London Stock Exchange: Decline in UK Funds

Lord Livermore Excerpts

Thursday 13th February 2025 Lords Chamber

[Baroness Neville-Rolfe]

To ask His Majesty’s Government what assessment they have made of the net £9.6 billion decline in investment in UK funds in the London Stock Exchange in 2024.

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

My Lords, there has been a net decline in investment in UK funds for the past nine consecutive years. This is, of course, a matter of concern, although this does reflect global trends, and the outflow in 2024 was £2.5 billion less than in 2023. The UK’s capital markets remain some of the strongest and deepest in the world, and the UK is a leading centre for international capital raising, last year raising over £20 billion of equity capital—more than the next three European exchanges combined.

[Baroness Neville-Rolfe (Con)]

My Lords, I was very glad to visit the stock exchange this week with other parliamentarians from the Industry and Parliament Trust. The stock exchange is important to national economic welfare. It is therefore unfortunate that the Government have scrapped the last Government’s plan for a tax-free Great British ISA, incentivising savers to invest in British stocks and shares. How does the Minister intend now to encourage people, including first-time investors, to invest in such shares?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question and for telling us about her first-hand experience this week. She may know that feedback from industry and consumers on the last Government’s proposed Great British ISA was mixed at best, and no clear value-for-money case was made for that, so, as she says, we will not be proceeding with it. But as she will know, at the Masion House speech the Chancellor published the interim report on the pensions investment review and launched consultations on measures that would deliver a major consolidation of the defined contribution market and local government pension schemes. They could unlock around £80 billion for investment in private equity and infrastructure, but of course, there is no guarantee that that will be invested in UK markets, as she says. The pensions review is absolutely committed to looking at further ways in which that can be achieved.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, when the Government chose not to follow the overwhelming response calling to exempt listed investment companies, otherwise known as listed funds, from consumer collective investments and to refer them to the Financial Conduct Authority consultation, did they realise that it would cost another £30 billion in lost investment? Did the Government realise that their interim solution, which the FCA is not enforcing, is a short-term solution and cannot give confidence to what are long-term investors and investments? Does the Minister agree that correct arithmetic cannot be a matter for consultation, and will he facilitate my meeting with officials to explain that beneath the jargon, smoke and mirrors, this issue is a simple matter of correct arithmetic?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question, and once again, I pay tribute to her for her campaigning on this issue. The Government absolutely recognise the key role the investment company sector plays in the UK economy; it represents over 30% of the FTSE 250 and invests in assets that support the Government’s growth agenda. We have listened carefully to the noble Baroness’s concerns, not least through her campaigning in the previous Parliament and her Private Member’s Bill in this Parliament. Last year we legislated, I think as a direct result of her campaigning, to reform retail disclosure, with the FCA launching a consultation on an entire replacement regime in December.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I am sure the Minister is aware that the tax-dodging fast-fashion firm Shein, having been rejected in New York, is now apparently seeking to list on the London Stock Exchange. Does the Minister agree with Liam Byrne, the chair of the Business and Trade Committee, who wrote to LSE asking if it agreed that it was important that firms seeking to list on the exchange have safeguards against forced labour in their products?

[Lord Livermore (Lab)]

The decision on whether a firm can list in the UK is a matter for the independent regulator, the FCA, subject to a firm meeting its listing rules and relevant disclosure requirements.

[Lord Hannan of Kingsclere (Con)]

My Lords, the chief beneficiary of the loss of business from London has been New York, where companies are not subject to stamp duty. Is the Minister’s department prepared to consider lifting this handicap from the London Stock Exchange to give us more of an equal chance?

[Lord Livermore (Lab)]

Stamp taxes on shares raise more than £4 billion a year in revenue. Targeted design features such as the exemption for transfers made on growth markets also support the UK’s competitiveness. This matter is out of scope of the pensions review, but we of course keep all taxes under review.

[Baroness Kramer (LD)]

My Lords, the London Stock Exchange suffered its biggest exit in a decade in 2024, with 88 companies moving out of the market compared with 18 new listings. The drop in liquidity and trading activity began with the 2008 financial crash but accelerated significantly with Brexit. We all want a rebound, but will the Government take the necessary steps to rebuild liquidity by strengthening our relationship with the EU? A customs union would be a good first step; as one investor said to me, “Outside of the EU, why choose London over New York?”

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question, and she knows I agree with her analysis of the effects of Brexit. Firms may, of course, choose to list in other countries for a variety of reasons, and the Government appreciate that there is a perception that firms, especially tech firms, will have larger valuations in the US. We are determined to change that perception, which is why the Government are taking forward an ambitious programme of reforms to boost the attractiveness of UK markets and to support firms to start, scale, list and, importantly, stay here. As she knows, through the Government’s work on the EU reset, we will absolutely strengthen our relationship with the European Union.

[Lord Howell of Guildford (Con)]

Does the Minister know that Australian pension funds invest 80% in Australia? Thirty years ago in this country, it was 40%, and in earlier years it was 60% and 70%. It seems to me that the situation is rather more serious than just “looking at further ways”. Does the Minister agree that if we really are to attract more FDI and sovereign wealth funds and create an attractive centre for high-innovation investment in this country, we need something a little beefier than what he has indicated so far?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question, and I agree with every word he said. We have been very guided by the Australian experience. We have been clear that UK pension funds are investing a lot less in the domestic economy than overseas counterparts. Australia and Canada are two that have been spoken about. He talks about beefier measures, but the pensions review is the most fundamental review of pensions for a generation, and it is actively considering what further interventions may be needed by the Government to ensure that our reforms to the UK pension system benefit UK growth.

[Lord Evans of Rainow (Con)]

My Lords, the Minister previously referred to corporation tax. Corporation tax in this country is uncompetitive compared to corporation tax across the water in the Irish Republic, where it is about half. The Republic has succeeded in attracting a number of international tech companies to set up their businesses there, at the expense of the United Kingdom. My home town of Macclesfield lost a significant investment of £400 million by AstraZeneca, which went directly into a pharmaceutical cluster in Cork. Can the Minister ask his officials to look into why, notwithstanding our uncompetitive corporation tax, we consistently lose out to the Republic of Ireland? Its civil servants are very good at working around ours, at the expense of the United Kingdom.

[Lord Livermore (Lab)]

The noble Lord says that the corporation tax is uncompetitive, but it is where his Government put it. We have said that we will cap it at that level for the remainder of this Parliament; it is one of the most competitive in the G7. We have also said that if it looks uncompetitive at any point, we will act.

[Lord Kamall (Con)]

My Lords, can the noble Lord enlighten the House on the conversations his department has had with UK pension funds on the barriers to them investing in the UK? What sort of concerns do they express, and what are the Government doing to overcome them?

[Lord Livermore (Lab)]

As I have already set out, that is exactly what the pension review is looking at: identifying those barriers and why UK pension funds invest less in the UK than their overseas counterparts. The consultation is currently live and we will feed back on it in due course.

[Baroness Stowell of Beeston (Con)]

My Lords, can the Minister tell us why, in opposition, the Labour Party proposed that it would follow the French Tibi approach to pension investment when they got into government, but since getting in, it has decided not to mandate investment from pension funds?

[Lord Livermore (Lab)]

As I say, the pension review is considering whether further government intervention may be needed to ensure that our reforms to the UK pension system benefit UK growth. Of course, throughout this process, we will continue to work with the pensions industry to improve saver outcomes and increase investment in UK markets.

National Insurance Contributions: Hospitality Sector

Lord Livermore Excerpts

Thursday 13th February 2025 Lords Chamber

[The Earl of Effingham (Con)]

My Lords, on behalf of my noble friend Lord Altrincham and at his request, I beg leave to ask the Question standing in his name on the Order Paper.

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

My Lords, it was this Government’s duty, in the Budget last year, to fix the foundations of the economy and to repair the £22 billion black hole in the public finances. In doing so, and in recognition of the importance of small businesses, including hospitality businesses, to the economy, we protected the smallest businesses by increasing the employment allowance from £5,000 to £10,500. This means that, next year, 865,000 employers will pay no national insurance at all, and 1 million businesses will pay the same or less than they did previously.

[The Earl of Effingham (Con)]

My Lords, I thank the Minister for his Answer, but I am afraid that I have to challenge the validity of his data on what he refers to as the black hole. Please let me quote Paul Johnson, the director of the Institute for Fiscal Studies, who said that Rachel Reeves

“may be overegging the £22bn black hole”.

Most crucially, please let me quote Richard Hughes, the chair of the OBR itself, who said:

“Nothing in our review was a legitimisation of that”


£22 billion figure. I have a simple question for the Minister: when the OBR’s chair says that nothing in its review was a legitimisation of the number that has now been repeated 59 times from His Majesty’s Government’s Benches, is the chair of the OBR wrong?

[Lord Livermore (Lab)]

I am rather astonished that the noble Earl has gone on this line of inquiry, but I am absolutely delighted that he has, because, as he knows, it is one of my favourite topics; I hope that we can make it 60 times from this Dispatch Box that I talk about the £22 billion of unfunded spending that we inherited from the previous Government. The noble Earl will know that the OBR’s review was on the meeting that it had with the Treasury on 8 February 2024, when, under the legislation passed by the previous Government, the then Government were obliged to disclose all unfunded pressure against the reserve. The OBR’s review has established that, at that point, the then Government concealed £9.5 billion from the OBR. Before we dismiss £9.5 billion, that is equal to the entire capital education budget and the entire capital health budget. That is not a drop in the ocean; that is £9.5 billion. The OBR then made 10 recommendations to stop this from ever happening again, and we have accepted all of those in full. Of course, that was just in February; the previous Government then had until July. What makes anyone think that, because the previous Government thought they got away with it in February, they could stop until July? Treasury figures show that, come the spring Budget—

[A noble Lord]

Too long!

[Lord Livermore (Lab)]

Well, it was quite a long question. The noble Earl asked me to break it down specifically, so I am answering him. By the spring Budget, that number had reached £16.3 billion, and by July, it had reached £22 billion.

[Baroness Kramer (LD)]

My Lords, the changes to the employers’ NICs threshold now mean that someone working part-time for just eight hours will be subject to employers’ NICs—a huge additional cost for the whole hospitality sector, including the pubs, which the Prime Minister says he champions. Will the Government not only reverse this hike but follow the Lib Dem proposal to halve employers’ NICs on part-time workers, saving the hospitality sector and the jobs of so many people who, because of responsibilities, disabilities or other limitations, absolutely rely on part-time work?

[Lord Livermore (Lab)]

The answer to the noble Baroness’s question is no. Of course, we recognise that the retail and hospitality sector has struggled in recent years. At the Budget, we introduced a number of policies, including freezing the business rates small business multiplier. Together with the small business rates relief, this will exempt over a third of properties from business rates. On national insurance, as I have said before, there are consequences to responsibility, but there would have been greater consequences to irresponsibility, and it is not clear to me how the noble Baroness would fund her policies.

[Baroness Altmann (Non-Afl)]

My Lords, the increase in the employment allowance for small businesses is most welcome, but can I press the Minister on the exemption for public sector employers from this increase in NICs and urge him to consider extending that exemption to social care and charity companies for example, particularly as they have such a preponderance of low-paid women in their workforce?

[Lord Livermore (Lab)]

The distinction that we are following follows the long-established distinction in these matters, and it is exactly the same as the previous Government had in their health and social care levy. That is a long-standing principle and, as the noble Baroness will know, we have extended a significant amount of compensation to public sector employers.

[Lord Blunkett (Lab)]

My Lords, in the noble Earl’s question, the IFS was prayed in aid, but is it not a fact that, throughout the general election, the IFS—particularly Paul Johnson its leader—was saying all the time that there was a black hole that would have to be filled?

[Lord Livermore (Lab)]

My noble friend is quite right. We inherited a situation where there was a complete fiscal fiction. We have had a tough Budget, but we have wiped the slate clean and restored transparency and honesty to the public finances. We inherited a situation where there were no spending plans in place; we have a spending review and, for the first time, we have put certainty into public spending. We inherited a situation where capital spending was falling, and we have ensured that capital spending is rising. We are bit by bit restoring and rebuilding the foundations of this economy.

