World Economic Outlook: UK Growth and Inflation

Lord Livermore Excerpts

Wednesday 22nd April 2026 Lords Chamber

[Lord Londesborough]

To ask His Majesty’s Government what assessment they have made of the estimate in the International Monetary Fund’s latest World Economic Outlook, Global Economy in the Shadow of War, published on 14 April, that the UK will have the lowest per capita growth and the joint highest inflation rate in the G7 this year.

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

My Lords, we did not start this war, but it affects us. The IMF’s updated forecasts build on its judgment that the UK is more exposed to energy price shocks than our counterparts—a problem this Government are tackling but which the previous Government failed to address in 14 years. The IMF has described our plan as the appropriate response and forecasts that the UK will be the fastest-growing European G7 economy this year and next.

[Lord Londesborough (CB)]

I salute the Minister for his stout defence and robust response, but it is not altogether shared by the gilt markets: witness our highest borrowing costs for 18 years. It is not just the IMF but the OECD—both have cut their growth forecast for the UK by a greater margin than for any other G7 country. Yes, they flag up the openness of our economy and the gas-intensive nature of our energy mix, but they also point to the UK’s zero per capita growth throughout the second half of last year. With inflation now rising, is the Chancellor not premature in making repeated claims of having built stability and resilience in our economy?

[Lord Livermore (Lab)]

No, I do not think she is, because the spring forecast showed precisely that: that Britain is well placed to weather this conflict. Inflation was at 3% and it was set to fall to target; borrowing was set to fall more over this Parliament than in any other G7 economy; GDP per capita was forecast to rise by 5.6% over this Parliament, compared with a fall of 0.2% in the previous Parliament; and we had increased headroom to over £23 billion. As I say, all these things mean we are well placed to weather this conflict. On the actual outturn data, last week’s figures show that the economy grew faster than expected in the three months to February, growth for the three months to January was upgraded, and yesterday’s labour market figures for February showed unemployment coming down and real wages continuing to rise.

[Lord Hintze (Con)]

My Lords, does the Minister agree that the only genuine way to look at the prosperity of our citizens in this country is GDP per capita? Does he also agree that one of the big detractors of growth in GDP per capita is the growing and significant welfare spend? If not, why not?

[Lord Livermore (Lab)]

I am very happy to agree with the noble Lord on the first part of his question: as I have said already, GDP per capita at the time of the spring forecast was forecast to rise by 5.6% over this Parliament. That compares with a fall of 0.2% in the previous Parliament—the worst Parliament on record for living standards. On welfare spending, as he knows, the previous Government increased welfare spending by £88 billion.

[Baroness Kramer (LD)]

My Lords, the Government keep looking in the rearview mirror. The IMF report and today’s inflation numbers are telling us that forecasts made in January essentially now go into the bin, and what we need are policies to deal with uncertainty and provide resilience. The new BICS provides energy-intensive industries with some benefits, but no money will flow for a year. When will firms know what that money will be and when they will get it so that they can plan? Is anything going to be put in place for food and agriculture? We are seeing a real rise in food prices and potential food shortages. Small businesses are, frankly, on the brink. Are there new policies to come forward that will provide the resilience we need?

[Lord Livermore (Lab)]

The noble Baroness is absolutely right to point to the need for economic resilience. As she knows, we must do more on economic security so that the UK does not continue to be more exposed to energy price shocks than our counterparts are. Since the election, we have invested in clean homegrown energy—renewables and nuclear. Yesterday, the Chancellor announced steps to go further, harnessing our domestic supply of oil and gas production from the North Sea, further removing barriers to new renewables investment, and reforming our energy system by further weakening link between high gas prices and electricity prices. The noble Baroness asked specifically about BICS; she will know that the consultation on scheme design and eligibility was published last week.

[Lord Watts (Lab)]

My Lords, is it not the case that inflation, economic growth and living standards were improving until we had the problem with Iran? Is it also not the case that, as soon as that problem has gone, the Government have the policies to drive the economy?

[Lord Livermore (Lab)]

My noble friend is absolutely right. The economy, at the time of the spring forecast, showed that we are well placed going into this conflict. Inflation was at 3% and is set to fall to target—a much lower starting point than when Russia illegally invaded Ukraine. Borrowing was set to fall more over this Parliament than in any other G7 economy. We had increased headroom for over £23 billion, giving us the buffer to respond to these shocks, and GDP per capita was forecast to rise. Therefore, my noble friend is absolutely right. Outturn data for February, the final month before this conflict began, showed that the economy grew faster than anyone was expecting.

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

My Lords, I encourage the Financial Secretary not to become mesmerised by IMF forecasts. The British economy has proved remarkably resilient over the past 18 years in the face of a succession of shocks. Generally, the Government have got into difficulty when the Treasury and the Bank have done too much rather than too little. Can he confirm that any interventions will be targeted and that the Government will maintain their inflation target and stick to their fiscal rules?

[Lord Livermore (Lab)]

I absolutely confirm to the noble Lord all three of those points. As he knows, the price cap is giving households certainty on their bills until July, ahead of the winter months. As we respond to this crisis, we must absolutely learn from the mistakes of the past, some of which he mentioned. The previous Government pushed up borrowing, interest rates, inflation and mortgage costs with an unfunded, untargeted package of support under Liz Truss, and they gave the most support to the wealthiest households. We will not repeat the mistakes of the previous Government. We are planning for every eventuality so that we can keep costs down for everyone and provide support for those who need it most, acting within our fiscal rules, as the noble Lord said, to keep inflation and interest rates as low as possible.

[Baroness Neville-Rolfe (Con)]

My Lords, the economic forecasts set out by the IMF and, indeed, by the noble Lord, Lord Londesborough, are very concerning from a national standpoint. Party passions aside, I believe that we must pursue a national growth path in the national interest. That needs to include a reduction, not an increase, in regulation, especially in building and planning; a cut in welfare spending, as we have heard; support for enterprise; and full utilisation of our energy resources. Does the Minister agree with that?

[Lord Livermore (Lab)]

Yes, and we are doing most of that, but the noble Baroness is opposing most of it. She said that we need to pursue a growth path. She will know that one of the most important things for growth is keeping inflation and interest rates as low as possible, but her party has unfunded proposals to deal with this crisis that would stoke inflation and put up interest rates. Exactly the wrong thing to do now would be to have a knee-jerk response to this crisis that would put household finances at risk. During the last energy shock, the previous Government got the response completely wrong, which meant higher inflation, higher interest rates and higher taxes. We will not repeat those mistakes.

[Lord Leigh of Hurley (Con)]

As well as the OECD report, the respected EY Item Club has said that the economy will flatline in the second and third quarters, leading to a real risk of recession. Deloitte has said that business confidence is at its lowest since Covid, and unemployment is thus now expected to rise to 5.8% by 2027. One of the reasons for that is the Employment Rights Act. The Prime Minister may not respect employees’ rights but business does, and business is stopping hiring for that reason. Given the war, is it not time to soften the effects of the Employment Rights Act?

