Spring Statement
Lord Livermore Excerpts(4 days, 11 hours ago)
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Baroness Kramer (LD)
My Lords, when I listened to the Chancellor yesterday, the only thought that kept chasing through my head was that this is someone who is completely out of touch with the real experience of people today. The whole Statement glossed over a halving of the growth forecast for this year to 1%, and the reality of benefit cuts. These and ongoing high inflation—an average of 3.2% forecast for this year—are pains that people will experience in their daily lives.
The average loss for an individual on PIP is £4,500 a year. According to the Resolution Foundation, a couple on universal credit, where one is disabled and the other is a full-time carer, could lose £10,300 a year.
We all agree that people need to work if they can, but this is not primarily a back-to-work programme; it is a cutting programme. It does not just hit vulnerable individuals; it hits their communities and will have a knock-on effect particularly in disadvantaged areas of the country. It looks to me as though the cuts are very much front-loaded and back-to-work support is back-loaded. Can the Minister tell me if that is correct?
As a result of the cuts, a quarter of a million people of working age will now fall into poverty, and worse, 50,000 children—I am using the Government’s own numbers. Was this really Labour’s goal? Should this not have been the time to revive the bank levy, raise tax on online gambling, close capital gains loopholes and increase the digital services tax? I will say more on that tax in a moment.
Even at the end of the forecast period, despite all the pain, borrowing is expected to be £3.5 billion higher than forecast in October, and the Chancellor will be faced with very little headroom—only £9.9 billion. Can the Minister tell us how much of that headroom disappeared just last night with Trump’s tariff announcements? The headroom also relies on very uncertain expectations of a major increase in productivity. In other words, uncertainty about tax rises and spending cuts will continue; they were not ended by this Statement. That uncertainty will further undermine any possible growth scenario.
Since the focus of this Statement was supposed to be growth, why was there nothing in it for small businesses, which face a crunch in just a few days as the rise in employer NICs kicks in? It is no wonder that the Federation of Small Businesses reports the lowest levels of confidence post-Covid. When the Chancellor spoke of cutting red tape, she could at the very least have focused on the endless Brexit red tape. If she had announced negotiations on rejoining the customs union and removing the current trade barriers, small businesses would be quickly planning a return to exporting and recovery of their roles in European supply chains.
And there was nothing in the Statement to shore up social care, GPs, dentists, hospices and all the services which are crucial to the NHS and to the return-to-work project, but which are making cuts now as higher employer NICs hit home.
I conclude by pressing the Government on the digital services tax. This exists not as some kind of windfall tax or as a special punishment for tech companies; it is a modest attempt to claw back a portion—some £800 million this year—of aggressive tax avoidance by the mega US tech companies. We have just voted into law with the Finance Act an undertaxed profits rule, which would let us claw back much more of that money lost to tax avoidance by this group, in the range of £2 billion to £3 billion a year. However, the Government are now hinting that the digital services tax will be cancelled and the undertaxed profits rule mothballed if they offend the Americans—I refer the Minister to a Treasury press release on 17 January.
The Chancellor spoke, as she should, of reducing tax avoidance by British people and companies, but why should American firms be exempted? Will the Minister give me an answer? Are the Government going to turn a deliberate blind eye to aggressive tax avoidance by the US mega tech companies in the faint hope of winning favour with President Trump, while at the same time they slash benefits to disabled people, burden social care and small businesses, eviscerate overseas aid and need to increase spending on defence?
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their questions and comments. Let me start with economic growth, this Government’s number one mission. The noble Baroness, Lady Neville-Rolfe, spoke about the global context in the Spring Statement, and the Chancellor yesterday quite rightly pointed both to the rapidly evolving global threat and to a global economy which is becoming much more uncertain.
The OECD recently downgraded its forecast for every G7 economy this year, and yesterday, the OBR revised down its growth forecast for 2025 from 2% to 1%. The noble Baroness, Lady Neville-Rolfe, blamed this on the decisions taken in the October Budget, which wiped the slate clean and repaired the public finances from the mess that we inherited. They were not easy decisions, but the truth is that they were the right decisions. Imagine if we were now facing this global economic uncertainty with a £22 billion black hole still in the public finances. What confidence would that have given to the Bank of England to cut interest rates? What signal would that have sent to investors about the stability and the resilience of our economy? What flexibility would that have provided for the Government now to increase defence spending in the face of this changing world?
The noble Baroness, Lady Neville-Rolfe, said that we need stability, but she opposes any action to get it. I am afraid that it simply is not credible to say that we should not have repaired our public finances nor rebuilt the foundations of our economy. Are we satisfied with the growth forecast? No, of course, we are not, which is why we are taking the serious action needed to grow our economy in the future and to go further and faster to invest in infrastructure with the Planning and Infrastructure Bill—which the party opposite opposes—and a third runway at Heathrow, increasing investment with pensions reform and a new national wealth fund, and dismantling red tape and burdensome regulation in every sector of our economy. This is a serious plan for economic growth with the right long-term decisions.
The noble Baroness, Lady Neville-Rolfe, focused on future growth, but she did not mention the pleasing fact that the Office for Budget Responsibility yesterday considered and scored one of the central planks of our plan for growth, concluding that our planning reforms will permanently increase the level of GDP by 0.2% by 2029 and by 0.4% of GDP within the next 10 years. That is the biggest positive growth impact that the OBR has ever reflected in its forecast for a policy with no fiscal cost. Again, the noble Baroness, Lady Neville-Rolfe, did not mention that the Chancellor was able to confirm yesterday that the OBR has upgraded its growth forecast next year and every single year of the forecast thereafter, so that by the end of the forecast, our economy is larger now compared to the OBR’s forecast at the time of the Budget.
The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, asked about tariffs. As they will know, we are pursuing an economic agreement with the US, and we are discussing what this means for the UK. That is our focus. We will continue to stand up for free and open global trade, because tariffs would damage both our economies. Those conversations continue. I am not going to give a running commentary, but we should see where we get to in the next few weeks.
The noble Baroness, Lady Kramer, asked me about the digital services tax. The Chancellor said very clearly yesterday that it is up to the UK Government to set tax policy for the UK economy. The digital services tax was intended to be temporary until there was a global agreement as part of pillar 1 and 2 of the OECD agreement, but we believe that companies should pay tax in the countries in which they operate. This is why we introduced the digital services tax in the first place, and our views on that have not changed.
The noble Baroness, Lady Neville-Rolfe, spoke about living standards, but she did not mention that living standards will now grow this year at double the rate expected at the time of the Budget and will rise twice as fast in this Parliament compared to the last. The noble Baroness, Lady Kramer, asked about inflation. Having peaked at over 11% under the previous Government, the OBR forecasts that CPI inflation will average 3.2% this year, falling quickly to 2.1% next year and meeting the inflation target of 2% from 2027 onwards. The noble Baroness, Lady Neville-Rolfe, asked about employment. The OBR expects employment to increase by 1.2 million over this forecast period and unemployment to fall to 4.1% by 2029.
Yesterday, the Chancellor also set out the consequences that increased global uncertainty has had on our public finances, and the noble Baroness, Lady Neville-Rolfe, spoke about the fiscal rules. I was disappointed to hear her follow the Liz Truss path of criticising the Office for Budget Responsibility. The fiscal rules are the embodiment of this Government’s unwavering commitment to ensuring economic stability, because we saw in the Liz Truss mini-Budget what happens when a Government lose control of the public finances. Mortgage rates soared, for which working people are still paying the price. That is why our fiscal rules are non-negotiable and why we will always deliver economic stability.
The Chancellor yesterday restored in full the headroom against the stability rule, moving to a surplus of £9.9 billion in 2029-30. The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, said that this was insufficient, but it is considerably higher headroom than the £6.5 billion headroom left by the previous Government, and we are of course not now carrying a £22 billion black hole in the public finances. We believe that we have got the balance right, and nobody should be in any doubt about how seriously we take the fiscal rules.
The noble Baroness, Lady Neville-Rolfe, asked about the savings from our reforms to welfare. When the Secretary of State for Work and Pensions set out the Government’s plans, she rightly said that the final costings will be subject to the OBR’s assessment. The OBR has said that it anticipates the package will save £4.8 billion in the welfare budget.
The noble Baroness, Lady Kramer, in her assessment ignored the fact that we are investing £1 billion to help people back into work. She also knows that the impact assessment that she referred to does not take into account in any way the consequences of that £1 billion investment; it does not take into account the consequences of anyone getting back into work. She will rightly know that the OBR will do that assessment and come back in the autumn with updated figures.
The noble Baroness, Lady Neville-Rolfe, asked about our spending plans. She said spending was too high, so I would be fascinated to know now where she intends to cut that spending from. The Spring Statement confirms that day-to-day spending is growing in real terms in every single year of the forecast period—by an average of 1.2% a year, in real terms, from 2025 to 2029. The spending review envelope is fully protected. That means we are spending £50 billion more on day-to-day spending in 2028-29 than the previous Government’s plans. I would be interested to know what, of that £50 billion, the noble Baroness, Lady Neville-Rolfe, would like to cut.
In the Budget last October, we increased capital investment by £100 billion over the course of the Parliament, including investing in transport, beginning the delivery of 1.5 million homes, supporting new industries and protecting record R&D funding. The OBR has looked at the growth impact across a decade; it is clear that particularly our capital investments—which the party opposite opposed—will lead to a significant 0.4% increase in growth. We are not cutting capital spending, as the party opposite did time and time again, because that choked off growth.
The noble Baroness, Lady Neville-Rolfe, asked about tax. I know she would not expect me, even if I could, to write the next Budget now. The Government are delivering on the fiscal strategy set out at the Budget last October, and we are going further and faster on growth because our planning reforms show that changes to tax and spend policy are not the only way to strengthen the public finances.
Over the past nine months, this Government have restored stability to our economy, giving the Bank of England the confidence to cut interest rates three times since the general election. We have begun to rebuild our public services with record investment in our NHS, bringing waiting lists down for five months in a row. We have increased the national living wage to give 3 million people a pay rise from next week. The backdrop to this Spring Statement was a world changing before our eyes. The responsible decisions we have taken mean that we can now act quickly and decisively in this more uncertain world to secure Britain’s future and deliver prosperity for working people.
Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)
My Lords, I have doubled the time available for Back-Bench questions to 40 minutes. The House wants short, sharp, succinct, to-the-point questions, not speeches. We will go around the Chamber, seeking to get as many noble Lords in as possible. Please note that, when a noble Lord asks a question, it is unlikely that the next question will come from the same Benches.
Lord Lamont of Lerwick (Con)
My Lords, is the Minister aware that there is considerable support on this side of the House for the aims of the Government’s welfare reforms? We agree that the programme is unsustainable and that there are perverse incentives, but if changes are to be made, do they not need to be made on a targeted and very sensitive basis? Will the Minister therefore tell us—this was raised by the Liberals but not really answered by the Minister—why, as a result of these reforms, 250,000 will go into poverty? It has also been reported by many MPs that people unable to wash the lower half of their body will be deprived of all benefits, and that people who cannot go to the toilet without assistance will lose all benefits as well. If, as the Minister says, this is being done on a targeted basis, why are these the results? Can the Minister actually convince us that this is a programme that is being done on a targeted basis and not just the cobbling together of some cuts at the last minute in order to make the books balance?
Lord Livermore (Lab)
I am grateful to the noble Lord for his question and for his concern and compassion in the examples he sets out. I will set out our three principles when it comes to welfare. First, the state should always be there to support people when they need it, and I think the reforms set out in the Green Paper deliver on that point. Secondly, the system should better incentivise work, and everyone who can work should work. Thirdly, we need a system that is sustainable, so that we have a welfare state that is there for generations to come. As I said in my answer earlier, the impact assessment that has been published today does not take into account the £1 billion being reinvested into the system from the £4.8 billion of savings. It is very clear that that £1 billion will help people get back into work. As we know, and I am sure he knows, work is the best route out of poverty.
Lord Livermore (Lab)
The noble Lord’s question is about the impact assessment, and I am answering that. The impact assessment takes no account of the extra £1 billion being invested. The OBR will look at that £1 billion over the summer and will come back with an updated impact assessment at that point.
Lord Pitkeathley of Camden Town (Lab)
My Lords, the UK continues to lag behind many EU countries in overall productivity—something that cannot be explained solely by differences in how the French choose to measure theirs. Could the Minister outline which specific measures in yesterday’s Statement are designed to boost productivity both within the Civil Service and across the wider economy?
Lord Livermore (Lab)
I am grateful to my noble friend for highlighting a very important point. The Governor of the Bank of England, in his speech last week, highlighted the link between productivity growth and living standards, so we know how important it is to increase productivity. Public sector productivity is one of the few issues that the noble Baroness, Lady Neville-Rolfe, and I agree on: I know that she, too, is focused on increasing public sector productivity. The difficulty is that the previous Government spoke about it but never took any measures to do anything about it. Yesterday, the Chancellor announced a £3.25 billion transformation fund to increase the productivity in our public sector, so that we can spend more money on the front line and get money in public services where it is needed. In terms of the private sector, in answer to my noble friend’s question, the thing I would point to most in yesterday’s Statement, is the importance of capital spending. We know that continual cuts to capital spending, under the previous Government, seriously restricted our productivity growth. The IMF consistently said to us that lack of public sector investment was a serious barrier to growth in our economy, because it is a serious barrier to productivity. Protecting, yesterday, £100 billion of capital spending, that we put in the Budget, is a central point for getting productivity up in our economy. The other thing I would point to is skills investment; we know that we need the higher-skilled workforce in order to do the construction work we are setting out.