[Lord Londesborough (CB)]

My Lords, would the Minister acknowledge that SMEs employing part-time workers, particularly in hospitality and retail, are facing 20% to 50% increases in their national insurance contribution bills on April 5, and that this hardly fits with a world of flexible and part-time work, and nor will it help the Government’s mission to get Britain working?

[Lord Livermore (Lab)]

We know it is particularly important to protect the smallest companies, and that is exactly why we doubled the employment allowance, meaning that 865,000 employers will now not pay any national insurance at all and more than 1 million businesses will pay the same or less than they did previously.

[Lord Popat (Con)]

My Lords, we are a highly regulated and highly taxed country; that has a big impact on SMEs. On regulation, to appoint a lawyer can take as much as two months, to open a bank account takes three months and even to register for VAT can take weeks. This NIC increase is very much an employment tax: on every person employed, you have to pay 15% NIC. Could the Minister please tell us what they can do to support SMEs, which are the backbone of our economy, in terms of regulations?

[Lord Livermore (Lab)]

I completely agree with the noble Lord that small businesses are the backbone of the economy. Many of the regulations he speaks about were introduced by his Government over the past 14 years. We have committed not to raise corporation tax for the lifetime of this Parliament, giving certainty to business and keeping the rate at the lowest in the G7. We will introduce legislation to tackle late payments, which is a key issue that disproportionately affects small businesses. The upcoming small business strategy will set out a comprehensive plan to ensure that small businesses have access to the right skills, finance and markets to reach their full potential.

[Lord Watts (Lab)]

My Lords, is it not the case that the Opposition are trying to suggest that the national insurance increases are the result of the Labour Government? Is it not a fact that, if they had not left that deficit, we would not have had to introduce the measures that we have had to introduce recently?

[Lord Livermore (Lab)]

My noble friend is absolutely right. As I have said all along, there are consequences to responsibility, and we have always acknowledged that. But the consequences of irresponsibility—for the economy and working people—would have been far, far greater. We saw exactly that with the Liz Truss mini-Budget, which crashed the economy and saw typical mortgage payments increased by £300 a month.

[Baroness Neville-Rolfe (Con)]

My Lords, £9 billion was also the cost of giving public sector workers a huge pay rise, without specific related productivity requirements. Recent changes have shown that probably the only people in the country who do not believe that the Chancellor’s Budget has unnecessarily worsened the position of hospitality, charities, hospices and many other small businesses are the Chancellor herself and the noble Lord opposite. Will the noble Lord think again, because of the effect on growth and on these particular sectors?

[Lord Livermore (Lab)]

I notice the noble Baroness did not mention today’s growth figures, which were obviously higher than expected, but, as we have said all along, they are simply not good enough. We are doing everything we can to bring stability back to the economy. The noble Baroness has opposed every single measure that we have taken to restore stability to the economy; she has opposed every single measure that we are putting in place to rebuild the supply side of this economy; she has opposed every single measure we put in place to rebuild the public finances. It is very interesting that she says she opposes the pay rises for public sector workers, and I am sure every public sector worker will be listening closely to what she says.

Economic Growth: Public Spending

Lord Livermore Excerpts

Wednesday 12th February 2025 Lords Chamber

[Lord Leigh of Hurley]

To ask His Majesty’s Government what assessment they have made of the effect on economic growth of the Chancellor of the Exchequer’s comments before the Budget on the “public spending inheritance” and of the consequent rise in employer National Insurance contributions.

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

My Lords, it was this Government’s duty in the Budget last year to fix the foundations of the economy and repair the £22 billion black hole in the public finances. We have always been clear that there are costs to responsibility; the increase in employers’ national insurance contributions will have consequences for businesses and beyond, but the costs of irresponsibility for the economy and working people would have been far greater. We are, of course, not satisfied with the growth rate. That is why we are going further and faster on economic growth, including through the measures announced in the Chancellor’s recent growth speech.

[Lord Leigh of Hurley (Con)]

My Lords, it seems the Government have no real idea of the damage the Chancellor has caused to the economy with her negativity and the ideological jobs tax. Perhaps they will listen to the CBI, which reports that expectations in the private sector are now the lowest in over two years, and private sector activity fell again in the three months to January. The Recruitment and Employment Confederation survey points to the most widespread weakening in demand for staff since the height of Covid in August 2020. The CEO said, somewhat damningly, that government actions are acting as “brakes on progress”. When will the Minister acknowledge that the Budget for growth and stability has produced the diametrically opposite result? If the Government are ideologically driven to extract cash from the private sector, there are much more business-efficient and tax-friendly ways of so doing.

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question, but his contention seems to be that we were wrong to be honest about the challenges in the public finances, and should instead have maintained the previous Government’s cover-up. He seems to be saying that we were wrong to deal with those challenges, and should instead have maintained the £22 billion black hole in the public finances. Let me be clear: those are exactly the two ingredients—hiding from scrutiny and hiding from reality—at the heart of the Liz Truss mini-Budget, and we saw how that ended. If that is the noble Lord’s recommendation, I fundamentally disagree with him. We were right to restore honesty and transparency to the public finances, and we were right to repair them, which is why we took the difficult decisions that we did.

[Lord Watts (Lab)]

My Lords, does the Minister agree that the last Tory Government left £22 billion to be paid by somebody? We heard no suggestion just now of how you bridge the gap between what the country can afford and that £22 billion.

[Lord Livermore (Lab)]

I completely agree with my noble friend. He is absolutely right that the previous Government left a £22 billion black hole; they had no idea how to fund that. We have still heard absolutely no alternative put forward by the Conservative Party: no alternative for dealing with the challenges that we face, no alternative for restoring economic stability and therefore no plan for driving economic growth.

[Baroness Kramer (LD)]

My Lords, does the Minister accept that growth will be very limited unless we fix the NHS, but that the NHS cannot be fixed until we significantly strengthen and expand both community health and social care services? So why are the Government levying increased employers’ NICs on GPs, dentists, pharmacies, hospices and care services so that they are now planning significant cuts? How does this make any sense? By the way, our proposals were costed and funded.

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. With the greatest respect, she wants the investment in the National Health Service but is opposing the national insurance contributions increases that fund this increased investment. I am afraid that you cannot have one without the other.

[Lord Kinnock (Lab)]

My Lords, does my noble friend agree that it is part of democracy that there is a universal call for politicians to tell the truth but that, when they do, they attract criticism, like that from the noble Lord opposite? Last year our right honourable friend the Chancellor told the truth about what she described as the black hole, and which I described as: “Nothing bloody worked”. Is it not a fact that to repair the damage done in 14 years will take time and patience? The Government are showing the right way with fresh capital investment and a total commitment to stimulating growth in the private and public sectors of our economy.

[Lord Livermore (Lab)]

I completely agree with my noble friend, and I am grateful to him for what he says. It is absolutely no approach to say that we should continue a previous Government’s cover-up and not be honest about the difficulties in the public finances. It is also completely wrong to say that we were wrong to deal with those challenges and should instead have maintained what my noble friend describes as a £22 billion black hole in the public finances. We were absolutely right to do what we did. We know that there are costs to responsibility, but the cost to irresponsibility would have been far greater—we saw that in the Liz Truss mini-Budget. Repeating the failures of the last 14 years is exactly not what the British economy needs.

[Lord Londesborough (CB)]

My Lords, taking together the impact of national insurance contribution increases and the 6.7% hike in the national minimum wage, can the Minister explain how raising the cost of employment by an average of £2,400 per employee is consistent with boosting economic growth?

[Lord Livermore (Lab)]

I am sorry that the noble Lord is not able to support the increases in the national minimum wage; that is a shame to hear. I do not know whether he was able to read the monetary policy report that was published alongside the growth forecast last week, but the Bank of England said that the combined effects of the measures in the Autumn Budget are expected to boost the level of GDP by around 0.75%.

[Lord Clarke of Nottingham (Con)]

The biggest mistake the Government made was during the general election, which they were obviously going to win, when they promised not to raise the basic taxes—income tax, VAT, national insurance for employees and so on—which are the normal toolbox of a Chancellor, so that when they inherited a fiscal crisis, they raised quite the worst possible tax on employers and employees. At the same time, they borrowed billions of pounds more, saying it was not more spending but investment. After this disaster, will the Minister now agree that the new Government have made a financial crisis even worse than it was when they were elected? Will they turn the March Statement into a mini-Budget to try to begin to repair the damage they have done?

[Lord Livermore (Lab)]

With the greatest respect to the noble Lord, I completely disagree with what he says. His contention is that we should have taxed working people after a cost of living crisis, and after the previous Government froze income tax thresholds and raised taxes on working people by £30 billion. I completely disagree; if that is his contention, I think he is wrong. He also says we were wrong to increase investment in the economy. The IMF has said that the lack of public investment in the economy was one of the major constraints to economic growth, and we have rectified that—so, on that point too, I think he is wrong.

[The Lord Bishop of St Albans]

My Lords, there is great concern in the charitable sector about these increases. Can the Minister tell us whether His Majesty’s Government are monitoring the effect on the charitable sector?

[Lord Livermore (Lab)]

We of course monitor the effect of all our policies on all sectors of the economy. We have increased the amount of money going to charities, and we will stand by that increased investment.

[Baroness Neville-Rolfe (Con)]

My Lords, the fact is that people across the UK are deeply concerned about the rise in employers’ NICs, as we will discuss on Report on the NICs Bill on 25 February. This is the wrong tax raid, and the OBR has reported that next year it will raise £10 billion less than the Treasury forecasts. Last week we heard, as we feared, the Bank of England halving its growth forecast for the UK. Will the Minister accept that the threat of the Chancellor’s jobs tax has crashed business confidence and the economy?

[Lord Livermore (Lab)]

No, I will not. The noble Baroness says it was the wrong tax rise; she has said that several times. She has never said what the right tax rise is, so I am not sure how she plans to fill the £22 billion black hole. She talks about growth forecasts; I notice that she did not mention that the Bank of England upgraded its growth forecast for the next year and the year after. She did not mention that the IMF now forecasts us to be the fastest-growing major European economy. She did not mention that the UK is now the second most attractive country in the world for inward investment—the first time we have been so for 28 years. We have still heard no alternative at all put forward by the Conservative Party: no alternative for dealing with the challenges that we face, no alternative for restoring economic stability and therefore no plan for driving economic growth.

[Lord Brooke of Alverthorpe (Lab)]

My Lords, does the Minister agree that attracting capital investment is a way forward, in which we can get growth and have some optimism instead of all the pessimism that we keep hearing? Will he review the possibility that we should explore and bring in more private-public partnerships that will bring capital in from across the world, maybe even America? We might have PPPs attached to the NHS and find ways to do a trade deal with the Americans.

[Lord Livermore (Lab)]

I completely agree with what my noble friend says about business sentiment—increasing positive sentiment in the economy—and I agree with him about increasing investment in the economy. It would be nice to hear a bit more positive sentiment from the party opposite. I will read what Rain Newton-Smith from the CBI said in the aftermath of the Chancellor’s growth speech last week: businesses will welcome the Chancellor

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

showing that we are serious about growth and prepared to take the tough decisions that are necessary.

Mortgage Prisoners Inquiry Bill [HL]

Lord Livermore Excerpts

2nd reading
Friday 7th February 2025 Lords Chamber

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

My Lords, it is a pleasure to speak in this debate. I begin by congratulating the noble Lord, Lord Sharkey, on his Bill and on his opening speech today. I thank him for bringing this issue to the attention of your Lordships’ House, not only through this Bill but through his campaigning over recent years.

The Government recognise the seriousness of the issue raised by this Bill—the challenge facing borrowers who have been unable to switch to a new mortgage deal despite keeping up to date with their repayments. While they constitute a small proportion of mortgage borrowers, for those affected the impact has been all too real, and I commend the noble Lord, Lord Sharkey, for his work to highlight their situation.