[Lord Livermore (Lab)]

The noble Lord pointed to some forecasts that are being made, but he then drew the wrong conclusion. I point him to the conflict going on in Iran: that is not a war that we started, but it will affect us. As I have already said, we went into this crisis with the economy well prepared to weather it, which we are doing. The outturn figures for last week showed that the economy grew faster than expected in the three months to February. When the data for January came out, the noble Lord asked me a topical Question, which I answered. That data was upgraded this week for that exact month, but he did not mention that. He keeps talking about one month, but one month comes after another—they tend to add up. The outturn figures from before the conflict began showed that the economy was growing faster than anyone expected. Of course this war will have an impact on our economy, and it is this Government’s responsibility to ensure that working people weather that in the right way.

[Lord Wallace of Saltaire (LD)]

My Lords, I declare an interest as a recipient of very considerable welfare payments in the form of my old-age pension and my wife’s old-age pension. The whole discussion about cutting welfare seems to leave out the very substantial chunk of welfare that goes to those of us who are retired. Does the Minister think that all the effort in cutting welfare has to be on the young, or does he think that any discussion about cutting welfare has to include the old as well?

[Lord Livermore (Lab)]

Clearly, we need a welfare system that works. No one believes that the system that we inherited is working. It abandoned too many people to a life on benefits, wrote off too many people as too sick to work and condemned too many children to be too poor to eat. That is why we are reforming the welfare system.

Credit Institutions and Investment Firms (Miscellaneous Definitions) (Amendment) Regulations 2026

Lord Livermore Excerpts

Monday 20th April 2026 Lords Chamber

Moved by

[Lord Livermore]

That the draft Regulations laid before the House on 4 March be approved.

Considered in Grand Committee on 15 April.

Motions agreed.

Capital Requirements Regulation (Market Risk Transitional Provision) Regulations 2026

Lord Livermore Excerpts

Wednesday 15th April 2026 Grand Committee

Moved by

[Lord Livermore]

That the Grand Committee do consider the Capital Requirements Regulation (Market Risk Transitional Provision) Regulations 2026.

Motion agreed.

Credit Institutions and Investment Firms (Miscellaneous Definitions) (Amendment) Regulations 2026

Lord Livermore Excerpts

Wednesday 15th April 2026 Grand Committee

Moved by

[Lord Livermore]

That the Grand Committee do consider the Credit Institutions and Investment Firms (Miscellaneous Definitions) (Amendment) Regulations 2026.

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

My Lords, I ask that the Committee considers two statutory instruments made under the Financial Services and Markets Act 2023: first, the Credit Institutions and Investment Firms (Miscellaneous Definitions) (Amendment) Regulations 2026; and, secondly, the Capital Requirements Regulation (Market Risk Transitional Provision) Regulations 2026. The purpose of this legislation is to ensure that the UK’s capital framework remains agile and responsive for banks and investment firms. I will first set out the context in which this legislation is being delivered.

The Financial Services and Markets Act 2023 revoked assimilated law in the UK related to financial services, to bring it in line with the UK’s domestic model of regulation. The UK’s domestic model—the Financial Services and Markets Act model—was first established through the Financial Services and Markets Act 2000. That model prioritises the setting of regulatory standards by expert, independent regulators, working within an overall policy framework set by the Government and Parliament. This approach maximises the use of expertise in the policy-making process by allowing regulators with day-to-day experience of supervising financial services firms to bring their real-world experience into the design of regulatory standards. It also allows regulators to flex and update those standards to ensure that regulation responds to emerging developments.

One area of financial services regulation where the Financial Services and Markets Act model will apply is capital requirements regulation. Capital requirements regulation is an existing body of assimilated law that covers the detailed and technical capital rules that apply to credit institutions, such as banks and building societies, and larger investment firms. Applying the Financial Services and Markets Act model in this area means replacing the existing capital requirements regulation in three ways.

First, some of it is being replaced by rules set by the Prudential Regulation Authority. This includes rules in relation to Basel 3.1, the final set of post-crisis reforms designed to strengthen the resilience of the UK banking system. Secondly, provisions relating to prudential equivalence, also contained in the capital requirements regulation, are being replaced by a new overseas prudential requirements regime in legislation. Thirdly, important definitions in the capital requirements regulation are being restated in new legislation because they are essential for ensuring that the system of prudential regulation continues to operate as intended.

The statutory instruments that we are debating relate to the first and third of these areas: the replacement of rules by the Prudential Regulation Authority, specifically in respect of Basel 3.1, and the restatement of key definitions in the existing capital requirements regulation. They do not relate to the new overseas prudential requirements regime, which will be legislated for separately.

The first statutory instrument that I will address is the Credit Institutions and Investment Firms (Miscellaneous Definitions) (Amendment) Regulations 2026. The sole purpose of this instrument is to restate important definitions from the existing capital requirements regulation in law. For example, the definition of what constitutes an investment firm is being restated so that it remains in legislation, rather than being defined by the Prudential Regulation Authority rulebook. This is necessary to ensure that the Government and Parliament remain in control of what activities should be regulated.

This instrument does not introduce new regulatory requirements, neither does it make any substantive change to the scope or effect of the definitions being restated. Its purpose is simply to maintain legal continuity and ensure that the prudential framework continues to operate as intended, as we complete the move to the Financial Services and Markets Act model.

I turn to the second statutory instrument, the Capital Requirements Regulation (Market Risk Transitional Provision) Regulations 2026. This instrument relates to the first part of the capital requirements regulation reform process—namely, the replacement of certain capital requirements regulations with rules set by the Prudential Regulation Authority, specifically in respect of Basel 3.1. Most of the work to deliver Basel 3.1 has already been completed and, following extensive consultation, the Prudential Regulation Authority has published the new rules that will apply to credit institutions and larger investment firms. These rules will ensure that the UK banking system is well capitalised, while protecting the ability of firms within scope to support economic growth, including the ability to provide finance to small businesses and infrastructure projects.

The UK remains committed to the full and consistent adoption of the Basel reforms. The Prudential Regulation Authority intends to implement most of the new Basel 3.1 rules from 1 January 2027, which will give UK-focused firms the regulatory certainty that they need to plan for the future and invest in the real economy. The timing of implementation in other major jurisdictions, however, remains unclear, particularly for certain market-risk requirements affecting banks that use internal models. This is particularly relevant for internationally active firms with cross-border trading activity. Implementing those specific requirements in the UK ahead of clarity elsewhere risks causing unnecessary operational complexity for internationally active firms, including the need to run different systems and processes in parallel across jurisdictions.

That is why the Government, in conjunction with the Prudential Regulation Authority, have decided to build in flexibility to the UK’s approach. The Government announced last year that implementation of new international model market risk requirements—the element of Basel 3.1 that will most affect the ability of UK banks to compete in international markets—will be delayed until 1 January 2028.

This instrument gives effect to that approach by disapplying the updated international model market risk rules during the transitional period from 1 January 2027 to 31 December 2027. During that period, firms will continue to apply the existing requirements. This will apply only to a small number of internationally active firms. This limited delay will allow the UK to flex the new internal model requirements for market risk, should that prove necessary, to ensure that the UK remains competitive with other major jurisdictions.

The instrument also provides the Treasury with the ability to extend the transitional period by making further regulations if international developments warrant it. Any such extension would be time-limited, subject to parliamentary scrutiny and used only if necessary to respond to material international developments.