Lord Bilimoria (CB)
My Lords, would the Minister agree that neither the Autumn Budget nor the Spring Statement mentioned trade at all? I have been appointed as the chair of the International Chamber of Commerce—the ICC UK—and we have just unveiled that we could unlock £25 billion in trade growth, £224 billion in efficiency savings and £22 billion in SME working capital by digitising trade and cutting transaction times, from two to three months to one hour, and reducing trade transaction costs by 80%. So why do the Government not run with this, full steam? With the trade and tariff wars emanating from the United States of America in full flow, digitising trade is the way ahead; modernising trade is the way ahead.
Lord Livermore (Lab)
The noble Lord is quite right to focus on trade and the importance of trade to growth. I think he is wrong to say that neither the Budget nor the Spring Statement mentioned trade; I think both did, because clearly trade is a big part of our growth strategy. We want to increase our trade flows with our nearest neighbours and biggest trading partner, the European Union, through our reset of our relationship with the EU. The Chancellor has been to visit China, the third largest economy in the world, which I think the previous Government had not engaged with it at all since 2019. We are engaged in trade negotiations with India and the GCC, and we have just acceded to the CPTPP, so trade is absolutely at the heart of it. Of course, many of the conversations already have revolved around our trading relationship with the United States, which again is a very incredibly important trading relationship to us. On digitising and streamlining trade, he is absolutely right. The Government have an agenda in that respect, but it is very expensive and we need to move ahead when fiscal conditions allow.
Lord Fox (LD)
My Lords, when I was sponsoring the Carer’s Leave Bill through your Lordships’ House, I saw how much unpaid carers benefit our economy, providing free services that would otherwise cost the state. That is why I was disappointed that the spending review will leave many unpaid carers struggling with financial hardship and increased care-giving demands without adequate support. Does the Minister not recognise that this is a false economy? These people give to the community their services. If they do not, and they are not adequately supported, those services will end up costing us.
Lord Livermore (Lab)
I agree with much of what the noble Lord says: supporting carers is very important. He talked about the spending review leaving them unsupported. Of course, the spending review has not yet taken place; it will take place in June of this year, and I think perhaps we should wait until the spending review reports to see what it has to say.
Baroness Coffey (Con)
Some 250,000 more people will be plunged into poverty, including 50,000 children. The OBR forecasts lower employment as a direct result of Labour’s welfare announcements, with unemployment rising overall and even more applications for PIP with changes to the UC health element. We will face the worst of all worlds, with arbitrary cuts and the Government dismissively discarding the previous Government’s proposals. Over 1 million people will be impacted; they face fear every day. When will the Government communicate to those people individually how they will be impacted, so that we do not see a rise in the genuine distress that people are facing right now?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her concern. She talks about employment, but, according to the OBR, it will rise by 1.2 million people over the course of the forecast, so I am not sure that what she is saying there is correct. As I have said repeatedly during this Question, the impact assessment she refers to takes no account of the £1 billion investment in helping people get back into work, so I am afraid that the impact assessment figures she is using are not correct. The OBR will look at the additional £1 billion over the course of the summer and come back with an updated impact assessment that takes it into account.
The Lord Bishop of Leicester
My Lords, I appreciate the work that the Government are doing to stimulate the economy and to get people back into work. I understand the dilemma that the Government face with the spiralling costs of welfare. But I am left to wonder: how is it that the DWP’s own impact assessment, which I understand includes the £1 billion investment that the Minister referred to, does also state that 250,000 people will be pushed into relative poverty, including 50,000 children? How can the Government of one of the richest countries in the world justify policies that push people into poverty?
Lord Livermore (Lab)
I hate to contradict the right reverend Prelate, but I am afraid that the impact assessment does not take account of the dynamic effects of the £1 billion invested from the £4.8 billion of savings—the OBR has said that very clearly. It will look at that and come back with its assessment of what the impacts will be. He asked me how I can justify reforming the system. I do not know how we can justify a system where one in eight young people is not in employment, education or training. I do not understand how we can justify a system that writes off an entire generation and leaves them consigned to a life on benefits. I do not understand how we can have a system that writes off people and does not give them the support to get them back into work. I think that is the moral thing to do.
Baroness Hayter of Kentish Town (Lab)
I congratulate the Government on grasping the nettle of the security challenge caused by Putin to the integrity of both Ukraine and the UK, and on repairing the damage that the party opposite did to our Armed Forces and growing it now for new challenges. Does my noble friend the Minister agree that our own national security and economic stability are absolutely linked? Does he also agree that we need a strong, resilient economy independent of global uncertainty and that the welcome increase in defence expenditure will boost jobs and growth across the whole of the UK?
Lord Livermore (Lab)
I am grateful to my noble friend for the points that she makes. I of course agree very much with her. As she knows, it was announced yesterday that we are increasing the defence budget by £2.2 billion in 2025, taking additional spending on defence to over £5 billion since the Autumn Budget. She is absolutely right that defence spending is a huge contributor to the future growth of our economy. That is why in the industrial strategy we have set out eight sectors that we believe will fuel the growth of the economy in future, and defence is one of them. Shortly in the spring, we will publish an industrial strategy for defence, which will set out how we can get highly skilled jobs throughout the UK as a result of the increase in spending that we are carrying out.
Lord Lansley (Con)
When the Government came into office, the disability employment gap was 28.6%. With the £1 billion return-to-work funding that the Minister has referred to repeatedly, what is the Government’s target for reducing the disability employment gap by the end of this Parliament?
Lord Livermore (Lab)
I am afraid that I do not know what that target is. If there is one, I will find out for the noble Lord and write to him.
Lord Londesborough (CB)
I will follow up on a key point raised by the noble Baroness, Lady Neville-Rolfe. While the OBR forecast for growth has halved to just 1%, which I think many would argue still looks optimistic, it is forecasting that we will see a net gain of 400,000 people joining the workforce and becoming economically active this year, even though unemployment is forecast to rise. Can the Minister shed any light on this forecast? Specifically, how many jobs will be created in the public sector and how many in the private sector?
Lord Livermore (Lab)
I do not know whether the OBR has set that out in it forecast, but I will be happy to go away and look at that for the noble Lord, if that is helpful. Clearly, a central part of our growth strategy is investment, which creates jobs right across the country. We have already seen many jobs being created in this economy, since we came to office, as a result of various investments right across the country. As I have discussed already, the additional investment in defence spending will see very highly skilled jobs created across the country. However, I will happily find out the specific breakdown for the noble Lord.
Lord Razzall (LD)
My Lords, there are clearly a number of lessons to be learned from the Spring Statement, but I will draw two quite serious ones: an omission and a failure of communication. Turning first to the serious omission—noble Lords who know me will expect me to say this—this was an opportunity to attempt to improve our relations with the European Union, given the benefit that it would have for trade and growth, as my noble friend Lady Kramer indicated. I would welcome the Minister giving somewhat more extensive comments on that when he responds.
The second is the failure of communication. There is no doubt whatever that the problems around the Welfare Reform Act in this area have become far too high. The Economic Affairs Committee of your Lordships’ House, on which I have the honour to serve, looked at that several months ago and concluded that the structure and incentives are wrong and that something needs to be done about it. How did the Government manage to implement a potentially very successful reform in such a disastrous manner? They have all the disability charities down their throats and the noble Lord, Lord Lamont, complaining about it. How did they manage that?
Lord Livermore (Lab)
I am not sure that I liked the last part of the noble Lord’s question there. On our relationship with the EU, I am not sure that the Spring Statement is necessarily the place in which you update every single part of the Government’s policies. The Government are engaged in a reset of our relationship with the European Union. Anyone who has heard me speak in this House will know that I have very clear views on the economic impact of the previous Government’s Brexit deal; it reduced our GDP permanently by 4%. So, when we have a conversation about growth, we have to take that into account. That is exactly why the Government are engaged in resetting our relationship with the European Union. We have set out ambitious proposals for increasing our trade relationships and improving our security co-operation with the European Union. This Chancellor was the first to address European Finance Ministers since Brexit and this Prime Minister was the first to address his European colleagues since Brexit. This is a very serious set of proposals and we are taking it forward at pace. We are ambitious, even though we know that it will take time.
The welfare reforms were set out by the Secretary of State for Work and Pensions in the House of Commons last week. She said that the figures were subject to final costings by the OBR. The Chancellor came to the House yesterday and updated those costings.
Lord Wigley (PC)
My Lords, is the Minister aware that in a Radio Wales interview this morning on yesterday’s Spring Statement, the Chancellor of the Exchequer did not seem to be aware that the First Minister of Wales, Eluned Morgan, had written to her two weeks ago about the serious financial issues facing Wales and still had not had a substantive reply? The Chancellor also did not seem to be aware that housing is a devolved matter in Wales or of how many new jobs her announcement about Newport will generate. In these circumstances, will the Government appoint a Welsh MP to a ministerial role in the Treasury explicitly to deal with matters relating to Wales?
Lord Livermore (Lab)
I am grateful to the noble Lord for his question. I am not in charge of the Chancellor’s correspondence unit, so I cannot say whether that letter has been replied to. I am also not responsible for appointing MPs to ministerial positions, so I cannot answer that point either.
What I can tell the noble Lord is that, as a result of the measures announced in the Spring Statement yesterday, £58 million of additional Barnett consequentials will be provided to the devolved Governments in 2025-26, £16 million of which will go to the Welsh Government. The UK Government have already made considerable progress on growth in Wales, including by confirming the Wrexham and Flintshire investment zone and designated tax sites in both the Celtic and Anglesey freeports, and by supporting steel communities through the Port Talbot Tata Steel transition board and providing £25 million of additional funding to the Welsh Government to keep coal tips safe.
Lord Davies of Brixton (Lab)
My noble friend will be aware that the two key figures projected in the OBR report are the future course of income in the form of taxation and expenditure. There is a high degree of uncertainty about both those projections, and yet under our fiscal rules, the Government are using the difference between those two highly uncertain figures as the control variable, causing an incredible degree of uncertainty. That is what the rules require. Does my noble friend share my surprise that using this highly uncertain figure is an appropriate basis on which to take away benefits from hundreds of thousands of people and put them into poverty?
Lord Livermore (Lab)
I hope my noble friend is not following the path of Liz Truss and the party opposite by criticising the OBR, because that is not a sustainable basis on which to build economic policy. The Chancellor has been clear that the fiscal rules are non-negotiable, and the OBR has confirmed that the Government are on track to meet them. On the wider policy of welfare reform, as I have said before, the system was unsustainable. It had the wrong incentives, and it is important that we get people back into work, because that is the best route out of poverty.
Baroness Gohir (CB)
My Lords, the welfare cuts will push women, children, the disabled and ethnic minorities further into poverty and lower their living standards. Surely, this is discriminatory and in breach of equality and human rights laws. Can the Minister tell us what consideration was given to equality laws? First, it was pensioners, now the disabled—why are this Government targeting the most vulnerable in society?
Lord Livermore (Lab)
They are not, and I am sure that the policies are fully in line with all equality laws, because that would have been signed up to before the policies were published. On what we are doing for working people, we saw yesterday that wages are now rising faster than prices, and that in this Parliament living standards will rise at twice the rate they did in the previous Parliament.
Lord Bellingham (Con)
During the Minister’s main response, he mentioned small businesses, SMEs, job creation and deregulation a number of times. Can he give the House the names of any SMEs that support the Employment Rights Bill?
Lord Livermore (Lab)
No, I do not have a full list of all SMEs in front of me, and I am not sure that that is a sensible question to ask me, if I am honest. Everyone is clear that we have a very clear small business strategy. We are helping small businesses to expand and grow, and to trade with the European Union.
Baroness Winterton of Doncaster (Lab)
My Lords, the fact is that areas such as South Yorkshire suffered from years of economic mismanagement and underinvestment by the previous Government. This Statement shows that, by stabilising the economy and investing in construction, defence and clean energy industries, the Government, with a hands-on approach, can create highly skilled, well-paid jobs and stimulate growth. But can my noble friend the Minister assure me that there will be a laser-like approach to areas such as South Yorkshire, which have been neglected for too long?
Lord Livermore (Lab)
I am grateful to my noble friend for that question and yes, I absolutely can give her that assurance. The Chancellor’s construction skills announcement yesterday—referred to by the noble Baroness, Lady Neville-Rolfe, in her opening comments –shows that, over this Parliament, the Government are funding a £625 million package to boost skills in the construction sector. This is expected to provide up to 60,000 more skilled construction workers to support the Government’s plans to deliver 1.5 million homes and progress vital infrastructure projects right across our country.
My noble friend talks about the importance of regional growth in areas such as South Yorkshire. As she knows, growth is the central mission of this Government. Through the growth mission the Government are restoring stability, increasing investment and reforming the economy in order to drive up prosperity and living standards across every single region of the UK—in our cities, our towns and our communities. So far, we have done a considerable amount of work to increase growth and living standards throughout the country, but I am very aware there is a lot more to do.
Lord Skidelsky (CB)
My Lords, do the Government believe that we have a shortage or a surplus of labour? The question arises because the OBR has calculated an output gap of 0.5%, closing by 2027, which suggests that we actually have full employment, yet that flies in the face of common sense. We have 1.5 million people, or 4%, unemployed; 8.4 million, or 20%, working part-time; 2.3 million, or 5%, on disability benefit; 3.3 million, or 8%, on incapacity benefit; and 4.2 million, or 10%, drawing sickness benefit. I am not suggesting that they are all available to work—of course that is not true—but some of them are. Can the Minister ask the OBR to make clearer the basis of its calculations of capacity and output gaps? On those depends the whole success of the Government’s economic strategy.