The Bill has one central provision; to establish a public inquiry into the events surrounding the creation of the group of borrowers commonly referred to as “mortgage prisoners”. The Bill also contains terms of reference for that inquiry. I will seek to address three key points. First, the origins of this issue, and why the Government’s assessment is that the right processes were followed in relation to this group following the financial crisis. Secondly, the case for a public inquiry and why the Government do not believe that it represents the right approach. Thirdly, support to those affected and the action the Government are now taking.

The vast majority of the borrowers we are discussing today took out mortgages under less stringent lending conditions prior to the financial crisis. Many of these mortgages were held with either Northern Rock or Bradford & Bingley, which were subsequently nationalised by the Government to protect financial stability. In 2010, they were transferred to a public body known as UK Asset Resolution, which was unable to offer new deals to borrowers because of state aid rules. Between 2014 and 2021, UK Asset Resolution sold these mortgages back to the private sector. Many were sold to so-called inactive lenders that did not offer new mortgage deals, leaving some borrowers paying costlier standard variable rate tariffs. Those borrowers were, and in some cases still are, unable to switch to another lender because they do not meet modern lending criteria. The terms of reference for the inquiry proposed by the Bill seek to investigate the process by which these mortgages were sold back to the private sector.

The Government recognise the challenges faced by these borrowers and the very real impact this process has had on them. However, our assessment is that the correct protections were put in place at the time and that all relevant Financial Conduct Authority rules were followed.

Specifically, bidders were prevented from changing a customer’s existing terms and conditions. Rules ensured that all mortgages were either administered by a Financial Conduct Authority regulated entity or made in accordance with Financial Conduct Authority regulations. Further protections were included with each subsequent sale, some of which followed recommendations from Parliament.

All types of lenders, including “active” lenders who offered new loans, were invited to take part in this process, but interest from active lenders was very limited and no viable bids were put forward in any of the sales. This likely reflects the fact that most of the loans involved were outside of most active lenders’ risk appetite following the financial crisis. The Government have studied this issue carefully but we remain of the view that no further action should have been taken at the time to encourage only active lenders to take part, particularly given the importance of delivering value for money to the taxpayer.

The Bill before your Lordships’ House proposes a statutory public inquiry to explore these issues in greater depth. The noble Lord, Lord Sharkey, has spoken powerfully about the situation faced by affected borrowers and his desire to fully understand the process which resulted in their inability to obtain a new mortgage deal. The Government understand and respect this argument. However, we believe the scrutiny provided to date has produced the necessary information in relation to these events. This includes the two reports published by the National Audit Office covering various aspects of the sales process and, separately, a Public Accounts Committee report into one of the biggest asset sales. The previous Government also provided relevant disclosures to Parliament on the completion of each sale.

The Government agree with all those who wish to see these issues fully and transparently investigated. We will continue to work with regulators and industry to ensure that the issues and specific proposals raised by the report mentioned by the noble Lord, Lord Sharkey, are properly considered. However, given the volume of information already in the public domain, we do not believe a further inquiry would provide any significantly new information or additional support to those affected.

Finally, on the support currently available to borrowers, there are protections in place for vulnerable mortgage borrowers. Financial Conduct Authority rules require firms to engage individually with their customers to provide tailored support. Lenders have been allowed to waive certain regulatory requirements when assessing whether a new mortgage deal is affordable for borrowers who are up to date with their repayments. This applies to the cohort of borrowers we have been focusing on. Mortgage lenders, including inactive firms, are also now subject to the consumer duty, which ensures that firms prioritise fair treatment and good outcomes for their customers.

I fully understand that some noble Lords wish us to go further. I assure them that we will continue to consider this issue closely by listening to those borrowers affected and engaging with regulators, the industry and other key stakeholders, including the noble Lord, Lord Sharkey, about the processes currently in place.

The Government recognise the impact felt by this group of mortgage borrowers. Their concerns have been ably highlighted by the noble Lord in this debate, as well as by other noble Lords from across the House. The Government will continue to listen carefully to their concerns and consult with others who have an interest in this issue, not least those households directly affected.

However, we are unable to support the Bill before your Lordships’ House today. Our assessment is that the correct process was followed when these mortgages were sold back to the private sector in the years after the financial crisis. We believe that the necessary information has now been put in the public domain, both as evidence submitted to Parliament by the previous Government and through other external analyses, including from the National Audit Office. Most importantly for the households affected, we are confident that significant protections are in place to protect vulnerable mortgage borrowers.

Although I appreciate this will not satisfy the noble Lord’s demands, I hope he will continue to work with the Government, as he has done throughout his campaign on this issue.

[Baroness Bennett of Manor Castle (GP)]

The noble Lord did not refer to my questions about the UK Financial Ombudsman Service. I understand that this is a new situation. Perhaps he could write to me about that.

[Lord Livermore (Lab)]

I will happily do so.

[Lord Sharkey (LD)]

My Lords, I thank everybody who has spoken so very powerfully about the plight of the mortgage prisoners. It is important to make one point about the mortgage prisoners: they are like everybody else in every other respect. They are not a delinquent or feckless part of society. They are not reckless. What befell them could have happened to a holder of a mortgage from any company that suffered the kind of damage that Northern Rock did during the crisis. No special characteristics of the mortgage prisoners somehow make them worthy of less attention or of getting worse deals.

I also note that the noble Lord, Lord Altrincham, did not entirely rule out a cap on SVRs. That is encouraging and perhaps the precursor to a longer situation.

I also acknowledge the Minister’s invitation to remain involved with discussions about the plight of mortgage prisoners. This is an ongoing, terrible situation, and I do not think anybody disagrees with that. Before I get to the real question that arises from this, I should ask again when we can expect a reply to Martin Lewis’s letter to the Chancellor. I am prepared to give way if the noble Lord will tell me immediately.

[Lord Livermore (Lab)]

As I tried to indicate in my remarks, we will continue to engage and look at that report, but I cannot guarantee a reply on any particular timescale.

[Lord Sharkey (LD)]

I close by reminding everybody that this is a current situation. Lots of people are suffering very badly indeed because of it, and it is not getting any better. So I close with Lenin’s favourite question: what is to be done? I beg to move.

Crown Estate (Wales) Bill [HL]

Lord Livermore Excerpts

2nd reading
Friday 7th February 2025 Lords Chamber

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

My Lords, is a pleasure to speak in this debate today. I congratulate the noble Lord, Lord Wigley, on this Bill and on his opening speech. While we may disagree on the substance of this issue, I enjoyed our debates on this topic during the passage of the Crown Estate Bill, and it was a pleasure to hear him put the case so powerfully again today.

I will begin by setting out how the Crown Estate currently operates and the case for retaining the current model, which the Government believe provides the best deal for Wales and for the wider United Kingdom. As noble Lords will be aware, the Crown Estate was established with the aim of creating lasting and shared prosperity for the whole of the United Kingdom. Governed by the Crown Estate Act 1961, it holds a diverse portfolio of buildings, shoreline, seabed, forestry, agriculture and common land. It has shown itself to be a trusted and successful independent commercial business, with a proven track record of effective manage-ment. Each year, the Crown Estate is required to pay its profits into the UK Consolidated Fund, which has totalled more than £4 billion over the past decade. This money is used to fund vital public services across the UK, including in Wales in reserved areas. When the UK Consolidated Fund is spent in England—in areas which are devolved to Wales—the Welsh Government also receive funding through the operation of the Barnett formula.

The proposed powers in the Crown Estate Bill, which is currently progressing through the other place, combined with the Crown Estate’s existing scale, expertise and track record, mean that it is uniquely placed to drive forward important growth-generating projects in Wales. This is particularly true in relation to offshore renewable energy and other emerging offshore technologies.

Over the last 20 years, the Crown Estate has helped to deliver a number of important renewable energy projects and to position Wales at the vanguard of clean energy technology and growth. The benefits of these projects are being felt in communities and supply chains right across Wales. For example, the Crown Estate has invested £1.2 million in Welsh tidal stream energy through the Morlais demonstration zone in Anglesey. Last year, the Crown Estate launched offshore wind leasing round 5 for floating offshore wind in the Celtic Sea, which is expected to deliver significant jobs and supply chain benefits locally. The Crown Estate works closely with the Welsh Government and Natural Resources Wales to develop these projects and ensure that resources are sustainably managed for the long term.

As noble Lords will remember, the Government were pleased to support the successful amendment of the noble Lord, Lord Hain, moved by my noble friend Lord Murphy, to the Crown Estate Bill, which will see the appointment of two Crown Estate board commissioners for Wales and Northern Ireland respectively. This is a positive step that will ensure the Crown Estate’s board continues to work in the best interests of the whole of the UK. Importantly, the devolved Governments will reserve the right to be consulted over these appointments. I am grateful to all noble Lords across the House, including some who have spoken in today’s debate, for their work to make this change possible.

Let me turn to the concerns the Government have with the Bill we are discussing today. Devolving the Crown Estate to Wales at this time risks significant fragmentation of the energy market and jeopardising the existing pipeline of offshore wind development in the Celtic Sea planned into the 2030s. This in turn would undermine international investor confidence and significantly delay progress towards net zero, to the detriment of the whole of the UK.

Devolution would likely require the creation of a new entity to take on the management of the Crown Estate in Wales. This entity would not benefit from the Crown Estate’s substantial capability and capital and systems abilities, nor from the fact that the Crown Estate’s marine investments are currently made on a portfolio-wide basis across England and Wales. Devolving the Crown Estate to Wales at this time would disrupt these existing investments, as they would need to be restructured to accommodate a Welsh-specific entity.

As the noble Baroness, Lady Humphreys, quoted from our debates on the Crown Estate Bill, devolution would likely delay UK-wide grid connectivity reform, which is crucial for meeting our growth targets, because it would make it harder to co-ordinate energy generation and infrastructure across England and Wales. The Government are driving forward grid connectivity reform. Introducing a new entity, which would have control of assets only within Wales, into this complex operating environment, where partnerships have already been formed, would not make commercial sense. A devolved entity would be starting from scratch, midway through a multimillion-pound commercial tendering process for a pipeline of Welsh projects, at a time when the Crown Estate is undertaking critical investment in the UK’s path towards net zero.

Some noble Lords have argued today that Wales would benefit financially from devolution of the Crown Estate. Let me set out why the Government believe this not to be the case. As I have already noted, Wales benefits from the UK Government’s spending derived from the Crown Estate. It receives Barnett funding when Crown Estate funding is spent in England in areas which are devolved in Wales. As the noble and learned Lord, Lord Thomas, quoted from our debates on the recent Crown Estate Bill, if Wales were to benefit only from the income from the Crown Estate generated in Wales, it would likely be zero or negligible for several decades to come. This is because Welsh assets are relatively new and will take time to mature, likely to be in the order of 10 to 15 years. Previous reports did not include costs and, as I understand it, many of the figures quoted today are reports of profits from activities without taking into account costs. As I have said before during debates on the Crown Estate Bill, disaggregating activities requires a high degree of subjective judgment.

My noble friend Lord Murphy asked about funding for the Wales Government in the event of devolution of the Crown Estate. Even if devolution could be achieved without risking the revenues for Wales that the Crown Estate generates, this would not automatically lead to an increase in the funding available to the Wales Government. As agreed in the Scottish Government’s fiscal framework review, which concluded in August 2023, the Scottish Government receive a block grant reduction to reflect the profits they retain from Crown Estate Scotland following its devolution.

The noble Lord, Lord Wigley, and my noble friend Lord Murphy raised the Treasury Ministers’ discussions with the Welsh Government about the Crown Estate. In November, I met the Welsh Government’s Cabinet Secretary for Finance and Welsh Language. Our discussion covered a range of issues, including the Crown Estate. I reiterated the UK Government’s position that we do not believe devolution of the Crown Estate is in the best interests of Wales or the wider UK. More widely, the UK Government maintain regular ministerial and official-level engagement with the Welsh Government across a range of different policy areas.