These statutory instruments are limited in scope and carefully targeted. They restate important provisions in the capital requirements regulation which need to remain on the statute book to ensure that the system of prudential regulation continues to operate as intended. They also enable a flexible and pragmatic approach to Basel 3.1 implementation, minimising disruption and protecting the competitiveness of UK firms while uncertainty over implementation remains in other jurisdictions.

Taken together, these limited changes will help to deliver an agile and responsive prudential regime for banks and investment firms. I beg to move.

[Baroness Kramer (LD)]

My Lords, the definition of a statutory instrument is very technical, and I frankly have nothing to add to it. The capital requirements SI, in that it provides the temporary flexibility to see how other jurisdictions will behave, seems understandable and we on these Benches oppose neither. However, I have some questions for the Minister on the changes that underlie these SIs.

The Minister will know that undue risk taken in their trading activities by internationally active institutions played a significant role in the depth and complexity of the 2007-08 crash and the economic stagnation that followed. I have always been concerned that the regulators will be persuaded by their competitiveness and growth objective to relax the risk requirements on this sector, and these SIs seem to confirm that that is indeed the direction of travel. Am I right?

The finance industry, which is keen to get profits from risk so long as the losses fall on taxpayers, has certainly been calling for scope to take more risk, always assuring us that its genius means that risk is not really risk. The Treasury is strongly encouraging risk-taking in the name of growth, but its view is very short-termist and again there is very little understanding of the way in which risk takes impact.

This SI refers constantly to competitiveness with other jurisdictions, particularly the US and the EU. What assurances can the Minister give me that we have not now entered the world of the lowest common denominator, which of course has been the greatest fear of many of us as we have seen regulation continuously softened?

Some I have talked to have said that the regulator is easing capital requirements, as this SI illustrates, to help the big conventional institutions counter the surge in private credit as the lesser of two evils. Is that correct? Some have said that the reduction in the risk requirement is to counter the pressures that will flow from the EU capital requirements directive 6, which could significantly restrict the ability of non-EU banks to provide core banking services to EU clients from outside the EU, thereby encouraging the further relocation of operations and staff from London to EU locations. Is it correct that this is an anticipative countermeasure to what the Treasury sees coming?

Others are saying that President Trump’s determination to significantly deregulate US banks and financial activities means that we have to enter and accept an era of high-risk banking and serious financial volatility. I am very cautious when the risk profile of British banking is set by President Trump’s definition of what is risk and what is not, but is it the view of the UK Government and regulators that we have to adjust to be competitive with President Trump’s perspective on what risk should be undertaken in the financial sector? I am most concerned that increases in risk across the piece in the financial sector are not being acknowledged and are consequently treated with complacency. The various protections that we have in place are partial, many of them are untested and even those that do exist are consistently being undermined. Does the Minister share my anxiety?

[Baroness Neville-Rolfe (Con)]

My Lords, these instruments are being taken together and I shall address them accordingly in the light of the helpful introduction by the Minister. However, before turning to the specific provisions, I would like to raise some broader questions about the Government’s approach to financial services regulation.

First, on the matter of dynamic alignment with the European Union, there has been considerable speculation about whether the Government intend to pursue closer regulatory alignment with the EU in financial services. I would be grateful if the Minister could clarify the Government’s position on this. My understanding is that the City itself has moved away from enthusiasm for dynamic alignment, recognising that regulatory autonomy, properly exercised, offers competitive advantages that should not be lightly surrendered. There is also the important point about regulatory uncertainty, which the Minister mentioned and which we all know stifles growth and deters investment. Can the Minister therefore confirm whether dynamic alignment remains under active consideration in this area and, if so, in what form?

Secondly and relatedly, on progress with EU-related regulatory changes, the Government have previously indicated certain commitments regarding implementation timelines for their reforms. Can the Minister update the Committee on whether these commitments are being maintained and the proportion of EU-derived legislation that has already been replaced, and give some indication of the timescales involved?

I turn to the instruments themselves, which are technical but important for the direction of travel. The first instrument provides transitional relief for the new market risk internal model framework, inserting a one-year pause before full implementation, for reasons that the Minister has set out. The second instrument restates and domesticates EU capital requirements regulation definitions into UK statute, addressing what would otherwise be a gap when existing EU-derived definitions fall away.

I have several questions for the Minister, some of which come from a slightly different perspective to those from the noble Baroness, Lady Kramer. On the definitional instrument, any process of transposition carries some risk that meanings shift in translation. Has any assessment been made of that risk? Have the PRA and FCA reviewed the new definitions from an operational standpoint to identify any areas where domesticated versions could give rise to interpretive uncertainty?

On the transitional instrument, the fact that it is necessary at all implies something concerning about the readiness of firms, the complexity of the new framework or both. The Minister also mentioned developments overseas, but can he confirm whether the new market risk framework, once fully in force, will represent a material increase in compliance burdens? He will know that this is something I am always concerned about. What concrete steps are being taken during 2027 to ensure that firms will genuinely be ready for full implementation, other than finding themselves reaching for another transitional instrument in 12 months’ time?

I should also like to know how much additional regulatory capital banks are likely to have to hold under the new rules, when they are finally implemented. Last year, the Financial Policy Committee concluded— I thought, helpfully—that overall bank capital levels could be 1% lower. Did the FPC take the trading book changes we are discussing into account?

On the questions of regulatory capacity, is there a risk of a bottleneck in the PRA’s model approval process? Has the PRA assessed its own readiness to manage applications without that becoming a practical choke point? Alternatively, and if the answer to that is reassuring, is it because, given the complexity, only big banks with big trading desks will opt for model approval under FTRB?

Turning to broader international comparisons, how does the UK’s implementation timeline approach to approvals compare with other major jurisdictions? If our framework proves materially more demanding than equivalent regimes elsewhere, there is a genuine risk of competitive disadvantage in global wholesale markets.

I heard from some involved that our regulators feel good about implementing international rules, while the US—and, indeed, the EU—are less driven to comply quickly or in detail. Can the Minister give the Committee his assessment of where the UK stands in relation to its peers and reiterate his commitment to growth in financial services, which he mentioned in his introductory remarks?

Finally, on the power to extend the transitional period, can the Minister set out the criteria by which the Treasury would judge whether an extension is warranted and what signals would prompt the Government to consider using that power? The Minister said that it would be time-limited and used only if necessary, but I am not quite sure what that means.

The integrity of our prudential supervisory framework depends on sound legal foundations, as the noble Baroness, Lady Kramer, has always emphasised. These instruments appear to address that, but technical competence is not the same as strategic direction. As we build out a domestically rooted regulatory framework, the question of whether that framework is orientated toward competitiveness and growth, and not merely toward prudential conservatism, becomes pressing.

I was glad to hear the Minister mention both growth and the importance of SMEs, but the Committee will no doubt recall the report published by the Financial Services Regulation Committee on this subject and the good debate it prompted in Grand Committee, for which the Minister was sadly unable to be present. As several of us stated, the regulators are still too risk-averse and their culture needs to change. The report by that respected committee found that the competitiveness and growth objectives were “work in progress”.