Lord Livermore (Lab)
I am grateful to the noble Lord for his question and his expertise on this matter. He rightly highlights one of the most important challenges facing this country, which is inactivity. We have far too many people who are economically inactive. We are the only country in which inactivity has not reduced to pre-pandemic levels at this point, and that clearly is not a sustainable situation. A lot of our policies are driven towards ensuring that people can re-enter the labour market, exactly as he says. On speaking to the OBR, I am more than happy to make that point to my colleagues.
Lord Forsyth of Drumlean (Con)
My Lords, the Minister is a man of integrity whom I hold in great regard and respect. So could he just be straight with the House and acknowledge that further cuts in public expenditure or more tax rises are absolutely inevitable, given the impact of the Budget on growth?
Lord Livermore (Lab)
I am grateful to the noble Lord for his very generous comments; I hold him in equally high regard and have enormous respect for him and his expertise in this matter. I do not think, however, that what he says is in any way inevitable. He talks about the impact of this Budget on growth. As he will know, yesterday the OBR upgraded its growth forecast from 2026 onwards for every single year of the forecast. For the first time, the OBR has recognised one of the major planks of our growth strategy—the planning and infrastructure work we are doing. It says there will be a permanent increase in growth of 0.2% by 2029, and 0.4% over the course of the decade. So the impact on growth of yesterday’s Spring Statement was positive.
The noble Lord talks about the risks. Of course there are risks. The OBR set out various scenarios for various risks, but the planning upgrade shows that there are also upside risks, as it were, in terms of growth. It shows that tax and spending is not the only way of meeting our fiscal rules; we can use growth to meet them, as yesterday’s planning announcement shows. It reduced the deficit by £3 billion in 2029 and as a result, there was growth of 0.2%. So I do not take what the noble Lord says as an absolute. Of course there are risks, and we are planning for those. We have rebuilt the headroom and eliminated the black hole in public finances, as he knows. That is an incredibly important way to set us up for the future.
Lord Lemos (Lab)
My Lords, the OBR forecasts that the Labour Government will meet two of the fiscal rules earlier and will be within touching distance of their new homes pledge. Can the Minister comment of those areas of progress on delivering growth, particularly the new homes pledge?
Lord Livermore (Lab)
I am grateful to my noble friend. Yesterday, the OBR said, as I have just outlined to the noble Lord, Lord Forsyth, that the Government’s planning reforms will increase our economic growth and, most importantly, will put us within touching distance of meeting our 1.5 million homes pledge. The OBR said that we will get to 1.3 million homes purely on the reforms we have introduced in the first nine months of this Government. Clearly, those additional homes are incredibly important. At the same time, we announced a major programme of construction skills works, so that we have the skilled workers necessary to build the homes we need.
Lord Evans of Rainow (Con)
Further to the question asked by the noble Baroness, Lady Kramer, regarding American corporations paying tax to the UK, what assessment has the Treasury made of the Republic of Ireland and its ability to attract American corporations? That is due to a combination of things—the corporation tax is half that of the UK’s, and there are lots of other tax incentives that are taken directly out of the UK economy. I appreciate that the Minister may not be able to answer this in full here, but can he write to me if there is an assessment? The Irish economy has been transformed by attracting American inward investment. Perhaps we could learn a thing or two from them.
Lord Livermore (Lab)
It is right to focus on inward investment. That is a very important aspect of our growth strategy. On corporation tax, we have set out clearly that we will cap it for the duration of this Parliament. If there is a competitive threat then we will act. That contrasts with the previous Government, under whom corporation tax rose and fell constantly, which did not give businesses the stability that they need. Inward investors tell us that planning is the number one barrier to bringing money into this country—it gets tied up in planning for years, with horror stories of planning applications lasting 13 years or more. Our planning reforms are vitally important, as they will raise skills to create that skilled workforce. The number one thing inward investors are looking for is stability. I genuinely believe that the Budget last October, in wiping the slate clean and repairing the public finances, provided an incredibly important platform of stability to allow such investment to take place.
Lord Scriven (LD)
The Minister believes in compassion and fairness. A couple in a non-disabled house receiving universal credit will be £370 a year better off with the reforms announced yesterday, but a couple on universal credit, where one is disabled and the other is a full-time carer, will lose £10,300 a year due to changes to PIP and the carer element of universal credit. How is this compassionate and fair?
Lord Livermore (Lab)
The noble Lord asks me what is compassionate and fair. I do not believe that one in eight young people not in employment, education or training is compassionate or fair. I do not believe that writing off an entire generation is compassionate or fair. I do not believe that 1,000 people coming into PIP every day is compassionate or fair. Is the noble Lord saying that we do not need any reform to our welfare system? I just do not believe that that is the case.
Lord Rosenfield (Non-Afl)
My Lords, as has been highlighted, the core fiscal judgment of the Chancellor is that the policy measures announced yesterday will maintain the fiscal headroom of £9.9 billion. If that is a balanced judgment, the risk of that headroom growing or shrinking in the near future should be broadly equal. However, in the light of the significant downside risks—tariffs, weak growth, policy risk—does the Minister agree that the risks are weighted to the downside? Although spending cuts and tax rises might not be inevitable, the implication is that it is more likely than not that further tax increases or spending cuts will be required to maintain that headroom.
Lord Livermore (Lab)
I thank the noble Lord for his question. I was lucky enough to work with him in the Treasury when he was an official there, so I know that he knows what he is talking about. Clearly, there are risks, as I set out to the noble Lord, Lord Forsyth. The job of the Government is to mitigate those risks and pursue a growth policy to ensure that we have sufficient growth and are resilient to the challenges that we are going to face. We have to get our public finances in order so that we have that resilience. We have to pursue stability, investment and reform. We are doing all those things to ensure that we have resilience. On tariffs, we are engaged in a conversation with the United States Administration, so we are doing what is necessary. We have rebuilt the headroom in full and we have, I think, provided the resilience needed to cope with an ever-changing and uncertain world.
Baroness Penn (Con)
The Minister has repeatedly cited figures on living standards. What impact will yesterday’s Statement have on the living standards of the poorest half of our population?
Lord Livermore (Lab)
The impact assessment that has been done so far does not include the £1 billion re-investment, so I am not sure that we can look at those figures right now. On real household disposable income, living standards will now grow this year at double the rate expected at the time of the Budget. The noble Baroness was a Treasury Minister when we saw the worst ever Parliament for living standards in history. Living standards will rise twice as fast in this Parliament compared with the last.
Baroness Bousted (Lab)
My Lords, the noble Baroness, Lady Neville-Rolfe, said that we all want growth. She will perhaps have seen the comments of the shadow Chancellor. He admitted that the party opposite’s approach to defining its economic policy is a
“blank sheet of paper exercise”.
There have been reports of Conservative Party researchers scouring their archives for policy inspiration. Is that not why we had no growth under the last Administration and why this Government need to correct the course, through the Autumn Budget and the Spring Statement?
Lord Livermore (Lab)
My noble friend very well draws attention to two key problems with the party opposite: the first is its record and the second is its future plans. Its record on growth is an absolute catastrophe. We saw austerity, followed by Brexit, followed by the Liz Trust mini-Budget. Growth was one of the biggest failures among a whole litany of failures of the previous Government. Looking forward, it has absolutely no plan for growth. All it can do is oppose. It has no plan of its own. It has no alternative policies. It opposes our measures to get stability, to get investment into the economy and to reform our economy. All it wants to do is criticise and talk down the economy. If the party opposite is going to criticise, it must come up with an alternative plan.
Lord Vaux of Harrowden (CB)
My Lords, the Minister has mentioned several times this £1 billion re-investment, which is not included in the OBR forecast. Can he confirm that the impacts of the Employment Rights Bill, which we are soon to discuss, are also not included in the OBR forecast, including the £5 billion cost to business that it will create? The OBR says that:
“Employment regulation policies that affect the flexibility of businesses and labour markets or the quantity and quality of work will likely have material, and probably net negative, economic impacts on employment, prices, and productivity”.
Does he agree with that?
Lord Livermore (Lab)
I am grateful to the noble Lord for his question. I hate to correct him, but I did not say that the £1 billion is not included in the OBR’s forecast. I said that it is not included in the OBR’s impact assessment; that is something different. The £1 billion is included in its forecast, and he is right to say that the Employment Rights Bill is not. The OBR gives a commentary on it, which he quotes from, but the Employment Rights Bill is not included in the forecast because it is still working its way through Parliament—it has its Second Reading today. We are confident that the Bill will result in ordinary working people having more money in their pockets and the security to spend that money by not having to worry, from week to week, whether they will be in work or how many hours they will get.
Lord Purvis of Tweed (LD)
My Lords, last week, the Development Minister told this Chamber that it was government policy to return ODA to the legally required 0.7% when the fiscal circumstances allowed—meaning when the Government’s fiscal tests are met. However, yesterday, the Green Book showed a pound-for-pound cut in ODA, linked with another policy expenditure. Can the Treasury Minister be very specific that, if the Government’s fiscal tests are met within this Parliament, we will return ODA to 0.7% in this Parliament?
Lord Livermore (Lab)
I am grateful to the noble Lord. The two statements that he makes are perfectly consistent with each other. We are absolutely committed to returning ODA to 0.7% when the fiscal conditions allow and we are currently switching ODA spending into defence spending. Those two things are perfectly consistent.
Viscount Younger of Leckie (Con)
My Lords, the Government have had difficulty in scoring the £1 billion that has been mentioned and predict that there will be 16,000 fewer jobs as a result of the welfare changes. How have the Government come to this huge sum, where is it going to help and how many people are predicted to be helped? The Government must know this before the OBR revert in September. If they do not, why not?
Lord Livermore (Lab)
I am grateful to the noble Viscount; he has far greater expertise in these matters than I do. The Secretary of State, when she presented the package of reforms to Parliament, said that the costings that she was setting out were subject to final costings by the OBR. The OBR has now set out its final assessment of costings and confirmed that this welfare package will reduce welfare spending by £4.8 billion in 2029-30. Following the OBR’s final assessment of the welfare savings from the package, taking account of the £1.4 billion of investment the Government are putting towards the reforms, including the £1 billion of employment support, the net welfare savings of this investment is around £3.4 billion.
Viscount Stansgate (Lab)
Can my noble friend confirm that the Statement’s provision for capital spending is crucial if the UK is to sustain and safeguard its research and development budget and infrastructure, such as data centres, that will be vital for future growth? Does he agree that we will need a combination of our world-class universities, entrepreneurs, emerging AI companies and others not only to start up but to scale up businesses in this country? As your Lordships’ House’s Science and Technology Committee is now investigating, it is the scale-up that is the real challenge.
Lord Livermore (Lab)
My noble friend is right. The Autumn Budget increased capital investment by £100 billion over the Parliament, including investment to protect record R&D funding, which, as my noble friend said, is vital for growth. The OBR has looked at the growth impact of that investment across a decade and it has been clear that those capital investments—which, incidentally, the party opposite opposed—will lead to a significant 0.4% increase in growth over the longer term. Not cutting capital spending, which the party opposite did time and again, was one of the most significant growth measures that the Chancellor outlined in her Statement.
My noble friend also talked about start-ups and scale-ups. He knows that I agree with him 100% on that. This country is extremely good at start-up; it is much less good at scale-up. Getting the necessary capital to those scale-ups is one of the most important things that we can do.
Lord Howell of Guildford (Con)
My Lords, if the Government want to reduce the size of the Civil Service significantly, as I believe they do, will the Minister advise the Chancellor to go a long way back and look at the period 1970-82, when we succeeded in cutting the central Civil Service by a third, from about 800,000 to 500,000 people? Will he remind her that this was done not entirely by administrative efficiency, although there are always gains to be made there, but by removing whole functions, industries and services from the bureaucratic sector and putting them into the regulatory or competitive sector? Will he also remind her that it takes a very long time and very careful planning to do that?
Lord Livermore (Lab)
I am grateful to the noble Lord for his expertise and experience in this matter. I am more than happy to look back at the period that he mentioned. The world has perhaps moved on a bit since then. Most importantly, he will see in the transformation fund that the Chancellor set out yesterday the importance of AI tools, for example, to modernise the state. Clearly, these types of technology did not exist at the point he spoke about. Using modern technology to help us get productivity savings in the public sector, in the Civil Service and more widely, will be an important part of the modernisation programme.
Lord Katz (Lab)
My Lords, I thank my noble friend the Minister for the Statement. In the run-up to the Spring Statement there was a lot of guff, frankly, about a so-called return to austerity. Although there have been some difficult decisions to make, is it not the case that, far from delivering the ideological austerity that we saw under the noble Lord, Lord Cameron of Chipping Norton, the Government are delivering real-terms increases in day-to-day spending, as well as much needed capital investment?
Lord Livermore (Lab)
I am grateful to my noble friend for making that point. The Spring Statement confirms that day-to-day spending is growing in real terms in every single year of the forecast period by an average of 1.2% a year. The spending review envelope is fully protected. This means that we will spend £50 billion more on day-to-day spending in 2028-29. I remind the House that the noble Baroness opposite said in her opening remarks that she thinks spending is too high, so I am looking forward to hearing what she would like to cut from that £50 billion the next time we have a debate.