The Crown Estate’s existing scale, expertise and track record mean it is uniquely placed to drive forward growth and investment in Wales. Wales continues to benefit from the funding generated by the Crown Estate, both through the UK Government’s spending in reserved areas in Wales and through funding for the Welsh Government via the Barnett formula. Devolving the Crown Estate at this time would significantly fragment the UK’s energy market, jeopardise the existing pipeline of offshore wind development in the Celtic Sea, undermine international investor confidence in the UK and significantly delay our progress towards net zero. It is for these reasons that the Government cannot support the Bill before your Lordships’ House. The Government will of course continue to discuss these issues—

[Lord Thomas of Cwmgiedd (CB)]

Before the Minister sits down, I want to press him on one point: the proportion of income classified in the accounts as derived in the marine sector from option fee and other income, some of which is straight-lined into the Consolidated Fund. Can he give the figure for Wales? As we have discussed, he was able to give it at an earlier point; it must be possible, and I would be grateful if he would write to the House and give us that figure. It is of huge symbolic importance to the people of Wales, and I do not want this Government to suffer 15 months hence.

[Lord Livermore (Lab)]

I am very grateful to the noble and learned Lord for his concern for the Government. I am told it is impossible to disaggregate the figures in the way that he has asked. I will double check that and write to him if I can, but I am told it is not possible to do that disaggregation.

[Lord Thomas of Cwmgiedd (CB)]

Forgive me for a moment, but I am quite used to arguing with accountants and I would be delighted to meet the Crown Estate to try to understand what the problem is. I believe it is accountancy gobbledygook that we cannot do it. Of course there will be an element of subjective judgment, but it can be done. If it cannot be done, please can I meet the accountants at the Crown Estate?

[Lord Livermore (Lab)]

I will happily suggest that to the accountants at the Crown Estate.

The Government will continue to discuss these issues with the First Minister and the Welsh Government, to ensure that Wales sees the full benefits of the Crown Estate.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Lord Livermore Excerpts

Committee stage
Thursday 6th February 2025 Grand Committee

Perhaps the Minister could tell us to what extent additional funds would be used to offset the rise in employers’ NICs in the FE sector. Holding the FE and HE sectors’ harness from the NIC rise is urgent. University finances are already very fragile, with a few obvious exceptions. I pointed out on the first day of Committee that nearly three-quarters of our universities will be running a deficit by the end of the year. Some 40% already have less than a month’s cash in the bank, and 10,000 jobs are expected to be lost in this academic year. Since we discussed this, only a few days ago, three Russell Group universities—Durham, Newcastle and Cardiff—have joined the long list of HEIs making job cuts and taking other cost-saving measures. The situation is perilous and needs urgent attention. The Government should be planning to safeguard and promote our world-leading university sector, not imposing more costs on it.

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

My Lords, the Government recognise the great value of UK higher education in creating opportunity and social mobility, as an engine for growth in our economy and in supporting local communities. The Budget provided £6.1 billion of support for core research and confirmed the Government’s commitment to the lifelong learning entitlement, a major reform to student finance that will expand access to high-quality, flexible education and training for adults throughout their working lives.

The Secretary of State for Education has also confirmed that maximum fees will rise in the academic year 2025-26 for the first time since 2017, from £9,250 to £9,535 for a standard full-time undergraduate course. This was a difficult decision that demonstrates that the Government are serious about the need to put our world-leading higher education sector on a secure footing. The noble Lord, Lord Sharkey, asked for some specific figures in terms of the additional funding; I will happily write to him with those.

This amendment would, however, introduce new pressures that would have to be met by either higher borrowing, lower spending or alternative revenue-raising measures. In addition, creating new thresholds or rates based on what sector a business is in would introduce distortion and additional complexity into the tax system. Likewise, delaying commencement of this Bill would reduce the revenue generated from it and, as with the previous amendment, would therefore require either higher borrowing, lower public spending or alternative revenue-raising measures.

The Government carefully consider the impacts of all policies, of course, including the changes to employer national insurance. As I have said in previous days of this Committee, an assessment of the policy has been published by HMRC in its tax information and impact note. Further, the OBR’s economic and fiscal outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions. The Government and the OBR have therefore already set out the impacts of the policy change. This approach is in line with previous changes to national insurance and previous changes to taxation, and the Government do not intend to provide further impact assessments.

In the light of the points I have made, I respectfully ask noble Lords to withdraw or not press their amendments.

[Lord Ahmad of Wimbledon (Con)]

My Lords, before he sits down, would the Minister care to comment on the impact—indeed, the double whammy—of taxation for the independent school sector? After assessing the imposition of that, it is now going to be impacted by national insurance too. Can he also comment on the impact on the teachers in terms of pension provision?

[Lord Livermore (Lab)]

I apologise—I did not catch the start of the noble Lord’s question. I am not quite sure what the question is.

[Lord Ahmad of Wimbledon (Con)]

The Minister did not comment on the impact on the independent schools sector, which is already reeling from the impact of the VAT that has been imposed on it and the assessments that have been made, including independent schools talking about pension provisions for teachers.

[Lord Livermore (Lab)]

I am not sure that I would share that characterisation from the noble Lord of the VAT policy. We have published an impact assessment for both that policy and this policy. We have no intention of publishing further impact assessments.

[Lord Altrincham (Con)]

I thank noble Lords who have spoken on this group. I thank my noble friend Lady Lawlor for reminding us that education is a public good and for her little history lesson on the delicacy of our educational settlement, not just in the 19th century but going all the way back to Queen Elizabeth I and before; it was most helpful. I also thank the noble Lord, Lord Sharkey, who reminded us that, for this section of the Bill and more broadly, the consequence of these tax rises is policy-driven unemployment. We already know that jobs are going to come out. The noble Lord pointed out that 10,000 jobs may come out of higher education; with 10,000 here or there, the numbers could build up quite quickly.

It is in that context that we ask the Government to approach this area with great caution. The Minister has responded that they have looked very carefully and are aware of the issues, and they are, in their judgment, proceeding with great care. In the light of the Minister’s comments, I thank him and beg leave to withdraw.

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[Baroness Kramer (LD)]

My Lords, I am speaking here as a winding speaker. The Committee will know that, on Monday, we discussed this whole sector in great detail, and the noble Lord, Lord Leigh, has echoed the numbers and essentially the substance of that first discussion.

We on these Benches take a very different conclusion about an impact assessment with a potential delay attached and £10,000 per institution. The noble Lord, Lord Leigh, gave an example of one of his particular interests facing a £1.1 million additional charge, so I do not think that £10,000 is going to make a ha’porth of difference to it. We think that the proposals are completely inadequate. We have always said that we need the exclusion of this whole sector from the changes in the NICs levies, and on that we stand our ground.

I shall say again to the Minister, who often replies that the Government have given an extra £600 million to this sector, that the noble Lord, Lord Leigh, and I have exactly the same figures, and the cost of the NICs Bill alone for this sector, according to the Nuffield Trust, is £900 million. So we are already £300 million behind, and that £600 million was meant to fill a whole lot of other cost gaps that continue for this sector, which is so crucial to our society.

I was interested to listen to the Conservatives on this issue. I was looking it up today: migrant workers make up 32% of care workers in England. Those figures are from November 2024. As I understand the policy announcement today, I am sure that the Conservative Party thinks that these are wonderful people to be able to look after our elderly and empty the bedpans, but they will be throwing them out of the country as soon as they have finished work, because they will not be permitted to become British citizens. So to me there is some interesting contradiction in this respect for the individuals and the assessment that they are not fit to be British. The noble Lord, Lord Leigh, sees no conflict in that, but I suspect that many others will see it, and I am sure that my party does: when we tell these people that they are valued and respected, we really mean it.

Once again, we do not think that these amendments are adequate to the need, and we stand our ground on the amendments that we first moved—but then, of course, under Committee rules, withdrew—on Monday.

[Lord Livermore (Lab)]

My Lords, I shall address the amendment tabled by the noble Baroness, Lady Neville-Rolfe, and the noble Lords, Lord Altrincham and Lord Leigh of Hurley, which seek to increase the value of the employment allowance for those providing social care, and the amendment tabled by the noble Lord, Lord Leigh of Hurley, which seeks to require the laying in Parliament of an impact assessment on social care providers 12 months after commencement and every 12 months subsequently.

As a result of the measures in this Bill, combined with wider Budget measures, the Government have provided a real-terms increase in core local government spending power of 3.5% in 2025-26, including £880 million of new grant funding provided to social care. This funding can be used to address the range of pressures facing the adult social care sector. Increasing the employment allowance for specific sectors would introduce new pressures that would require either higher borrowing, lower spending or alternative revenue-raising measures. It would also add complexity to the tax system.

The Government of course carefully consider the impacts of all policies, including the changes to employer national insurance. As I have said previously, an assessment of the policy has been published by HMRC in its tax information and impact note. Further, the OBR’s economic and fiscal outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions. The Government and the OBR have therefore already set out the impacts of the policy change. This approach is in line with previous changes to national insurance and taxation, and the Government do not intend to provide further impact assessments. In light of those points, I respectfully ask noble Lords not to press their amendments.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the Minister for his response. I hope he will take away noble Lords’ concerns about the social care sector, because there seems to be agreement that we have a problem. I thank my noble friend Lord Leigh for his careful analysis and his examples of individual carers from Jewish Care, the Voluntary Organisations Disability Group and Age UK, whose work in Wales and Scotland he also mentioned.

There is a strong case for looking at this area again. The noble Baroness, Lady Kramer, may differ on how we should do it, but there is agreement on the problem. The Minister confirmed the figure that I used at Second Reading, explaining that the cost of NICs would outweigh the £800 million for social care—which we were very glad to see in the Budget. That is not a great net position.

The proposal for an annual assessment of the impact on social care is not a bureaucratic requirement, but a vital mechanism of accountability and continuous improvement. By compelling the Chancellor and the Secretary of State to publish and lay before Parliament an annual report detailing the impact of these provisions, we can ensure that there is an ongoing dialogue between policymakers and those on the front lines of care delivery.

It serves several key purposes. First, it provides transparency, which I think the House is increasingly interested in, and allows Parliament and, by extension, the public to understand how policy changes are affecting social care providers in real time. This level of openness is essential to maintaining public trust and ensuring that government policies are working as intended. Secondly, it creates a framework for evidence-based policy-making. By regularly reviewing the impact of the increased employment allowance, the Government can adjust their approach to ensure that their measures are effective. Finally, importantly, it signals to social care providers that the Government are committed to monitoring and supporting their performance through not just lip service but concrete measures. The challenges facing the social care sector are not only multifaceted but serious, and demographic changes mean that the demand for social care services is set to rise dramatically in the years ahead.

An annual impact assessment would ensure that we remain vigilant. It would provide a structured opportunity to evaluate the effectiveness of the allowance increase and other changes, to identify unintended consequences and to take corrective action if necessary. I have spoken at length but, in the circumstances, I beg leave to withdraw my amendment for today.

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[Lord Altrincham (Con)]

I thank my noble friend Lady Noakes for her amendments in this group; for her extremely well-made case as to how we might look to soften the blow for public services and the private sector; and for drawing attention to so many areas on the edge of public services that will be affected, such as dentists and childcare jobs. This is where the impact will be widely felt across the country.

On Amendments 54 and 55, the Government have stated that the purpose of this Bill is to repair the public finances. A key aspect of this plan is to ensure that public authorities can continue to operate efficiently without being overly burdened by rising employment costs. By increasing the employment allowance for public authorities to £20,000, we would reduce the financial pressure on them to provide essential services. Increasing the employment allowance specifically helps offset rising staffing costs, which are expected only to grow as the Government invest more in public services.

As the Government focus on boosting public sector capacity to meet future challenges in depopulation, the higher allowance would support that goal. It would provide greater flexibility to focus on improving service quality and enhancing delivery without worrying about escalating employment costs. The proposal aligns with the Government’s goal of unlocking economic growth. The ability to support and maintain a strong and capable public sector workforce means that these services can continue to contribute positively to the wider economy. This tax increase will inevitably drive policy-driven unemployment, which we have talked about, as already evidenced in the recent jobs numbers.