In conclusion, is the Minister able to tell us how the Government are keeping up pressure on the regulators on these important objectives, and perhaps provide some live examples of what they are actually doing on competitiveness and growth?

[Lord Livermore (Lab)]

My Lords, I am grateful to both noble Baronesses for their extensive questions on these relatively modest SIs. I have some answers to the questions posed by the noble Baronesses. I do not have all the answers but I will, of course, write with the answers that I do not have to hand.

The noble Baroness, Lady Kramer, asked me, as we have debated many times in the past, about risk and growth. She knows my position on this. We are not undermining many of the incredibly important elements of a system that were put in place post financial crash. We are, though, seeking to tilt the system slightly more towards growth and away from regulating purely for risk.

The noble Baroness asked whether this was a race to the bottom to the lowest common denominator and whether we were undermining the strength of standards in the UK regulations. Of course, as she knows, it is an asset to the UK that the PRA is a global leader in promoting strong international standards, having played an important role in developing the Basel standards and now implementing those standards in the UK. The UK’s priority for Basel implementation has always been aligned implementation across the major jurisdictions, in particular the US. The UK is pressing ahead with implementation, as it has committed to do, while putting in place transitional measures to reduce operational complexity while the US finalises its approach.

The uncertainty surrounding the US implementation of Basel 3.1, particularly in relation to the market risk elements of their package, meant that a UK implementation date of 1 January 2027 would be materially out of line. Therefore, the decision was taken to delay the UK’s implementation of the market risk rules for new internal models to facilitate alignment of implementation dates as much as possible.

The noble Baroness asked whether we were adjusting to President Trump’s perspective. I do not believe that is the case at all. She asked me about delaying Basel to defend against CRD VI. The Treasury is aware of developments relating to Article 21c and is monitoring the position. The Treasury engages regularly with EU counterparts on a range of financial services and banking regulatory matters. Strengthening our relationships with international partners, including the EU, is a key focus of the Government’s financial services growth and competitiveness strategy.

The noble Baroness, Lady Neville-Rolfe, asked me initially about dynamic alignment with the EU. She will know that much of the commentary at the moment is speculation about the forthcoming King’s Speech, and I am obviously not going to comment on what may or may not be contained in it. Specifically on financial services and alignment with the EU, the UK is not directly linking our implementation with that of the EU. The UK has published its Basel package and continues to plan to implement a Basel package that aligns with international standards by 1 January 2030. However, if any jurisdiction releases proposals that may have a material impact on the competitiveness of the UK financial services sector, we will work closely with the PRA to address these impacts as needed.

The noble Baroness, Lady Neville-Rolfe, asked about definitions and whether they may be changed in any way. We consulted on the legislation at Mansion House last year and sought views from industry and the regulators to ensure that the effect of the definitions remained the same, and no issues were raised throughout that process. The noble Baroness also asked me about increasing admin burdens from market risk rules. The PRA has designed its Basel package to result in an overall capital level that remains stable and will be no more complex to comply with.

The noble Baroness also asked me how the PRA is ensuring that its model approval is effective. The PRA’s work is obviously supported by the Government. We support what it is doing to develop a more responsive and agile approach to banks, using its own internal risk models for capital requirements. This in turn could help improve competition and lending in a mortgage market, allowing banks to invest more into the UK. In March, the PRA set out changes to its approval processes for firms with existing models, including enhanced pre-application engagement, to help resolve difficult issues before formal submission, dedicated submission slots and a commitment to complete quality checks within four weeks and review complete applications within six months.

The noble Baroness also asked me about how UK banks will prepare for implementation. The UK has published proposals for Basel 3.1 which strengthen the resilience of our banking system and deliver the certainty banks need to finance investment and growth in the UK. This announcement is a positive example of the UK’s FSMA model of regulation, providing a package tailored to UK needs and a clear plan for implementation, giving banks the certainty they need to plan and invest for the long term.

The noble Baroness also asked me to restate my commitment to growth in financial services; I am more than happy to do that. I am aware that both noble Baronesses asked me a couple more questions that I do not have answers to immediately, but I promise I will write on the specifics of those. In the meantime, I commend the regulations to the Committee.

Motion agreed.

Middle East: Economic Update

Lord Livermore Excerpts

Thursday 26th March 2026 Lords Chamber

[Baroness Kramer (LD)]

My Lords, if this war with Iran continues, and especially if the Strait of Hormuz remains closed as we approach autumn, the global economy will be in serious trouble and the crisis will impact severely—directly on energy prices and, more broadly, on the cost of living. There was far too little in the Chancellor’s speech to give ordinary folk, never mind the markets, real reassurance. People are not naive. Simply to repeat the steps that the Government planned for the economy anyway in the pre-Iran war world is not sufficient.

The Chancellor indicated that any support beyond changes that are already in the system would be targeted at those who are most in need. What does that mean? Is it limited to the 6 million people who claim welfare or pension credit? Is it correct that the Treasury lacks the capacity to identify and assist those who do not qualify for those benefits but are still very low earners? What should the earnings threshold be for support? Will the Chancellor act immediately to, at the very least, zero-rate VAT on heating oil and liquefied petroleum gas? Will she introduce a proper price-cap mechanism for off-grid fuels? Will the Government also reverse their senseless cuts to home insulation programmes, which will be important to a wide range of people?

In her speech, the Chancellor failed to recognise the dire position of small businesses. Inflation in January pre-war was at 3%. We have found today that UK business activity is growing at its slowest pace since September, with a huge jump in manufacturing input prices. At such a time, tax, NICs and other blows from the Budget will fall on small businesses in April—a few days away. This Government seem cavalier about loading small businesses with additional costs, even though they are the backbone of our economy and jobs, and sustain our local communities.

The Government know that small businesses face a broken energy market that leaves most of them paying inflated energy prices. Will they now instruct the Competition and Markets Authority to investigate suppliers that are blocking small business access to the best energy deals? Will they now change the business rate system so that small businesses can improve their energy efficiency without facing business rate penalties? Will they adopt the idea of an energy security bank to provide low-cost loans for households and small businesses to invest in energy efficiency?

When the country is anxious, it needs a speech from the Chancellor that recognises and responds to the changed reality. Will someone from the Government please give that speech before anxiety becomes a self-fulfilling prophecy?

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

I am grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their comments and their questions. As it is the last day before Recess, I wish both noble Baronesses a very happy Easter in advance.

The noble Baroness, Lady Neville-Rolfe, began her comments by welcoming what we are doing on nuclear, and I am grateful for her support on that and for her support as we implement the Fingleton review. As she knows, we have already begun to rewrite the story on nuclear for this country: we have begun construction at Sizewell C, we have agreed an extension to Sizewell B and we are due to sign the contracts on the UK’s first small modular reactor in Anglesey in partnership with Rolls-Royce. The Chancellor has also confirmed that we will legislate to implement the Fingleton review on nuclear and wider infrastructure in the next Session and has also written to industry and to regulators to get them to set out their plans to fast-track its implementation.

I was disappointed to see the noble Baroness indulge in some anti-EU rhetoric, which I know she does not actually believe. I think it makes absolute sense at this time of global instability that we deepen our economic relationship with our closest partners. It is clear that that is where maximum growth will come from for this country.