Strategic Priorities Statement: Defence
Lord Livermore Excerpts(6 days, 11 hours ago)
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Lord Jackson of Peterborough
To ask His Majesty’s Government why the Chancellor of the Exchequer did not specifically include the defence industry among the priority sectors in her Statement of Strategic Priorities to the National Wealth Fund, published on 19 March.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, consistent with the Government’s manifesto, the National Wealth Fund supports the growth and clean energy missions, prioritising investment in advanced manufacturing, digital technologies, clean energy and transport. Recognising the need to adapt to a rapidly changing world, the statement of strategic priorities set out that the National Wealth Fund will also invest in dual-use technologies which support the UK’s defence and security, and will support the wider industrial strategy, including in defence.
Lord Jackson of Peterborough (Con)
My Lords, the EU has apparently taken the decision to shut the UK out of its €150 billion defence fund unless we acquiesce on a new fishing agreement. Clearly, the Macron Administration and the EU seem to care more about fish than our collective defence. In addition, domestic pension funds like NEST and the People’s Pension have refused to invest in defence firms on so-called ethical grounds. Given these acute challenges, does the Minister agree that the Chancellor’s decision further weakens and undermines a crucial sector? Will he implore his ministerial colleagues to reconsider their priorities so that there is proper consistency in government?
Lord Livermore (Lab)
I am grateful to the noble Lord for his question, but I am not sure he listened to the first Answer I gave. I very clearly said that the statement of strategic priorities sets out how the National Wealth Fund will invest in defence. It says very clearly that it should invest in
“dual-use technologies and … support supply chain resilience across these priority sectors, to better support the UK’s defence and security”.
It also says that the National Wealth Fund
“should consider the role it can play in supporting the delivery of the wider Industrial Strategy, including in defence”.
That wider industrial strategy absolutely achieves many of the things the noble Lord is talking about. The strategic aim of the defence industrial strategy is to make sure that the imperatives of national security and a high-growth economy are fully aligned.
Lord Browne of Ladyton (Lab)
My Lords, I thank the noble Lord, Lord Jackson of Peterborough, for bringing the attention of your Lordships’ House to this issue and once again encouraging me properly to research a subject. On 19 March, the Chancellor wrote to the CEO of the National Wealth Fund to communicate the Government’s strategic priorities for the fund. That latter document on three occasions explicitly identifies defence as a priority under Investment Principle 2. It also goes on to enjoin the CEO to refer, in assigning priorities, to the Government’s industrial strategy Green Paper, which in turn refers to the importance of the UK’s defence sector no fewer than 38 times. The former Conservative Business Secretary, Greg Clark, described that Green Paper as a serious and substantial document and applauded it for singling out eight sectors, including defence, as priorities. Does the Minister agree with me that it is reasonable to expect the CEO of the fund to read beyond the press release and to examine in depth the correspondence and references to which his attention has been drawn?
Lord Livermore (Lab)
I am very grateful to my noble friend for his question. He far more eloquently than me set out what I was attempting to say in my previous answer. He draws attention to the importance of reading the documents that are in your Question before tabling your Question.
Lord Stirrup (CB)
My Lords, has the Minister seen the recent piece in the Financial Times setting out the challenges posed to defence companies by the high level of friction within Europe-wide supply chains? This is not just a Brexit issue. Brussels has criticised the overregulation of intra-EU transfer of defence-related products. Does the Minister agree that we and our European partners need to address this issue as a matter of urgency if our defence industry is to develop the high degree of efficiency that is so necessary in the light of the serious challenges we face?
Lord Livermore (Lab)
I very much agree with the noble and gallant Lord. I hope those issues will be addressed through the Prime Minister’s work with the European Union on defence and security co-operation, and in the defence industrial strategy and the wider EU reset.
Baroness Smith of Newnham (LD)
My Lords, it is clearly welcome that the strategy includes defence. What support are His Majesty’s Government planning to give to small and medium-sized enterprises working in dual-use technology? Are His Majesty’s Government thinking about letting contracts in the short to medium term, so that, as we build up our defence expenditure towards 2.5%, the companies have the certainty of knowing that there will be contracts?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. The issues she raises will be addressed exactly by the defence industrial strategy. One of its key objectives, for example, is procurement—increasing its pace and opening it up to small and medium-sized enterprises, as she said. I hope that there will be more for her to hear in tomorrow’s Spring Statement.
Baroness Penn (Con)
My Lords, can the Minister confirm that any defence spending channelled through the National Wealth Fund will not be constrained by the Government’s fiscal rules, specifically the investment rule, as those investments will be scored as net financial assets under the new measure of debt introduced by the Chancellor?
Lord Livermore (Lab)
I can absolutely confirm that all National Wealth Fund spending will be within the fiscal rules.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, is the Minister perplexed, like me, by the negativity coming from the Benches opposite? As well as many tens of billions of pounds in the National Wealth Fund, our Government have given billions to infected blood compensation, and next month we will get the triple lock on pensions. Those are three tremendous steps forward. Can the Minister urge the Chancellor to be just a little more upbeat tomorrow?
Baroness Neville-Rolfe (Con)
My Lords, defence is the single most important activity of the state, and it is therefore unfortunate that many ESG funds have excluded investment in defence stocks, hitting our innovative UK companies. Does the Minister agree that the rebranded National Wealth Fund must lead the way more clearly and work with private sector funds to spur significant investment in the UK defence sector, as well as in other priority areas?
Lord Livermore (Lab)
I do agree with that, because the noble Baroness described exactly what the National Wealth Fund is there to do: to work closely with the private sector to catalyse more private sector investment in industries that we consider to be priority sectors. As the rest of this Question has shown, defence is very much one of those priority sectors.2
Baroness Blackwood of North Oxford (Con)
My Lords, for the National Wealth Fund to crowd in capital at the scale envisaged, it must be empowered to deploy capital against higher levels of risk appetite and against a wide range of products and financial investments. Moreover, it will need to operate at market pace. Whatever the strengths of the Treasury, historically it has not been renowned for its risk appetite or pace. What steps does the Treasury intend to take to ensure that the National Wealth Fund is empowered to act, not only with the appropriate risk appetite but with the necessary pace, to attract private sector investment?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. I do not agree with her criticism of the Treasury, but I agree with what she said about risk appetite. That is exactly why, when the Chancellor wrote to the National Wealth Fund, she specifically said that the
“economic capital limit will … be increased from £4.5 billion to £7 billion, allowing”
the National Wealth Fund to “take on greater risk”, and giving greater “flexibility over its investments” to
“support more projects that struggle to access private finance”.
Lord Watts (Lab)
My Lords, does the Minister welcome this Question from the Opposition? Does it not once again demonstrate the problems of Brexit? We hear every week about differences, and today they are complaining about access to aviation and defence. Is it not time that they changed their position and stopped asking questions that give us an advantage?
Lord Livermore (Lab)
I am very happy to agree with my noble friend’s assessment of the damage that Brexit has done to our economy.
Lord Purvis of Tweed (LD)
My Lords, many of our European partners, particularly Poland, are seeking to diversify satellite technology to overcome the reliance on certain technologies in the context of increased defence expenditure. Surely that would also be the United Kingdom’s ambition. Can the Minister confirm that, as we increase our defence expenditure—which I welcome—there is now the opportunity to work much closer with our European allies, rather than using part of that increased expenditure on Starlink, which is owned by Elon Musk?
Lord Livermore (Lab)
I am very happy to say that, as the noble Lord knows, this Government plan increase defence expenditure to 2.5% by the end of the Parliament. However, it is not for me to set out today exactly how that will be spent.
Baroness McIntosh of Pickering (Con)
The Minister referred in his first Answer to the role of Great British Energy in delivering clean energy. How will the Government achieve that if the budget for GB Energy is reduced in the forthcoming spending review?
Lord Livermore (Lab)
The noble Baroness said “if”, and I do not in any way accept that. She should wait for the spending review to see what will happen.
National Insurance Contributions (Secondary Class 1 Contributions) Bill
Lord Livermore ExcerptsMonday 24th March 2025
(1 week ago)
Lords ChamberRead Full debate National Insurance Contributions (Secondary Class 1 Contributions) Bill 2024-26 View all National Insurance Contributions (Secondary Class 1 Contributions) Bill 2024-26 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 85-I Marshalled list for Consideration of Commons Reasons - (21 Mar 2025)
Lord Livermore
That this House do not insist on its Amendment 1, to which the Commons have disagreed for their Reason 1A.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, in moving Motion A, I will speak also to Motions E, E1, H, H1, W and W1. Before I address these Motions directly, I will briefly set out why the Bill before your Lordships’ House is necessary.
Upon taking office, this Government inherited three distinct crises: a crisis in the public finances; a crisis in our public services; and a crisis in the cost of living. That included a £22 billion black hole in the public finances, public services at breaking point, NHS waiting lists at record levels, and working people suffering the worst cost of living crisis in a generation, with inflation having reached over 11%. Faced with this reality, any responsible Government would need to act. That is why we took action in the Budget to wipe the slate clean, to repair the public services, to protect working people and to invest in Britain. That included an historic investment of an additional £25.7 billion for the NHS, which is helping to bring down waiting lists more quickly and put an end to over a decade of underinvestment and neglect.
We took this action in the fairest way possible, by keeping our manifesto promises to working people not to increase their income tax, national insurance or VAT. However, we needed to take some very difficult decisions elsewhere on tax, including the changes to employer national insurance contributions contained in this Bill. Following this change, more than half of businesses with national insurance liabilities will see no change or will see their liabilities decrease, and 865,000 employers will now not pay any national insurance at all next year.
We have consistently acknowledged that some businesses will now contribute more and that the impacts will be felt beyond businesses. This was a difficult decision, but it was the right decision, because not acting was simply not an option. As a result of the decision, and others, taken in the Budget, we have created a foundation of stability on which we are now taking forward our agenda of growth and reform.
There are consequences to responsibility, but the consequences of irresponsibility for the economy and for working people would have been far greater. We saw that with the Liz Truss mini-Budget, which crashed the economy and increased typical mortgage payments by £300 a month.
Baroness Neville-Rolfe (Con)
My Lords, we have worked together on these three modest, common-sense amendments, and we will also support them if it comes to a vote.
Lord Livermore (Lab)
My Lords, I am very grateful to all noble Lords who have taken part in this debate. As I have outlined, the measures contained in this Bill are necessary to repair the public finances, to rebuild public services, to protect working people and to invest in Britain. This includes an historic investment of an additional £25.7 billion for the NHS that is helping to bring down waiting lists more quickly and puts an end to over a decade of underinvestment and neglect. In doing so, the Government have kept their promise to working people to not increase their income tax, their national insurance or their VAT. We have always acknowledged that there are costs to responsibility, but the cost of irresponsibility would have been far greater.
The noble Baroness, Lady Neville-Rolfe, asked about the impact of the Bill on hospices. The Government of course recognise the vital role that hospices play in supporting people at the end of life and their families, and the cost pressures that the hospice sector has been facing over many years. That is why, as several noble Lords have mentioned, we are supporting the sector with a £100 million increase for adult and children’s hospices to ensure that they have the best physical environment for care, and £26 million revenue funding to support children’s and young people’s hospices. All charities, including hospices set up as charities, can also benefit from the employment allowance, which this Bill more than doubles from £5,000 to £10,500.
On assessments, as I have said previously, the Government and the OBR have already outlined the impacts of this policy change. This approach is in line with previous changes to national insurance and previous similar changes to taxation; the Government do not intend to provide further impact assessments.
The revenue raised from the measures in this Bill will play a critical role in repairing the public finances and rebuilding our public services. Any future changes which exempt certain groups would have cost implications, necessitating higher borrowing, lower spending or alternative revenue-raising measures. For these reasons and the other reasons that I have already set out, I respectfully ask noble Lords not to press their Motions containing Amendments 1B, 5B, 8B and 21B.
Lord Scriven (LD)
My Lords, I thank all noble Lords who have taken part in this informative and important debate. I support the Motions in the names of the noble Lord, Lord Londesborough, and the noble Baroness, Lady Neville-Rolfe.
It is a strange world we live in. I never thought that I would come to this House as a Liberal Democrat and argue for a Minister to have a Henry VIII power to try to help the Government with the consequences of a policy, and to have a Minister turn it down. No one is denying the right of the Government to raise revenue; what my amendment does is give the Government a tool to act swiftly on the consequences of what may, and probably will, happen in health and social care. It is not just pharmacists, GPs, hospices and dental practices that will suffer but people who require their services. Some of the most vulnerable will find that services stop because of the cash-flow and debt issues that the Bill will exacerbate in services that are already pressurised.
It is disappointing that when the olive branch is given, the Minister has decided to continue with the folly. Looking at the faces of some Members behind him, I think that they understand some of the potential consequences. It is disappointing that the Government and the Minister have not agreed to the olive branch. I therefore believe that it is right that I ask the House to agree to my Motion A1. I would like to test the opinion of the House.
Lord Livermore
That this House do not insist on its Amendment 2, to which the Commons have disagreed for their Reason 2A.
Lord Livermore (Lab)
My Lords, in moving Motion B, I will speak also to Motions C, D, F, G and J to V. The other place has disagreed to Amendments 2, 3, 4, 6 and 7 and Amendments 9 to 20, as they interfere with public revenue. The other place did not offer any further reason, trusting that this reason is sufficient. On that basis, I hope that noble Lords are content not to insist on Amendments 2, 3, 4, 6, 7 and 9 to 20. I beg to move.