I understand that the Minister believes that the Government had no flexibility when they produced their Budget and made these tax choices. However, as the months have passed, the economic situation has changed and there has been quite a bit of wage inflation. As such, these proposals to increase the employment allowance could be cost-neutral to the amount of money raised, and should certainly not be immediately dismissed as unfunded policy decisions.

[Lord Livermore (Lab)]

My Lords, the amendments tabled by the noble Baronesses, Lady Neville-Rolfe and Lady Noakes, seek to expand the eligibility of the employment allowance to domestic workers and the public sector, and to increase the value of the employment allowance for organisations carrying out functions of a public nature.

As we discussed on the previous day in Committee, the employment allowance was introduced in 2014 by the previous Government. Currently, eligible small businesses with employer national insurance bills of £100,000 or less receive £5,000 of employment allowance, which means that they can deduct £5,000 from the total employer national insurance that they pay on their employees’ wages. This Bill increases that employment allowance to £10,500 from April 2025. It also seeks to expand the employment allowance to all eligible employers by removing the £100,000 eligibility threshold, which will simplify and reform employer national insurance so that all eligible employers now benefit. All of the remaining eligibility criteria remain unchanged.

As has been the case since the employment allowance was introduced in 2014, organisations operating wholly or mainly in the public sector are not eligible to claim it. As we discussed during the previous session in Committee, eligibility for the employment allowance is not determined by sector but depends on the make-up of an individual business’s work. The HMRC guidance explains that this is based on whether an organisation is doing 50% or more of its work in the public sector.

The noble Baroness, Lady Noakes, asked for some specific figures in relation to that. The number of those claiming the employment allowance varies from year to year because the amount of work done in the public sector varies from year to year. It is for individual businesses to determine the amount of work that they do in the public sector, therefore data is not collected in the way the noble Baroness asks for.

The noble Baroness also asked for specific additional assessments. As I have said many times before—she is no doubt sick of me saying so—the Government have provided the impact assessments that we intend to provide and do not intend to provide any further such assessments. I am not aware of any plans for a specific information campaign, in the way that she asks for, but I am very happy to take her suggestion back and discuss it with colleagues.

[Baroness Kramer (LD)]

I thought that the Minister was about to sit down, so I apologise if I moved too soon. I would just like to clarify something. In the situation described by the noble Baroness, Lady Noakes, where somebody employs a nanny, a carer or whatever else, I have always worked on the assumption that the employment allowance at £10,900 would, in effect, negate any employer’s national insurance on that individual. If that is not correct, it would be helpful for me to understand that. I thought that that was how the micro-business protection worked; if I have got it wrong, please let me know.

[Lord Livermore (Lab)]

I think that I have an answer for the noble Baroness but I would like to double-check it so, if she does not mind, I will write to her to be absolutely certain on this point.

[Baroness Kramer (LD)]

Thank you.

[Lord Livermore (Lab)]

In conclusion, the Government have provided £4.7 billion of funding to support public sector employers with increased employer national insurance. Expanding eligibility for, or increasing the value of, the allowance would come with additional costs and would reduce the revenue generated by this Bill; this would then require either higher borrowing, lower spending or alternative revenue-raising measures. In the light of these points, I respectfully ask noble Lords to withdraw or not press their amendments.

[Baroness Noakes (Con)]

I am not going to thank the Minister for that reply because he has given us no more information and no justification for why employers who employ people for domestic or household care should not get the employment allowance. He has given no explanation as to why private sector public authorities do not get an employment allowance, other than it was put in the 2014 Act. Both these categories are significantly affected by the other contents of this Bill, so I had hoped that the Minister would respond with some rationale for why the Government think it is right that these categories of employer should not qualify for the employment allowance.

This is rather typical of the way in which the Minister has conducted the whole of this Committee. Since this is the last time we will speak in it, I would like to record that it has been more than disappointing. We normally expect Ministers to give us, or offer to provide, information. We do not normally expect Ministers simply to repeat, parrot-like, three or four set lines that are shuffled for whatever the particular amendment is, but that is what we have received. We are in Committee, so I will of course beg leave to withdraw my amendment, but I would like to record that this is no way to run a Committee.

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[Lord Livermore (Lab)]

My Lords, I will first address the amendment seeking to require the Government to review the impact of the measures in the Bill on people with protected characteristics. The Government carefully consider the impact of all decisions on those sharing protected characteristics, in line with our legal obligations and our commitment to greater fairness and opportunity. The Government are committed to meeting their obligation to the public sector equality duty, and Ministers are confident that the Government have met the obligation for the changes in this Bill.

Turning to the amendment requiring a review of the impact of the Bill on the environment and green jobs, as I have said previously, an assessment of the policy has been published by HMRC in their tax information and impact note. Further, the OBR’s Economic and Fiscal Outlook sets out the expected macroeconomic impact of the changes to employer national insurance contributions. The Government and the OBR have therefore already set out the impacts of the policy change. This approach is in line with the previous changes to national insurance and previous changes to taxation, and the Government do not intend to provide further impact assessments. In light of these points, I respectfully ask the noble Baroness to withdraw her amendments.

[Baroness Bennett of Manor Castle (GP)]

My Lords, I have some sympathy with the comments made earlier about the quality of debate and response that we have received from the Government in this Committee. I must express agreement with those statements. I thank the noble Baroness, Lady Neville-Rolfe, for responding here. I point out that these amendments very much reflect her Amendment 64, which concerns the impact on economic growth, so I am not sure that the arguments about increased bureaucracy and resource cost will apply equally to her amendments.

None the less, let me pick up the points made by the Minister. He said, in referring to the effect on people with protected characteristics, that the Government are considering this carefully. I invite this Committee to consider some of the reports that have come out this week on the lack of trust—among young people in particular—in our Government and our so-called democracy. If we are to win back trust and have people feel that the Government are acting for the common good, not for a few special interests, the Government will need to show their workings. If the Government do indeed care, they need to demonstrate that they care, which is the kind of thing that this review would do.

On Amendment 69, I say again in response to the noble Baroness, Lady Neville-Rolfe, that the economy is a complete subset of the environment. There are no jobs on a dead planet. There is not much point in assessing economic growth if there is nothing living for it to grow in. We are in Committee so I beg leave to withdraw my amendment, but I will be back.

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[Baroness Neville-Rolfe (Con)]

My Lords, I support Amendment 70. I am delighted that my noble friend Lord Fuller has joined the Committee today and spoken with such passion and eloquence, and I support his proposal for an impact assessment of the costs involved with this Act on local authorities. It was also good to hear from my noble friend Lord Porter; as a former civil servant many years ago, I was amused by his comment about policies hanging around in a drawer. I particularly remember that when I used to go to the Council in Brussels; there were a lot of proposals that used to hang around for a long time.

I agree that the jobs tax is the wrong approach, and I agree with my noble friend Lord Jackson that there are some tricky issues in parts of local government. I have to say that I have often been an admirer of local government, particularly councils, over a long career.

This week the Government confirmed £502 million of funding to help local authorities to cover the increased costs of directly employed staff due to the changes in the national insurance contributions. Ministers have also allocated £13 million separately to mayoral combined authorities, with some allocations to follow in due course. As we have heard, local authorities will need additional support in the face of the jobs tax. I welcome the fact that Ministers have brought this support forward, but we have heard from my noble friend Lord Fuller that that the allocation is totally inadequate. He called it a £1.226 billion headache, while my noble friend Lord Jamieson, also very experienced in this area, explained that it is just not possible to absorb these sorts of costs, for example, by reducing prices to suppliers. Services will inevitably have to be cut.

I shall highlight some examples where we believe the allocations will fall short. Hampshire County Council is facing a £10 million increase in costs due to the increase in NICs but the allocation it has received from the Government is just £7 million, leaving a £3 million shortfall, which I suspect is quite typical. My noble friend Lord Jackson talked of the likely demise of the lido in Peterborough and of libraries that are closing, although I am glad to say that, so far, we have kept our libraries open in Wiltshire. We are also hearing reports from Kensington and Chelsea and Harlow councils that they are facing a shortfall following the announcement of the allocations.

Clearly the Government’s additional allocations need to cover every penny of the increased cost to local authorities, otherwise they are going to have to cut services. It would therefore be helpful if the Minister could commit to engaging with MHCLG to seek assurances about what is happening and how that could be improved.

Councils, as we have heard from my noble friend Lord Fuller, have been treated a lot worse than sectors like the police, the Civil Service and the National Health Service. This is a case in point for the argument we have been making throughout Committee where the Government have failed to produce thorough and comprehensive impact assessments. Mistakes like this can be made. The new refusal of the Treasury to provide essential information in debates like this, when such major changes are taking place, is extremely disappointing, as my noble friend Lady Noakes said, in her usually trenchant way. The Minister needs to listen to the Opposition when we call for a proper assessment of the impact of this policy on our local authorities. We want to know about other sectors too, but local authorities are this particular group’s concern and we will be returning to the charge.

The truth is that the Bill is very damaging. It will have perverse effects that will reduce the expected national insurance and tax take, as we have heard from the OBR, and it will have a negative effect on jobs, prices and growth. I hope the Minister will think further in the light of these four days of debate before Report.

I should say that I have enjoyed this Committee because of the insights it has given into many sectors and their challenges. It has been an extraordinary cross-cutting debate, and I look forward to Report on 25 February after our much-needed winter break.

[Lord Livermore (Lab)]

My Lords, I am grateful to all noble Lords for their contributions to this debate and for the local government expertise that has been shared with the Committee. At the Budget and the recent local government finance settlement, the Government announced £2 billion for new grant funding for local Government in 2025-26. This includes £515 million to support councils with the increase in employer national insurance contributions.

The LGA figures set out by the noble Lord, Lord Fuller, are an external estimate rather the Government’s, and I cannot comment on those figures. However, the Treasury is of course engaging closely with HMCLG, as the noble Baroness, Lady Neville-Rolfe, asked. The Government have committed £4.7 billion next year to provide support for departments and other public sector employers for additional employer national insurance costs. This applies to those directly employed by the public sector, including local government. However, as the noble Lord, Lord Fuller, said, independent contractors, such as those services contracted out by local authorities, will not be supported with the costs of these changes. This is exactly the same definition as with the changes to employer national insurance rates, under the previous Government’s plans for the health and social care levy.

Covid Counter-Fraud Commissioner

Lord Livermore Excerpts

Wednesday 5th February 2025 Lords Chamber

[Lord Foulkes of Cumnock]

To ask His Majesty’s Government when they expect to receive a report from the Covid Counter-Fraud Commissioner.

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

My Lords, Tom Hayhoe has been appointed Covid Counter-Fraud Commissioner. He will use every means possible to recover public money lost in pandemic-related fraud and ensure that that money is returned to public services. At the end of this year, the commissioner will provide a report, which will be presented to Parliament, outlining his findings on PPE procurement and other areas of Covid fraud, as well as identifying lessons and recommendations for government procurement in the face of future crises.

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

I am grateful to my noble friend for that, but there seems to be some confusion about whether, after his all too short 12 months, the commissioner should report to Parliament on lessons to be learned for future pandemics, or whether he should report according to his job description: regularly, to the public and Parliament, about how much of the £8 billion—not just from Michelle Mone and the VIP lane but many others—has been recovered. Can we have an assurance that the public and Parliament will be told regularly how much of that money has been recovered?

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question, and he is absolutely right. We promised that we would act on the fraud and waste that took place during the Covid pandemic. Let us remember that billions of pounds were handed out to friends and donors of the Conservative Party, including a £40 million contract awarded to the then Health Secretary’s local pub landlord. Billions more were defrauded from the taxpayer, and more than £1 billion was spent on PPE that either did not arrive or was not fit for purpose.

On entering government, we found £674 million of contracts in dispute, but we inherited a recommendation from the previous Government that any attempt to reclaim that money should be abandoned. That is unacceptable. The Chancellor has instead put a block on any contract being abandoned or waived until it has been independently reviewed by the commissioner, and she will absolutely ensure that regular reports are given to Parliament, as my noble friend asks, on the progress of that work.