The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, spoke about the Competition and Markets Authority. It has stepped up its statutory monitoring of fuel prices and will publicly update on fuel pricing later this month. It is also working with Government to monitor the cost of household essentials, including groceries, for price rises and disruption. It has launched a market study into heating oil on top of its existing work to identify and tackle breaches of consumer law in the heating oil market. The Chancellor also announced this week that we are going further to make sure it has the bite it needs to detect and crack down on price gouging, bringing in a new anti-profiteering framework and considering time-limited targeted powers for the CMA and other regulators as needed. Yesterday, the Chancellor and the Business Secretary both met and convened the regulators’ council to discuss its work to protect consumers and small businesses, as the noble Baroness, Lady Kramer, mentioned.

On oil and gas, I agree with what the noble Baroness, Lady Neville-Rolfe, said. We will ensure the North Sea oil and gas plays an important role in our economy for years to come. Last week, the Chancellor met with the North Sea industry leaders to discuss their role in jobs, investment, growth and energy supply. The noble Baroness also mentioned energy security. She did not mention the fact that the last Government’s failure to invest in energy was a failure to protect our country. But, through determined long-term action, this Government are taking control of our own energy supply. We are investing in renewables, lifting the ban on onshore wind, streamlining grid connections, bringing the next renewables auction forward to this July and driving forward negotiations on the UK’s participation in the EU internal electricity market. We also ran the biggest ever floating offshore wind auction last year.

As I mentioned already, the noble Baroness, Lady Neville-Rolfe, welcomed nuclear, and we must guarantee that our domestic oil and gas industry can play a crucial role as well for years to come. So we are investing in tie-backs to make the most of existing production facilities. The Chancellor has also announced that she has instructed officials to develop plans to back critical energy projects with indemnities if their planning consent is challenged in the courts, so that we can build the infrastructure that we need.

The noble Baroness, Lady Neville-Rolfe, mentioned the OECD projections out this morning. As she knows, the war in the Middle East is not one that we started, nor is it a war that we have joined, but it is a war that will have an impact on our country. The OECD’s projections are highly sensitive to the duration of the shock and reflect the impact of higher energy prices, which the UK, as she knows, is more susceptible to. But, in an uncertain world, we have the right economic plan. The decisions we have taken have put us in a better position to protect the country’s finances and family finances from global economic instability.

Both noble Baronesses touched on the economic situation that we find ourselves in. The full economic impact of the conflict remains uncertain, but the spring forecast showed that the Government have the right economic plan, that we enter this period of global uncertainty with the fundamentals of our economy strong and that we are more prepared for a more volatile world. We have cut inflation, which now stands at 3%—a lower base than at the outset of Russia’s illegal invasion of Ukraine. We have prioritised growth to drive up living standards. The OBR forecast before this conflict showed that GDP per head was set to grow more than was expected at the Budget, with growth of 5.6% over the course of this Parliament. We have stabilised the public finances, having already reduced the deficit by £20 billion this year from 5.2% to 4.3% of GDP—its lowest level for six years and the fastest reduction in the G7. Of course, these forecasts predate the current conflict in the Middle East, but Britain today is in a stronger position to withstand whatever uncertainty comes our way.

The noble Baroness, Lady Noble-Rolfe, spoke about defence. We are delivering the biggest sustained increase in defence spending since the Cold War. The Chancellor has approved access to the Ministry of Defence to use the special reserve to deploy additional capabilities to the Middle East, meaning that the net additional cost of these operations will be funded by the Treasury. The defence investment plan will be published in due course. We are investing £270 billion over this Parliament, after years of our Armed Forces being neglected under the previous Government. We will increase defence spending to 2.6% of GDP from 2027, and we are increasing spending on defence by £5 billion in this year alone.

Finally, both noble Baronesses spoke about energy bills. The noble Baroness, Lady Neville-Rolfe, asked me what “responsible” means. It means that, as we respond to this crisis, we should learn from the mistakes of the past. The previous Government pushed up borrowing, interest rates, inflation and mortgage costs with an unfunded, untargeted package of support under Liz Truss that gave the most support to the wealthiest households. Between 2022 and 2024, under the last Government, households in the top income decile received an average of £1,350 of direct energy bill support. That left us with high levels of national debt—a cheque written then for a bill that is still being paid today. Contingency planning is taking place for every eventuality so that we can keep costs down for everyone and provide support for those who need it most, acting within our iron-clad fiscal rules to keep inflation and interest rates as low as possible.

[The Deputy Speaker (Viscount Colville of Culross) (CB)]

My Lords, the noble Lord, Lord Campbell-Savours, is taking part remotely. I invite the noble Lord to speak.

[Lord Campbell-Savours (Lab) [V]]

My Lords, on the background to this strategy and the shock referred to by the Minister, as post-conflict Iran at some stage moves from regional threat into a period of post-conflict reconstruction, do we intend to stand by and watch as Israel takes advantage of the situation by accelerating its programme of land annexation, thereby further promoting regional insecurity and international tension? These conditions challenge the very recovery projects and programmes we are funding, which were identified in the Statement. We all support Israel in its hour of need, but should we not be demanding in response and end to the settlement expansion, as it challenges the stability we all want? It will destabilise recovery.

[Lord Livermore (Lab)]

I am pleased to say that this is a Statement about the economic situation, and I do not think anyone would ever put me in charge of diplomacy. I am not going to stray into matters that are much more properly a subject for my colleagues in the Foreign Office, so I shall leave it there.

[Lord Fuller (Con)]

My Lords, I am a 40-year veteran of the fertiliser industry, and two weeks ago I raised for the first time the prospect of shortages of ammonia causing a fertiliser-led food security shock in this country. Last week, I highlighted the effects of the Iran war on our foundational chemical industries based on soda ash, aniline, vinyl, chlorine, ethylene and others. This morning, the Financial Times’ leading article echoes my concerns, and elsewhere there are reports that the EU is backpedalling fast on new carbon taxes and reviewing the emissions trading system. When are the Government going to announce a delay to the counterproductive food chain taxes that will turn an inflation disaster into a cost-of-living catastrophe by driving up the cost of beer, bread, biscuits, milk and cheese to new heights in short order?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. I know he has a great deal of expertise in the specific sectors that he mentioned. Of course, the Treasury and the Department for Business and Trade are constantly monitoring the impact of this crisis on those sectors and we will take action if necessary. It is not currently our intention to take the specific measures that he mentioned but, as I say, we will be reviewing and monitoring those sectors very closely.

[The Lord Bishop of Norwich]

My Lords, I welcome this Statement and join the Chancellor speaking in the other place in paying tribute to our Armed Forces. In particular, I welcome support for those families and households hardest hit; however, I share the concern of the noble Baroness, Lady Kramer, for small businesses, and extend that with a question around what we are doing to support the charitable sector: for example, from my recent experience, in the transport costs associated with food banks, in heating warm hubs and so on. We have a responsibility to care for those who care for others, and I ask what the Government are doing to support that work.

[Lord Livermore (Lab)]

I am grateful to the right reverend Prelate for his question and I agree with him and the noble Baroness, Lady Kramer, on the importance of small businesses to our economy. As the Chancellor said, we do not yet know what the full impact of this conflict will be, so we must be agile in responding appropriately at each moment. It remains the case that the best way to protect families and businesses, large and small, and charities, which the right reverend Prelate mentioned, is by the rapid de-escalation of this conflict.

