lords, we on these Benches very much welcome this report. Of course, after decades of underinvestment, it is essential to ensure that our country can operate appropriately.
I will ask the Minister about infrastructure and adaption and resilience to climate change. Our climate is changing before our very eyes. In a number of places in this report there are vague promises to do things, not firm commitments. To pick up one example, although we welcome the £7.9 billion of capital for a new 10-year flood investment programme, the report says that the Government will merely “explore” setting a long-term, multiyear target for flood risk management in line with prior recommendations made by the NAO and the NIC. Will the Government go further on these things, recognise the speed at which climate change is happening, and put more effort into ensuring that we have the best policies in place?
I agree with the noble Earl on the importance of investment in net zero and measures to tackle climate change. From a growth perspective, it is not one or the other for those investments; they go hand in hand.
I do not quite agree with the noble Earl’s view on the vagueness of these commitments. We are putting real money behind real projects: £14.2 billion into nuclear; £9.4 billion into carbon capture and storage; £80 million of investment in ports to support floating offshore wind; and £13.2 billion for the warm homes plan. This is a huge amount of investment into real concrete action to move us forward. We were talking before about getting people on to public transport—for example, in relation to take-up of EVs. Action is going on across the board on the measures that he talked about. I am grateful to him for his support on that.
I very much welcome the strategy that the Minister relayed to your Lordships’ House. However, I refer him to the decision yesterday in the Northern Ireland High Court, which struck down the Northern Ireland Executive’s major flagship project from the Department for Infrastructure—a £1.7 billion upgrade to the A5 to save lives and improve economic connections throughout Northern Ireland and with the Irish Republic. It was struck down because it was contrary to another part of the Northern Ireland Executive’s overall strategy programme for government. Is this something on which the new NISTA, which sits within the Treasury, could assist the Northern Ireland Executive? They certainly need help from somewhere if they are going to be able to deliver major infrastructure projects in the light of this very serious judgment.
I am grateful to the noble Lord for the question and for bringing that to my attention—I did not know about that decision. I will very happily go away and look at that. We have tried to engage extensively with the devolved Governments to ensure that there is strong alignment between the strategy and what they are doing. We will continue to do that as we move into implementation, for example through the Council of the Nations and Regions. I am happy to go and talk to my colleague the Chief Secretary about how NISTA can play a role to secure that. We have put substantial amounts of capital investment into Northern Ireland as a result of the spending review. Clearly, we want to make sure that that is spent in the right way and achieves the right objectives, so I will very happily take that back for him.
My Lords, I welcome the Statement from the Minister about a much more joined-up and rational approach to infrastructure. It has been long called for and is very much welcomed. I also welcome NISTA’s commitment to ensuring that infrastructure developers are going to take account of biodiversity protection and delivery. I was delighted when NISTA’s predecessor discovered climate change, and the fact that it has now discovered biodiversity is even more welcome.
I also am very pleased to see that the Government are committed to the land use framework approach to spatial issues. But a fair number of existing infrastructure schemes are already in progress and decisions are being made on a day-by-day basis, and government departments across the piece are now preparing spatial strategies of all sorts. We have housing spatial strategies, transport spatial strategies, energy spatial strategies—everybody has a spatial strategy, but we have not yet got the land use framework in place that gives them join-up and integration. So when do the Government intend to make their hand clear on the land use framework approach? I am concerned, as I said, that by the time it arrives and is then implemented at national, regional and local level, it will be too late for many of the decisions on infrastructure that are currently being made.
Secondly—and more of this anon, tomorrow—in my view, the Planning and Infrastructure Bill does not take a sufficiently clear approach to a land use framework approach. In fact, any concept of land use framework is singularly absent in the Planning and Infrastructure Bill, which seems not to be as joined up as this admirable strategy is. Perhaps the Minister would care to respond on that.
I am grateful to my noble friend for her support for NISTA and the spatial planning elements of that. I do think that the spatial side of that is really important, as she says, to make sure that infrastructure is not just built in isolation but focuses on building communities and looks across the piece and integrates national, regional and sector-level planning. I do not have any news for her today on the land use framework, and I certainly hear what she says about the Planning Bill. I do not have anything to add today to what is already known, but I will make sure that, when we do, she is one of the first people to know.
My Lords, I congratulate the Government on bringing forward the 10-year strategy. It has managed to put a smile on the Minister’s face, which is very welcome indeed. In the interests of transparency and clarity, can I ask him what the route for the trans-Pennine route upgrade will be and what consultation there will be? There seemed to be some confusion in an interview last week from the Minister responsible as to what the route would be. It would be very helpful to know. It will be a very welcome upgrade. I regret that it has not taken precedence over HS2 or HS3, but we are where we are. Also, can he comment on the implications of clean energy? To be fully understood, it is going to take 10% of farmland and 10% of fisheries out of production. Have the Government considered what the impact on farming and fisheries is going to be?
I am grateful to the noble Baroness for the smile; it is always most welcome. On the route of the trans-Pennine route upgrade, she spoke about the importance of transparency. I think the best thing will be to write to her and set it out in full, so that there is no misunderstanding.
In terms of farming, I hope she welcomes the £2.7 billion per year in sustainable farming and nature recovery. I think that is a very substantial investment in the things she spoke about.
My Lords, there have been a number of references to NISTA, the National Infrastructure and Service Transformation Authority. The Statement says:
“Based in the Treasury, NISTA brings oversight of infrastructure strategy and delivery together, and integrates assurance, design and delivery assessments”.
The Treasury is not the expert in transport, energy or social housing infrastructure. Many Members of your Lordships’ House often lament the dictatorship of the Treasury over other government decisions. Is this not a further concentration of power within one department in government, when actually we need the people with the expertise and knowledge to have the oversight, not this concentration in the Treasury?
Well, the noble Baroness might not expect me to agree with her on that; I think the more Treasury, the better, from my point of view. So, no, I disagree with her, but of course NISTA is there to work for the whole Government and not just the Treasury. It has to be based somewhere and it makes sense for it to be based in the Treasury, given the Treasury’s responsibility for the 10-year infrastructure strategy, which it will be overseeing. Of course, NISTA’s expertise will be available to Ministers right across government.
My Lords, I congratulate the Treasury on this plan, which is well thought through. If the economy is going to grow, we have to ensure that public investment grows faster than public consumption. That is reflected in the Government’s plans. But, like my noble friend Lord Birt, I worked for Governments of both main parties who announced investment plans with great fanfares and good intentions, only to jettison them the first time they got into difficulty. That happened in 1976, 1992, 2008 and 2016. The Minister mentioned that fiscal rules this time will see us right but, as he knows, fiscal rules come and go. Can he assure the House, especially the sceptics among us, that, should the Government get into financial difficulties, they will protect investment, even if that means bearing down on public consumption?
I am grateful to the noble Lord—I was going to say “my noble friend”—for his question. The fiscal rules are non-negotiable, as he will know. We have put them in place for exactly the reasons he described. Too often in the past, public investment has been cut to patch up holes in day-to-day spending. The reason we are setting out this 10-year plan now is to give certainty and stability to the investment horizon, and we will protect that investment going forward.
My Lords, I will briefly go back to a subject I have raised several times with the Minister before—PPPs. I welcome pages 44 and 45 in the report, and I also share the interesting views expressed by the noble Baroness, Lady Kramer and look forward to the report that is coming. I am content to leave the issues with the Treasury. Perhaps the Treasury might expand its vision a little bit wider and, when we come to review the future PPPs, we might think about involving the public in them and not limiting private investment simply to big capital. There is money around among the public. People are prepared to invest. We ought to be more open-minded about it and perhaps look at some of the experiences of the past. There will be money there for us and it will be committed.
I am grateful to my noble friend for his support for this. I am pleased to give him some good news as part of this, because I know he has spoken extensively about the use of PPPs and is a strong advocate for that. As I said, the Government will explore the feasibility of using new PPP models for taxpayer-funded projects in the limited circumstances I talked about. As NISTA’s work goes forward and develops these new PPPs, it will be through engagement with departments and industry. I hope some of that engagement will include the groups my noble friend referred to.
(2 days, 16 hours ago)
Lords ChamberMy Lords, I beg leave to ask the Question standing in my name on the Order Paper and I refer the House to my registered interests, including that I run two business improvement districts.
My Lords, the Government are creating a fairer business rates system that protects high streets and supports investment. We do not anticipate that these business rates reforms will have any direct impact on business improvement districts.
I thank my noble friend the Minister for that reply. Business improvement districts—BIDs—are vital to local economies and high street regeneration, and rely heavily on the business rates system. Will my noble friend commit to consulting them directly through bodies such as Association of Town & City Management before making any future reforms? As government services move more fully online, will he back online voting for bid ballots in order to keep the process accessible, efficient and fit for the digital age?
I thank my noble friend for his question and pay tribute to his work and his expertise in this area. As he knows, business improvement districts play an important role in improving the local trading environment in our high streets and town centres, investing over £154 million each year in their local areas.
On the consultation on future reforms, my honourable friend the Exchequer Secretary, together with Treasury officials, has engaged extensively with stakeholders to codesign a fairer, more modern business rates system. I know that the Association of Town & City Management, which my noble friend mentioned, has been an important part of that. Later this summer, we will publish an interim report that sets out a clear direction of travel, with further policy detail to follow in the Budget.
As for online voting, in the English Devolution White Paper, the Government recognised the importance of ensuring high levels of turnout. My colleagues at MHCLG will come back with further proposals in due course.
My Lords, what assessment have the Government made of the impact of changing business rates here in London on the West End? High Streets UK has labelled the Bill a bit of a disaster and said it will be bad for growth, bad for investment and bad for jobs, and puts too much burden on Britain’s flagship high streets.
I am grateful to the noble Lord for his question. As he will know, the current business rates system, with temporary reliefs for retail, hospitality and leisure, creates a yearly cliff edge for the sector, disincentivises investment, creates uncertainty and places an undue burden on our high streets. Exactly because of and recognising that, to support our high streets, the Government announced at the Budget last October our intention to introduce permanently lower tax rates for retail, hospitality and leisure properties with a rateable value below £500,000 from 2026-27. The rates will be set at the Budget this autumn so that the Government can take account of the revaluation outcomes and the broader economic and fiscal context in their decision-making.
My Lords, can the Minister say which of the recommendations set out in the 2023 report on business improvement districts have been implemented? In particular, what consideration have the Government given to reinstating the BID loan fund? What plans are there to set up more property owner BIDs outside London, as the report recommended? Are there any plans to assist with the setting up of BIDs in regions in the north and east, where they are scarce?
I am grateful to the noble Lord for his question. On this Government’s proposals for improving BIDs, the English Devolution White Paper, which I mentioned, set out our intention to strengthen BIDs. We will come forward with further proposals to do so in due course.
My Lords, over the years I have run a number of small businesses. In England, any small business with a rateable value of £12,000 or less is entitled to a 100% rebate. Do the Government have any plan to increase that threshold from £12,000?
We have set out very clearly that we want to go further to modernise the system, over and above the tax cuts that I set out for small properties, exactly for the reasons my noble friend sets out. We have published a discussion paper setting out priority areas for reform that highlights further areas, including how to incentivise investment. Later this summer, we will publish an interim report setting out a clear direction of travel. We will then set out further policy detail in the Budget this autumn.
My Lords, could the Minister consider the position of ABIDs and perhaps, when the Government refuse a situation, provide some more incentives for ABIDs, so they act more like a local levy for seaside towns?
I am very happy to take that away and discuss it with my colleagues in MHCLG.
My Lords, we on these Benches broadly support BIDs and would not want to upset the good arrangements that exist. I welcome the Minister’s assurances on these issues, as far as they go, but could he undertake to come back to the House and inform us if developments suggest that their future is in doubt, given their importance right across the country?
Yes, absolutely, although I do not quite see why their future would be in doubt; as I said, we have set out our intention to strengthen them. We will bring forward proposals to do exactly that. I do not see that the wider business rates reform agenda we have set out would in any way impact the important work that they do.
My Lords, I, too, pay tribute to my noble friend Lord Pitkeathley for the work he does in support of business improvement districts, but I also pay tribute to business improvement districts themselves for the extraordinary work they do in improving the nature of, usually, town centres, but it might be different areas, and also in reducing crime and disorder in those areas. In the light of the Prime Minister’s foreword to the strategic defence review—I refer to my interest as chair of the National Preparedness Commission—in terms of the national initiative that he is talking about and the shared endeavour to improve our preparedness and resilience as a nation, does the Minister not see that there is a particular role for business improvement districts in ensuring that local areas are indeed resilient against all sorts of attacks and threats and that businesses themselves are making a contribution to that process?
I am grateful to my friend for his question. I will say honestly that I had not thought of it in that way before, but I can absolutely see the point that he is making. My noble friend started his question by talking about the important role that BIDs play. There are, as he knows, more than 340 BIDs now operating in the UK, which are cumulatively investing more than £154 million each year in their local areas. I think the type of initiative that he described is exactly the type of work that they, in some areas, do, and I am sure could do more widely. So I very much agree with the point that my friend makes.
My Lords, are the Government considering using business rates to encourage live music in pubs and clubs? That could have a massive effect on making, certainly pubs, more interested in providing music on weekends.
That is a very interesting proposal from my noble friend. As I say, we will set out an interim report later this summer, setting out a clear direction of travel, and let us see whether those ideas are included.
Following the question asked by the noble Lord, Lord Harris, does the Minister know or will he research what proportion of BID money is being spent on foot patrolling by the private security industry in areas where we thought the police were supposed to be doing it and where we are already paying for it separately?
I am very happy to follow the noble Lord’s suggestion and research that. I do not know the number off the top of my head, but in the spending review, we set out important new investment in the high street, particularly the security of the high street, because we know that, if we want people to go into their high streets and spend money and time there, they need to feel safe. Therefore, investment in crime reduction and deterrence in the way that the noble Lord sets out is important.
(1 week, 6 days ago)
Lords ChamberMy Lords, I recognise that the Chancellor faces real constraints, and this morning’s GDP figures for April underscore the problem. However, I am not going to use this opportunity to spend a lot of time talking about growth. It is such a big issue that we need some separate debate time set aside for it.