Baroness Neville-Rolfe (Con)
My Lords, the Government have rejected a number of amendments which call for the exemption of various sectors from the jobs tax, citing financial privilege. The amendments would have protected small business, providers of transport for students with special educational needs, small charities, providers of early years education and hospices, which we have already heard a lot about today, because of their desperate situation, from my noble friends Lord Leigh, Lord Ashcombe, Lady Monckton and Lady Noakes.
The Government’s refusal to acknowledge the damaging impacts that this tax on jobs will have is very concerning. The tax is in complete contrast to their insistence that they are the party of growth. Indeed, the most recent GDP statistics from the ONS indicate that the economy shrank by 0.1% in January. The way the Government are now taxing the more productive private sector to pay for a huge increase in less productive public projects and salaries means, I fear, that this trend will continue.
We have recast our review clause into a modest one, which we will be voting on shortly. We will not oppose the government amendments in this second group, but I give notice that we are planning to seek assistance for those providing SEND transport in the Bus Services (No. 2) Bill.
Baroness Kramer (LD)
My Lords, briefly, we regret very much that the other place rejected amendments that would have exempted key groups such as universities, nurseries and those providing SEND transport—essential services that provide key support will be under huge financial pressure. We have had to be selective. We have offered the Government opportunities to take powers in the areas where we think the greatest damage will be done most rapidly. Therefore, we will not press the Government on these amendments.
Lord Livermore (Lab)
My Lords, I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their agreement not to insist on these amendments. We have had to take difficult but necessary decisions to repair the public finances and rebuild our public services. Not acting was simply not an option. As a result, through this decision, and others taken in the Budget, we have created a foundation of stability on which we are now taking forward our agenda of growth and reform.
Lord Livermore
That this House do not insist on its Amendment 3, to which the Commons have disagreed for their Reason 3A.
Lord Livermore
That this House do not insist on its Amendment 4, to which the Commons have disagreed for their Reason 4A.
Lord Livermore
That this House do not insist on its Amendment 5, to which the Commons have disagreed for their Reason 5A.
Lord Livermore
That this House do not insist on its Amendment 6, to which the Commons have disagreed for their Reason 6A.
Lord Livermore
That this House do not insist on its Amendment 7, to which the Commons have disagreed for their Reason 7A.
Lord Livermore
That this House do not insist on its Amendment 8, to which the Commons have disagreed for their Reason 8A.
Lord Livermore
That this House do not insist on its Amendment 9, to which the Commons have disagreed for their Reason 9A.
Lord Livermore
That this House do not insist on its Amendment 10, to which the Commons have disagreed for their Reason 10A.
Lord Livermore
That this House do not insist on its Amendment 11, to which the Commons have disagreed for their Reason 11A.
Lord Livermore
That this House do not insist on its Amendment 12, to which the Commons have disagreed for their Reason 12A.
Lord Livermore
That this House do not insist on its Amendment 13, to which the Commons have disagreed for their Reason 13A.
Lord Livermore
That this House do not insist on its Amendment 14, to which the Commons have disagreed for their Reason 14A.
Lord Livermore
That this House do not insist on its Amendment 15, to which the Commons have disagreed for their Reason 15A.
Lord Livermore
That this House do not insist on its Amendment 16, to which the Commons have disagreed for their Reason 16A.
Lord Livermore
That this House do not insist on its Amendment 17, to which the Commons have disagreed for their Reason 17A.
Lord Livermore
That this House do not insist on its Amendment 18, to which the Commons have disagreed for their Reason 18A.
Lord Livermore
That this House do not insist on its Amendment 19, to which the Commons have disagreed for their Reason 19A.
Lord Livermore
That this House do not insist on its Amendment 20, to which the Commons have disagreed for their Reason 20A.
Lord Livermore
That this House do not insist on its Amendment 21, to which the Commons have disagreed for their Reason 21A.
Lord Livermore (Lab)
My Lords, I have already spoken to Motion W. I beg to move.
Motion W1 (as an amendment to Motion W)
Closed-Ended Investment Companies: Cost Disclosure
Lord Livermore Excerpts(1 week ago)
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The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, last year, the Government legislated to reform retail disclosure so that it is fairer and more proportionate. Recognising the concerns mentioned in the Question, the Government also took exceptional action to exempt investment companies from cost disclosure requirements to provide interim relief while the replacement regime is finalised. Operationalising this legislation is now a matter for industry and the regulator.
Baroness Wheatcroft (CB)
My Lords, I thank the Minister for that response, but despite the Government’s welcome SI, and FCA emergency guidance last November, some retail platforms continue to ban customers from investing in UK investment trusts that do not disclose their ongoing charging figures, even though those figures are misleading, as the Government accept. Will the Minister hold urgent talks with the FCA to insist that this barrier to investment be removed immediately?
Lord Livermore (Lab)
I am very grateful to the noble Baroness for the question. I also pay tribute to other noble Lords, including the noble Baronesses, Lady Altmann and Lady Bowles, for their continued championing of the investment trust sector and for bringing their concerns to the Government’s attention in their Private Members’ Bills in this Parliament and the previous one. As a result of their campaigning, the Government have now legislated to provide the Financial Conduct Authority with tailored powers to deliver a new disclosure regime. The Government have also temporarily exempted investment companies from cost disclosure legislation.
On the specific matter raised by the Question, of requirements by investment platforms for the investments they offer, that is now a matter for the industry and the regulator. While I recognise that the Government may not have gone as far as the noble Baroness would like, we have a shared objective of ensuring that that this reform achieves the right outcomes for investment companies and for the sector as a whole.
Baroness Bowles of Berkhamsted (LD)
My Lords, I declare my interest as a director of the London Stock Exchange. As the Minister said, in November, the PRIIPS SI made an immediate policy and legislative change in view of responses to HMT’s CCI consultation, aiming to free the investment trust market from incorrect legislation. Did the Government expect the FCA to reverse that in their December consultation? Will the Government reassert their policy? Will they also assert their policies against duplicative legislation and in favour of growth for consumer investments? If not, how do the Government expect to harness either retail or professional investment in this valuable sector for infrastructure?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. I absolutely recognise the key role that the investment company sector plays in the UK’s economy, as she sets out, representing more than 30% of the FTSE 250 and investing in assets that support the Government’s growth agenda. We have listened to industry concerns and, last year, as the noble Baroness said, we legislated to reform retail disclosure. The FCA launched a consultation on an entire replacement regime in December. The Government look forward to seeing the outcomes of that consultation in due course.
Lord Forsyth of Drumlean (Con)
My Lords, what is going wrong when Parliament—and all credit to the Government for acting on this matter—and the Government pass a statutory instrument and the regulator then puts out a consultation document that provides for reversing what the Government have said should happen and what Parliament has decided? I know that the Minister must be aware of the number of Peers and others who have written on this matter. Surely the regulator is accountable to Parliament and the Government and should behave accordingly.
Lord Livermore (Lab)
I absolutely recognise the issues that the noble Lord raises. The Government’s view is that now that they have temporarily removed investment trusts from cost disclosure requirements, implementation is a matter for the industry. I recognise that there are some frustrations among the sector, but we believe that operationalising this legislation is a matter for the industry and the regulator.
Lord Leigh of Hurley (Con)
My Lords, I declare my interests as an investor in investment trusts and as a senior partner at Cavendish, which has written in to the consultations. It is quite clear that investment trusts offer members of the public the opportunity to invest in assets that would not otherwise be available to them and should be encouraged. The problem is that the rules were set in Brussels, and Europe does not have investment trusts. We now have the opportunity to do something bespoke and specific for us. Does the Minister agree that that will not be possible with the current structure that we have with the FCA and that it is now time that the FCA and, for that matter, FOS, were brought within government so that the situation as my noble friend Lord Forsyth explained it can be resolved?
Lord Livermore (Lab)
I do not think I can agree with the second part of the noble Lord’s question, but I absolutely agree that these vehicles do not exist in Europe and do exist in this country, which is exactly why the Government legislated to reform retail disclosure in the way that they did so that it is fairer, more proportionate and more suited for UK markets.
Lord Watts (Lab)
My Lords, does the Minister agree that the system needs to be transparent and, quite frankly, there need to be effective rules? If we have effective legislation or rules, and we have transparency, is that not what we are seeking?
Lord Livermore (Lab)
Yes, I agree with my noble friend. The Government have provided the Financial Conduct Authority with tailored powers to deliver a new disclosure regime that is fairer and more proportionate and, as I said in the previous answer, tailored specifically to UK markets. I know that the FCA is engaging extensively with the industry and other interested parties as it looks to finalise its rules.
Baroness McIntosh of Pickering (Con)
Does the Minister share my concern about what has happened to investment trusts over the past six to 12 months? What is the Government’s policy regarding saving?
Lord Livermore (Lab)
Yes, I do share the noble Baroness’s concern, which is exactly why we have done all the things that I have set out so far in this Answer. The Government’s policy regarding saving is that we think it is a good thing and we want to encourage more of it.
Baroness Neville-Rolfe (Con)
Does the Minister agree that the most important objective in the savings area is to ensure that sufficient investment opportunities are available, whatever their nature, to allow and encourage UK investors to save and invest, especially in UK stocks? Will he outline how the Government intend to support products that facilitate private investment in important areas such as property and infrastructure, as closed-ended funds are generally well suited to that?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. What she is saying is right; the Government share her view. That is exactly why the Chancellor established the pensions review, for example, in her recent Mansion House speech. Her view is that the pensions review could unlock billions of pounds in additional investment in fast-growing businesses and infrastructure while improving outcome for savers. That is exactly the objective of that policy.
Baroness Bowles of Berkhamsted (LD)
My Lords, the Minister must know that some 329 firms and individuals signed a response to the HMT consultation, and there were many other submissions besides. The Government said that, in response to that consultation, they changed policy. How can that policy be changed a month later? This time, 558 firms and individuals have signed the response to the Financial Conduct Authority, with many more similar, separate responses. Does that not tell the Government that the direction of travel is wrong and that if they want this solved in less than another two years, by when this investment opportunity will be gone, they will have to intervene?
Lord Livermore (Lab)
I am grateful to the noble Baroness, again, for her question. I am not sure that we are going to agree on this specific point. I have already set out the Government’s position very clearly. I recognise that there are frustrations among some noble Lords and in the sector. It is the Government’s view that operationalising this legislation is a matter for industry and the regulator. The Government look forward to seeing the outcomes of the FCA’s consultation in due course.
Baroness Bennett of Manor Castle (GP)
My Lords, in an earlier answer, the Minister said that the Government want to encourage savings and think that saving is a good thing. How does the Minister square that with the fact that the Government are planning to increase the supply of credit to households, regarding that as a way to encourage growth? Despite the obvious risks that increasing household credit brings—and the fact that, as the Economics Observatory noted, consumer confidence remains weak, as it has been since the Brexit vote in 2016, and has declined since mid-2024—how do we square up encouraging savings and encouraging credit?
Lord Livermore (Lab)
The Government have a very clear objective of increasing living standards in all parts of the country. We want all households to have more money available to spend and to save.
Baroness Bowles of Berkhamsted (LD)
Early last week, the Government published another statutory instrument in draft form with a lot of amendments to MiFID. Can we expect that those MiFID amendments to legislation will likewise be ignored by the Financial Conduct Authority in due course?
Lord Livermore (Lab)
I think that is a matter for the Financial Conduct Authority.
Finance Bill
Lord Livermore ExcerptsWednesday 19th March 2025
(1 week, 5 days ago)
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The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, it is a pleasure to open this Second Reading debate on the Finance Bill. I take this opportunity to warmly welcome my noble friend Lady Caine of Kentish Town to your Lordships’ House, and I very much look forward to her maiden speech.
The Bill before your Lordships’ House legislates for tax changes announced in the Budget last October, many of which come into effect this financial year. That was a once-in-a-generation Budget, on a scale commensurate with the challenging inheritance that this Government faced, an inheritance consisting of three distinct crises: a crisis in the public finances, a crisis in our public services and a crisis in the cost of living.
In the public finances, as noble Lords may have heard me say before, this Government inherited a £22 billion black hole—a series of commitments made by the previous Government that they did not fund and did not disclose. The OBR has established that the previous Government concealed £9.5 billion and
“did not provide the OBR with all information available”.
As we now know, during the five months they had left in office, the previous Government continued to amass unfunded commitments that they did not disclose. By the Spring Budget, Treasury records show that these had reached £16.3 billion; by July, they had reached £22 billion.
The Treasury has published a line-by-line breakdown of these unfunded commitments: 260 separate pressures that the previous Government did not fund and did not disclose. The previous Government also failed to budget for costs they knew would materialise, including £11.8 billion to compensate victims of the infected blood scandal and £1.8 billion to compensate victims of the Post Office Horizon scandal.
Of course, this Government inherited not just broken public finances but broken public services, with NHS waiting lists at record levels, children in portakabins as school roofs crumbled and rivers filled with polluted waste. Added to this was a cost of living crisis that had hit working people hard, with inflation peaking at over 11%. This was the reality we inherited. Faced with this reality, any responsible Government would need to act.
That is why this Government took action in the Budget to wipe the slate clean, repair the public services, protect working people and invest in Britain. That included a historic investment of an additional £25.7 billion for the NHS, which is helping to bring down waiting lists more quickly and put an end to over a decade of under- investment and neglect. We took this action in the fairest way possible, by keeping the promise we made to working people in our manifesto not to increase their income tax, national insurance or VAT.
The Government did, however, need to take some very difficult decisions elsewhere in relation to tax—difficult decisions, but the right decisions. We have always been clear that there are costs to responsibility and that the increase in employers’ national insurance contributions will have consequences for businesses and beyond, but the costs of irresponsibility would have been far greater. As a result of the decisions we have taken, we have created a foundation of stability on which we are now taking forward our agenda of growth and reform.