He mentioned transport costs and we have already taken action: we have extended the fuel duty cut of 5p and have pushed out the cheaper fuel finder, empowering people to avoid rip-off prices. We are chasing down the last few filling stations, so that we can reach 100% compliance with that. He will also know that, when wholesale kerosene prices more than doubled overnight, we stepped in within a matter of days with £53 million of support for those who needed it most. From next week, households will benefit from £150 off their energy bills, thanks to the action that we took in the Budget. Also, the price cap is giving households certainty on their bills until July, ahead of the winter months when people use 78% of their gas.

[Lord Redwood (Con)]

My Lords, the Government say that they will directly reduce food bills by joining the EU SPS. Can the Minister give us a forecast of how much cheaper food is going to be? It certainly never worked when we were in the EU and it is a very complicated and expensive scheme.

[Lord Livermore (Lab)]

No, but I am certain that it will lead to lower food prices, just as I am certain that the Brexit that the noble Lord championed has led to all manner of difficulties for consumers, households and businesses. I am sorry that he is still unable to concede that very important point. As I have said before, at a time of global instability, getting closer to and building a deeper economic relationship with our closest partners is in our national, security and economic interest.

[Lord Livingston of Parkhead (Non-Afl)]

My Lords, in coming back to the comment on oil and gas made by the noble Baroness, Lady Neville-Rolfe, the growth of green energy and the growth of oil and gas are often described as somehow at odds with each other. It is quite clear that we need both for our energy security. We should grow our green energy while oil and gas remain transitional fuels. Therefore, as Norway is doing, the UK should grow its energy and gas supplies so that we can support our tax base and improve our energy security. It may not affect prices, but it is an important role that the UK can play not just for itself but for other countries, and it is not at odds with the energy transformation.

[Lord Livermore (Lab)]

I agree with every word that the noble Lord said. We will ensure that North Sea oil and gas play an important role in our economy for years to come. Last week, the Chancellor met with North Sea industry leaders to discuss their role in jobs, investment, growth and energy supply. As the noble Lord and I have said, and I agree with him, we are investing in renewables at the same time. We are lifting the ban on onshore wind and streamlining grid connections. We ran the biggest ever floating offshore wind auction last year and have brought forward the next renewables auction to this July, and we are driving forward negotiations on the UK’s participation in the EU internal electricity market.

[Lord Eatwell (Lab)]

My Lords—

--- Later in debate ---

[Lord Eatwell (Lab)]

My Lords, could the Minister confirm the number in the OBR report which accompanied the Spring Statement that public sector real investment will increase by 12% this year? Could he explain to what degree that 12% is repairing the damage done by the previous Administration and increasing productivity for the future?

[Lord Livermore (Lab)]

I am grateful to my noble friend for bringing this to the House’s attention. I absolutely agree with what he said and am happy to confirm the figure that he set out. As he knows and we all know, investment was a particular failure of the previous Government over the last 14 years. When we won the election, private sector investment was the lowest in the G7. Public sector investment was no better and was set to fall again, from 2.5% to 1.7% of GDP. We have increased capital investment by £120 billion over this Parliament, ruling out a return to the austerity of the past. As my noble friend said, that is incredibly important for increasing growth and productivity in the economy.

The OBR has estimated that the eventual growth impact of this increase in capital investment will add 1.4% to GDP. Cutting this now and returning to austerity would be the worst thing that we could do for growth and the very definition of short-termism, yet that is precisely what previous Chancellors with previous fiscal rules have done. In the years following the financial crisis, austerity took demand out of the economy when it was most needed, undermining investment in critical infrastructure, weakening productivity and choking off growth. We will not repeat the mistakes of the past.

[Earl Russell (LD)]

My Lords, the Climate Change Committee was clear last week that the cost of another oil price crisis would be greater than the cost of reaching net zero by 2050, so these Benches fully support the need to roll out renewables at a faster rate. However, we continue to have high energy bills and there is a need to decouple gas, so I ask the Minister what further action the Government are considering in this space, so that we can bring down energy bills.

The Minister spoke about the need to target support so that it reaches the most vulnerable. I briefly want to ask whether he agrees that there is a need for the Government to do a greater piece of work on data, so that they can identify those people who are in most need of support with energy bills.

[Lord Livermore (Lab)]

I am grateful to the noble Earl for his question and his consistent support for the action we are taking on renewables. He is absolutely right that it is important that the Government enable the country to take control of its own energy supply. As he says and I have said, we are continuing to invest in renewables by lifting the ban on onshore wind and running the biggest ever floating offshore wind auction last year.

On household energy bills, I have said that contingency planning is taking place for every eventuality. I agree with what he says about data, and of course that work is ongoing. It is very important that we keep costs down for everyone, while providing support for those who need it most and acting within our fiscal rules to keep inflation and interest rates as low as possible.

[Lord Bridges of Headley (Con)]

My Lords, I hope I am not going to test the noble Lord’s legendary diplomatic skills in answering this question but, last year, the Prime Minister said that “security and defence” were

“not one priority amongst many others but the central organising principle of government. The first thought in the morning, the last at night, the pillar on which everything else stands or falls”.

In light of the Statement that the Chancellor delivered the other day, could the noble Lord confirm that that statement from the Prime Minister is still the case and that defence is the overall organising principle of government? Can he therefore explain when we will see a rapid rise in defence spending and why current forecasts show a welfare spending increase way above that of defence?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. He knows that the previous Government increased welfare spending by £88 billion in their last five years, which is quite a legacy for us to have inherited. He also knows that we are delivering the biggest sustained increase in defence spending since the Cold War. As I have said already, the Chancellor has approved access for the Ministry of Defence to use the special reserve to deploy additional capabilities in the Middle East.

He asked me how we will increase defence spending. We are investing £270 billion over this Parliament, after years of our Armed Forces being neglected under the previous Government. We will increase defence spending to 2.6% of GDP from 2027 and we are increasing spending on defence by £5 billion in this year alone. Our ambition is to reach 3% in the next Parliament, when fiscal and economic conditions allow. We are not going to put an arbitrary date on that percentage until we know exactly where the money is coming from.

I should also say that, this week, the Chancellor announced a new defence procurement mechanism. A core group of NATO allies—Finland, the Netherlands, the UK and other partners—have announced that they are exploring setting up a new mechanism for financing by 2027. The aim is to aggregate demand to drive joint procurement, accelerate defence investment and increase the availability of critical capabilities.

[Baroness Primarolo (Lab)]

My Lords, I am grateful for my noble friend the Minister’s Statement, for the steps the Government are taking, and that they will keep under review the impact on families and businesses, particularly small businesses. I return to the question of energy security. Is my noble friend in a position to give us more details on the work being done on the grid infrastructure to ensure its efficient use, speedily bringing down energy prices as we shift to more renewable sources? Will the Government consider returning to their considerations on zonal pricing as a way of bringing energy bills down?