On these Benches, we are pleased with the significant allocations for the NHS and for housing in the spending review, though we are concerned that there are no targets for social housing, since we need at least 150,000 new social homes a year. I ask the Minister: given this additional money—which I know is only £3.9 million a year, but still, it is additional money—will we see that number of social homes come through annually? That really is the need that must be met.
However, nobody will be surprised that I was disappointed—almost to the point of devastation, quite frankly—to see adult social care overlooked, with no uplift until 2028, despite the reality that the situation is grim as we speak and that, without properly functioning adult social care, improvements to the NHS will be seriously undermined. If the Casey review is the hold-up, it should be and could be completed this year.
The Chancellor also suggested that she would back the fair pay agreement for adult social care workers sought by Care England. She absolutely should—care workers deserve every penny—but did I hear correctly that she will not fund it? The total package is £2 billion a year, and just the living wage and sick pay portion is £805 million a year. That kind of money puts in jeopardy not only many care providers but many local councils. If the Minister says that there was an uplift for councils, then not only does that rely on a 5% council tax increase in most councils but the additional money will be fully swallowed up by SEND, which is also in a dire situation. Will the Minister please explain what seems completely inexplicable: the overlooking of adult social care?
I also ask for clarification on defence spending. The Chancellor said she would raise it to 2.6% by 2027—which is the right direction—but is it correct that when she spoke, she treated spending on the secret services and on the Ukraine war as defence spending? If we speak in the terms that we have all been using up to now then the 2027 spend is, in my estimate, below 2.4%. I hope the Minister will tell me I have simply misunderstood. Will he help explain what exactly is going on with this defence spending? To me, all this confusion is underscoring the importance of cross-party talks, which my party has proposed, so that we collectively find a way to reach the necessary 3% well ahead of 2034. Boy, would I appreciate some clarification on what on earth is happening within that budget.
I am pleased to see new funds for the British Business Bank, whose greatest weakness, frankly, is its tiny size. However, to which bit of its activity is the additional money to be directed? I am particularly concerned about small business lending, and it could make a serious difference if much of the new funds are directed into the BBB’s Community ENABLE fund and its growth guarantee scheme. Who will make that call, is it dedicated, and does it have a target? Could the Minister please tell us more?
I could raise a lot of other questions, but I am anxious to hear properly from the Minister. I came away from the spending review, the Blue Book and the speech asking endless questions to which I could not find answers. I thought that I was going rather brain-dead. Then, I heard Paul Johnson of the IFS talk about the documents being so opaque that he was asking questions and could not find answers. If he cannot, we need help. Could we have clarity in the future, but in the meantime could the Minister please serve as our clarity?
I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their comments and questions on yesterday’s spending review Statement.
It would have been perfectly credible for the noble Baroness, Lady Neville-Rolfe, to say she cannot support any of this investment because she did not support any of the difficult decisions that we took to make this investment possible. It also would have been perfectly credible for her to come here today and say she has changed her mind, now supports the difficult decisions that we took and therefore will support the investment that those difficult decisions have permitted.
Unfortunately, the noble Baroness did neither of those things. We heard her support for the huge amounts of spending we announced yesterday for the nuclear programme—for example, £30 billion into nuclear. We heard her support the £3 bus fare cap, even though her party had refused to fund it any longer than last December. Yet she has opposed every difficult decision every time we have stood here for almost a year now. She has opposed every single difficult decision we have taken to repair the public finances and fund the public services. Even today, she was opposing the changes to the fiscal rules that enabled the additional investment spending we have made. She supported the nuclear spending, which is investment spending, but she opposed the fiscal rule change that enabled that spending. That simply is not credible.
The party opposite cannot support the investment in the spending review without supporting the money to pay for it. We all know exactly how we ended up with a £22 billion black hole in the public finances. That is exactly the approach that Liz Truss took in her mini-Budget, which crashed the economy and sent mortgage rates spiralling. We will not be repeating that mistake. The shadow Chancellor is distancing himself from the Liz Truss approach, and the noble Baroness should distance herself from that approach too. She talked about the money that is being allocated. I am not sure she understood the process of the spending review: the envelope was set by the Chancellor last spring. She cannot say in any way that we have lost control or are deviating from that envelope, because the Chancellor allocated every single penny of that envelope and not a single penny more. I fully understand what she is saying—that she understands that—but, in that case, I do not understand why she made the criticisms she did. The Chancellor was simply allocating the envelope that she set out in the spring.
The noble Baroness also said that the last Government delayed the spending review. We all know why the last Government delayed the spending review: because their sums did not add up. They had a £22 billion black hole at the heart of it, and they knew that the moment they did a spending review that black hole would be revealed. That is the reason why they delayed the spending review.
The noble Baroness talked about growth and the performance of the economy. In the first quarter of this year, the UK was the fastest-growing economy in the G7. Under the forecasts inherited from the previous Government, this year the UK would have been the slowest-growing economy in the G7. If she wants to compare growth stats, I am more than happy to do that with her all day. The figures out today show that April was a challenging month, given global headwinds. That was the month in which the tariffs were imposed by the US, and it was before we had agreed the trade agreement with the United States. If you dig into those growth figures, you can see that a lot of it is driven by a decline in exports because of that. It underlines the need to continue to deliver on our growth mission.
The noble Baroness talked about facts. The facts are that living standards are now forecast to grow four times faster than in the previous Parliament. Real wages have already grown by more in the first 10 months of this Labour Government than in the first 10 years of the previous Conservative Government. She often talks about productivity and GDP per capita, but GDP per capita fell in the last Parliament. It is now forecast to rise by 5.6% in this Parliament. On top of that, the IMF has upgraded our growth forecast, as did the OBR in the Spring Statement.
It is disappointing to me that the noble Baroness often says that she and I agree on growth, but she did not mention any of the growth-boosting measures included in this spending review. She did not mention that capital spending would increase growth by 1.4% in the long term. She did not mention the £39 billion affordable homes programme, which is vital for growth. She did not mention the record amounts of R&D funding rising to £22 billion a year. She did not mention any of the major rail projects to connect our towns and cities and make sure that growth is felt right throughout the United Kingdom. She did not mention the skills budget and the amount of money we are spending on skills. It is disappointing that she says she supports growth but then does not welcome or mention any of the investment that we are doing to get that growth.
The noble Baroness mentioned borrowing and the public finances. Average borrowing in this Parliament will be 2.8% of GDP, compared with 5.6% of GDP over the previous 14 years. She talked about the investment rule. Obviously, we have changed that fiscal rule—quite rightly—to enable the much-needed investment infrastructure to deliver stronger growth in the future. She opposes that change to that fiscal rule and yet somehow also claims to support the investment that the rule brings about.
The noble Baroness talked about tax. Yesterday’s spending review allocated the envelope set out by the Chancellor in the spring. These record settlements have been made possible only by the tough but necessary decisions we took in the Budget last October. On future decisions on tax and spending, I am not going to write four years’ worth of Budgets at this moment, even if that was in my power. The independent OBR will produce a new forecast in the autumn for the Budget. The Chancellor will take decisions at that point based on that forecast, and I will not prejudge those now.
The noble Baroness asked me about funding of the winter fuel during Question Time earlier. As she knows, we will set that out in full at the time of the Budget.
The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, both asked about defence. As the Chancellor made clear yesterday, increasing defence spending is a strategic necessity, and that is why we will be spending 2.5% of GDP on defence by 2027. The noble Baroness, Lady Kramer, asked about the precise definitions: 2.5% will absolutely be the case by 2027. If she wants to include the intelligence agency spending and the other spending she mentioned, it is 2.6%, but it is 2.5% excluding those things—I can give her that absolute certainty. Our ambition is to reach 3% in the next Parliament when fiscal and economic conditions allow, but we will not be putting arbitrary dates on when we will meet that.
I have two final points: the noble Baroness, Lady Neville-Rolfe, asked about efficiency and productivity. This is the first zero-based review done into spending for 18 years. The previous Government had 14 years to do a zero-based review, if they really cared about efficiency in public spending, and they did not do one at all over the course of 14 years.
The noble Baroness did not mention any of the reforms we are doing in the NHS. In fact, she sounded quite sceptical of additional money going into the NHS, which is a great shame as we know it is the most treasured public service in this country. She did not mention digitisation, for example—putting £10 billion into the NHS app to make it far more efficient in its spending. We are doing a great deal more on efficiency savings. All departments have identified at least 5% savings and efficiencies by 2028-29.
Finally, the noble Baroness, Lady Kramer, spoke about social care. I am grateful to her for welcoming some of the other additional spending, particularly on the NHS and housing, for example. She talked about social housing: we have made the £39 billion investment into the affordable homes programme. That is crucial for growth, as she said.
I pay tribute to the noble Baroness, who has consistently campaigned on social care. The spending review provides an increase of over £4 billion available for adult social care in 2028-29, compared with 2025-26. That includes an increase to the NHS’s minimum contribution to adult social care via the better care fund, in line with the Department of Health’s spending review settlement. This will support the sector to improve adult social care, with further details to be set out shortly.
The noble Baroness asked about the fair pay agreement. As the Chancellor said yesterday, we remain committed to delivering a fair pay agreement in line with our manifesto commitment, and we will set out further details of that shortly. She also asked about the British Business Bank. There will be an increase to £25.5 billion, and it will set out further details as to how that will be allocated. In the industrial strategy in a few weeks’ time—access to finance is obviously a major issue for all those sectors—we will set out how the British Business Bank can help with those access to finance issues.
My Lords, I also wish my noble friend Lord Livermore a very happy, significant birthday.
Communities across the country were told for years that they would be levelled up. In practice, regional investment plummeted and long-promised schemes were downgraded or pulled entirely. Does my noble friend agree that while it will take time for people to see the results of regional investment, the money allocated to English city regions and the devolved authorities will enable long-term schemes that provide jobs and growth and are genuinely transformative?
I am grateful to my noble friend for her kind words and her good wishes. I absolutely agree with her. One of the central themes of this spending review is making sure that growth is both created in all parts of the country and felt in all parts of the country. For too long, we have been reliant on just one or two regions of our country to generate that growth. Clearly, given our growth mission and the importance of raising sustainably the level of growth in this country, making sure that every part of the country contributes to that economic growth is absolutely vital.
On the regional investment that my noble friend talks about—in particular the transport investment that the noble Baroness, Lady Neville-Rolfe, referred to—the previous Government made lots of grand plans but never funded any of those grand plans. What we are doing here is setting out a very careful strategic plan to connect our cities, connect our towns to our cities, and funding that fully, so that those transport connections are made and people are able to get around cities and regions, which is absolutely vital to economic growth. It is no good having the jobs, the skills, the towns and the housing if they are not connected and people cannot travel around to them. I think that is an absolutely vital part of getting growth throughout the country.
My Lords, notwithstanding the welcome moneys for the repair of cultural venues, the cuts overall to the arts are hugely disappointing. This will affect most the individual freelancer, who really had high hopes that finally there would be reinvestment in their sector. Of course, small and large organisations will be affected, too. So I ask the Minister, would he agree with me that these cuts make no sense, considering the Government have earmarked the creative industries as the linchpin of growth? They do not seem to grasp the vital role—a role in innovation—that the subsidised arts sector plays in the ecology of the creative industries as a whole. Neither is the 15% cut to staffing within the DCMS, while such cuts are not happening everywhere, a vote of confidence in the sector, so the Government do need to rethink these cuts.
I am grateful to the noble Lord for his question. I know that he is a passionate and long-standing campaigner for the cultural sector. As outlined in the spending review yesterday, the DCMS will invest more than £2.9 billion across its entire capital programme to safeguard and modernise cultural and heritage institutions in towns and cities. I hear very much what he says about the wider cultural sector and I ask him to wait for the creative industries industrial strategy sector plan, which will be coming out shortly and which I hope will address many of the issues that he is talking about. As he says, we absolutely recognise the enormous value, both cultural and economic, that the creative industries offer. We will be setting that out in the sector plan for the industrial strategy in the coming weeks and I hope that we can discuss it at that point.
My Lords, there are things to welcome in the spending review: I would point in particular to His Majesty’s Government’s steps to support the most vulnerable, tackle regional inequality, increase investment in schools, social housing and healthcare and maintain some level of support for the arts and culture, recognising their importance. More support for libraries, which act as community hubs, is welcome. I hope that the benefit of churches, which are also public buildings that contribute to community life, especially in rural areas, will also be recognised and that DCMS will do this by resolving the long-term uncertainty about the future of the listed places of worship grant scheme beyond 2026 and the capping of grants, effectively, by VAT liability.
May I press, however, the Minister on two other matters that I think are important? The first is children—our nation’s future—and investment in them. While on the surface, the increased access to free school meals is welcome, could the Minister reassure the House that the Government have not uncoupled free school meal eligibility from the pupil premium? Secondly, given the impact of the cost of living on families and the growth in child and rural poverty, which I do see even in the diocese of Chichester, especially in our coastal towns, can the Minister give assurances that the much-delayed child poverty strategy will now be published as a matter of urgency, with further consideration being given to ending the two-child limit and reviewing other policies which so adversely impact the well-being and flourishing of our nation’s young people and their families?
The right reverend Prelate set out a number of issues that he agreed with, and obviously I am grateful for his agreement with those. He talked about child poverty and he knows that—as the Prime Minister described it—our free school meals policy is a down payment on the work that we want to do to tackle and end child poverty. I was lucky enough to be part of a previous Government—I worked for a previous Chancellor—who reduced child poverty by 1 million children, so there should be no doubt about my personal commitment to reducing child poverty. I had to sit by, as did many of my noble friends, and watch the previous Government increase child poverty by 700,000. That is not something that any of us wanted to see; so he should be reassured that we absolutely prioritise this issue.
The right reverend Prelate asked about free school meals. The children of every family on universal credit will be eligible for those free school meals. He described the child poverty strategy as much delayed. I am not sure I would accept that. I think we have set out when it will come—alongside the Budget this autumn—and it will consider all the issues and representations that are put to it. There is quite a lot in this spending review to tackle child poverty. As I say, that is a down payment and I very much hope we will be able to do more.
My Lords, I very much welcome the fact that the Chancellor reiterated yesterday, in the other place, a commitment to no unfunded increases in expenditure. Could the Minister reassure me about the other promise which she made in the autumn Budget—I am going to read it so I am not misrepresenting it—that there would be no further tax increases during the current Parliament? She said, “I will not increase your income tax; I will not increase your national insurance; I will not increase your VAT”. Does that promise still stand? How can it possibly stand with the Government’s debt interest bill now being £105 billion and rising and the costs of borrowing, because of the level of debt, actually being higher than they were at the time of the crisis under Liz Truss?