The Bill before your Lordships’ House is wide ranging, and I will speak to the measures within it in three distinct categories: first, the measures the Government have taken to deliver on the specific commitments made in our manifesto; secondly, measures to put the tax system on a fairer and more sustainable footing; and thirdly, measures to improve health outcomes and support the clean energy transition in line with our growth strategy.
On the first of these, our manifesto included a commitment, which is being delivered through this Bill, to remove the outdated concept of domicile status from the tax system and ensure that everyone who is a long-term resident in the UK pays their taxes here. In its place, the Bill introduces a new residence-based regime from April this year. This new regime will be internationally competitive and focused on attracting the best talent and investment into the UK. The new rules mean that anyone who has been tax resident in the UK for more than four years will pay UK tax on their foreign income and gains, as is the case for other UK residents. That is a much simpler and clearer test than exists under the current regime.
The independent Office for Budget Responsibility has confirmed that these reforms will raise a total of £33.8 billion over the five-year forecast period. This includes £21.1 billion from the previous Government’s reform and £12.7 billion from the further reforms announced at the Budget. This will help to fund vital public services and provide stability in the public finances. Reflecting our continued engagement with stakeholders to ensure the reforms operate as intended, the Chancellor recently announced that we are making elements of these reforms simpler to use and more attractive, while retaining the structures announced at the Budget.
Our manifesto also pledged to
“end the VAT exemption … for private schools to invest in our state schools”.
This Bill delivers on that commitment too. Some 94% of children in this country attend state schools. However, too many children do not get the opportunities they deserve because too often these schools are held back by a lack of investment. That is why we introduced VAT on private school fees from 1 January this year to secure the additional funding needed to improve educational outcomes across the UK. Together with our changes to business rates, this measure will raise around £1.8 billion a year by 2029-30 and just under £500 million in this year alone.
The Government published a tax impact and information note setting out the impacts of this policy at the time of the Budget. The Government’s costings, set out in a detailed costings note, have been certified by the OBR. The evidence to date supports these assessments, and we remain very confident in them. Private schools have continued to open in England. Pupil movements remain in line with expectations. Many private schools are partially or fully absorbing costs, instead of passing on higher fees. More pupils are receiving their first choice of school than they did last year.
A final key manifesto commitment relates to the energy profits levy on oil and gas companies. The Bill before your Lordships’ House fulfils our promise to increase the rate of the levy by three percentage points to 38%. It also extends the levy by one year and removes an investment allowance for the oil and gas industry that was not available to any other sector. While oil and gas will continue to play an important role in the energy mix during the transition, we must drive public and private investment towards cleaner energy.
The money raised from these changes will help finance our clean energy transition, enhance energy security and create new jobs. To support these objectives, the Bill maintains 100% first-year allowances in the energy profits levy regime, along with a targeted decarbonisation allowance to help the sector reduce its emissions.
The Bill also contains a range of measures to make the tax system fairer and more sustainable and to restore stability to the public finances. The Bill takes a balanced approach towards capital gains tax, which is paid by fewer than 1% of adults each year. The higher main rate will increase from 18% to 24%, ensuring that the system remains internationally competitive, with the UK retaining the lowest rate of any European G7 economy. The new headline top rate will also remain lower than it was from 2010 to 2016. We are maintaining business asset disposal relief, with its £1 million lifetime limit, and increasing the rates of capital gains tax applied to this relief and investors’ relief in a phased way to give businesses time to adjust.
On inheritance tax, the Bill will ensure that wealthy estates contribute their fair share by extending the freeze in inheritance tax thresholds by a further two years to 5 April 2030. To support home ownership, the Bill also increases the higher rates of stamp duty land tax, so that those looking to move home or purchase their first property have a greater advantage over second home buyers, landlords and companies purchasing residential property.
Putting the tax system on a fairer and more sustainable footing also requires addressing the tax gap—the difference between the amount of tax that is owed and the amount that is collected. The measures set out by the Chancellor in the Budget last October represent the most ambitious package ever to close the tax gap and ensure that everyone who should be paying their taxes is doing so.
Overall, our package is expected to raise £6.5 billion per year by 2029-30. We will achieve that by investing £1.9 billion in HMRC staff and modernised IT systems, including recruiting an additional 5,000 compliance staff, and we will remove loopholes used to reduce tax liabilities. For example, the Bill introduces capital gains on liquidation of a limited liability partnership, changing the way capital gains are taxed and closing a route used for avoidance.
The third and final set of measures in the Bill seek to reduce health-related harms, support the clean energy transition and fund our vital public services. As our growth strategy makes clear, improving health outcomes is essential for delivering resilient, long-term growth. The Bill renews the tobacco duty escalator at RPI plus 2% and increases duty by a further 10% on hand-rolling tobacco this year. The soft drinks industry levy is being reviewed and uprated to maintain incentives for manufacturers to reduce their sugar contents. Alcohol duty is uprated in line with RPI, except for draught products in pubs, recognising the unique role that pubs have in communities.
To support our net-zero commitments, we are introducing new powers to allow for the introduction of the carbon border adjustment mechanism, which will place a carbon price on emissions-intensive goods imported into the UK. We are supporting the take-up of electric vehicles by increasing incentives for zero-emission vehicles in the vehicle excise duty first-year rates.
This Bill delivers on the Government’s manifesto commitments, puts the tax system on a fairer and more sustainable footing, supports the transition to clean energy and improves health outcomes. It is also a Bill to fix the foundations of our economy by repairing the £22 billion black hole in the public finances that we inherited.
The measures contained within the Bill reflect responsible choices. The Government have always been clear that there are costs to this responsibility, but the costs of irresponsibility would have been far greater. As a result of these choices, we have now created a foundation of stability in the public finances on which we will drive forward our agenda of growth and reform. We have set out a clear strategy for achieving our growth mission, but we are not satisfied. That is why we are going further and faster to put Britain on a better path and to deliver for the British people. I beg to move.
Lord Livermore (Lab)
My Lords, it is a pleasure to close this Second Reading debate on the Finance Bill. I am grateful to all noble Lords for their contributions and questions. I join others in warmly congratulating my noble friend Lady Caine of Kentish Town on her fascinating maiden speech. My noble friend brings a wealth of experience to your Lordships’ House, particularly in the creative industries that she spoke about with great expertise today. I am very pleased that she chose the table that she did and I very much look forward to working with her, and to her further contributions in debates such as this.
Upon taking office, this Government inherited three distinct crises: a crisis in the public finances; a crisis in our public services; and a crisis in the cost of living. As my noble friend Lord Eatwell said, that included a £22 billion black hole in the public finances, public services at breaking point, with NHS waiting lists at record levels, and working people suffering the worst cost of living crisis in a generation, inflation having reached over 11%. Faced with this reality, any responsible Government would have needed to act. That is why we took action in the Budget to wipe the slate clean, to repair the public services, to protect working people and to invest in Britain. We did so in the fairest way possible by, contrary to what the noble Baroness, Lady Neville-Rolfe, said, keeping our promises to working people not to increase their income tax, national insurance or VAT.
However, we needed to take some very difficult decisions elsewhere on tax, including some of those contained in the Bill. They were difficult decisions but they were the right ones, because not acting was simply not an option. As a result of those decisions, as my noble friend Lord Eatwell also said, we have created a foundation of stability on which we are now taking forward our agenda of growth and reform. It is notable that during the many debates on this subject since the Autumn Budget, including today, we have not heard any alternative put forward by the party opposite: no alternative for dealing with the challenges we face or for restoring economic stability, and therefore no plan for driving economic growth. They have shown no humility for the economic damage they inflicted on this country over 14 years, they have come up with no alternative plan and they have provided no apology. It falls to this Government to clean up the mess that we inherited.
The noble Baronesses, Lady Neville-Rolfe and Lady Lawlor, and the noble Lord, Lord Altringham, spoke about economic growth. As my noble friend Lord Hain said, there was, of course, no bigger failure by the previous Government than their failure on growth. The combined effect of their austerity, their disastrous Brexit deal and their Liz Truss mini-Budget was devastating. Had the economy grown by the average of other OECD countries over the past 14 years, it would be more than £150 billion larger today. The OECD’s interim economic outlook, published on Monday, shows that in a changing world, as the noble Baroness, Lady Kramer, observed, increased global headwinds are affecting all G7 economies. Although the UK is forecast to be Europe’s fastest-growing G7 economy over the coming years, second only to the US, the structural problems in our economy run deep. That is why the Government are going further and faster to protect our country, reform our public services and boost growth.
Our strategy consists of three key elements: stability, investment and reform. It recognises that, first and foremost, it is businesses, investors and entrepreneurs that drive growth, as many have said today, alongside a Government who systematically remove the barriers that they face. It includes launching the biggest sustained increase in defence spending since the Cold War; fundamentally reshaping the British state to deliver for working people and their families; and taking on the blockers to get Britain building again.
The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, spoke about the changes to employer national insurance contributions, which are being legislated for separately in the national insurance contributions Bill. We have always been clear that there are costs to responsibility, and the increase in employers’ national insurance contributions will have consequences for businesses and beyond. But the consequences of irresponsibility, for the economy and for working people, would have been far greater. We saw that with the Liz Truss mini-Budget, which crashed the economy and saw typical mortgage payments increase by some £300 a month.
The noble Baroness, Lady Penn, asked about the Spring Statement. I am happy to confirm that there will continue to be only one fiscal event a year: the Budget every autumn. She will have to wait, I am afraid, as will my noble friend Lord Davies of Brixton, until next Wednesday to hear what the Chancellor has to say.
The Bill before your Lordships’ House spans three distinct categories: first, the measures the Government have taken to deliver on the specific commitments made in our manifesto; secondly, measures to put the tax system on a fairer and more sustainable footing; and thirdly, measures to improve health outcomes and support the clean energy transition, in line with our growth strategy.
The Government made a series of commitments in our manifesto that are being delivered through the Bill. They include our commitment to remove the outdated concept of domicile status from the tax system and ensure that everyone who is a long-term resident in the UK pays their taxes here. This was focused on by the noble Lords, Lord Markham, Lord Leigh of Hurley and Lord Altringham. In its place, the Bill introduces a new residence-based regime from April. This new regime will be internationally competitive and focused on attracting the best talent and investment to the UK.
During the passage of the Bill, as mentioned by the noble Baroness, Lady Neville-Rolfe, the Government tabled a number of minor technical changes and administrative easements to ensure that the new regime works as intended. As part of this, we have made changes to ensure that no tax will be due in any past or future tax year for taxpayers in circumstances where they were previously UK-resident and taxed on the remittance basis; they remitted foreign income or gains during a period of long-term non-residence before 6 April 2025; and they have enjoyed or continue to enjoy the benefits of the remitted foreign income and gains after resuming their UK residence. These changes provide certainty for taxpayers and ensure that no tax will be due in these circumstances. The existing remittance rules will continue to apply in circumstances not covered by this amendment so that, where a non-taxable remittance has been made prior to 6 April 2025, a second remittance of the same income or gains remains taxable.
The noble Lords, Lord Markham and Lord Leigh of Hurley, asked about the impact of these changes. We are confident that our new regime will remain internationally competitive and focused on attracting the best talent and investment to the UK. Evidence from the previous Government’s reforms to the non-dom regime in 2017 show that the vast majority of former non-doms who became liable for tax on their worldwide income and gains remained UK-resident and continued to contribute to the UK economy. The new regime will also be more competitive for new arrivals over their first four years of UK residence than the current rules. The noble Lord, Lord Leigh of Hurley, and the noble Baroness, Lady Lawlor, asked about the amount raised, which we remain confident of. The OBR has certified that the non-dom reforms the Government are legislating will raise £33.8 billion over the forecast period.
The noble Lord, Lord Markham, raised concerns about changes being made to the transfer of assets abroad rules in relation to the reforms to non-domicile status. The transfer of assets abroad legislation is a wide-ranging anti-avoidance provision aimed at preventing individuals who are UK resident avoiding a tax liability by transferring assets to a person abroad. I reassure the noble Lord that the changes to these rules will not displace the effect of the old remittance basis rules for the years in which they had effect, such that a tax charge will continue to arise only at the point of remittance. The noble Lord, Lord Markham, also raised a concern that the introduction of the temporary repatriation facility—the TRF—could lead to retrospective taxation if the Government choose to change the rates of tax charged in the future. The rates of the TRF charge are set out in the Bill and will be set at 12% for the tax years 2025-26 and 2026-27, and at 15% for 2027-28.
Our manifesto also pledged to
“end the VAT exemption … for private schools to invest in our state schools”.
The Bill delivers on that commitment, as focused on by the noble Baroness, Lady Kramer. Some 94% of children in this country attend state schools; however, too many children do not get the opportunities they deserve because these schools are too often held back by a lack of investment. That is why we introduced VAT on private school fees from 1 January this year, to secure the additional funding needed to improve educational outcomes across the UK. Despite what the noble Baroness, Lady Neville-Rolfe, seemed to suggest, the evidence to date supports the assessments we have made and we remain confident in them.
Another key manifesto commitment relates to the energy profits levy on oil and gas companies, mentioned by the noble Baroness, Lady Neville-Rolfe. The Bill fulfils our promise to increase the rate of the levy by three percentage points to 38%. It also extends the levy by one year and removes the 29% investment allowance. Although oil and gas will continue to have a role in the energy mix during the transition, we must drive public and private investment towards cleaner energy. The Government recognise that oil and gas will continue to have an important role. The sector continues to benefit from £84 of tax relief for every £100 of private investment. It will also continue to benefit from a decarbonisation allowance at a similar value of relief as it received prior to the increase in the rate of the energy profits levy.