[Lord Livermore (Lab)]

I am grateful to my noble friend for her question on energy security. As she rightly says, energy security for this country is about making the best use of all the resources at our disposal. It is why we are investing more in nuclear, as the noble Baroness, Lady Neville-Rolfe, said at the outset: we are investing in the construction at Sizewell C and have agreed an extension to Sizewell B, and we are due to sign the contracts on the UK’s first small modular reactor in Anglesey in partnership with Rolls-Royce SMR. It is why we must, as several noble Lords have said already, make the most of our oil and gas reserves—we will ensure that North Sea oil and gas plays an important role in our economy for years to come—and why we are meeting with industry leaders to discuss their role in jobs, investment, growth and energy supply. It is, of course, why—again, as several noble Lords have said—we must make the most of our transition towards renewables and why we should invest heavily in those, as we are doing. We are taking action, as my noble friend says, to streamline grid connections, and that work goes on. We are undertaking a series of very important initiatives in that respect. On zonal pricing, as I understand it, the Department for Energy Security and Net Zero has said that that is not the direction that it intends to go in.

[Lord Hannay of Chiswick (CB)]

My Lords, will the Minister tell us whether the Treasury has made any estimates of how much oil, in value, Iran needs to export before it drops below a way of maintaining any form of international economic viability? Has the Treasury estimated how Iran will cover its shortfall in foodstuffs and such materials that are, and have always been, needed by Iran beyond those that it grows itself?

[Lord Livermore (Lab)]

Those are both very interesting questions. I cannot say that I am aware of estimates on either of those—they certainly have not crossed my desk—but I am more than happy to look into them for the noble Lord. If I find anything, I shall write to him.

[Lord Lancaster of Kimbolton (Con)]

My Lord, I declare my interest as director of the Army Reserve. I listened carefully to the Minister’s Statement about the increase in defence spending, which is, of course, most welcome. Can the Minister perhaps then confirm to me that, next year, the Ministry of Defence will not be required to make significant in-year savings?

[Lord Livermore (Lab)]

As I think I have said clearly, the Chancellor has approved access for the Ministry of Defence to use the special reserve to deploy additional capabilities in the Middle East, meaning that the net additional costs of these operations will be funded by the Treasury.

[Lord Tyrie (Non-Afl)]

My Lords, as I understand it, the Government’s commitment on defence spending is to increase it from the 2.3% of GDP that it inherited to 2.6% of GDP, which the Minister has reiterated now. In the 1930s, in the five-year period after 1933, defence spending in this country increased from about 2.3% to 6.8%, which is a trebling. Do the Minister and the Government appreciate that, to deal with the scale of the threats with which we are now faced, we need to take dramatic action on defence—to increase it at considerable pace, far faster than the 0.3% to which the Government are committed at present?

[Lord Livermore (Lab)]

I think I have set out very clearly the pace at which we are increasing and will increase defence spending. From 2027, we will increase defence spending to 2.6% of GDP, and we are increasing spending on defence by £5 billion in this year alone. Our ambition is to reach 3% in the next Parliament, when fiscal and economic conditions allow.

[Viscount Trenchard (Con)]

My Lords, following on from the noble Baroness’s question about grid capacity and upgrading the grid, does the Minister not agree that the more small nuclear we can introduce instead of intermittent renewable sources—such as onshore and offshore wind—the better, because it is firm baseload power? Also, it reduces the need to upgrade the grid because, for example, high-temperature gas-cooled reactors—50-megawatt reactors—can be placed over the fence, alongside data centres or industrial clusters. Our Japanese friends have almost given up on us and are now considering working with different partners on commercialising their high-temperature gas-cooled reactor technology, which was originally a British invention. When will the Government confirm their commitment to early deployment of this very effective and useful technology?

[Lord Livermore (Lab)]

I am grateful to the noble Viscount, who clearly has a great deal of expertise in this matter. I agree with everything he said, certainly in the first part of his question. SMRs and AMRs being deployed in the UK will form an incredibly important part of our energy mix. We have set out and published a framework so that we can see more private sector investment in exactly those technologies. As he says, AMRs in particular can provide very high heat to decarbonise a lot of our industry, which is incredibly important. They do not need to connect to the grid, so they do not use up grid connections. That is exactly the kind of technology that we would like to see deployed more. As I said, we have published a framework so that we can see more private investment in exactly those technologies.

[Lord Leigh of Hurley (Con)]

My Lords, while the Minister is not transferring to the Diplomatic Service—we would miss him greatly—there does seem to be a sense of denial in the question by the noble Lord, Lord Eatwell, and the Minister’s answer. GDP is now expected to expand by just 0.7% this year, according to the OECD interim economic outlook, which he will know was published today. That is down by 0.5 percentage points from the organisation’s prior prediction of 1.2%. This would put the UK second last in the G7 growth table and represents the largest downgrade in growth projections for any G20 economy. Rather than denial, we need to face reality. I am particularly concerned that, in the debate on this matter in the other place earlier this week, the Chancellor kept referring to the fact that borrowing will fall. Does the Minister think she really understands the difference between deficit and debt?

[Lord Livermore (Lab)]

Yes, I am absolutely certain that she understands the difference between those two things. As I have said already, the war in the Middle East is not one that we started nor one we have joined, but it will have an impact on our country. The OECD’s projections are highly sensitive to the duration of the shock and reflect the impact of higher energy prices, to which the noble Lord knows we are more exposed than many other countries. But I am absolutely certain that, in an uncertain world, we have the right economic plan. The decisions we have taken have put us in a better position to protect the country’s finances and family finances from global instability.

HBOS: Fraud Investigation

Lord Livermore Excerpts

Thursday 26th March 2026 Lords Chamber

[Lord Sikka]

To ask His Majesty’s Government what assessment they have made of the adequacy of Lloyds Bank’s investigation of fraud at HBOS; and when they expect Dame Linda Dobbs’s review of the fraud to be completed and published.

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

My Lords, in 2017, Lloyds Banking Group independently launched the Dobbs review to assess the handling of the fraud, which took place in the early 2000s, and to determine what it knew or should have known and whether it reported it appropriately to the regulatory authorities. The Government understand that drafting is under way, and the review’s findings will be shared with the Financial Conduct Authority once completed, which will then consider what actions are appropriate to take.

[Lord Sikka (Lab)]

My Lords, I thank the Minister for his reply. It would be helpful to have a bit of background. Fraud at HBOS goes back to 2002. The regulators did little. In 2017, the Thames Valley Police and Crime Commissioner secured six criminal convictions. Still the FCA, SFO and the police did not fully investigate. The Government left it to Lloyds Bank, which owns HBOS and which then appointed Dame Linda Dobbs to investigate and prepare a report. There has been no report to date. Victims are still awaiting compensation, and many have died since. Does the Minister agree that it is a government duty to deliver justice to victims of bank fraud?