I am grateful to the noble Lord for his question. On the specific question that he asked about whether the manifesto commitments that we have given to working people still stand, yes, they still stand. The manifesto very clearly says there will be no increase in working people’s income tax, national insurance or VAT. That commitment continues to stand. In terms of future decisions on tax and spending, as I have said already, I am not going to write now—it is not in my gift to write now—four years-worth of Budgets. As he knows, the OBR will produce a new forecast in the autumn for the Budget, and the Chancellor will take decisions at that point, based on that forecast. He can be assured, though, that, at all times, we will meet the fiscal rules, but I am not going to prejudge those decisions now.
I am not sure whether he was defending at that point the Liz Truss mini-Budget or not. He shakes his head vociferously. I do not blame him: I would not want to defend it either.
My Lords, there is much to welcome in this spending review. Can I especially welcome the £39 billion of investment in social and affordable housing that the noble Baroness mentioned earlier on? Shelter yesterday called this a game-changer. The National Housing Federation said it was the most ambitious affordable homes programme in decades. All of that is extremely encouraging. I note that the ramping up of extra funding is gradual, as the noble Baroness, Lady Kramer, mentioned, reaching an additional £4 billion per annum by the end of the spending review period. What needs to be done as this money is ramped up in the next couple of years to ensure that this funding is generally transformational? In particular, I know he is passionate about improving the supply of skilled workers in the housing construction sector so that it really does result in the step change we all want in social housing.
I thank my noble friend for his question. He is absolutely right. The Government are providing the biggest boost to social and affordable housing investment in a generation, and giving social housing providers the long-term certainty that they need to focus on development. We are putting in £39 billion for a successor to the affordable homes programme. We are making a 10-year social housing rent settlement from 2026 at CPI plus 1, alongside a consultation on how to implement social housing rent convergence. We are putting in over £1 billion of new investment to accelerate the remediation of social housing. So I think that is genuinely, as he says, transformative, and I am glad that those experts in this field have welcomed that allocation.
As my noble friend said, it is a gradual increase, which is probably sensible for public finance reasons, but probably for delivery reasons too, to ensure that it can actually be implemented, but he is absolutely right to point to skills. In this spending review, we have a record allocation in terms of skills, but also, at the time of the Spring Statement, the Chancellor set out a construction skills package, which I think is vital. Clearly, not just on housing, we are doing a lot of infrastructure investment and a lot of infrastructure spending. We must have the skilled workers to do that work; I absolutely agree with my noble friend on the vital importance of skills alongside this investment.
My Lords, I declare an interest as former chairman of the South East Wales Transport Commission and the North Wales Transport Commission. I want to make a few remarks with respect to those roles, rather than comment at this stage on the macroeconomic aspects of the Statement. I very much welcome the proposals in the spending review for the investment in rail services in south-east Wales and north Wales. My understanding is that this allocation will allow most of the recommendations of the two transport commissions that I chaired to go ahead. The new stations in south Wales will provide vital commuter rail services, connecting major housing developments to sites of potential economic growth on both sides of the border. They will provide an effective alternative to many existing car journeys on heavily congested roads and will improve opportunities for those without cars, who face serious challenges with existing public transport.
In the case of south-east Wales, much of the work has already been done to progress these technical studies for both projects. The development work is largely complete and the project is ready to go. In north Wales, there are projects identified that will also improve transport connectivity to important centres of good jobs, such as Deeside and Wrexham industrial estates, the aircraft facility at Broughton and the city of Chester. There is also, would you believe, the real possibility of connecting by train those two great football cities of Liverpool and Wrexham. Does the Minister agree that these funds should be used as soon as possible?
In the Treasury over the past months I have heard many references to the “Burns stations”, so it is a great privilege to talk to the noble Lord himself about these stations. He is absolutely right. We are investing at least £445 million into rail enhancements over 10 years to enhance rail across Wales, including at Padeswood on the Borderlands line and through upgrades to the core valley lines, as part of the 10-year infrastructure strategy that my right honourable friend the Chief Secretary will set out more details of next week.
This includes providing £48 million over four years to the Welsh Government to work with them to upgrade the core valley lines; up to £80 million for port investment to support floating offshore wind into Wales; and £2.4 million over three years to launch a new brand Wales programme promoting Welsh investment opportunities and exports around the world.
My Lords, I too wish the Minister a happy birthday. In welcoming the increase in defence spending, I am sure he will acknowledge that diplomacy goes hand in glove with our ability to deliver on our defence and trade priorities. My former department has suffered the largest reductions, of over 8.3%, in both CDEL and RDEL. What assurance can the Minister give me and all Members of your Lordships’ House that important priorities such as the integrated security fund, which focuses on cybersecurity threats and counterterrorism, will be not just sustained but, in the ever dangerous world that we live in, increased?
I am grateful to the noble Lord for his kind wishes. He is vastly more experienced and expert in these important matters of defence than I am. To answer his very specific question on the integrated security fund, the spending review settlement enables the fund to continue to deliver programmes that support the National Security Council’s national security priorities. The integrated security fund will focus on the most pressing threats facing the UK, whether posed by hostile states, instability in volatile regions or emerging cyber and technology-enabled risks.
My Lords, I would like to ask about continued funding by DfE for the music and dance scheme bursaries for talented young musicians and for the outreach work of the national centres for advanced training in dance. It is right that the Government fund schemes such as these, which ensure that dance training is not just for elites and that children from any background can access a world-leading vocational music or dance education. Can my noble friend the Minister convey to the Chancellor and the Secretary of State for Education the need to protect and, when possible, to grow the funding of our leading pathway into music and dance careers for young people from deprived backgrounds?
I will do exactly as my noble friend asks and pass that on. The important announcements yesterday that she mentions are incredibly welcome. The Secretary of State for Culture, Media and Sport and the Chancellor also announced the dormant assets initiative to get more creative industries into more schools, so that the huge advantages and benefits of that kind of creative industry are available no longer only to privileged children but to far more children in state schools.
My Lords, I can only welcome the 3% increase in NHS funding in real terms, although it is below the long-term average over decades of 3.6% increases. The chief executive of the NHS Confederation has said that this
“won’t be enough to cover the increasing cost of new treatments”.
With that in mind, it is disappointing that while “public services”, “public finances” and “public debt” appear in the Chancellor’s speech, there is no use of the phrase “public health”. Given that the NHS is under such pressure, surely the Government should look to decrease the demand for healthcare by improving the health of the nation, which is, compared with comparable countries, extremely poor. That would mean measures to deal with water, air and other pollution, our broken food system and the poor quality and lack of green spaces. Will the Government look at making the nation healthier to help the NHS?
Yes. The noble Baroness says that we are not spending enough on the health service. Over the next five years, £30 billion will be invested in day-to-day spending, with over £5 billion specifically allocated to address the most critical issues. The noble Baroness likes to tell us how she does not believe in economic growth. If we do not have economic growth, how will we find the money to fund our public services? I sat through the national insurance Bill. The noble Baroness opposed it and the additional money that it brought into our National Health Service. She says that this is not enough money. How exactly is she going to find the money? She is mouthing “wealth taxes”. If she thinks a wealth tax is going to raise that many billion pounds, I would love to see her proposals.
My Lords, the capital investment contained in the spending review will be very welcome in many parts of the country. The problem will be making sure that it is money well spent. As those of us who were here in the morning heard, public bodies often are not the greatest at making sure they can build a door, let alone a motorway. How will the Government ensure that we get value for money on our projects? Just having an office called the “office for value for money” might not be enough. I was cheered that the Chancellor said the amount of money being spent on consultants had come down. Can the Minister put a figure on that and tell us what the budget for consultants over the next few years will be?
I do not have the specific budget for consultants over the next few years to hand. I am more than happy to write to her with that figure if it is available. She is right that we have reduced the number of consultants. It ballooned under the previous Government, who like to talk about saving money but did not always walk the walk.
We are investing an additional £113 billion in capital spending, which is enabling so many of the projects that we are discussing today. It would not be possible if we had not rewritten the fiscal rules that we inherited from the previous Government, which guaranteed neither stability nor investment. We inherited such a poor public infrastructure situation from them as they repeatedly cut investment spending to patch up the holes in their day-to-day spending. The noble Baroness mentioned the change to the fiscal rules. Alongside the fiscal rules, we have set out very clear guard-rails to ensure that that money is spent wisely and carefully through public finance institutions. I am very confident that we have set out those guard-rails and will ensure that we get the value for money that she is describing.
My Lords, I too wish the Minister a happy birthday, and I declare my interests.
Does the Minister recognise the damage caused to UK growth by pension funds? We have the second largest pension system in the world according to the Government, the Exchequer gross contribution is £70 billion a year, and our DB and DC schemes are no longer backing Britain and are selling or underweighting UK equities and risk assets, damaging investments and corporate financing costs. DB pension funds bulk buying annuities is driving up long-term gilt yields, which many noble Lords have mentioned, as the insurer sells the gilts they tell the pension funds to buy as soon as they take over the assets, competing with the Bank of England’s QT sales. Our economy is desperate for long-term investment. Our brilliant companies are being snapped up on the cheap by foreign owners or private equity. I believe in Britain, and the Government seem to have a clear opportunity to require pension funds, if they wish to receive these generous taxpayer subsidies, to put, say, at least 25% of their new contributions into British assets to reverse the doom loop that pension funds have created for our markets and restore some growth.
The noble Baroness and I, along with many others in this House, have discussed these issues many times before. I think she knows that what she wants and what I want and what the Government want are pretty much the same thing. She says she wants to see greater levels of investment by pension funds into UK assets, and that is exactly what we want to see as well. The Chancellor set out some proposals on that in her Mansion House speech last year. We have seen substantial pension fund reform announced by this Government, which should bring an additional £50 billion of investment into the UK. We have seen the Mansion House compact announced just last week—a voluntary scheme by pension fund providers to get more investment into the UK. The Chancellor will make her next Mansion House speech on 1 July. I hope this will include more interesting announcements on this regard. It will also include the financial services growth and competitiveness strategy, which I hope will achieve many of the things that the noble Baroness is talking about.
My Lords, I declare my interest: from 2018 to 2025 I was the lead non-executive director of His Majesty’s Prison and Probation Service. Can my noble friend the Minister tell us how much the Government are having to spend to rectify the appalling failure of the last Government to address the prison capacity crisis and all its consequences?
My noble friend is absolutely right, and I pay tribute to the expertise that he brings to this question. In the summer of 2024, at the time of the election, prisons were operating at over 99% capacity. Clearly, the previous Government, as I was saying before, did not believe in investment spending, because they kept cutting it. Our social fabric was in a terrible state when we took over. We are having to do a lot of investment spending now to make up for the damage done over 14 years. The Government in this spending review are providing £7 billion to deliver 14,000 new prison places by 2031.
My Lords, today’s growth figures make tax rises in the autumn all the more likely, but one rise that we do not have to wait for is the 5% increase to council tax each year planned for in this spending review. The Minister will know that council tax is a regressive tax. He will also know that this is the biggest increase since the 2001 to 2005 Parliament. Can the Minister confirm to the House how much a 5% growth in council tax each year will cost the average working family?
The noble Baroness says that we do not have to wait for it. She is absolutely correct: we do not have to wait for it because her Government introduced it. A 5% cap in council tax is something introduced by the previous Government—we have not changed that. It is a cap. Councils do not have to increase council tax by 5%, but, under the rules, they cannot increase council tax by more than 5% without a local referendum. We have not changed that. That is to invest in things such as social care, but also, as is normal, to put money into policing.
My Lords, the benefits of the infrastructure expenditure are wide-ranging and indeed thrilling. However, most of those benefits are going to be long term, and I think most people are still worried about the cost of living and their day-to-day access to public services. Can my noble friend the Minister say a little more about how the plan is going to affect ordinary people, day-to-day?
My noble friend is absolutely right when she says that a lot of our capital spending is long term. I think that is perfectly right. For example, the noble Baroness earlier talked about pension funds. I met representatives of some of the largest Canadian-Australian pension funds recently, and they told me that one of the most attractive parts of the UK economic landscape at the moment is the long-termism of our policy-making. They want to see long-term commitments and long-term investment so that they can invest into this country. The long-term nature of the policies is important, but my noble friend is absolutely right that people need to see improvements in their lives much sooner than that, because obviously they have lived through the cost of living crisis brought about by the previous Government. We need to see those cost of living improvements quickly.
One of the funds established yesterday was the pride in place fund. It is important that people see improvements quickly in their local communities. We also announced funding for the warm homes plan, with a total of £13 billion allocated across this Parliament to improve the energy efficiency of people’s homes. We did a big boost to social and affordable housing, with £39 billion, and expanded free school meal eligibility in England to all children with a parent receiving universal credit. We invested more to fund childcare entitlements for working parents. We funded the freeze to prescription charges at below £10 over the spending review period, and we launched a new crisis and resilience fund to help families when in crisis.
My Lords, the Minister will recall the table to the spending review which lists the departmental expenditure limits. Within that there is a line for the reserve, which I assume is essentially the contingency reserve. I recall that, back in 2023-24, the contingency reserve was over £9 billion, and that was completely blown and we had to have supplementary estimates. The table shows that, for phase 2, the reserve is at 1% of the totals for DEL and does not increase over the three years: it goes from £6.7 billion, to £6.7 billion, to £7.1 billion. This seems to be an inadequate figure for contingency that far out and is not, as one would expect, a rising figure—a wedge of contingency—in the later years. I wonder whether the Minister might explain why that wedge does not appear as one would have expected.
If I may say so, the rising wedge, as the noble Lord describes it, is his analysis. It clearly is not analysis shared by the Government. I do not know whether it is based on any economic theory. It may be, but it is clearly not one that the Government share, because they are the numbers that the Government have set out.
My Lords, one of the most welcome aspects of the spending review is the terrific increase in science and technology spending, which will drive innovation across the country. It is long overdue, especially as it is now linked to Horizon, with an explicit reference to the building of new partnerships and new skills. I hope we can attract some of those American scientists who are now rather destabilised, shall we say, by the Trump Administration.