[Lord Robathan (Con)]

Can the Minister confirm that his colleague, the anti-corruption Minister, resigned over allegations of corruption, and can he please tell the House what assistance His Majesty’s Government or the police are giving to the authorities in Bangladesh investigating this?

[Lord Livermore (Lab)]

I am not sure what that has to do with the Question before us, but the Prime Minister and the Minister involved absolutely have set out the circumstances of that case in the letters that they exchanged.

[Baroness Kramer (LD)]

My Lords, does the Minister recognise that a key reason why exposing Covid fraud has been so slow and difficult is the inadequacy of whistleblowing protection, which exposes so many whistleblowers to financial ruin and career destruction? The harm is not tackled by the duty of candour, which is important but is not whistleblower protection. Will the Government please deliver urgent reform as a crucial way not just to solve this problem, but to deter or catch early any kind of future abuse? I recommend to the Minister proposals for an overarching office of the whistleblower.

[Lord Livermore (Lab)]

I am very grateful to the noble Baroness for her question, and I absolutely agree with the underlying point she is making. I met Tom Hayhoe, the Covid Counter-Fraud Commissioner, last Friday, to make sure that I was fully prepared for this Question. I discussed his work with him, and he told me that he is considering a whistleblowing mechanism to enable the public to draw attention to abuses they are aware of. The work he is doing is absolutely in line with what the noble Baroness is asking for.

[Lord Hain (Lab)]

My Lords, can my noble friend ask the commissioner—and maybe take an interest in this himself—about the shortage of yachts for sale at the end of Covid? I was told by one of these yacht owners—this is not something I have ever indulged in—that he could not buy one for love or money. The reason was that people had been given, in his words, “a lot of money” by the Chancellor, particularly if they were running businesses, and were then able to indulge in buying yachts, to the point where they ran out of opportunities to do so. There was clearly something going on there.

[Lord Livermore (Lab)]

My noble friend clearly knows more yacht owners than I do—I have not discussed this matter with any yacht owners—but I absolutely understand the point he is making about the amount of fraud and abuse that was rampant in the system. The fact that the previous Government decided not to pursue so many of those contracts is not acceptable, which is exactly why we have set up these systems.

[Baroness Neville-Rolfe (Con)]

My Lords, more seriously, wherever there is fraud in public life, it should be rooted out and punished. Does the Minister agree, therefore, that the best and wisest course is to wait for the outcome of the commissioner’s report, including any recommendations on whistleblowing? A lot was done in a hurry during Covid—some good, some less good. But the worst thing would have been to extend the lockdown for months, as favoured by Sir Keir Starmer.

[Lord Livermore (Lab)]

The commissioner has clearly set out his programme of work. He will work in three phases: first, an assessment of the recovery efforts to date; secondly, a plan for further activity to drive additional recoveries; and thirdly, a consideration of lessons learned and recommendations for future government schemes. The noble Baroness says that we should wait for the outcome of his report; that is perfectly fair, but what I do not understand is why we inherited a recommendation from the previous Government that any attempt to reclaim money should be abandoned. That is surely unacceptable.

[Lord Watts (Lab)]

My Lords, has not a smokescreen been created here? Can my noble friend guarantee that the commissioner will carry out his full investigations and that, once he has done so, any criminal activity will be referred to the police to take the appropriate action?

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question, but obviously, I cannot say what criminal activity may be uncovered. Certain proceedings and investigations are already ongoing. We would not want to prejudice those proceedings, and nor would the commissioner, but my noble friend is right to say that the commissioner should be allowed to do his work.

[Lord Scriven (LD)]

My Lords, does the Minister agree that the person investigating must have as much transparency as possible? During this sorry affair, whenever we asked questions, the last Government kept coming back to commercial sensitivity. That excuse should not be used: the public should know how their taxes are being used.

[Lord Livermore (Lab)]

I completely agree with the noble Lord. The underlying point he is making is that we should be able to understand where taxpayers’ money has gone and to recover as much of that as possible, so that it is not lining the fraudsters’ pockets but is funding our public services. That is absolutely what the commissioner’s work is about: identifying where that money has gone and trying to recover as much of it as possible.

[Baroness Deech (CB)]

Does the Minister agree that the root cause of the fraud was our lack of preparedness for the epidemic, which caused people to rush into contracts? What assurance can he give the House that if there is another pandemic—heaven forbid—even this year, we are ready and would not be open to fraud again?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. It was certainly one reason; I do not know whether it was the main reason. A pandemic remains the top risk facing the UK, as outlined in the national risk register, and ensuring that the UK is prepared for a future pandemic is a top priority for the Government. We are embedding the lessons learned from the Covid-19 pandemic within our approach to pandemic preparedness. As I understand it, it is clear that the UK did not have enough PPE, for example, in stock when the pandemic hit, and at the Budget we invested £460 million to strengthen the UK’s pandemic preparedness and health protection capabilities. There is also a forthcoming Department of Health and Social Care pandemic preparedness strategy. It will include a new UK-wide respiratory pandemic response plan, which will be tested later this year in a tier 1 national exercise.

[Lord Moylan (Con)]

My Lords, what inquiries are the Government making into the fraud that the Chinese Communist Government sought to perpetrate, along with certain members of the international medical establishment, to the effect that the Covid virus did not originate in a laboratory in Wuhan?

[Lord Livermore (Lab)]

To be honest, I am not aware of any such investigations.

[Lord Mackinlay of Richborough (Con)]

My Lords, I wish the Government well in their counter-fraud investigations into Covid, because public money is of course of the utmost importance, but there is a clear and present daily problem with government procurement. Some years ago, I did a piece of work with the TaxPayers’ Alliance, looking at the price of photocopy paper across public institutions. It was vastly different: from £1.99 to £5.33 for a ream, within a health trust on the south coast. Can the Minister assure me that work is being done to maximise procurement gains throughout the system?

[Lord Livermore (Lab)]

Yes, I can, and I agree with the noble Lord. At the Budget, the Chancellor launched the Office for Value for Money, which will assess where and how to root out waste and inefficiency and to unlock value-for-money studies in specific high-risk areas of cross-departmental spending, and scrutinise investment proposals to ensure that they offer value for money.

UK–China Economic and Financial Strategy Dialogue

Lord Livermore Excerpts

Tuesday 4th February 2025 Lords Chamber

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

My Lords, the 2025 UK-China Economic and Financial Dialogue was the first since 2019. The Chancellor was joined by the Governor of the Bank of England, the chief executive of the Financial Conduct Authority, and representatives from Britain’s financial services firms. The dialogue unlocked agreements worth £600 million over the next five years, and secured new agreements on vaccine approvals, fertiliser, whisky labelling, legal services, automotives, and accountancy. In financial services, co-operation was agreed in areas such as capital markets, pensions and sustainable finance. The Chancellor also raised areas of concern to the UK, including trade imbalances, economic security, Russia’s illegal war in Ukraine, and human rights.

[Lord Davidson of Glen Clova (Lab)]

My Lords, I thank my noble friend the Minister for his response. I congratulate the Government on breaking the hiatus in the dialogue, which lasted for a long period of five years. Does my noble friend agree with me that the UK indisputably has a world-class financial services industry, which has delivered one-third of the service exports to China? Will he outline what is proposed by the Government to strengthen the relationship between China and the UK in financial services?

[Lord Livermore (Lab)]

I am grateful to my noble and learned friend for his question. He is right: this was the first economic and financial dialogue since 2019. The Chancellor was absolutely clear that we cannot ignore the fact that China is the second-largest economy worldwide, and our fourth-largest trading partner. He is right that financial services are the jewel in the crown of our relationship with China. That is why our financial services were the key focus of the Chancellor’s visit, which secured significant outcomes in terms of a new green bond, new commercial licences and quota allocations, the UK-China wealth connect, and capital markets and financial regulatory co-operation. That co-operation will continue and be strengthened.

[Baroness Kramer (LD)]

My Lords, could the Minister tell us whether the dialogue included a discussion of BRICS Pay? This is the alternate payment system that the BRICS countries have created in order to be able to move away from SWIFT. Obviously, it assists sanctions- busting, and it potentially destabilises the global financial system. What discussions were held on BRICS Pay?

[Lord Livermore (Lab)]

I am aware of the issue raised by the noble Baroness, but I do not believe that discussions took place on that. The Government consider that it is up to each individual country to decide what international agreements it wants to be part of.

[Baroness D’Souza (CB)]

My Lords, does the Minister believe that there are any risks at all involved in importing large numbers of electronic vehicles manufactured in China, which would plug the gap in the falling number of Tesla vehicles that are being purchased in the UK?

--- Later in debate ---

[Lord Livermore (Lab)]

The Government are committed to attracting investment into the UK to support our world-leading energy ambitions. Investment in the energy sector is subject to the highest levels of national security scrutiny, and we will not hesitate to use our powers to protect national security wherever we identify concerns.

[Baroness Neville-Rolfe (Con)]

My Lords, did His Majesty’s Government discuss with the Chinese authorities the imposition of 10% tariffs on Chinese exports by the United States?

[Lord Livermore (Lab)]

It is not for the UK to comment on US-China relations.

[Baroness Eaton (Con)]

My Lords, what assessment have the Government made of the potential risks associated with increased economic engagement with China? What strategies are in place to safeguard against such vulnerabilities?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. We must, and will, continue to engage with our international partners on trade and investment to grow our economy, while ensuring that our security and values are not compromised. That means finding the right way to build a stable and balanced relationship with China, one that recognises the importance of co-operation and addressing the global issues that we face, competing where interests differ and challenging robustly where we must.

[Baroness Blackwood of North Oxford (Con)]

Given the global financial and AI sector impacts of DeepSeek, what discussions were had about IP exfiltration as part of the national security discussions that the Minister has mentioned?

[Lord Livermore (Lab)]

I am afraid that I am not aware of any such discussions.

[Lord Sassoon (Con)]

I note my interest as president of the China-Britain Business Council and as having other China interests. Does the Minister agree with me that in total there are some £40 billion of UK exports going to China each year, including to Hong Kong, and those support 400,000 UK jobs? While the EFD marks a very important re-engagement with China, will he confirm that there will be other ministerial engagements at the top level, including Trade Ministers, to support British business growth?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. I agree with the point that he sets out in terms of the number of jobs that are supported by trade between our two countries. Yes, I think that further such ministerial engagements are planned. The Secretary of State for Business and Trade and the Secretary of State for Energy Security and Net Zero are both, I think, due to attend similar discussions.

[Lord Mackinlay of Richborough (Con)]

My Lords, does the Minister have any discomfiture at all about his Government going to China and begging for investment and trade while many parliamentarians in this Palace remain sanctioned by the Chinese regime?

[Lord Livermore (Lab)]

I completely disagree with the noble Lord’s characterisation of the Chancellor’s visit to China. As I said, we must and will continue to engage with our international partners in trade and investment, and that includes engaging with China. We cannot ignore the fact that China is the second-largest economy worldwide and our fourth-largest trading partner, with exports supporting close to half a million jobs in the UK. We need to help British businesses export around the world, and that includes to China. On human rights and the parliamentary sanctions that the noble Lord talks about, the Chancellor did raise those—absolutely—but she believes that, unless we open that dialogue, we will be unable to raise the concerns that we have.

[Lord West of Spithead (Lab)]

Were there any discussions at all about the Chinese merchant fleet and the use of certain ships by the Russians as the shadow fleet—and also the £7 trillion worth of trade that goes through the South China Sea and is threatened by Chinese actions?

[Lord Livermore (Lab)]

Of course, I was not in the room, so I cannot entirely judge exactly whether those issues were raised—but certainly the Chancellor raised important issues of national security. She raised the concerns that the UK Government have about China, and Russia’s illegal war in Ukraine, so the issues that my noble friend raises would have been very much at the forefront of their discussions.

[Lord Forsyth of Drumlean (Con)]

Does the Minister understand that the impact of fining our car companies huge sums for making vehicles that people want to buy, because they are not making sufficient electric cars, has the effect of handing our car industry to the Chinese, who are flooding the market with cheap electric cars—leading to the destruction of jobs throughout the Midlands and elsewhere?