The noble Baroness, Lady Penn, and the noble Lord, Lord Altrincham, asked about the impact on jobs and investment as a result of this change. The Government are committed to managing the energy transition in a way that supports jobs in existing and future industries. That is why, beyond the abolition of the investment allowance in the energy profits levy regime, we have not made any additional reductions to the level of tax relief that the sector can claim. We are also taking steps to give the sector and its investors long-term certainty by publishing a consultation looking at how the fiscal regime will respond to oil and gas price spikes after the energy profits levy ends. An impact assessment was also published at the time of the Budget.
The Bill also contains a range of measures to make the tax system fairer and more sustainable and to restore stability to the public finances. The noble Baronesses, Lady Neville-Rolfe and Lady Coffey, and the noble Lord, Lord Fuller, spoke about the reforms to agricultural property relief and business property relief, which will be legislated for separately. Under the current system, 100% relief on business and agricultural assets is heavily skewed towards the wealthiest estates. According to the latest data from HMRC, 40% of agricultural property relief is claimed by just 7% of estates making claims. That amounts to just 117 estates claiming £219 million of relief. It is neither fair nor sustainable to maintain such a large tax break for such a small number of claimants, given the wider pressure on the public finances. The new system, which will apply from April next year, maintains significant tax reliefs for estates while supporting the public finances in a fair way.
The reliefs sit on top of existing spousal exemptions and nil-rate bands. Therefore, a couple with agricultural or business assets will typically be able to pass on up to £3 million-worth of assets without paying any inheritance tax. I am pleased to say that I did hear the noble Baroness, Lady Penn, clearly on this occasion with her question. The reforms to APR and BPR from April 2026 are expected to raise £520 million in 2029-30. This is a combined policy across the reliefs, rather than separate policies for each relief, so a breakdown of the revenue between them is not available.
The noble Baroness, Lady Coffey, asked about double-cab pick-ups. The change announced at the Autumn Budget 2024 will be implemented in April 2025, and HMRC has put in place extensive transitional arrangements for businesses which purchase, lease or order a double-cab pick-up prior to this. As a result, the charge will not impact the capital allowance’s treatment of anyone who already owns a double-cab pick-up or who purchases one before April 2025. For employers and employees with a benefit-in-kind currently or who purchase, lease or order a DCPU before 6 April 2025, the existing treatment will continue to apply until the earlier of the disposal lease expiry or 5 April 2029. There are alternative vehicles with the same off-road and haulage capabilities that are still treated as goods vehicles, such as single-cab pick-ups.
The noble Baroness, Lady Neville-Rolfe, asked about the digital services tax. The UK’s objective has always been to ensure that all businesses pay their fair amount of UK tax on the value they derive from the UK market. The UK remains committed to removing a digital services tax once the pillar 1 global solution on international tax is in place. The Government are looking forward to working with the new US Administration to understand their concerns regarding the DST and to consider how these can be addressed in a way that preserves the DST’s policy objectives.
The noble Lord, Lord Leigh of Hurley, and the noble Baroness, Lady Kramer, asked about the position of the US Government on pillar 2. The UK and the US continue to enjoy a strong relationship, as the Prime Minister’s recent visit to Washington demonstrated. We recognise that the US Administration have concerns about pillar 2, and the Government are looking forward to engaging with the US to work through these concerns, alongside other members of the inclusive framework.
My noble friend Lord Davies of Brixton asked about the rationale for requiring administrators of UK-registered pension schemes to be UK residents. Under existing rules for such schemes, the scheme administrator can be resident in the EEA, which can make enforcement of tax debts from the scheme difficult and costly for HMRC. This requirement will support HMRC’s enforcement activities, as there will be a UK resident for it to engage with.
The third and final set of measures in the Bill seek to reduce health-related harm, support the clean energy transition and fund our vital public services. As our growth strategy makes clear, improving health outcomes is essential for delivering resilient long-term growth. Transitioning to net zero is central to this mission, and that is why the Government are capitalising on new opportunities and investment in clean energy industries right across the UK.
The noble Baroness, Lady Kramer, spoke about the impact of alcohol duty changes on pubs. Alcohol duty rates on non-draft products increased in line with RPI from February this year. However, nearly two-thirds of alcoholic drinks sold in pubs are served on draft. Therefore, instead of uprating these products in line with inflation, the Government are cutting draft duty by 1.7%, which means a penny off a pint in the pub. Overall, this change will reduce the total duty bill for eligible businesses by up to £100 million a year.
The noble Baroness, Lady Coffey, spoke about the soft-drinks levy. Based on evidence of the soft-drinks levy’s impact to date, the Government anticipate further product reformulation as a result of this measure, and this is reflected in the OBR-certified costing. This announcement will protect the real-terms value of the SDIL and maintain the incentives for manufacturers to reduce sugar content. This is not a retrospective tax: the new rates will apply only from 1 April. Historic tax rates and treatment will not change.
The noble Lord, Lord Moynihan, spoke powerfully about the importance of school sports and about childhood obesity. As I understand it, revenues from the soft-drinks levy are not formally allocated to any individual spending programmes. However, since the introduction of the SDIL, the Government have helped schools support healthier and more active lifestyles through expanded investment in the PE and sport premium, and this will continue.
This Bill delivers on the Government’s manifesto, puts the tax system on a fairer and more sustainable footing, supports the transition to clean energy and improves health outcomes. It is a Bill to fix the foundations of our economy by repairing the £22 billion black hole in the public finances that we inherited. That has involved making difficult but responsible choices to wipe the slate clean, repair public services, protect working people and invest in Britain. These decisions have been taken in the fairest way possible, by keeping our promises to working people not to increase their national insurance, VAT or income tax. As a result of these decisions, we have created a foundation of stability on which we are now taking forward our agenda of growth and reform. Low growth is not our destiny, but growth will not come without a fight. That is exactly why the Government are going further and faster to unlock the full potential of the economy.
Bill read a second time. Committee negatived. Standing Order 44 having been dispensed with, the Bill was read a third time and passed.
Independent School Fees: VAT
Lord Livermore Excerpts(2 weeks, 4 days ago)
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The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, the result of imposing VAT on school fees has been to help raise revenue to fund the Government’s objective that every child has access to high-quality education, including the 94% of children who are educated in the state sector. The Government have published a tax impact and information note setting out an analysis of the impacts of this policy. The Government’s costings, set out in a detailed costings note, have been certified by the independent Office for Budget Responsibility. We remain confident in those assessments but will of course continue to monitor the impact of the reforms.
Lord Lexden (Con)
My Lords, what are the Government to say to the mother of a child with special needs whose independent school is closing because of their education tax? She writes to me: “Shell-shocked does not cover it. My child is autistic. State secondary was an utter disaster. She felt safe and happy. Her heart is now broken”. What are they to say to the head of a small independent school in Derbyshire with 120 pupils, who writes to me: “I am battling to save my life’s work”? How would members of the Government feel if they were forced to move their child to a new school in the middle of an academic year, particularly if exams were in the offing? How should the sudden imposition of an unprecedented education tax on 1 January, after a rushed consultation last summer when schools were on holiday, be described? One word does it: cruel.
Lord Livermore (Lab)
I am grateful to the noble Lord for his question, and I pay tribute to his involvement in this sector. As he will know, probably better than me, there has historically been a significant turnover within the private school sector, with around 3% of private schools—roughly 75 in the UK—opening and closing each year, with the overall number of private schools remaining stable. Since this policy was announced in July, private schools have continued to open in England in line with historic trends.
Baroness Bull (CB)
My Lords, I thank the Minister and the Government for their recognition of the unique role that the Music and Dance Scheme schools play in enabling talented young dancers and musicians to pursue their dreams, whatever their background. Is the Minister aware of the recent demonstration of the success of that scheme in the outstanding achievements of Jakob Wheway Hughes, who is a student on the scheme at Tring Park School for the Performing Arts? He won not one but three of the prizes at the prestigious international ballet competition, the Prix de Lausanne. Will the Minister join me not only in congratulating Jakob on his success but in noting the role that the Music and Dance Scheme has played in achieving that success?
Lord Livermore (Lab)
I am grateful to the noble Baroness for her question. Of course, I will join her in congratulating Jakob. As she knows far better than I do, the Music and Dance Scheme provides grants and help with fees at eight schools and 20 centres for advanced training. The Department for Education has decided to adjust its Music and Dance Scheme bursary contribution for families with a relevant income below £45,000 a year to account for the VAT that will be applied to fees, ensuring that the total parental fee contribution for families with below-average relevant incomes remains unchanged for the rest of this academic year.
Lord Addington (LD)
I am not a Tory, thank you. I remind the House of my declared interests in this field. Special educational needs is one of the big sectors where the private system has been used by the state system to reinforce its own effectiveness. You get support only if you have an EHC plan. These are agreed by everybody as being extremely expensive and difficult to implement. Why are the Government giving support only to those with special educational needs who ask for such plans to be imposed on the state system and encouraging people who do not have them in the private sector to take them out?
Lord Livermore (Lab)
The policy remains as it was. It will not impact pupils with the most acute additional needs. Where pupils’ places in private schools are funded by local authorities in England, Scotland and Wales because their needs can be met only in a private school, local authorities will be able to reclaim that VAT. In terms of those without one of those systems in place, on average, the Government expect private school fees to increase by around 10% as a result of this measure.
Lord Foulkes of Cumnock (Lab Co-op)
My Lords, I am not a Tory either. Does my noble friend the Minister agree that the scare stories coming from opposite, like many of their scare stories, have been proven to be wrong? The Press Association’s review of schools has shown that there has not been a major transfer from the private sector to the public sector. In fact, in the public sector in England, more pupils have got their first choice of school this year than last year. The private schools that are closing are doing so for reasons other than the increase in fees. The noble Lord, Lord Lexden, is shaking his head, but he is wrong.
Lord Livermore (Lab)
As always, I agree with everything that my noble friend says. All the comments that we have heard to date about the Government’s assessments being incorrect have been proven to be wrong. On the number of pupils who would move from one sector to another, that is absolutely in line with what the Government’s assessment said. On the amount of VAT that would pass through to the fees that parents pay, that is absolutely in line with what the Government said. On the number of schools that would close, that is absolutely in line with what the Government said. As my noble friend said, many councils now say that there has been no obvious impact from the addition of VAT on private school fees, and more pupils are receiving their first choice of school than they did last year.
The Earl of Clancarty (CB)
My Lords, while I welcome any relief for the music and dance schools, does the Minister accept that the £45,000 cut-off point for a whole family is too low? When will that be reviewed? Should not the Government do everything possible to encourage UK students into our creative schools, including the Yehudi Menuhin School, whose remarkable students we had the privilege of hearing in the Lords last week?
Lord Livermore (Lab)
I am grateful to the noble Earl for his question. I agree with the second part of it that we should encourage people into those schools. In terms of what the Government can do, the Department for Education has already acted and adjusted its scheme, and it will continue to maintain that for the rest of the academic year.
Baroness Goldie (Con)
Many of our Armed Forces educate their children privately because that is the only way they can ensure continuous provision of education because of the extraordinary lives we ask them to lead and the sacrifices they make for the safety of our nation. While the MoD pays a continuity of education allowance, that covers only a proportion of the parental cost. The imposition of VAT on private school fees has added to the expense of the balance which Armed Forces personnel are paying, magnified if they have more than one child being educated. Is this really the best we can do for our Armed Forces personnel?
Lord Livermore (Lab)
I agree with much of the sentiment that the noble Baroness expresses. The Government greatly value the contribution of our diplomatic staff and our serving military personnel. The continuity of education allowance provides clearly defined financial support to ensure that the need for frequent mobility, which often involves an overseas posting, does not interfere with the education of their children. As the noble Baroness will know, the Ministry of Defence and the Foreign Office have both increased the funding allocated to that allowance to account for the impact of any private school fee increases on the proportion of fees covered. The noble Baroness raises the proportion of the fees paid by the parents. As she will know, on average, the Government expect private school fees to increase by around 10% as a result of this measure, but many schools, as we have seen so far, have fully or partially absorbed VAT costs. How individual schools fund this additional cost is a commercial decision for them.
Lord Blunkett (Lab)
Does my noble friend agree that, although this is a critical area, it should be confined to those serving overseas and should not include those spending a substantial amount of time in the UK but still having their fees subsidised by either the MoD or the Foreign Office?
Lord Livermore (Lab)
I am grateful to my noble friend for his question. As I have said, the continuity of education allowance is designed to provide clearly defined financial support to ensure that the need for frequent mobility, often involving overseas postings, does not interfere with the education of the children involved.
Baroness Neville-Rolfe (Con)
My Lords, VAT on independent school fees is an unpleasant, class-based change of the kind sometimes adopted by the party opposite. This increased private school fees by 12.7% this January, according to the ONS. We will debate this matter next week with the Finance Bill, but does the Minister not feel rather embarrassed that his Government are the first one to tax education?
Lord Livermore (Lab)
If the noble Baroness wants to talk about what she is embarrassed about, I am very happy to talk about the previous Government’s record over the past 14 years. This was a necessary decision that will generate additional funding to help improve public services, including for the 94% of pupils who are in the state sector.