My question is about how housing fits into the growth agenda—it clearly does. One of the most explicit elements is the new towns programme, which is lined up not just to fill housing need but to drive housing growth and economic growth linked to infrastructure in different parts of the country where we need that growth. Can the Minister just tell me how that fits into the £39 billion now made available for affordable and social housing?
I absolutely agree with my noble friend—both where she started and indeed where she ended. I completely agree about the importance of innovation and the spending that we have been able to do in this spending review. As I have said before, the industrial strategy will be published in the coming weeks. Clearly, innovation and R&D are vital to those high-growth sectors. She also talked about the importance of partnership, and that sits at the heart of the industrial strategy—a partnership between government and business, helping to systematically remove the barriers to growth. As my noble friend will know, we have increased public funding on R&D to a record high of £22.6 billion in the spending review.
My noble friend talked about housing and its link to growth. I completely agree that, for too long, people have not been able to live anywhere near the jobs that they want to do because they have not been able to afford the housing to be close to those jobs. That is absolutely not good for growth. I am certain that the £39 billion we are investing will help us to begin to tackle that.
My Lords, the noble Lord will recall that the Government were elected on a promise of ending the housing of refugees in hotels within 12 months of being elected to office. For what reason have the Government now decided to continue to house refugees in hotels until the end of this Parliament?
Probably because of the inheritance that we faced from the party opposite, which did absolutely nothing to tackle or fund that issue. We have funded it in the spending review on the terms that the noble Baroness set out.
My Lords, in contrast to the moaning dirge we have from the Front Bench opposite, my inbox is full of emails congratulating the Government on the spending review, and from some unexpected sources, such as Liz Cameron, director of the Scottish Chambers of Commerce, who welcomes the Acorn carbon capture go-ahead, the defence expenditure and the Edinburgh University supercomputer. That is a great welcome, but will the Minister confirm that the money being allocated to the Scottish Government is the largest ever grant since devolution? Will he do everything he can to make sure that that money is spent efficiently, effectively and according to our priorities?
I am grateful to my noble friend for giving me the feedback that he is receiving. He is absolutely right to highlight the incredibly important things we have done in the spending review for Scotland, such as the investment of £8.3 billion over the Parliament in homegrown, clean nuclear power, alongside establishing a new government campus for energy that draws on the world-leading engineering expertise in Aberdeen, the Acorn carbon capture and storage project that he mentioned, and £750 million for a new supercomputer at Edinburgh University. Those are all genuinely exciting developments.
As my noble friend said, this is a record settlement for the Scottish Government since devolution in 1998. They will receive £50.9 billion per year on average between 2026-27 and 2028-29, including an additional £2.9 billion per year on average through the operation of the Barnett formula and £451 million of targeted capital funding in addition. My noble friend asked how we will ensure that that is spent on our priorities. Obviously, the best way to do that is to ensure that people vote Labour at the next election.
Like my noble friend on the shadow Front Bench, I was surprised that the review suggested that a benefit-cost ratio of less than one could still be considered value for money. It also committed to publishing the BCR for all the cases. Can the Minister say when that will happen and whether it will also include projects from the NHS?
The noble Baroness referred to the review of the Green Book. Its six key findings were that there was insufficient emphasis on place-based objectives; ineffectiveness at assessing transformational change; continued overemphasis on benefit-cost ratios in decision-making; overly long and complicated guidance; inadequate capacity and capability across the public sector; and poor transparency around appraisal. We will set out the information that she requires in due course.
My Lords, I particularly welcome the extra nuclear expenditure in the spending review. However—
My Lords, I join the House in wishing the Minister a very happy birthday and many more of them ahead. I too welcome yesterday’s Statement. We feel as if we are turning the corner and starting to take a longer view, which we have not had expressed by politicians for quite some time. It is true that there are risks for us and, given the instability in the world, it is desirous that we are not too inflexible about how we look to change our minds as needs require it when circumstances change. I do not like to see us digging in too firmly in saying that we will not change this or that when circumstances may force it.
In looking at our tax system, investment is one of the ways in which we will see progress be made, and Statements will be made on that very shortly. One of the things the Government—and, indeed, all parties—ought to look at is the way we try to maximise opportunities for raising funds. It is high time that council tax was subject to a review. It is way out of touch with reality and is now being run very unfairly. I suggest to the Government that, as they look at wider tax reform, they look in particular at council tax and at changes to make it fairer and more productive in paying for these investments.
I agree very much with what my noble friend said to begin with about uncertainty. I think he was talking about the increasing global headwinds we face as a country when it comes to the economy and about the importance of stability; I completely agree with him. The IMF, for example, in its most recent report when it upgraded its forecasts for the UK economy, said that our fiscal strategy is striking a
“good balance between supporting growth and safeguarding fiscal sustainability”,
and that our
“Growth Mission focuses on the right areas to lift productivity”.
On spending, it concluded that our plans are “credible and growth-friendly”, and
“are expected to provide an economic boost over the medium term”.
I am afraid that I do not agree with the points my noble friend made on council tax towards the end of his question.
My Lords, the Minister mentioned pride in place recently. It is understandable that people have pride in the place where they live. One of the indications of that is the number of volunteers who come forward to work in the Britain in Bloom scheme, but some volunteers have told me that there has been an enormous amount of vandalism, tearing apart the beautiful plantings that unpaid volunteers have made to beautify their local area and which have been much appreciated by local people. They say that part of the problem is there are not enough police on the beat and that, even when they have CCTV evidence and can identify the perpetrators, the police do not have time to do anything about it. I have heard from the police that the settlement for the police will not be adequate for the increased number of police that has been promised. Can the Minister give any cause for optimism to all those volunteers who work so hard?
I am grateful to the noble Baroness for what she says, and I agree with her about the importance of pride in place and the difficulties around vandalism, graffiti, fly-tipping and so on. That is exactly why the pride in place fund was established: to tackle some of those really difficult local issues. When it comes to police funding, the Government increased investment in policing yesterday, and the spending power of our police will increase by 2.3% in every year of this Parliament, which is around £2 billion extra for the police. I hope the noble Baroness can take that back to the people she talks about and give them the optimism and reassurance she asked for.
My Lords, I particularly welcome the extra nuclear expenditure in the spending review. However, the IFS director, Paul Johnson, said that his think tank was “baffled” by the Chancellor’s spending review. He said that the Chancellor will
“have all her fingers and all her toes crossed”,
but that OBR borrowing and growth forecasts are not downgraded for the autumn, which will
“almost certainly spark more tax rises”.
Can the Minister say whether that will be the case, or will there be more borrowing?
Secondly, supporting my noble friend Lady Altmann’s point about encouraging investment in UK-quoted equities, can the Minister give his views on how insurance companies and pension funds could be encouraged to devote more assets to the quoted areas of these markets?
The noble Lord started by welcoming nuclear, and then seemed to say that the fiscal position was not what he would like it to be. I feel as if he needs to choose which lane he wants to be in in that respect. Will he support the measures we have taken and support the change to the fiscal rules, or support the spending? I am not sure that he can both oppose the way to raise the money but then support the way we are spending it.
On the second part of his question, we have set out very clear pension reform. We may not agree on that specific point, but I hope we agree on our objective, which is to get more pension fund investment into the UK economy.
(1 week, 6 days ago)
Lords ChamberTo ask His Majesty’s Government what steps they are planning to take to change the entitlement to the Winter Fuel Payment.
My Lords, we are extending eligibility so that this winter, all pensioners with incomes up to and including £35,000 will benefit from the winter fuel payment. That means 9 million pensioners will now receive it—more than three-quarters of pensioners.
My Lords, since tabling this Question, we have had 40 minutes of exchanges on Tuesday. In fairness to the Minister, he addressed most of the questions, albeit at times provocatively. However, he did not answer the question from my noble friend Lord Hailsham, who asked why, when the Government needed to save money on the winter fuel allowance, they did not simply abolish it and then increase in November each individual’s entitlement to the state retirement pension by the same amount and recover it through the tax system. The Minister said:
“That may be one option, but it is not the option we have chosen”.—[Official Report, 10/6/25; col. 1224.]
Would that not have been simpler?
I am grateful to the noble Lord for the question. We have to remember the circumstances in which we found ourselves back in the autumn. We had to take many difficult and urgent decisions, because we needed to find in-year savings due to the £22 billion black hole in the public finances that we inherited. We had to come in and make urgent in-year decisions. We therefore had to put in place a system that was able to generate immediate savings. The system that the noble Lord describes was not able to generate those immediate savings. That is why we did what we did. We are now able to extend eligibility, as I have said. We are extending it so that this winter, all pensioners with incomes up to and including £35,000 will benefit from the winter fuel payment.
My Lords, the noble Lord asks whether there is a plan. Can the Minister confirm that there is a plan, and whether, if it does not work, they will again have another plan? Things change so much. Is there a reserve plan for when this plan does not work?
I am not sure I entirely followed the noble Lord’s question. We have set out clearly what the policy is. All pensioners with incomes up to and including £35,000 will benefit from the support, as will all those on pension credit and certain other income-related benefits. The payment of £200 per household, or £300 per household where there is someone over 80, will be made to all pensioner households in England and Wales. Individual pensioners with taxable income above £35,000 will have any winter fuel payment automatically recovered by HMRC without the need for them to take action.
My Lords, earlier this week, when the Prime Minister was explaining the rationale for the Government’s change on the winter fuel payment, he said that because the economy was now growing as a result of the Government’s policies, they were now able to make this change. Given the news yesterday that the economy is no longer growing, but actually shrank in April, would the Minister like to have another go at explaining the reason for the reversal of policy, and perhaps be honest about the fact that it was just incredibly unpopular and very ill-thought-through in the first place?
One thing that was ill-thought-through was the Liz Truss mini-Budget and the £22 billion black hole in the public finances, which is why we had to take the action that we did. It might be nice if the noble Lord took some responsibility for what we inherited. As I said already, when we came into office, we had to take a number of very difficult and urgent decisions to put the public finances back on a firm footing. That involved difficult decisions on welfare, on tax and on spending, and one of those was means-testing the winter fuel payment. We have listened to the concerns about the level of the means test and we are now able—all the while still means-testing the winter fuel payment, because that is the right thing to do—to extend eligibility so that this winter, all pensioners with incomes up to and including £35,000 will receive it.
My Lords, I start by wishing my noble friend the Minister best wishes for his birthday today. He has the special treat of an Urgent Question and a Statement on the spending review—what more could anyone ask for?
I very much welcome the decision to reintroduce the winter fuel payment. In answer to the Question, my noble friend said that anyone with income above £35,000 would not receive the payment. There is one problem with that, in that some forms of income are not taxed. Someone with a substantial cash ISA—I understand that there is a Member on the Liberal Benches who has £1 million in his ISA; he has made no secret of it, and presumably receives a very substantial income—with a taxable income of less than £35,000, would presumably still receive the winter fuel allowance, or is some step going to be taken to avoid that problem?
I am grateful to my noble friend for his question and for his birthday wishes—that was very kind of him. Obviously, we had to achieve the right balance between a simple system to administer and getting the support to those who need it most. The system that we have come up with sticks with the existing rules of the tax system and, I think, achieves the right balance, as I described.
My Lords, like other Peers, I welcome this decision. The other day, I asked the Minister something to which he did not respond, and I wonder if I might ask it again. Is one of the lessons learned from this for the Government that, should they be making further cuts in spending, they might not look to vulnerable or disabled people.
I am grateful to the right reverend Prelate for his question. I am sure that all of us have lessons to learn in life. I believe that it is very important that we reform our welfare system; it is not working and it needs reform, and I think everyone agrees with that. We will do this on a principled basis—namely, that those who can work should work, that those who want to work should be supported so that they can do so, and that we protect those with the most severe disabilities who will never be able to work.
My Lords, as the Minister knows, I did not welcome this decision. Turning to principles, does he agree that cliff edges in the tax and benefits system are undesirable? Can he explain whether, when a pensioner’s income moves from £34,999 to £35,000, support will be tapered away, or whether £1 in extra income will result in a £300 loss of winter fuel allowance?
I am grateful to the noble Lord for his question. He knows much more about the tax and benefits system than I do, I suspect, having spent many more years working on it than me. The answer to his question is that it is the latter: it is up to and including £35,000, so it will be at £35,001 where that happens. At that point, they will lose the winter fuel payment in its entirety.
I am glad of the opportunity to wish the Minister a happy birthday from these Benches.
We welcome the decision by the Government partially to reverse their decision on the winter fuel allowance. That will ensure that our oldest and most vulnerable citizens are better protected through the dark and cold of the winter months. However, when he answered questions before, the Minister did not adequately answer how this £1.25 billion reversal will be funded. Can he tell us today whether it will result in further tax rises, in departmental spending cuts or in increases in borrowing, and, if not, where the money will come from?
I am very grateful to the noble Baroness for her kind words. We are setting out these changes now to ensure that more pensioners are able to receive support this winter. That is important. As she knows, we have moved to just one fiscal event a year, so, as is now normal, these changes will be fully funded at the next fiscal event, which is the Budget in the autumn. This will ensure that final costings and funding decisions come alongside a full forecast from the OBR—something that the previous Government did not do—and we will ensure that the fiscal rules are met at all times.
My Lords, following the reference to those on these Benches and ISAs, I should perhaps declare to the House that I do not have £1 million in my ISA—I wish.
The Minister said that all pensioners earning up to £35,000 would benefit from this. Where I live, in the Scottish Borders, he will be aware that there is a degree of uncertainty, because of the interaction with devolved responsibilities, and because the benefits and tax system is reserved. Can the Minister reassure those where I live, in the Scottish Borders, that they will indeed benefit from what the Government have announced?
The noble Lord knows that winter fuel payments are a devolved policy in Scotland. The Scottish Government will receive a mechanical uplift in their funding as a result of the change in England and Wales. The Minister for Pensions spoke to his counterpart in Scotland on the day that this policy was announced. We are very conscious of the need for sufficient lead-in time, and those discussions will continue.
(2 weeks ago)
Lords ChamberMy Lords, I beg leave to ask the Question standing in my name on the Order Paper, and I apologise to the House because I have only half a voice today.