[Lord Livermore (Lab)]

I absolutely understand the point that the noble Lord raises. There are different priorities that we need to balance as we make policy and move forward. As he says, there is the industrial strategy priority of making sure that we have a competitive and thriving car industry in the UK, and there is also the objective of making sure that we achieve our net-zero objectives. Transport is a major component of that, so electric vehicles will play a very important part as we move towards our net-zero targets. Absolutely, we have to balance those objectives, and I am very aware of the issues that the noble Lord raises.

[Baroness O’Loan (CB)]

My Lords, the Minister told us that the Chancellor spoke about the sanctioning of Members of your Lordships’ House and the human rights implications of that appalling situation. Can he tell us whether there were any other discussions in the human rights context in the light of China’s appalling record on human rights?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. Yes, I reassure her that there absolutely were. The UK Government will stand firm on human rights in China and will continue to raise concerns at the highest level of the Chinese Government. In all our engagements with the Chinese Government, we continue to challenge them robustly on human rights violations and continue to raise our concerns at the highest level of the Government. The Prime Minister did so at his meeting at the G20 with President Xi and the Chancellor also raised concerns in a number of areas, including the case of British national Jimmy Lai, the restrictions on rights and freedoms in Hong Kong, human rights abuses and forced labour.

[Lord Brooke of Alverthorpe (Lab)]

Given that climate change knows no boundaries and that there is a change of policy taking place in the USA in that regard, does the Minister see the possibility of us having more dialogue with China in this context as a way forward?

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question. Our journey towards net zero will remain vital for our energy security in this country, as well as our economic growth, so that will absolutely continue to play an important part in our economic policy. China will of course be part of that in how we move forward together, both in terms of its own journey towards net zero and in how it can help our journey towards net zero.

Pension Fund Reliefs

Lord Livermore Excerpts

Tuesday 4th February 2025 Lords Chamber

[Baroness Altmann]

To ask His Majesty’s Government what plans they have to ensure the taxpayer spending on pension fund reliefs has a beneficial long-term impact on the United Kingdom’s economy and financial markets.

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

My Lords, the Government published the interim report of the pensions investment review on 14 November. This report put forward a series of ambitious proposals to reform the UK pensions system. Together, these proposals could unlock around £80 billion of productive investment in infrastructure and fast-growing companies. The full report will be published in the spring ahead of legislation being introduced in the pension schemes Bill.

[Baroness Altmann (Non-Afl)]

I thank the noble Lord for his Answer. Can I press him a little on the £70 billion of taxpayers’ money that is going into people’s pensions every year, with absolutely no requirement for any of it to be placed into the UK or to revive the UK economy? We have a growth agenda, and a desperate need for long-term investment in assets that are very suitable for UK pension funds. Will the noble Lord agree to meet me to discuss ways in which we can encourage or incentivise more pension assets, and more of the taxpayer contribution, to boost our economy rather than all the others? All other major countries’ pension schemes have significant overweighting in their domestic markets, whereas ours have maybe 3% in UK equities.

--- Later in debate ---

[Lord Livermore (Lab)]

I am very grateful to the noble Baroness for her question. I take this opportunity to recognise her career-long commitment to improving outcomes for savers and investors. The announcements the Chancellor made at the Mansion House on the pensions review could unlock billions of pounds of additional investment, but of course, as the noble Baroness rightly said, it is not in any way guaranteed that this investment will take place in the domestic market. The Government share her concerns that UK pension funds are investing less in the domestic economy than overseas counterparts. There is also clear evidence of a sustained pattern of withdrawal by DC pension schemes from UK-listed equities for at least the last decade. That is why the pensions review is considering whether further interventions may be needed to ensure our reforms benefit UK growth. We will continue to work with the pensions industry to increase investment in UK markets. I look forward to continuing to work with the noble Baroness on these issues and of course I am very happy to meet her.

[Baroness Drake (Lab)]

My Lords, the Government’s recent announcement on measures to spur growth will increase the supply of infrastructure and productive investment for pension funds to invest in, but the fragmented nature of UK pension provision can hamper its ability to invest in such assets—in many instances, it cannot deal with the scale of investment required. Do the Government remain committed to addressing this capability problem as part of their strategy for growth?

[Lord Livermore (Lab)]

I am grateful to my noble friend for her question. I absolutely agree; there is international and industry consensus that scale and consolidation are beneficial to pension funds, driving economies of scale and efficiencies that can be passed back to savers and unlocking productive investment. That is what the Mansion House reforms seek to do. My noble friend talked about the ability of pension funds to invest in productive assets. That is what the infrastructure strategy and the industrial strategy are designed to do. I hope we will see more announcements along those lines at the time of the spending review.

[Lord Palmer of Childs Hill (LD)]

My Lords, I hear what the Minister says, but what steps are the Government taking to increase the supply of domestic infrastructure projects and other long-term investments in the UK economy that would meet the needs of pension funds’ trustees and investors? I hear from trustees that they would quite like to do some of this stuff but sometimes struggle to find suitable projects in which to invest. Are we not going backwards, with listed investment companies being killed off?

[Lord Livermore (Lab)]

The answer to the last part of the noble Lord’s question is no. However, I very much agree with the analysis he set out in the rest of his question. Ensuring that there are investment opportunities for these assets to be invested in is a key part of our strategy, which is why we are producing the infrastructure strategy at the time of the spending review. I hope it will answer a lot of the noble Lord’s questions when it comes out.

[Lord Leigh of Hurley (Con)]

Following the excellent question from the noble Baroness, Lady Altmann, on pensions, I am not asking my noble friend the Minister to meet me, but I am asking him to have a look at the British ISA idea, whereby tax-free savings could be focused on British companies. I know that the Labour Party is keen on investment in British companies, as we all are. Will he look again and promote the idea of a British ISA?

[Lord Livermore (Lab)]

I am flattered to be referred to as the noble Lord’s noble friend, and I consider him to be a friend as well. I am more than happy to look at his ideas.

[Lord Davies of Brixton (Lab)]

I thank the noble Lord—my noble friend—the Minister for his replies. Will he agree that the best thing that pension funds, both defined benefit and defined contribution, could do to support the British economy is pay adequate and secure pensions? What plans do the Government have to ensure that that is the case?

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question. I of course agree that adequacy is an absolutely essential part of the pensions landscape. That is what phase 2 of the pensions review is designed to look at. The scope and terms of reference for phase 2 will be published in due course, once we have made fuller progress with phase 1.

[Baroness Bowles of Berkhamsted (LD)]

Is the Minister aware that the resumption of investment flows into investment trusts requires investor confidence, including from pension funds, that the future regime will not repeat the mistakes of the past? How can that happen when the FCA consultation suggests reinstating aggregation of costs for investment trusts, which do not have consumer costs, and then not aggregating costs for ETFs, which do have such costs? Are the Government prepared to lose billions more over the next 18 months or more until the regulator gets it technically correct?

[Lord Livermore (Lab)]

I am aware of the issue that the noble Baroness raises, mainly because of her campaigning on it. I pay tribute to her and to the noble Baroness, Lady Altmann, for their campaigning on this issue and for their Private Members’ Bills when we were in opposition, which I found extremely persuasive. I think we have made some progress since we have been in government. I regret that we are not able to go as far as the noble Baroness set out in her recent Private Member’s Bill right now, but we continue to review these issues and I thank her again for her campaigning.

[Baroness Neville-Rolfe (Con)]

My Lords, it is all very well to talk and review, but we face problems now. Do the Government intend to introduce extra incentives to encourage pension funds to invest in UK-listed shares and in domestic infrastructure?

[Lord Livermore (Lab)]

The noble Baroness talks of a sense of urgency, but, of course, she had 14 years to do something about this and did not. The previous Government never legislated for the reforms they brought forward. We are legislating for them. As I said, we are absolutely concerned that UK pension funds are investing less in the domestic economy, which is exactly why the pensions review is looking at the issue.

[Lord Hamilton of Epsom (Con)]

My Lords, one of the obligations on the trustees of pension funds is to get the best return for pensioners. Is the Minister resigned to the fact that, if we invest in British infrastructure, pensioners will be worse off as a result?

[Lord Livermore (Lab)]

I am not sure that the noble Lord should talk down the British economy in quite that way.

[Lord Sikka (Lab)]

My Lords, for 2023, the cost of tax relief on pension contributions was £46.8 billion, and another £23.8 billion of relief was given on related national insurance contributions. Some 63% of the total tax relief went to 6 million higher and additional rate taxpayers, and only 37% went to 28.1 million basic rate taxpayers. By fixing the tax relief at 20% for everybody, the Government can not only reduce inequalities but have £14.5 billion a year surplus. Will the Minister consider this reform?

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question. He is correct that the Government spend around £70 billion annually on pension tax reliefs, because we want to encourage pension savings. That is why, for the vast majority of savers, pension contributions made from income during working life are tax free, and it is why, like many other countries, the UK exempts from tax the returns pension funds receive on the investments they make. Tax is not within the scope of the pensions review.

[Lord Howell of Guildford (Con)]

My Lords, one way of making pension funds better able to support British industry would be to amalgamate many of the smaller ones and increase their efficiency. I think this idea has already been mooted and discussed. Is there not a further thought that the large area of public service pensions, which are unfunded—not local government, which is funded—should be considered being made into funded pensions? Would that not also help to reinforce pensions’ contribution to our nation?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. He is absolutely right that consolidation and scale are key to the strategy behind the pensions review. I will certainly pass his ideas back to my honourable friend, the Pensions Minister.

Growing the UK Economy

Lord Livermore Excerpts

Monday 3rd February 2025 Lords Chamber

[Lord Fox (LD)]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

and Tina McKenzie of the FSB said:

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


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

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

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

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

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

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

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

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

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

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

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

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

[Lord Desai (CB)]

My Lords, does the noble Lord not agree that, because we had a debate on growth very recently, and because the question has been raised again, what we really need is an expert committee—perhaps your Lordships’ Economic Affairs Committee—to inquire into why we have not had growth for the last 15 years and why all the policies that were tried by the last Government failed completely? If we learn from our experience, it might be more helpful than having frequent debates in your Lordships’ House.

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. Obviously, it is not for me to suggest what inquiries the Economic Affairs Committee should conduct. If it were to conduct such an inquiry, I would certainly read its report with interest, and I think we would see that the record of the previous Government on the economy was nothing short of catastrophic—whether it was their austerity, which took demand out of the economy at exactly the wrong moment; their disastrous Brexit deal, which has reduced GDP by some 4%; or their disastrous Liz Truss mini-Budget. All of these things have done long-term deep-seated damage to the economy, which will take time to turn around, but I believe we are starting to turn that around and we will continue to do so.

[Baroness Kramer (LD)]

My Lords, given the passenger forecast for a third runway of a doubling of passenger numbers at Heathrow, I was told that domestic passengers would come from all the regional airports because the airlines would cease to fly direct international flights from regional airports, including both Birmingham and Manchester, and instead feed to Heathrow. I was told that the international passengers would be almost exclusively transfer passengers—one of the reasons for arguing that not a lot of additional transport is needed into London. I understand why all of that works to create profits for the airport, but I find it very hard to see how that creates any growth. Can the Minister please explain how, particularly, that damage to the regions will help with regional growth and, frankly, how transfer passengers contribute significantly to overall growth?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. This is, I think, probably one of the few issues that we disagree on. Obviously, she is asking me to comment on what she was told several years ago, and I cannot necessarily comment on what she was told then. She is describing, I think, the concept of a hub airport, which is why Heathrow is such a specific proposition, and will lead to significant amounts of growth in our economy, not least because of freight. The amount of freight that Heathrow conducts, the increase in trade, and the new emerging markets that an expanded Heathrow will connect us to, will directly lead to increases in growth in this country. That is an incredibly valuable thing.

The noble Baroness spoke about regional growth and regional airports. I would simply point her to the enthusiastic response from regional airports. They have come out very strongly in support of an expanded Heathrow, because they know it will lead to expansion for them and growth and jobs in their areas. We know that, in terms of the economic benefits of the expansion of Heathrow, 60% of those benefits will be outside London and the south-east. So I genuinely disagree with the noble Baroness when she says that it is negative for the regions; I think this is a very positive point for regional growth.