Capital Investment and Share Ownership
Lord Livermore Excerpts(2 weeks, 4 days ago)
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Lord Brooke of Alverthorpe
To ask His Majesty’s Government what consideration they have given to implementing an updated public-private partnership model to attract capital investment and to open share ownership to more people.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, the Government are committed to working in partnership with the private sector to deliver the infrastructure that our country desperately needs. We will set out our approach to unlocking greater private investment in UK infrastructure in the 10-year infrastructure strategy, which will be published alongside the spending review in June.
Lord Brooke of Alverthorpe (Lab)
My Lords, I am grateful for that response. I wonder whether I can persuade the Minister to move rather faster with the suggestion, which some of us have been pursuing, that we need to review the structure of the PPPs that we had under the previous Labour Government. We need to extend it so that we have wider participation of not just government departments but cities and mayors. On the other side of the fence, we need to extend the private side and give individual citizens the right to shares in these new ventures. Is the Minister prepared to meet a small group of us to talk in advance of the review?
Lord Livermore (Lab)
I am grateful to my noble friend for his question. As I say, the Government will publish a cross-cutting 10-year strategy for the UK’s social, economic and housing infrastructure in June, alongside the spending review. It will help to drive growth, deliver net zero and support improved public services by providing more coherence across different types of infrastructure than has been the case in the past. Of course, I am more than happy to meet my noble friend and the group he mentioned.
Lord Fox (LD)
My Lords, some public/private partnerships have worked very well. The contract for difference system has been very good at getting a huge amount of private sector investment into the offshore wind sector. Others have proved far less successful. For example, there have been crippling costs for schools that have had long-term, low-quality, high-cost maintenance programmes. It would be helpful if the Minister could tell your Lordships’ House how the Treasury is learning from this. How is it involving the private sector in developing the right risk and reward structures for the right projects? How is it involving local authorities, which often end up picking up the cost of these public/private partnerships
Lord Livermore (Lab)
The noble Lord is absolutely right in much of what he says. The private finance initiative was a specific public/private partnership model that was developed 20 years ago. The Government are actively managing the legacy PFI portfolio and learning lessons from that. The Infrastructure and Projects Authority believes that there is an opportunity for the public and private sectors to reset relationships, improve performance and deliver high-quality public facilities and services. Of course, lessons have been learned from the past. On 24 March the National Audit Office will publish a report called:
“Lessons learned: Private finance for infrastructure”.
Lord Tyrie (Non-Afl)
The PFI has been a very mixed bag, but parts of it have been highly successful. Unfortunately, the Treasury’s approach to negotiating run-off in PFI has led a large number of top-flight managers in these good PFI projects to leave the industry altogether and seek work elsewhere. What steps are the Government taking to make sure that there is no further attrition?
Lord Livermore (Lab)
As the noble Lord says, many of the private finance initiative contracts are coming to an end within the next decade. It is important to prepare early for a seamless transition to the public sector to protect taxpayers’ money. The Infrastructure and Projects Authority is responsible on the Treasury’s behalf, providing oversight and support to the portfolio of operational PFIs. It carries out regular health checks and, to date, around 215 expiry health checks have already taken place.
Baroness McIntosh of Pickering (Con)
My Lords, a variety of Governments have tried to introduce private sector investment into water sector projects. The Pickering Slow the Flow pilot scheme that I was involved in at a later stage was hugely successful in factoring in a number of public partnerships. Can the Minister look at this to open up, for example, supermarket involvement and farmers contributing to flood resilience in catchment areas?
Lord Livermore (Lab)
I am very interested in what the noble Baroness says, and I will look at that further. As I say, the 10-year infrastructure strategy will be the point at which we set out the Government’s approach to private investment in infrastructure. I cannot say more than that at this point.
Lord Macpherson of Earl’s Court (CB)
My Lords, does the Financial Secretary agree that, generally, the quality of PFI projects has improved over time, with an increasing number transferring risk successfully to the private sector and the projects being delivered on budget and on time? Given that the ONS now classifies pretty much all PFI projects as being on balance sheet, can he encourage the Treasury to provide sufficient expenditure cover in the spending review to support innovative public/private partnership proposals?
Lord Livermore (Lab)
As the noble Lord describes, there have of course been positive examples of PFI projects. For example, more than 100 hospitals were built by the previous Labour Government’s PPP programme. The Government are absolutely committed to harnessing private investment and restoring growth. On the latter part of his question, as I said before, the 10-year infrastructure strategy will be the point at which we set out the Government’s view of that, and it will be published alongside the spending review in June.
Baroness Neville-Rolfe (Con)
My Lords, does the Minister agree that we should be wary, not least because of the experience with PPI in things such as schools and hospitals, which several noble Lords have mentioned, about the establishment of public/private partnerships? Can I encourage him to be a little more forthcoming? What does he see as the risks? How will the Government assess value for money for the new schemes, perhaps with the help of the Infrastructure and Projects Authority, which he mentioned, whose work I respect?
Lord Livermore (Lab)
I am afraid the noble Baroness cannot encourage me to be more forthcoming. As I have said, the 10-year infrastructure strategy will be the point at which we set out the Government’s approach to private investment in infrastructure. I think she will agree with me that private investment is vital for the country’s infrastructure. The Chancellor has established the British Infrastructure Taskforce, made up of some of the UK’s biggest financial companies. That will support the Government’s infrastructure goal and ensure that the strategy is credible and deliverable.
Lord Reid of Cardowan (Lab)
My Lords, of course the public/private partnerships and PFIs had risks, and of course there were failures. That is almost inevitable in any new experimental and radical approach to funding services. But the truth is that over the last 20-odd years, the level of services to people in Britain has been much higher because of our engagement with the private sector. Can I therefore encourage my noble friend the Minister and his colleagues not to be deterred when it comes to infrastructure? There is no doubt in my mind that huge added value is possible if we are prepared to be bold in public/private partnerships.
Lord Livermore (Lab)
I am grateful to my noble friend for those words, and I agree with much of what he said. The Government remain absolutely committed to harnessing private investment and restoring growth. We will work in partnership with the private sector while ensuring that projects provide value for money for taxpayers, now and in the future, and that appropriate lessons are learned from the past.
Lord Forsyth of Drumlean (Con)
My Lords, is not the key to a successful private finance initiative the appropriate transfer of risk? To ensure that happens, it is important to have the people in the Treasury or elsewhere with the necessary skills to negotiate the appropriate contracts. In wishing the Government well in taking this forward, I ask them to give consideration as to how they will achieve that.
Lord Livermore (Lab)
The noble Lord is right. He is far more expert in these matters than I am, but I absolutely agree with him. Clearly, the public sector needs to be an intelligent client when it is negotiating with the private sector. That skill set is vital both within the Civil Service and in the skills we can draw on. As I mentioned, the Chancellor has established the British Infrastructure Taskforce to try to help with skills and advice. It is made up of some of the UK’s biggest financial companies, and it will support the Government’s infrastructure goals and ensure that the strategy is credible and deliverable.
Baroness Bennett of Manor Castle (GP)
My Lords, the Minister referred to the disastrous Blair PFI NHS hospitals scheme. I do not think there is much awareness that about half the money is still to be paid off. The noble Lord, Lord Fox, referred to the cost to local government. The Minister is probably aware of the National Institute of Economic and Social Research figure: local government is paying £13.5 billion. The institute also found that £1 billion had been made in pre-tax profit by a handful of companies, often registered in Guernsey and Jersey. Is PFI not simply a benefit to the financial sector?
Lord Livermore (Lab)
I think it was probably a benefit to the people who were able to be treated in the 100 hospitals that were built as a result of it. As I say, the private finance initiative was a specific public/private partnership model that was developed 20 years ago. The Government are actively managing the legacy PFI portfolio, and we are learning lessons from that.
Carbon Border Taxes
Lord Livermore Excerpts(2 weeks, 5 days ago)
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Lord Fuller
To ask His Majesty’s Government, further to the proposals by the European Union to exempt 80 per cent of eligible EU companies from new carbon border taxes, what plans they have to ensure that equivalent businesses in the United Kingdom are treated similarly.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, this is already the case. To ensure that the costs of complying with the UK carbon border adjustment mechanism are proportionate, it will apply only to those firms importing CBAM goods valued at £50,000 or more over a rolling 12-month period. The Government estimate that this will exclude 80% of CBAM-eligible firms while retaining more than 99% of imported emissions within the scope of the tax.
Lord Fuller (Con)
My Lords, the carbon border adjustment mechanism is a tariff by any other name. I am involved in an industry affected by CBAM, so I know more than most about the astonishingly divergent way in which the UK Government plan to introduce this tax. It will damage competitiveness, be complex to administer and drive growing inflationary pressures. There are even proposals to levy the tax to protect industries that do not even exist anymore. The EU has worked out for itself—
Lord Fuller (Con)
I am just about to ask the question. The EU has worked out for itself that building a walled garden around the economy will damage its own competitiveness. The Prime Minister said today in PMQs that all options were on the table in so far as tariffs are concerned. Does the Minister agree that the whole UK proposal needs a fresh look, or is he prepared to see us sleepwalk into a trade war with our friends and allies in the United States while damaging trade with our close EU partners?
Lord Livermore (Lab)
I am grateful to the noble Lord for his question. However, the answer is no, I do not agree with him. Reducing the UK’s carbon emissions is necessary to meet our emissions targets, and the emissions trading scheme and the carbon border adjustment mechanism are necessary tools to do that. Our approach is very similar to that of the EU. As the noble Lord said in his Question, we are doing exactly what the EU is doing—in fact, I think it has followed us, rather than the other way around, so our approaches are extremely similar. The US Administration have made no public comment on the UK CBAM, and I am not going to speculate on a hypothetical.
Earl Russell (LD)
My Lords, does the Minister agree that the UK and the EU running separate carbon markets only adds regulatory burdens and damages our energy transition and national industries? Is it time to work with our EU partners and look at relinking carbon markets to help to make our industries more competitive and drive down our energy bills?
Lord Livermore (Lab)
I absolutely agree with the noble Earl that alignment is helpful to UK competitiveness. We recognise that alignment with existing regimes can reduce administration burdens, so we will align where appropriate and we will follow developments on the EU CBAM very closely. We also continue to explore all options to improve trade and investment with the EU, which includes the UK and EU giving serious consideration to linking our emissions trading schemes.
The Earl of Devon (CB)
My Lords, given that we now produce no nitrogen fertiliser at all in the United Kingdom, and all of it is imported, have the Government calculated the impact of the carbon border tax on the price of food grown in the UK?
Lord Livermore (Lab)
Fertiliser production in the UK is subject to carbon pricing under the UK Emissions Trading Scheme. A UK CBAM will ensure that fertiliser produced overseas faces a comparable carbon price to equivalent goods produced in the UK. Most UK agricultural prices are a function of a range of international factors and the Government do not expect a CBAM on fertiliser to put UK farmers at a competitive disadvantage.
Lord Bellingham (Con)
My Lords, I declare an interest in this subject. Further to the question asked by the noble Earl, Lord Devon, can the Minister say whether the Government have made any assessment at all of the impact that this could have on our balance of payments?
Lord Livermore (Lab)
I do not think that that is relevant to this policy. Most of our trade in food is with the EU, and the EU has a similar scheme to ours.
Lord Watts (Lab)
My Lords, is not this another example of the mess that has been left by the previous Government? Does my noble friend agree that they did nothing to negotiate this, which is now causing problems to our industry?
Lord Livermore (Lab)
I am very tempted to agree with my noble friend. I think that what he says is absolutely the case.
Baroness Neville-Rolfe (Con)
My Lords, UK energy prices are far too high, notably for industrial uses such as steel, cement and ceramics, and for manufacturing, which are vital to the UK economy. Does the Minister agree that the arrangements for a carbon tax here and any border mechanisms must always be considered against the need to reduce energy costs for users and, as has been foreshadowed, to keep prices down, especially for hard-pressed consumers?
Lord Livermore (Lab)
Yes—I agree with the noble Baroness that energy prices are too high. I just wonder what the previous Government did to tackle that over 14 years. This Government have invested in CCUS, for example, which the previous Government did not. I do not know whether the noble Baroness agrees with our investments in that; she opposes the revenue-raising measures that we have taken to raise the funds to invest in those measures. It is an interesting question, but I of course agree with her. That is why the tax is designed in exactly the way that it is.
Lord Hannan of Kingsclere (Con)
My Lords, to return to my noble friend Lord Fuller’s question, how is this different from a tariff? One effect of a tariff is that it results in the outsourcing of manufacturing. People will take car-making or whatever to places that are not affected by this additional levy. Have the Government made any assessment of how much deindustrialisation there will be as a consequence of imposing what is, in effect, a tariff on ourselves?
Lord Livermore (Lab)
As I understand it, the noble Lord likes market-led approaches. The UK Emissions Trading Scheme is a market-led approach whereby those domestic firms and industries that are able to decarbonise quickly do so first, while technological solutions are found for those where it is more difficult. To maintain the integrity of the UK’s decarbonisation efforts through the emissions trading scheme, we must mitigate the risk of carbon leakage, which means that we must have a carbon border adjustment mechanism.
Supply and Appropriation (Anticipation and Adjustments) Bill
Lord Livermore ExcerptsTuesday 11th March 2025
(2 weeks, 6 days ago)
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Child Benefit and Guardian’s Allowance Up-rating Order 2025
Lord Livermore Excerpts(3 weeks, 5 days ago)
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Lord Livermore
That the draft Order and Regulations laid before the House on 15 January be approved.
Considered in Grand Committee on 3 March.