My Lords, the Government’s plan for change set out three metrics for the economic growth mission: first, that we will aim for the highest growth in the G7—we are currently the fastest-growing economy in the G7; secondly, higher living standards in every part of the country—living standards are now forecast to grow more than four times faster than in the previous Parliament; and thirdly, rising GDP per capita. Whereas this fell in the previous Parliament, GDP per capita is now forecast to rise by 5.6% in this Parliament.
I thank the Minister for his reply. On GDP growth, I doubt the 0.7% increase in the first quarter will be replicated later in the year. There is an old expression: one swallow does not make a summer. I suspect that that will be the case. Moody’s rating agency recently said that the Chancellor’s £25 billion tax raid on employers last October has already dented confidence in the British economy and it will weigh on growth very heavily in 2025. In fact, I believe that these policies which came into effect—
I will get to my question in a second. I believe the policies that came into effect in April will affect the British economy like an earthquake. My question is this. I live in south Cornwall, in a small-harbour fishing village. We no longer have any fishing in that village. There is fishing in Mevagissey, Looe and Newlyn. Will the Minister explain to the House how he expects the fishing industry to grow over the next 13 years?
I am grateful to the noble Lord for eventually getting to his question, but I am sorry that he chose to talk down the economy in the way that he did. I remind him that, when this Government took office, the UK was ranked seventh out of seven G7 economies projected for 2025. We currently have the fastest-growing economy in the G7. He talked about a report; let me give him another report. When the IMF last week upgraded the UK’s growth forecasts, it said that the Government’s fiscal strategy was striking a good balance between supporting growth and safeguarding fiscal sustainability, that the growth mission focuses on the right areas to lift productivity, and that our spending plans are credible and growth-friendly—spending plans that his party opposes. His party has opposed every single measure that we have taken to grow the economy.
My Lords, is the Minister aware that earlier this afternoon I had the great pleasure of being in the Peers’ Gallery to hear a brilliant speech by the Chancellor of the Exchequer, which was followed by an awful diatribe from Mr Stride, or “Baby Steps” as he is now called? Does the Minister agree that he was not just talking down the economy like the noble Lord, Lord Booth; he was talking down Britain?
I very much agree with my noble friend on every word that he said. The spending review that we saw this afternoon from the Chancellor set out capital spending that increases growth by 1.4% in the long term. Every single penny of that capital spending has been opposed by the party opposite. The spending review set out a housing settlement—the biggest investment in a generation. It set out record levels of R&D spending, the biggest ever transport settlement, and a record commitment to skills investment. Every single penny of that spending was opposed by the party opposite. It can talk down Britain, but it opposes every single measure this Government are taking to increase growth in the economy.
My Lords, perhaps I might offer some Cross-Bench objectivity. Here it comes. The 0.7% growth rate in Q1 was encouraging, but the growth rate over the last three quarters, which covers this Government’s tenure, is just 0.8%. That is less than in both the eurozone and the US. Does the Minister agree that it is growth per capita that matters—not the forecast but the track record here and now? And how concerned is he that our economic growth rate continues to lag our population growth?
I am grateful to the noble Lord for his question. He did indeed show his characteristic objectivity. I will simply say that, where GDP per capita fell in the last Parliament, GDP per capita is forecast to rise by 5.6% over the course of this Parliament.
My Lords, I hope the Minister will agree that to achieve growth in the UK we need a liquid and effective investor market. Despite London Tech Week, Wise plans now to shift its listing from London to New York and on Monday Spectris, Alphawave and Oxford Ionics, all key creative tech companies, announced that they would be taken over by US investors. In 2024, UK equity funds suffered £9.6 billion in outflows when most other equity funds had huge inflows—a pattern that dates from Brexit. I understand that the Government plan to press the pension sector to invest in UK companies, but what other steps are they taking to restore those key investment flows that used to come from Europe into the UK and to counter the US’s use of tariffs to incentivise the takeover of British tech?
I am grateful to the noble Baroness for her question. She mentions the outflows. The outflows in 2024 were less than in any previous year over the last 14 years so, although they are not what we want to see, they are perhaps not as doom-laden as she might want to make out. The Chancellor set out extensive capital market reforms in her last Mansion House speech. She has another Mansion House speech due on 1 July, at which point we will also publish the financial services growth and competitiveness strategy. I hope that will help to answer some of the questions that the noble Baroness asks.
My Lords, the Government’s tax hikes last year are believed—by the Bank of England, no less—to have reversed the frankly anaemic growth we have seen in the last couple of months, and we shall see what happens in the coming months. Since growth is the Government’s stated economic priority, which I agree with, it is unfortunate that today’s Statement by the Chancellor does so little to improve the position—for example, by boosting productivity across the economy. How do the Government plan to improve the situation, particularly in the coming months?
My Lords, the noble Baroness says that growth was anaemic under this Government. As I said before, the UK was ranked seventh out of seven for projected 2025 growth when this Government took power but is now the fastest-growing economy in the G7. We all know what the Tory record on growth was; had the economy grown over their 14 years at the average of other OECD economies, it would have been £150 billion larger. The noble Baroness asked what was in the spending review to boost growth. I have already listed some of the measures: record investments in housing, R&D, transport and skills, more money to reduce inactivity, more money for childcare, access to finance and a record investment in nuclear. Every single penny of that her party opposes. She says she supports growth, but she does not support a single one of the measures to get it.
My Lords, do the Government not recognise that the most obvious thing they could do to improve our growth record would be to improve our trading relationship with Europe? What do the Government propose to do in that regard?
I agree with the noble Lord’s point, which is exactly why we have embarked on the EU reset and negotiated a new strategic partnership with the EU that is in the national interest. I completely agree that the EU is our closest partner and biggest market. In 2024, almost half the UK’s total trade was with the EU and around 94,500 UK businesses exported goods to the EU, which is why the EU reset is so important. We negotiated a defence pact with the European Union, and we negotiated an SPS agreement with it to make exports easier. We have moved closer to agreeing closer co-operation with the EU on energy and the ETS, and we have agreed that we will work towards establishing a balanced youth experience scheme with the EU. All these things will move us closer to our biggest and most important market.
My Lords, is it not the case that we inherited a bankrupt economy and low growth, and that we had no prospects in the UK until we had a Labour Government? Is it not going to take more than a couple of months to turn around the mess that the last Government left?
On a constructive note, will the Minister give an undertaking to take an early opportunity to read the report that will be produced on Friday by the Financial Services Regulation Committee of this House, which sets out a clear agenda for how the regulators can help to establish growth in financial services, which should be a matter of consensus across the board? It certainly is a unanimous report by this House of the kind of quality that this House is famed for but which does not always result in immediate action by Governments.
I am very grateful to the noble Lord for his question. I absolutely will read the report as soon as it is published. I was lucky enough to serve on the Economic Affairs Committee when the noble Lord was its chair and I know he is now the chair of the committee producing this report, so I know it will be a report of incredible quality and I look forward to reading it. I know the Chancellor shares many of the committee’s objectives when it comes to financial services, and I hope the noble Lord will see much of that agenda laid out in her next Mansion House speech. I look forward to debating the report with him in this House in due course.
(2 weeks, 1 day ago)
Lords ChamberMy Lords, this surely must be the Government of unintended consequences. When this policy was first mooted, I asked the Minister whether there would be any financial gain from it because, with the further uptake in pension credits, the actual money saved is miniscule. It is nothing like what the Government said they would get, so we have gone through all this pain and people have suffered, all for a strange bit of ideology.
Following on from what the noble Baroness on the Conservative Front Bench said, reports in the media suggest that winter fuel payments will be made automatically as a universal benefit this winter. Money will then be reclaimed when higher-income pensioners fill in their tax returns. Can the Minister say how the Government will ensure that the new system does not mean that the bereaved families of tens of thousands of dead pensioners—not only widows and widowers but dead pensioners—will be pursued by tax officials to recoup the payments? The Government of unintended consequences strike yet again.
Although the Chancellor has finally acknowledged the failure of this policy—thanks to sustained efforts by the Liberal Democrats and others—the scale of the distress created must not be forgotten. Do the Government intend to uprate the £35,000 threshold in line with inflation in future years?
This has been a disastrous policy. It has not raised the money we were told it was intended to raise. There will be further distress down the line while they try to sort out this mess.
My Lords, I am very grateful to the noble Baroness, Lady Stedman-Scott, and the noble Lord, Lord Palmer of Childs Hill, for their questions and comments. I am grateful to the noble Baroness for welcoming this change of policy, and I thank both speakers for the consensus that now exists across the House on the current policy position.
The noble Baroness began by asking how we got here. We got here, of course, because when we came into office, we had to make a number of very urgent decisions to put the public finances back on a firm footing. That involved us taking some very difficult decisions on welfare, tax and spending, including means testing the winter fuel payment. I am very grateful to her for noting that we have now listened to the concerns raised, inside and outside this House, about the level of the means test.
The noble Baroness asked about the savings that will be generated from this policy. As she rightly said, we expect the policy to cost around £1.5 billion a year in total, including £1.25 billion in England and Wales, by the end of this forecast period. She asked about the savings that this would generate. It is estimated to save around £450 million a year, compared to universal winter payments.
The noble Baroness asked when and how this would be paid for. We are setting out these changes now to ensure that more pensioners can receive support this winter—that is the right thing to do. There is now just one fiscal event a year, so, as is normal, these changes will be fully funded at the next fiscal event, which is the Autumn Budget. This will ensure that final costings and funding decisions come alongside a full forecast from the OBR, and we will ensure that the fiscal rules are met at all times.
The noble Baroness also asked about the other policies we are pursuing. It was appropriate that, ahead of tomorrow’s spending review, she reminded us that the party opposite has not supported a single policy that we have put in place to stabilise the public finances or to raise money for public services. When we have tomorrow’s spending review, it will be very interesting to hear from the party opposite that it now supports all the spending we are doing, even though it did not support a single one of the difficult measures we took to raise money for public services. It is very interesting that she opposed the Employment Rights Bill, because we again see that her party does not support a single measure to improve the lives of working people.
Well, I think it is true.
The noble Baroness asked specifically about the tax system. No additional pensioner will be brought into the tax system because of this change; we can give that assurance to the House today.
The noble Lord, Lord Palmer of Childs Hill, asked about recouping payments from deceased people. HMRC has established processes in place to recoup payments and finalise the tax affairs of deceased people, so nothing will change because of this policy. This is not a taxable payment. We assure the House that, if this is the only outstanding tax charge remaining from a deceased person, HMRC will not pursue anyone just for this specific amount of money. The noble Lord also asked whether we will uprate the threshold of £35,000. We will set that out in the Budget.
My Lords, as someone who has spoken from these Benches against this proposal, I very much welcome the Government’s decision. The way the change has been characterised is a bit misleading. Does the Minister not agree that this represents a rejection of means testing and a return to universal benefits, with, quite rightly, the cost being handled for those on high incomes through a redistributive tax system?
I am grateful to my noble friend for his support for the change—I was going to say in the means test, and that is obviously exactly what his question is about. I am not sure I am expert enough to engage in a debate with him about the definition of a means test. Clearly, we are raising the level at which pensioners are entitled to and benefit from this policy. As he says, it will be paid universally to all pensioners, and those with an income over £35,000 will have the winter fuel payment recovered by HMRC through the tax system.
My Lords, this is certainly a shambolic way of conducting a government, but otherwise, I find myself unfortunately rather out of step with the exchanges so far.
The winter fuel payment had nothing to do with the level of fuel bills. It was paid to everybody, rich or poor, as a prize for reaching a certain age, which is why, at the last general election that I fought successfully as a candidate, the Conservative Party manifesto contained a commitment to abolish it. Unfortunately, we never got round to that.
The Government failed to make their case, which was exploited very successfully by Nigel Farage, so now they are introducing an extraordinarily generous means test. I quite accept that this should be means tested, but we are now going to pay it out to some of the better off households in this country. Does the Minister not accept that if the Government can somewhere find £1.5 billion to spend on the alleviation of poverty, there are very many more sensible ways of spending it that might help relieve the quite excessive levels of poverty that exist in our society at the moment? Meanwhile, I thank him for the £300 that I shall be receiving in a week or two’s time, although apparently, I shall be giving it back eventually.
I am grateful to the noble Lord for his question. I am sorry that he does not share the consensus in the House on the new policy position. He is absolutely right in his characterisation of the policy. I do not know what he earns, so it is not right for me to comment on that, but if he earns above the £35,000 threshold, it will be recovered through the tax system. He describes it as an extremely generous means test. It is kind of him to say that, but it is in line with average earnings and we have decided that that is the appropriate level it should be paid at.
My Lords, I declare an interest as co-chair of the all-party group on older persons. Is the Minister aware that Age UK, which really understands this issue and campaigned on it, welcomes unreservedly the Government’s decision—unlike the Conservatives, who say that they welcome the decision but would not find the money to pay for it? [Interruption.] That is exactly what the noble Baroness said. Will the Minister use his undoubted talents and tell them how they can reconcile that difference?
I am grateful to my noble friend for his question. I pay tribute to him and to Age UK for the campaigning work they have done, not least to increase pension credit uptake. There was a record increase this year in the take-up of pension credit. An additional 60,000 people are now claiming pension credit, which is incredibly welcome.
We have listened to the concerns raised by Age UK, among others, about the level of the means test. We have now acted to ensure that, although we are still means testing the payment, we are raising the threshold to extend eligibility, so that this winter, more pensioners will be able to benefit from it. Nine million pensioners will now receive it—more than three-quarters of pensioners in total.
My noble friend is absolutely right about the party opposite: they are more than happy to spend the money, but they are less keen on raising it.
My Lords, would it not be better to incorporate the allowance into the pension, which is taxable, making it easier and fairer to administer?
That may be one option, but it is not the option we have chosen.
My Lords, as one of the few supporters of the original measure—like my friend, the noble Lord, Lord Clarke—I feel the Minister’s pain. But when the Treasury has to retreat, it is best to concede more rather than less; in that respect only, I congratulate the Minister on the proposal. Can he provide an assurance that, as and when the Government have the resources to consider further tax and benefit changes, they will prioritise working-age families rather than the elderly, who have benefited from considerable government largesse, not least through the triple lock?
I am grateful to the noble Lord for his qualified support for the policy. The Government absolutely know that their number one concern and mission is to increase the living standards of working people and to do so through increasing growth in the economy, and that absolutely will be the focus of our policies going forward.