[Lord Lansley (Con)]

My Lords, I remind noble Lords of my registered interests relating to Cambridge and Oxford. I welcome what the Government are saying in their focus on the Oxford to Cambridge growth corridor, and the appointment of the noble Lord, Lord Vallance. But the establishment of an Oxford growth commission needs to run in parallel with the existing work of the Cambridge Growth Company. Can the Minister tell us more about how the Oxford growth company can catch up in terms of the existing leadership team, budget and local political relationships that the Cambridge Growth Company has now established?

[Lord Livermore (Lab)]

I am very grateful to the noble Lord. As he stood up, I was reminded that he contacted me last week on this point and I owe him a response. I apologise to him for not having got back to him quickly enough. What he said dovetails perfectly with what the Chancellor said in her speech. Clearly, the Cambridge Growth Company has been very successful under the leadership of Peter Freeman. We have now set up a growth commission for Oxford to review the barriers to growth that are holding the city back from reaching its full potential. At the moment, that is a specific team within MHCLG, but it has the potential to grow into something similar to what is happening in Cambridge. I do not think we would see any problem in that happening and developing in that way. What the noble Lord, Lord Vallance, is doing is complementary to that in terms of joining it up.

The whole point of the growth corridor is that we do not see it as two separate cities doing their own thing but instead join them up and see the benefits. People talk about it being Europe’s equivalent of Silicon Valley. All the business reaction post the announcement has been incredibly positive in terms of what it can do and the benefits that it can achieve in attracting businesses into the area. The big problem businesses have is a lack of affordable housing and fast transport to move people about within that region. We are looking to address both of those things. I think we will be very supportive of what the noble Lord says about Oxford.

[Viscount Stansgate (Lab)]

My Lords, I welcome the Chancellor’s speech and the positive statement of intent that it conveys. I put it to my noble friend that one key ingredient is investment in science and technology. I draw the Minister’s attention to one example. We know that we have strengths in the life sciences. A recent report by your Lordships’ Science and Technology Committee, of which I am a member, on engineering biology, indicated an enormous new range of potential growth opportunities. When the Minister and his noble friend Lord Vallance come to consider what to do, I hope that special attention will be paid to reports of that kind, because that is the future.

[Lord Livermore (Lab)]

I 100% agree with everything that my noble friend said. Innovation is one of the seven pillars of the growth strategy. R&D and innovation are absolutely vital when it comes to growth. He will know that life sciences are one of the eight sectors we have selected as part of the industrial strategy, because of the huge competitive advantage we potentially hold in that area. I held a round table last week with representatives of the life sciences sector. They have some incredibly exciting proposals to bring forward. They will be captured when it comes to the life sciences sector plan that we will bring forward as part of the industrial strategy before the spring.

[Lord Macpherson of Earl’s Court (CB)]

My Lords, the history of direct support for industrial investment is not a happy one, with much money wasted and few jobs created. Can the Financial Secretary confirm that the Treasury will continue to take a rigorous approach to assessing support for inward investment, based on the best value for money principles?

[Lord Livermore (Lab)]

Yes, I can, and I am happy to say that I cut my teeth in the Treasury when the noble Lord was Permanent Secretary to the Treasury, and I learnt a lot from him. I very much agree with his view of the Treasury’s role within Whitehall.

[Lord Grayling (Con)]

My Lords, I remind the House of my interests as an adviser to AtkinsRéalis. I was also the Secretary of State who introduced the last Government’s Airports National Policy Statement. The Minister has just said that he expects spades in the ground by the end of this Parliament. We are probably 12 to 18 months away from the new planning legislation so, for now, the Government have to go through an ANPS process. There are then likely to be judicial reviews, albeit curtailed as the Government intend, and then a DCO process. I asked the Transport Minister this afternoon whether he expected to be able to short-cut that process; he said he did not yet know and would not know until he saw detailed proposals from Heathrow in the summer. How can the Minister, and indeed the Chancellor, say they will get spades in the ground by the end of this Parliament? Those who have been through it before know that, unless the process changes, there is no possibility of that happening.

[Lord Livermore (Lab)]

I was lucky enough to be in the House for the noble Lord’s question to my noble friend the Transport Minister, and I obviously agree with what my noble friend said to him. In terms of timescales, the Government have asked Heathrow to come forward with its proposal by the summer of this year, and we have said that we want to confirm planning consent by 2028. That is obviously an accelerated process, but we are determined to do everything it takes to accelerate it. I am confident that there will be spades in the ground at Heathrow within this Parliament. The third runway is part of a wider programme of expansion of Heathrow, including various terminal expansions, so without question there will be spades in the ground at Heathrow. However, we also want to see spades in the ground for the runway within this Parliament.

[Lord Hamilton of Epsom (Con)]

My Lords, as is predictable, the Minister trotted out the usual thing about the black hole of £22 billion. On the other hand, the Government are looking at departmental budgets, which by most people’s reckoning are completely bloated, and looking for savings. What are the chances of those savings well exceeding £22 billion?

[Lord Livermore (Lab)]

I am very grateful to the noble Lord for raising the £22 billion—he knows it is one of my favourite topics, and I am always very happy to talk about it. It was obviously one of the most shocking features of our inheritance from the previous Government that they had £22 billion of commitments that they did not fund and sought to conceal from various government bodies. That is deeply shocking and should not be taken lightly. The noble Lord has said to me previously that the Government’s budgets are bloated; most government departments would dispute that, after decades of austerity under the party opposite. We know that public services are stretched extremely thin. I have asked him before for his examples of that bloating, and what savings he would propose. I would be more than happy to discuss any potential savings that he has in mind, but I think they are unlikely to reach the level that he describes.

[Lord Bichard (CB)]

My Lords, can the Minister reassure both me and the House that the Government and the Treasury understand that growth in the economy is about investing not just in capital projects but in people? We have seen an underinvestment in skills for the last 15 years. Are we going to see another few years when the skills element of growth is not given a priority? We are going to be debating it later in the week; I would like to know whether it features highly in the Treasury’s considerations.

[Lord Livermore (Lab)]

It does absolutely, and I agree with everything the noble Lord said. Investment in people is one of the key pillars of the Government’s growth strategy, and skills falls under that, so it is a top priority. I talked about how the Chancellor’s strategy is to improve the supply side of the economy and, obviously, skills are a key feature of that and of our ability to grow the economy. When it comes to all the various infrastructure projects we are talking about, we know that we are going to need the skilled labour to achieve them. I am happy to reassure him that it is central to our thinking.

[Baroness Falkner of Margravine (CB)]

My Lords, the Statement says a lot about spades in the ground; it does not say very much about the UK’s woeful productivity challenge. Is the Minister aware that Gareth Davies, the head of the NAO, has said that our public services cost too much and simply cannot deliver? Beyond the skills shortages, what is the Treasury doing to address the level of public spending that we have reached, which has gone from 33% to 36% in the last five years?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. I completely agree with her, which is why the Government have set a 2% productivity target for all government departments as part of the spending review. We have been very clear that, clearly, in a constrained fiscal environment, productivity and reform will be central to delivering better public services. In an environment where the noble Baroness opposite and I do not agree on very much, this is definitely an area where we agree, in terms of the importance of driving productivity not just in the private sector but in the public sector too. Please let me reassure the noble Baroness that this is absolutely top of mind as we consider the spending review decisions that we have to take.

[Lord Sikka (Lab)]

My Lords, the key lesson from the last 14 years is that sustained economic growth cannot be secured without improving the purchasing power of the bottom 50% of the population. The two-child benefit cap, the winter fuel payment cut for pensioners below the poverty line and a freeze on personal allowances are just some of the impediments. Can the Minister say when these policies will be reversed and when steps will be taken to secure equitable distribution of income and wealth because, without money, people simply cannot buy products and services?

[Lord Livermore (Lab)]

Although I disagree with my noble friend on some specifics that he raises, I think we all agree that it is right that we have a goal to raise living standards in every part of the UK by the end of this Parliament, which is why that is central to our Plan for Change targets when it comes to the economy. We have already provided stability to the economy, enabling the Bank of England to make two interest rate cuts; we have protected working people by keeping our promises on tax at the Budget; we have frozen fuel duty; and we have increased the minimum wage, and we are now seeing wages starting to rise. All those things are beneficial in terms of living standards. My noble friend will appreciate, though, that we have to grow the economy before we can start distributing the benefits of that growth.

[Baroness Stowell of Beeston (Con)]

My Lords, to return to the Minister’s remarks about innovation, how would he justify to the innovators and risk-takers who are starting up businesses and trying to scale up in the UK the day-one employment rights in the Employment Rights Bill? I refer him to another Select Committee report, published today, about scaling up AI in creative tech businesses and the barriers that they face. These, too, are priority areas for growth that the Government have highlighted.

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. I know that this is an area in which she is particularly expert—far more expert, I am sure, than I am. I will say a couple of things. First, I completely agree: it is often said to me that the UK is a very good place to start a business and a less good place to scale up a business. I think that has to be central to our thinking when it comes to economic growth and growing those small businesses. When it comes to entrepreneurs and those who we want to take greater risks in our economy, one of the most important things we can do is ensure economic stability, because the more stable the economy is, the more willing people are to take the risks that we want them to take. She asks about employment rights. All the evidence now suggests that, the more secure a workforce is, the more productive it is. We were talking about productivity before and, on secure rights for workers, workers who are more economically secure are going to be more productive workers in the economy.

[Baroness Wheatcroft (CB)]

My Lords, the Minister acknowledged the importance of resetting relations with the EU. I understand the importance of sticking to the golden rules his party has laid down about not rejoining the single market or the EU customs union, but does he acknowledge that it is really important to improve those trading relations as quickly as possible? Therefore, will the Government not just discuss but pursue wholeheartedly joining the pan-Euro-Mediterranean convention?

--- Later in debate ---

[Lord Livermore (Lab)]

I agree with the noble Baroness’s analysis, and we are absolutely dedicated to resetting our relationship with the EU, which is clearly our biggest trading partner. Following their meeting in Brussels in October, the Prime Minister and the President of the Commission agreed to strengthen the relationship between the UK and the EU, and last month at a Eurogroup meeting of EU Finance Ministers, the first to be attended by a UK Chancellor since Brexit, the Chancellor set out the need for a closer UK-EU economic relationship based on trust, mutual respect and pragmatism. The Chancellor has also said that she is absolutely willing to consider the customs partnership that the noble Baroness refers to. The noble Baroness is also right about speed: we recognise that delivering new agreements will take time, but we are ambitious, we have clear priorities and we want to move forward at pace.

[Baroness Penn (Con)]

My Lords, I am glad the Minister found something else to agree with my noble friend Lady Neville-Rolfe on: the importance of affordable energy for growth. Can the Minister therefore clarify whether the Government endorse the more than doubling of the carbon price in the next five years, which is needed to achieve and deliver another of the Government’s missions—that of clean power by 2030—as set out in the National Energy System Operator report?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for that question. I will leave it to my right honourable friend the Secretary of State for DESNZ to bring forward the Government’s response in that area.

[Baroness Bennett of Manor Castle (GP)]

My Lords, Martin Wolf, the chief economics commentator for the Financial Times, this morning noted how trend growth across a wide range of global North countries continues to be at historic lows, reflecting real-world conditions such as increasing dependency ratios, and geopolitical and climate shocks. Mr Wolf said that

“the government could focus on redistribution instead”

of growth. Does the Minister agree with Mr Wolf that something such as a wealth tax could be a way to immediately address child poverty, ill health among working-age people, the housing crisis and the low spending power among the lowest 50% of the population by income that the noble Lord, Lord Sikka, alluded to?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question, but I do not understand the contention at the heart of it. She talks about redistribution, but what is the growth she wants to redistribute if she does not believe in growth? She talks about a wealth tax, but what wealth is it that she wants to tax? She does not believe wealth should be created.