My Lords, I welcome the position of the Minister, and it was also good to hear praise for his leadership from the Benches opposite. But does he agree that it is unfortunate to hear attempts to pitch pensioners against workers’ interests in fair pay and stronger employment rights, not least because the workers of today will become the pensioners of tomorrow, and we know that low pay, weak security and poor rights lead to poverty in old age?
I am grateful to my noble friend and I agree with everything that she says. I will just add to what she said at the end: low pay and insecurity at work are detrimental to growth, and obviously we need growth in our economy to pay for the benefits that we want to pay to pensioners and others. Once again, the party opposite calls for the growth but they are not willing to support the policies that get us there.
My Lords, when the Chancellor was doing her various media interviews setting out the retreat on this policy, she rather unbelievably tried to suggest that it was done not because it was incredibly unpopular but because somehow the economy has got rather better since last year. Given that we have seen inflation up, unemployment up and the OBR slashing its growth forecast, the Minister should get some personal credit for not trying to insist on that nonsense in your Lordships’ House. When the Treasury analyses the cost of both the original policy and its reversal and takes into account the extra people claiming pension credit and the cost of reversing this policy, can he set out, either today or at the fiscal event, whether this whole set of decisions has saved or cost the taxpayer money?
I am grateful to the noble Lord for his question. On the facts about growth, we inherited forecasts from the previous Government for 2025 growth where we would have been seventh out of seven in the G7. In quarter 1 of this year we were first out of seven in the G7, so we will not take any lectures from him about the growth performance of the economy. He asked about the costings of the policy. The costings of the previous policy included assumptions about take-up of pension credit, so that pension credit increase figure was already in the costings for the previous policy. The costings of this policy will be certified by the OBR and scored at the Autumn Budget, and we will set out what he asks for.
My Lords, I commend my noble friend the Minister on the courageous decision to make the necessary changes to the winter fuel payment and bring some joy to many pensioners. The Government should be congratulated on actually listening to what the people are saying. In that respect and under the principle of parity as it relates to the payment of benefits in Northern Ireland, can the Minister outline what discussions have taken place between the Treasury, the Department for Communities and the Department of Finance in Northern Ireland about ensuring that pensioners—I declare an interest—qualify for this restoration of the winter fuel payment?
I am grateful to my noble friend for her question. As she knows much better than I do, winter fuel payments are transferred in Northern Ireland. The Minister for Pensions spoke to his counterpart in the Northern Ireland Government yesterday. We are of course very conscious of the need for sufficient lead-in time so that the necessary policies can be put in place in good time for this winter. The Northern Ireland Executive will receive a mechanical uplift in their funding as a result of this change in England and Wales.
I welcome the new policy, but does the Minister agree that the public would find it helpful if some thinking was given by the Government about the choice of the figure of £35,000? I have no feelings one way or the other, but I think the general public might find it helpful to find some kind of rationale behind this figure. Why was it not higher or lower? Why that particular figure?
My Lords, £35,000 is broadly equivalent to average earnings. It means that 9 million pensioners will now benefit from this. That is roughly three-quarters of pensioners.
My Lords, last week the Intergenerational Foundation released a report that found that the public spending gap between children and pensioners has widened by 170%. That means that in 2023-24 pensioners received around £31,000, in comparison to children at £18,000. The winter fuel allowance has meant that there are fewer pensioners in poverty, and that is a good thing, but when we look at child poverty stats, they are almost double those of pensioners in poverty. Will His Majesty’s Government review abolishing the child benefit cap?
I am grateful to the noble Baroness for her question, and I absolutely share her commitment to tackle child poverty in this country. We have made initial steps with the free school meals policy that the Prime Minister and the Secretary of State for Education set out last week. I hope that the spending review will have more to say on that subject, and on the child poverty strategy published alongside the Budget.
My Lords, I have two points. First, can the Minister say how many more pensioners will now have to submit a tax return? Secondly, this policy is full of anomalies. To give just one example, somebody who has saved diligently since ISAs began will have a portfolio of about £400,000. The income from that is not reported on any tax return at all. Therefore, somebody with £35,000-plus—at least £20,000, £30,000 or £40,000 more—can still get winter fuel payment under the Government’s announcement. How are the Government going to force people to disclose the income from ISAs and other tax-free savings?
Well, the tax system stays exactly as it is now, so I do not quite understand how my noble friend’s question arises. As I said before, no one will be brought into the tax system as a result of this policy who currently is not in the tax system.
My Lords, I welcome the reversal of the decision on winter fuel payments, having spoken, like others, cautioning against so many pensioners who are vulnerable and in need being deprived of it—not against the principle of changing it and restricting it to some degree. I just wonder whether, in terms of lessons learned, a more general principle might be acknowledged that in future cuts, the Government will not look to making them from vulnerable or disabled people.
As I have said all along, we have listened to the concerns about the level of means tests. We are still means-testing the winter fuel payment, because we think it is right that the very richest pensioners do not have their fuel bills subsidised when there are other calls on public spending, but I am grateful to the right reverend Prelate for supporting the policy now to extend that eligibility so that this winter more pensioners are able to benefit from it.
My Lords, I declare my interests, and I am glad that the Government have listened. I welcome the undoing of a terrible wrong. Can the Minister confirm that the Government estimate that about 50,000 more pensioners were in poverty last winter and 100,000 more pensioners ended up in A&E? Does this not show the difficulties of making short-term changes, without proper planning, which affect some of the most vulnerable people in our country? I ask for a commitment that, first, there will not be a consideration of means testing of the state pension itself and, secondly, the Inland Revenue’s helplines for simple assessment will be sufficiently staffed so that pensioners worried about whether they are going to have to pay back this money will get answers in a reasonable period of time.
I am happy to give the noble Baroness those commitments.
My Lords, the Opposition suggested that the Government have put pensioners behind the NHS and teachers. Does the Minister agree that the Tories do not seem to want to tell teachers or NHS staff that they want them to be poorer?
My noble friend is obviously right to point out that the party opposite has consistently criticised the public sector pay rises that we have given.
My Lords, following on from the question asked by the right reverend Prelate, I hope that the Minister is aware that roughly 750,000 pensioners on pension credit and therefore eligible for the winter fuel allowance applied for it last winter but have not yet had it. Will he look at this problem?
I will look at that and discuss it with my noble friend Lady Sherlock.
My Lords, I perhaps take a slightly different view on this. Of course, I welcome people being able to get their winter fuel payments. We are still applying the pension credit, which is absolutely right. I do not know what everybody else in this House who got winter fuel payments did with them, but I donated mine to charity; I certainly did not need that £300, and there are plenty of others like me.
If I have a concern about government policy, it is this. Nobody seems to recognise that pensioners benefited very well from the triple lock. I do not agree with the triple lock. I may be in a minority, but that money could be used, as people have said, for alleviating child poverty—probably one of the biggest challenges that we face. I am not expecting the Minister to do an about-turn on that one; I am just making a comment. When we go for the triple lock, there is an expensive cost. Tomorrow, we will hear the Chancellor make known how she will balance that budget. I welcome that people on pension credit—who we wanted to claim pension credit—will be able to get their winter fuel payments. In that respect, this is good. I have only expressed my one area of concern.
I am grateful to my noble friend for what he says. Over 12 million pensioners are now benefiting across the UK from the triple lock. Their state pension is set to increase by up to £1,900 over the course of this Parliament. Almost 60,000 extra households are now receiving the pension credit that they are entitled to, which I think we can all agree is a very good thing. He said that he donated his winter fuel payments to charity; he is welcome to continue to do that if his income is below £35,000. If it is under that and he wants to opt out of receiving it, he is very welcome to do so. We will bring forward proposals before the Summer Recess enabling him to do that.
My Lords, when your Lordships’ House debated the original changes to the winter fuel payment, it was suggested that we should not means-test the winter fuel payment but tax it instead. The noble Baroness the Minister rejected that option, saying that it failed on two fronts: it did not meet the savings test or the fairness test. If the Government had listened to your Lordships’ House then, millions of pensioners who did not receive their winter fuel payment this winter would have done so. What has changed in terms of the practical ability to implement this policy now compared with when it was first suggested by your Lordships’ House?
I thank the noble Baroness for her question, but to be clear: we are not taxing it. We are recovering it through the tax system, which is a different policy from the one that she is describing.
Of the 12 million pensioners, how many are millionaires? Is it true that it is 3 million?
I do not have those numbers to hand, but I will see whether they exist. If they do, I will write to my noble friend.
(2 weeks, 2 days ago)
Lords ChamberMy Lords, I beg leave to ask the Question standing in my name in the Order Paper and declare my interest as vice-president of the Shaftesbury Society and my involvement in many other similar charities.
My Lords, the Government have had to take difficult decisions to repair the public finances and rebuild the public services. Giving careful consideration to and properly assessing the impact of these decisions is a priority. A tax information impact note was published alongside the introduction of the Bill containing the changes to employer national insurance contributions, which sets out the impact of the policy on individuals, businesses and civil society organisations. As I committed to your Lordships’ House during the passage of the Bill, we will continually monitor and assess the impacts and effects of these policies.
The Government’s national insurance increase to 15%, plus lowering the threshold to £5,000, will cost charities an additional £1.4 billion annually. One in four employers are implementing redundancies as a result. This will drastically cut charitable services, which is akin to kicking in the teeth the most vulnerable in our society. Has any assessment been made of the impact on charities serving vulnerable young and old people?
I am grateful to the noble Lord for his question. Of course the Government recognise the important role that charities play in our society as a trusted and independent partner to the public sector in helping deliver vital public services. We also recognise the work done by unpaid careers and welcome this week’s Carers Week as an opportunity to pay tribute to the invaluable work that they do throughout the UK. As I said in my opening Answer, we had to take a number of very difficult but necessary decisions, including on employer national insurance, to fix the public finances and restore economic stability. In doing so, though, we recognised the need to protect the smallest businesses and all charities, which is why we have more than doubled the employment allowance to £10,500, meaning that more than half of businesses, including charities, either gain or see no change in the amount that they will pay. As I also said in my Answer, we will continually monitor and assess the impact and effect of those policies.
My Lords, does the Minister agree that the Government have already published several comprehensive spending review announcements over the past week? Does he further accept that social care funding is inextricably linked to the NHS’s recovery? Will he therefore use this opportunity to reassure the House that social care will not be cut in the comprehensive spending review?
I agree with the noble Baroness’s first statement of fact; we have already made several spending review announcements. She will know that the Government are making available so far £3.7 billion of additional funding for social care authorities in 2025-26, including an £880 million increase in the social care grant. This is part of an overall increase to local government spending power of 6.8% in cash terms. As for future years, she will have to wait for Wednesday to find out the details of the spending review.
My Lords, in addition to their role in providing many social care services, charities perform a very important function in speaking up for patients, users and carers, enabling them to find their voice and claim their rights. Would my noble friend agree that this advocacy function is extremely important and should be supported and encouraged? I draw attention to my registered interests and thank the Minister for his acknowledgement of Carers Week.
I am grateful to my noble friend for her question and I wholeheartedly agree with what she says. Civil society organisations play an absolutely vital role in speaking out and advocating on behalf of their beneficiaries. This role is a fundamental part of a thriving democracy. We have a rich history of charities campaigning for change in this country. Examples span the huge breadth of the voluntary sector, from the NSPCC on child protection to the RSPCA promoting animal welfare, international development charities tackling global poverty and inequality, environmental charities raising awareness of global warming, and many other examples.
Civil society’s campaigning and advocacy roles should of course be recognised and celebrated, which is why the civil society covenant framework, launched in October 2024, aims to establish a renewed partnership between the Government and civil society organisations. It outlines four foundational principles: recognition, partnership, participation and transparency. Following extensive engagement across the sector, we aim to launch the civil society covenant later this year.
My Lords, given the worrying data from the National Care Forum that 73% of providers reckon that they will have to refuse new care packages from local authorities or the NHS, and that 22% plan to close their businesses entirely, what consideration are the Government giving to renegotiating completely the national insurance contributions, to ensure that those who provide direct care are not burdened with an expenditure that risks putting up the load and demand on the NHS itself and on local authorities, so that we get circular downward spiralling of excess expenditure?
I do not think I can give a positive answer to the main thrust of the noble Baroness’s question. As she will know, and as I said already, the Government are making available £3.7 billion of additional funding for social care authorities in 2025-26. We will set out future years’ allocations in the spending review on Wednesday. As she knows, the Government will provide support for departments and other public sector employers for the additional employer national insurance costs.
My Lords, in Committee on the national insurance Bill we put an amendment down to exempt hospices specifically from national insurance increases. The CEO of Thames Hospice, to which I declare I am a donor, said that, as a result of the proposed changes, more people will die in pain and agony than would otherwise need to be the case. What assessment have the Government made of the cost of these national insurance increases on hospices specifically, and what advice would he give to the chief executive of Thames Hospice?
As the noble Lord knows, the Government recognise the vital role hospices play in supporting people at the end of their life and their families. The Government are determined to shift more healthcare into the community and ensure that patients and their families receive high-quality, personalised care in the most appropriate setting. Hospices will have a very big role to play in that shift. The Government are supporting the hospice sector with an additional £100 million for adult and children’s hospices, to ensure that they have the best physical environment for care, and £26 million revenue to support children and young people’s hospices.
The Minister will recall from the amendment I tabled in Committee to what was then the Bill that my twin brother was an early beneficiary of SEND transport. Will the Government monitor the impact of national insurance increases on the effectiveness and continuity of provision in this area and inform the House of such findings in due course?
I am grateful to the right reverend Prelate for his question. The answer is yes; I think I committed to doing so during the during the legislative process of that Bill. As I said then, the Government do not expect the changes to national insurance to have a significant impact on home-to-school travel for children with SEND. The Government have increased funding for the core schools budget by £2.3 billion, increasing per-pupil funding in real terms in 2025-26, and £1 billion of this funding will go towards supporting the special educational needs and disabilities system. The Chancellor will set out funding for schools as part of the spending review on Wednesday.
My Lords, the fact is that these increases have devastated the charitable sector. For example, Noah’s Ark Hospice in north London said recently that the rise in national insurance represented
“basically a £100,000 tax on us that we hadn’t budgeted for”.
Yet the need for these services has never been greater, as the Minister has just acknowledged. Will he assure the House that the Government will not increase national insurance contributions again and that his review will look sectorally in detail at the effect on charities, hospices and social care before the next Budget?
On the first half of the noble Baroness’s question, as she knows, as part of the changes to national insurance, the Government recognised the need to protect the smallest businesses and charities, which is why we more than doubled the employment allowance to £10,500, meaning that more than half of businesses with national insurance liabilities will either gain or see no change this year. The Government provide a great deal of additional support to charities via our tax regime, which is among the most generous anywhere in the world, with tax reliefs for charities and their donors worth just over £6 billion for the tax year to April 2024.
My Lords, partners of big law and accountancy firms derive most of their income from one source but, despite that, they are not deemed to be employed by the firm. Therefore, the firms do not pay employer’s national insurance on the partners’ share of profits. The big four law firms are avoiding about £4 billion a year in employer’s national insurance contributions. Can I urge the Minister to look into this and bring forward reforms, so that we can have lots more revenue for the things that we need?
I am very grateful to my noble friend for his suggestions, which I will always take very seriously.
(2 weeks, 6 days ago)
Lords ChamberThe Liberal Democrat Benches fully support measures to grow our economy across every nation and every region. We therefore welcome this Statement detailing planned investment in public transport and infrastructure. It is good to see not just plans but the money set aside for some city regions, giving long-term transport financial settlements. Frankly, that is the only sensible way to ensure investment in transport infrastructure, rather than the constant stop-start begging-bowl approach we saw with the previous Government, which benefits no one and delivers nothing. For too long, communities have heard promises only, to be left with phantom transport networks, so investment in transport infrastructure is vital if we are to grow our economy and create access to jobs across the country.
In particular, we are very pleased to see the Metrolink to Stockport in this announcement, which is testimony to the hard work of the local Liberal Democrats, who have been campaigning and working on this issue for many years—indeed, long before the mayor and the combined authority were created. However, we have a number of questions. It seems that areas without mayors are being left behind or ignored. Where is the plan and money for rural areas? There are parts of the south-west, for example, which would benefit hugely from transport infrastructure investment, yet this area has been ignored in this Statement. It feels as though Bristol is as far west as the Government can see.
Whether it is Cumbria, Shropshire, Norfolk, Devon or Cornwall, there is nothing in this Statement for them, so what plans do the Government have for a rural growth strategy? What funding is planned for our railways as they come under public ownership? There is a desperate need for major investment across the network to enable more frequent trains to serve our communities. Will there be a railway investment plan? Will the Mayor of London and Transport for London be allocated further funding to maintain and grow the capital’s transport system, creating jobs across the country?
The cost of fares is a real barrier to many people. What plans are there to reduce fares—in particular, to reinstate the £2 bus fare cap—and to reform rail fares to make them affordable for passengers? Alongside the investment in infrastructure, there is the challenge of the skills and workforce issues. What plans do the Government have to ensure that we have the skilled and trained workforce to build this transport infrastructure, including fixing the apprenticeship levy? This is a welcome first step, but key questions need to be answered to ensure that every area can grow and prosper.
I am very grateful to both noble Baronesses, Lady Neville-Rolfe and Lady Pidgeon, for their questions, and I welcome the noble Baroness, Lady Pidgeon, to her place and look forward to speaking with her in many more of these debates.
The noble Baroness, Lady Neville-Rolfe, asked a number of questions. She started by asking about growth. I noticed that she did not mention that, in this quarter, the UK is the fastest-growing economy in the G7. I noticed that she did not mention that our growth forecasts have just been upgraded by the IMF. I noticed that she did not mention that, in many business surveys, business confidence is now at its highest level for many years. I hope that, when she talks about growth, she will always give a rounded picture of where we are on growth.
She asked whether these measures will contribute to regional growth, and yes, of course they will: that is the whole point of them. For too long, we have relied on just one part of the country to generate economic growth. We need to make sure that more parts of our country are contributing to growth and more people throughout our country are feeling the benefits of that growth. That is absolutely why we are doing what we are. It is why we started with connectivity: because we know that connecting city regions is incredibly important, enabling more people to travel to work, connecting labour markets and connecting businesses to more places so that they can sell more goods to more people. That is absolutely central to what we set out yesterday. The answer to the question, “Will this contribute to growth?” is: yes it absolutely will. We saw in the Spring Statement the OBR, for example, scoring for the first time some of our growth measures, and of course we hope that it will continue to score our growth measures going forward.
She asked: is this new money? Absolutely, yes—yesterday, we announced £15 billion of new money. It is the biggest ever investment by any British Government in our regional transport network. As a result of the fiscal rules and the difficult decisions that we have taken, we are in the spending review increasing the overall amount of spending by £300 billion: £190 billion on day-to-day spending and an increase of £113 billion on capital spending. I noticed that the noble Baroness, Lady Neville-Rolfe, welcomed—slightly half-heartedly—what we announced yesterday. It is notable that she welcomed the additional spending, but she has at no point welcomed any of the difficult measures we have taken to raise that money so that we can spend it on the things that she is now welcoming. I think that her shadow Chancellor is today making a speech where he is seeking to distance himself from the Liz Truss approach from the previous Parliament. Yet it seems to me that the party opposite is repeating exactly the same mistakes of the Liz Truss mini-Budget of spending money that it does not have. I think that is a huge risk going forward. As I say, she has welcomed this spending, but she has opposed every single measure we have taken to raise the money to fund it. She asks: will this policy require any additional taxes? No, because we have already raised the taxes in the last Budget—£40 billion—to enable us to spend this money for the rest of this Parliament. So yes, these measures will be met within the envelope that was set at the last Budget.
The noble Baroness said that these are the same measures as the previous Government announced. She kept using the phrase, “We promised”. I think that is a really important phrase because, yes, the previous Government did promise many things, but they did not put a single penny of funding behind any of the promises made. The big difference between what we are doing now, what the Chancellor announced yesterday, and what the previous Government announced, was that they made lots and lots of promises that they never funded—not with a single penny of funding. She will have heard me refer to the £22 billion black hole in the public finances. That is exactly why that black hole occurred. What we announced yesterday was real funding for real measures going forward. That is the big, fundamental difference. She asked for an honest assessment, and I think I would call for some honesty from her too that the previous Government did not fund any of those promises.
She asked about the Green Book. We have set out that the Green Book was used by previous Governments against regional authorities and local mayors as a reason not to invest outside London and the south-east. We have changed that methodology. We will set out in the spending review next week the full details of that review, and I look forward to discussing the full details of that with her.
She said that funding would not be seen for two years from now. Of course, there was no funding seen under the last Government at all, so of course we have to start somewhere and we have to get the money out of the door—she is absolutely right. But spades will be in the ground in this Parliament, and we absolutely confirm that.
She asked: will we see improvements for business? Yes, it is absolutely the purpose of this announcement to connect businesses to more areas. It is why local transport networks are so vital and why we have started where we are. She talked about the fiscal front, and I completely agree with her. Of course there are increasing pressures, but that is why I say to her that we must not make promises that we cannot afford. The previous Government did exactly that; we will not make that mistake.
I am very grateful to the noble Baroness, Lady Pidgeon, for her welcome for the long-term nature of these announcements, and it is obviously great that national government is working with local government and local government leaders to deliver on these promises. She called it a welcome first step, and I would agree exactly with that sentiment. We were very clear about what we were and were not announcing yesterday. Yesterday, we were announcing the connectivity of city regions, so of course this focused on certain city regions. Next week, we will set out in the spending review the entire regional plan for growth: for the rest of England, Scotland, Wales and Northern Ireland. That is what we will do, but yesterday we were talking purely about the connectivity of city regions, and we were putting the transport connectivity first, because we know that that is the essential underpinning for so much else in our growth strategy.
She touched on a number of other things that are important to growth. She talked about skills, for example. I completely agree with her when it comes to skills. We will be setting out in the spending review, and then in the industrial strategy in the weeks following the spending review, the measures that we are taking. She talked about having the workforce to build this transport infrastructure. Absolutely: I completely agree with her on that point. She asked about funding for railways, the rest of the country and regional plans, and about the Mayor of London, et cetera. All those questions will be addressed in the spending review next week, and I look forward to discussing that with her and other noble Lords next week.
My Lords, I very much welcome the Statement on connectivity across England, and I welcome the noble Lord’s commentary in relation to the spending review next week, particularly in relation to the connectivity of the different parts of the United Kingdom. He will know that I have mentioned the report of the noble Lord, Lord Hendy, on union connectivity many times, and I urge the Minister and his colleagues to look at that report again, particularly in relation to the A75 in Scotland, which is very important for people and businesses travelling from Northern Ireland to England, because that road really needs an upgrade. I commend the Government for taking this initiative. I really believe in capital investment leading to economic growth, and I think that connectivity will be very much helped by that. I urge him to look at that connectivity review and to link up the rest of the Kingdom as well.
I am grateful to the noble Baroness for her question and the points that she makes. I think we would agree with a lot of what she says. She is supporting the importance of connectivity underlying much of our growth mission. That is obviously what we were starting to set out yesterday—as I say, just in the city regions for now, but next week, in the spending review, in the rest of the United Kingdom. I cannot comment on the specific road that she mentions ahead of that spending review, but of course I will take away what she says about that report and very much support what she says about connectivity.
Does the Minister accept that a key step in overcoming regional economic disparities is the mobilisation of the full labour force and, in particular, bringing into worthwhile employment young people who are fit to work and not in full-time education or training? What progress has been made to overcome regional disparities in that regard?
I very much agree with the noble Lord in what he says about bringing people in. We have far too many people inactive in our labour market. I think we are the only country in the G7 where inactivity rates have not returned to where they were prior to the pandemic, for example. At a time when, as the noble Baroness, Lady Pigeon, mentioned, we need the workforce there to build this infrastructure, there are far too many people who are currently inactive, and it is a huge waste of potential. We have started, with the welfare reforms that we have set out, to get more people back into the labour market. There will be more detail in the spending review next week, or perhaps following the spending review, on the settlement that the Department for Education and the Department for Work and Pensions will be receiving to ensure that we get more of those people who are not in education or training back into the workforce.
My Lords, like my noble friend Lady Pidgeon I support the announcement from the Government. I also support her call for the reinstatement of the £2 bus fare cap.
I listened with interest to the Minister’s comment about connectivity in city regions. I want to press him regarding South Yorkshire. I welcome the tram renewal. However, in addition to tram renewals, did the ask from the regional mayor include tram extensions? The Supertram system in Sheffield has been in place since the early 1990s, albeit that a small extension from Meadowhall in Sheffield to Rotherham was done during the coalition years. Was a tram extension asked for?
I am grateful to the noble Lord for his support for what we have set out and for connectivity in general. We announced £1.5 billion for South Yorkshire, to support the reopening of Doncaster Airport and to renew the existing and now publicly controlled Supertram network with track replacements, overhead line maintenance, rolling stock renewal and a full fleet of new vehicles by 2032, linking jobs and homes in Sheffield and Rotherham. It was also to reform South Yorkshire’s buses—the noble Baroness, Lady Neville-Rolfe, is keen on buses—with franchise buses operating in Sheffield, Doncaster and Rotherham by 2027 and across South Yorkshire by 2029.
My Lords, I am curious about the relationship between the timing of this announcement and the review of the Green Book. The figures announced today are practically the same as those promised by the Conservative Government a year ago. We are expecting from the Government a review of the Green Book which is meant to tilt investment further towards the city regions outside London. The Chief Secretary to the Treasury confirmed in his Statement yesterday that the Green Book review will be published next week. Why have the Government rushed out these figures, which are clearly based on the existing Green Book and the Conservatives’ financial methodology? Would the city regions not have benefited more had the Chief Secretary waited until after next week’s announcement, when the new Green Book—we do not know what it will contain yet—is in place?
No, that is not the case at all. The noble Lord refers to promises made by the previous Government, which the noble Baroness, Lady Neville-Rolfe, also referred to. Promises were made. Let us be clear: not a single penny was allocated by the previous Government to a single promise that they made. The noble Lord can compare what this Government are doing with what the previous Government did, but this Government are putting money towards those announcements.
The noble Lord then said that announcements were—in his bizarre phrase—“rushed out”. Making announcements is not rushing anything out. It is setting out very clearly what our policy is for the connectivity of the city regions. We will publish the review of the Green Book next week. That will make sure that, in future, additional investment is not biased towards any one region but that the entirety of the country is considered when it comes to those announcements. That makes perfect sense. I do not recognise the analysis that the noble Lord is putting forward.
My Lords, I welcome the Government’s announcements in relation to regional growth. As the sometime author of the Green Book, I welcome the direction of travel in terms of investment appraisal. However, inevitably, resources are finite. Can the Financial Secretary confirm that the Government are prioritising those projects with the greatest economic return? Does he agree that the private sector also has a critical role in delivering regional growth? Can he reaffirm the Government’s commitment to sound public finances, the better to bear down on the cost of borrowing?
I agree with the noble Lord’s points. He asks about the Green Book. He has much more experience in this matter than I do. We have set out—and I hope that he agrees—that for too long the guidance in the Green Book has been biased against certain parts of the country. We want to address that. On whether we will prioritise the spending on where it has the greatest return, yes, this is key to the methodology that the Green Book sets out. The Green Book reinforced investment in areas that were already successful. It did not necessarily enable investment in areas where there was a high degree of potential. That is what we want to do. By investing in areas of high potential, there will be huge returns. We have already set this out. There could be a potential increase of about 3% of GVA if we can get the city regions up to the average productivity of the country, as the noble Baroness, Lady Neville-Rolfe, said. That is the intention and why we are doing what we are doing.
The noble Lord talked about the importance of fiscal responsibility. He will know that this Government inherited a £22 billion black hole in the public finances. Restoring fiscal responsibility is the central driving purpose of the stability pillar of our growth mission. We have set out very clear fiscal rules that require no borrowing for day-to-day spending, unlike the previous Government, who had that £22 billion black hole in their day-to-day spending. We have repaired that. At the first opportunity, when the fiscal rules were tested at the Spring Statement, we repaired the headroom against the fiscal rules in full to what it was before. We have set out very clear fiscal rules. We will stick to them, and everything that we set out in the spending review next week will be shown to be fully funded and fully in line with the fiscal rules.
My Lords, I welcome the proposals. I remind the Minister that the Leeds tram scheme was cancelled by the last Labour Government in 2009, so it is very good to see it coming back 26 years later.
I note that the Statement says that modern growth
“relies on dynamic, interconnected city regions”.
I live on the outskirts of Bradford, the largest city in Britain without a mainline station. I am conscious that the lack of a decent trans-Pennine link and the overcrowding of the existing rail links between Leeds and Manchester is a huge problem for interconnection between three potentially vital regions of Britain—West Yorkshire, South Yorkshire and Greater Manchester. I remind the Minister that a new trans-Pennine rail link, Northern Powerhouse Rail, was talked about, planned and proposed, on and off, throughout the last Government. We need to make something which will be transformative for the entire north of England.
I am grateful to the noble Lord for his support and for what he says. He knows much more about that region than I do. He will know that in the previous Budget, we funded the trans-Pennine upgrade for the work that was under way. We gave a further £2.1 billion investment for West Yorkshire yesterday, which will deliver for the West Yorkshire mass transit system, linking up Bradford, Kirklees, Calderdale, Wakefield, Pudsey and Leeds. I hope that goes some way towards what he is asking for. There will be further transport announcements in the spending review next week. I look forward to debating those then.
My Lords, I must apologise to the House and my noble friend the Minister for being a couple of minutes late for the start of the Statement. I hope that the House will forgive me; it is the first time that I have done that.
I want to ask the Minister about the east Midlands. We have felt very left out over many years in that important part of England, but I was delighted by yesterday’s announcement as it affects transport links between the two great cities of Nottingham and Derby. That is a great plus which we are very pleased about. Now for my slight gripe: I spring from Leicestershire, and we are feeling slightly left out, not from yesterday’s announcements but because, generally, Governments, and particularly the previous one, have failed to do anything to help in this way in the east Midlands and around Leicester in particular. Can the Minister and his colleagues consider that when future decisions are made?
I am very grateful to my noble friend. Even though he was late, I was very happy for him to contribute when he was welcoming what we have done, for which I am grateful; I was less keen once he started with his gripe. We have pledged £2 billion of additional investment in the East Midlands to develop the Trent Arc, linking Derby and Nottingham to create tens of thousands of new jobs and homes, and to connect Infinity Park Investment zone and the East Midlands Freeport with sites including Ratcliffe-on-Soar clean energy and advanced manufacturing and East Midlands Intermodal Park—home of Toyota in the region. I absolutely hear what he says about Leicester; I will take that back and hopefully will have more good news for him in the spending review next week.
My Lords, I am conscious that some of these announcements sound familiar—that is why I welcome them—but I was concerned that the Ely Junction upgrade was not mentioned. I hope for better news later next week. The Minister referred to the Green Book. I am very interested in this, because it was changed in December 2020 specifically to make sure that the Government’s strategic priorities—of which growth around the country was one—meant that a project’s BCR could be lower than for other projects, but that it would still be awarded and could go ahead.
Based on what the Minister has said, I am just wondering what further changes are going to be made in the Green Book on the back of the changes that have already happened, which have meant that projects could be deployed—that is why so many of these projects were announced two years ago. I would be grateful if he could explain this further. He talks about black holes and the like; of course, he knows that the OBR does not agree with that assessment. I would also be grateful if he could clarify the spending announcement, because he said that this would be new money. Is that on top of the £36 billion announced two years ago for many of the projects that were re-announced yesterday?
The noble Baroness has asked a number of questions. When she stood up, I was hoping she was going to defend the Liz Truss mini-Budget that her party is trying to distance itself from today. I was disappointed that she did not do that. She did try to defend the £22 billion black hole, which is almost as enjoyable as defending the Liz Truss mini-Budget, and she will know that that is what we inherited.
The noble Baroness talked about re-announcements made yesterday. I will just make this point again: they are not re-announcements if actual money is put behind them. The previous Government announced many things and made lots of promises—the noble Baroness, Lady Neville-Rolfe, used the word “promises” lots of times—but they did not put a single penny behind any of those things. Not one penny or pound of any of those announcements was ever funded. We are now funding those announcements, so it is a very different situation.
The noble Baroness asked about the Green Book. As she knows, the Treasury Green Book sets out the guidance for public servants on how to assess the value for money of Government projects. We have heard from many regional mayors that previous Governments wielded the Green Book against them as an excuse to deny important investment in their areas. That is why in January the Chancellor ordered a review of the Green Book and its use to make sure that this Government give every region a fair hearing on investment. The purpose of the review is to determine whether the Green Book is being used to provide Ministers with fair, objective and transparent advice on public investment across the country, including outside London and the south-east of England. We will publish the full conclusions of that review next week alongside the spending review.
My Lords, having just heard what the Minister said about the various regions, may I ask him what, if anything, will happen further west than Bristol?
I tried to address that in answer to the question from the noble Baroness, Lady Pidgeon. Yesterday we talked about interconnectivity within the city regions. We will be announcing the full regional transport plan and regional growth plan for the whole of the country—England, Scotland, Wales and Northern Ireland—next week in the spending review.
My Lords, one way you can tell that I am a Treasury nerd is that I am really looking forward to the Green Book review being announced next week, and I welcome what my noble friend has said about that today. There are many problems with the way the Treasury has, historically, allocated money for long-term investment. One is the regional bias that we have discussed today, but another is that capital budgets are allocated for short periods with an incentive to spend them by the end of a three-year cycle, whether it is appropriate or not for the project. Does the Treasury still intend to move towards longer-term capital budgeting, and will we hear something about that next week in the spending review?
I am very grateful to my noble friend for his question and for his expertise in this matter. He is right on capital budgets, with which, historically, there have been two problems. The previous Government’s fiscal rules did not prioritise capital investment, so when they had holes in their day-to-day spending plans, they would raid the capital budget to top up them up. That is why we have seen the infrastructure of our country deteriorate over the past 14 years. This Government’s fiscal rules ensure that we do not cannibalise those investment budgets to fund day-to-day spending. That is incredibly important, and it is why we have this £113 billion of extra capital spending to announce in the spending review. My noble friend is also absolutely right about the short-term nature of those capital budgets. Yes, three years is probably too short a planning horizon, which is why we will be announcing five-year capital budgets in the spending review.
My Lords, I apologise for not being here at the beginning of this important Statement. I was on the Social Mobility Committee, which is related to regional growth. As an MP, I represented the new town of Runcorn, and I was interested to see that the proposed new towns are in Essex, Surrey, Oxfordshire, Cambridgeshire, Buckinghamshire, Bristol, Wiltshire, Warwickshire and North and South Yorkshire. There is no mention of the north-west or north-east of England. That is quite concerning when we look to achieving the growth we want to see in all the regions of our country. Can the Minister update the House on whether there are any proposals for new towns in the West Midlands and the north-west and north-east of England?
I will have to check with my colleagues in MHCLG on that point, and I am more than happy to write to the noble Lord to answer it. On growth plans for the rest of England—and for Scotland, Wales and Northern Ireland—outside of the city regions that we announced yesterday, there will be much more to say in the spending review next week, but I will write to him on this point.
My Lords, I welcome yesterday’s Statement. London is grinding to a halt while, hopefully, we are seeing the rest of the country improve its communications. The Mayor has recently made announcements about changes to the congestion charge. I know this is not my noble friend’s direct area of responsibility, but should we not review the possibility of extending the congestion charge to the western part of London? We are grinding to a halt, and it is time we did something fundamental to stop it.
I think that may be a question for the Mayor of London.
(3 weeks ago)
Lords ChamberTo ask His Majesty’s Government what progress they have made in reforming environmental, social, and governance rules to ensure that they are not used by financial institutions to deny banking services, including loans, to the UK defence sector.
My Lords, the Government have been clear that there is nothing contradictory between ESG considerations and defence. No company should ever be denied access to financial services solely on the basis that they work in the defence sector. The Government are working closely with the defence sector and financial services to identify the extent of this issue, to reduce barriers to essential banking services and to support a resilient defence industry.
My Lords, I am grateful to the Minister for that Answer, and somewhat reassured. However, there is still evidence—plenty, in fact—of the threat of debanking faced by SMEs in this sector because of an absurdly overzealous interpretation of ESG considerations. The Government’s defence commitments are welcome, but private capital will of course be necessary to deliver those. Can the Government commit now to bringing ESG rating agencies within the regulatory perimeter, which will force greater transparency? Will they also take a leading role in underlining the desirability of investment in defence and national security, such as by using the National Wealth Fund and encouraging local government pension funds and other public investment vehicles to allocate funds to the sector? While they are at it, can they perhaps also remind the banks that defending the nation is profoundly ethical?
I am grateful to the noble Lord for his Question, and I am happy to say that to all three of his supplementary questions the answer is yes. I agree with a lot of what he says. Access to finance is a significant issue for defence SMEs, and as a result it will be one of the key considerations for the forthcoming defence industrial strategy. It is not entirely clear-cut that all those access to finance issues are a result of ESG considerations; there are many more, and it is quite a complex picture. As for the noble Lord’s three questions, we recognise that the ESG market has developed quickly and without formal oversight, leading to some stakeholders raising significant concerns. To address those concerns, the Government will lay secondary legislation later this year to bring ESG ratings providers into regulation so that they are subject to rules set by the FCA. We have also set defence as one of the priority sectors that we want the National Wealth Fund to invest in—I think that was the noble Lord’s second question. Finally, we are working closely with the banking sector to make sure that it understands the importance of the defence sector to the economy.
My Lords, apart from ESG questions, there are wider questions about investment in defence companies. I declare an interest as an academic. Obviously, often it is students, and some of my colleagues as academics, who may think that the defence sector is not suitable to invest in, just as they are not keen to invest in tobacco or oil. What can His Majesty’s Government do to help launch the national conversation that the strategic defence review says we need to help people, not just the banks but other investors, understand that we need to work with defence companies, because the defence of the realm is the most important duty of the state?
I was not quite sure where the noble Baroness’s question was going, but I definitely agree with where it ended up. The Government have made it absolutely clear that we consider defence an ethical investment. We do not see a conflict between sustainable investment and investment in our world-leading defence sector. At the end of the day, it is not for the Government to tell investors what they can and cannot invest in, but at a time of increasing geopolitical instability, supporting the defence sector has never been more critical.
My Lords, perhaps I may ask a supplementary to the excellent Question asked by the noble Lord, Lord Sharpe of Epsom, based on the experience of an entrepreneur and inward investor who plans to build a much-needed factory in the United Kingdom to manufacture weapons-grade ammunition and who has been refused access to banking facilities, because of the defence nature of his proposal, by one of our leading banks. As the strategic defence review makes clear, one criterion for success over the next few years will lie in the number, scale and diversity of defence and dual-use technology companies in the UK. The review also emphasises the need for a whole-of-society approach to defence. With that in mind, does the Minister agree that we must ensure that banking facilities are more readily available beyond the historic primes to defence companies, particularly those which aspire to be, or are, suppliers to the UK Government, and that our procurement should support SMEs to do just that?
I am grateful to my noble friend for his question, and I agree with everything he said. The Government have been clear that no company should ever be denied access to financial services solely on the basis that they work in the defence sector, and the banking sector should never take a blanket approach to any one sector. I very much recognise the story that my noble friend tells, and that SMEs face unique challenges working in the defence sector, compared with larger, more established suppliers, including in accessing financial services, as the noble Lord said in his original Question. As my noble friend said, they face difficulties opening bank accounts and an increased risk of sudden bank account closure, as well as higher costs of borrowing and access to capital, and they often face a higher compliance burden. That is why we have set out that supporting and unlocking the full potential of SMEs will be a key consideration of the forthcoming defence industrial strategy.
My Lords, it sounds as though the Government are well aware that this is a fairly widespread practice, particularly among the larger lending banks. What advice have they therefore given to the banks about defining what the defence sector is? The defence sector, of course, through its supply chains, affects the vast bulk of British industry, so it is important that they define it in a sensible way.
I do not think any specific guidance has been given in the way that the noble Lord asks, but the most important thing to say here is that the banking sector should never take a blanket approach to any one sector. Of course, the decision as to what banking services to offer is ultimately a commercial decision but, as I said, banks should not take a blanket approach and they should make sure that decisions are taken on a case-by-case basis. The Government are actively engaging with banks to ensure that they understand the importance of the defence sector. The FCA has worked to understand why banks might close or reject accounts, and where it has found areas where firms need to improve customer outcomes, the Government expect them to consider the FCA’s findings and take them very seriously.
My Lords, is this another case of a regulator letting the British public down? Should we not press the regulators to do the job that they are supposed to do, and if they do not do it, remove them?
No, I disagree with my noble friend on that point. As I said before, the ESG market has developed quickly and without formal oversight, so it is the responsibility of government to make sure that that sector is brought under the scope of regulation. As I have said, we will lay secondary legislation later this year to bring ESG ratings providers into regulation so that they will be subject to the rules set by the FCA. Once that legislation is passed, the FCA will consult on regulatory requirements for ESG ratings providers.
My Lords, the Minister has said that it is not for the Government to tell banks to whom they should lend and in what they should invest, but it seems to me that the banks, particularly the large banks, are never slow to beg for public money when they get themselves into trouble. Should the Government not make it clear to those banks that they have a moral obligation to help to defend the public on whose money they depend in times of difficulty?
I agree very much with what the noble and gallant Lord says. The Government have made it very clear that we consider defence an ethical investment. We do not see a conflict between sustainable investment and investment in our world-leading defence sector.
My Lords, defence is a vital requirement of our nation; I think we are all agreed on that. There have been many bad examples, which is why we are debating this today. Does the Minister agree that it is preposterous, unpatriotic and concerning that investment in our defence sector—for example, by certain pension funds or others prioritising ethical investment—should be actively discouraged by those purporting to favour a sustainable approach to investment? This needs to change.
I agree with the noble Baroness. As I said previously, the Government have made it very clear that we consider defence an ethical investment. We do not see a conflict between sustainable investment and investment in our world-leading defence sector, and at a time of increasing geopolitical instability, supporting the defence sector has never been more critical.
(1 month, 1 week ago)
Lords ChamberMy 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?
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.
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?
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.
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.
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.
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?
Because it is very important that this voluntary commitment delivers the investment that is promised for the UK economy.
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.
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.
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?
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.
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?
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.
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.
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.