[Lord Livermore (Lab)]

The Government share the frustration at how long processes relating to this issue are taking to conclude. In 2017, Lloyds Banking Group independently launched the Dobbs review to assess the handling of the fraud, what it knew or should have known, and whether it reported it appropriately to the regulatory authorities. The noble Lord mentioned the FCA. The FCA has undertaken an investigation into this matter historically and has taken enforcement actions. The FCA previously investigated and, with the PRA, jointly reported on the failure of HBOS. There was a criminal investigation resulting in six convictions in 2017. The FCA investigated knowledge of these matters with HBOS and its communications with the FCA after the initial discovery of the misconduct. Lloyds Banking Group has informed the Government that it is providing all the assistance and resources that Dame Linda and the review have requested, and that drafting is under way. It has reiterated the point that it will make the findings of Dame Linda’s review available when completed and will co-operate with Parliament. The Government inherited a series of processes that are independent of government and not accountable to us or the FCA. With our having inherited that legacy, it is right that the Dobbs review, alongside the work of Sir David Foskett, is allowed to conclude.

[Baroness Kramer (LD)]

My Lords, I am going to press the Minister to take a stronger position on this issue, which was £1 billion of criminal financial manipulation by HBOS Lloyds. The FCA spectacularly failed to investigate, initiating a report only under strenuous insistence from Vince Cable. It then misrepresented, to this House and others, the conclusions of that report—as was exposed when the original document was leaked to the Treasury Select Committee. Given all that, will the Government now back Dame Meg Hillier, who has demanded that when this report is completed, it is published in full and unredacted, which is not the position that Lloyds appears to be taking?

[Lord Livermore (Lab)]

As I said before, the Government inherited a series of processes that are independent of government and not accountable to us or the FCA. With our having inherited that legacy, it is right that the Dobbs review, alongside the work of Sir David Foskett, is allowed to conclude. Lloyds Banking Group has informed the Government that it is providing all the assistance and resources that Dame Linda and the review have requested and that drafting is under way. It has reiterated the point that it will make the findings of Dame Linda’s review available when completed and will co-operate fully with Parliament.

[Lord Tyrie (Non-Afl)]

Will the Government reconsider their decision not to publish the report in full? I fully support what the noble Baroness, Lady Kramer, has said. I chaired the Treasury Select Committee through a substantial period during which these issues developed. It really is wholly unacceptable, so long after the development and exposure of this fraud, that people are not receiving compensation. We now need the publication and full transparency of that report.

[Lord Livermore (Lab)]

As I have previously said, Lloyds Banking Group has reiterated the point that it will make the findings of Dame Linda’s review available when completed and will co-operate fully with Parliament. The noble Lord mentioned compensation. As I understand it, the independent Foskett Panel was established by Lloyds Banking Group in 2020, in part following engagement with the FCA and the Treasury, to determine the right level of compensation in individual cases. That review is independent. I understand that it has made its determinations and settled compensation for the majority of victims, but there are a few outstanding cases and I very much hope that this work will conclude in the near future.

[Lord Woodley (Lab)]

My Lords, can the Minister assure the House that the victims of this incredible £1 billion HBOS fraud will have the opportunity to challenge and correct the published version of the Dobbs review?

[Lord Livermore (Lab)]

I am afraid I do not know the answer to my noble friend’s question. I will very happily check and write to him in due course.

[Baroness Neville-Rolfe (Con)]

My Lords, the truth is that this was an appalling state of affairs, with many small and medium enterprises driven into insolvency as a result of the HBOS Reading fraud. Following the 2017 convictions which the Minister has mentioned, courts made several Proceeds of Crime Act confiscation orders—for example, a £10 million order against David and Alison Mills—yet their criminal benefit was assessed to be far higher, at around £69 million. Can the Minister tell us how much has been recovered and returned to victims to date? Will the Minister commit to a victim-first distribution plan for any further recoveries?

[Lord Livermore (Lab)]

As I said to the House previously, the independent Foskett Panel was established by Lloyds Banking Group in 2020, in part following engagement with the FCA and Treasury, to determine the right level of compensation in individual cases. As I said before, the review is independent. I understand that it has made its determinations and settled the compensation for the majority of victims, although there are a few outstanding cases. I hope this work will be able to conclude in the near future.

[Lord Davies of Brixton (Lab)]

I speak as an officer of the All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services. The Government have placed considerable reliance on developing financial services as an engine of growth in our economy. Does my noble friend the Minister agree that transparent and clear anti-fraud activity is an essential element and that any doubts about the effectiveness of our anti-fraud policy will weaken the opportunities open to us. As the noble Baroness, Lady Neville-Rolfe, said, the extent of the pain and problems caused by this fraud should not be underestimated. Somewhat oddly, it only really came to light because of the work of the Thames Valley Police. We really do need to get better on this.

[Lord Livermore (Lab)]

My noble friend is far more expert in these matters than me, and I think I agree with what he said. As I said, the Government share the frustration at how long processes related to this issue are taking to conclude. We very much hope that the findings of Dame Linda Dobbs’ review will be available very shortly. My noble friend mentioned the importance of the financial services sector, and I would like to reiterate that. The financial services sector is critical to the ambitions of our country; it is one of the largest and most productive sectors of the UK, worth around 9% of total economic output, employing 1.2 million people across the UK. So, I very much endorse what my noble friend says.

[Lord Stirrup (CB)]

Does the Minister accept that some of the difficult political challenges facing western societies today are a consequence of the destruction of the faith that people have in the effectiveness and fairness of the socio-political economic model following the financial crash of 2007 and the economic consequences? Therefore, issues such as the HBOS scandal are not just one-offs; they are not just a matter of dealing with certain financial consequences. If, as a society, we do not clearly address these things, the difficult political challenges that we currently see will continue and, indeed, get worse.

[Lord Livermore (Lab)]

It is very difficult to disagree with what the noble and gallant Lord says, and I am sure I agree with much of it. Substantial protections were put in place in terms of financial services after the financial crisis that he described, and those protections remain; that is, adherence to international standards, ensuring robust NRA remains in place, commitment to ring-fencing and the new FPC, FCA and PRA—that whole architecture. The reforms that were put in place post financial crisis are incredibly important in ensuring ongoing confidence in our financial services sector.

[Lord Hamilton of Epsom (Con)]

My Lords, can the Minister now answer the question from the Conservative Front Bench? How much money has been got back from the fraudsters and how much of that has ended up with the victims of this appalling crime?

[Lord Livermore (Lab)]

As I said before, that is a matter for the independent Foskett Panel, which was established by Lloyds Banking Group in 2020. The review is independent. I understand that it has made its determinations and settled the compensation for the majority of victims, although there are, of course, a few outstanding cases. I hope this work will be able to conclude in the very near future.

National Insurance Contributions (Employer Pensions Contributions) Bill

Lord Livermore Excerpts

Consideration of Commons amendments and / or reasons
Wednesday 25th March 2026 Lords Chamber

Moved by

[Lord Livermore]

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

1A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

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

My Lords, in moving this Motion, I will also speak to Motions B, B1, C, D, E, F, F1, G, G1, H, H1, J, K, L, M and M1. The other place has disagreed with Amendments 1 to 12, as they would alter the financial arrangements made by the Commons. The other place did not offer any further reason, trusting that this reason is deemed sufficient.

While the Government disagree with the substance of these amendments, I am pleased that we have been able to discuss and debate these issues. I am very grateful to the noble Baronesses, Lady Neville-Rolfe, Lady Kramer and Lady Altmann, and the noble Lords, Lord Altrincham, Lord Leigh of Hurley, Lord Fuller, Lord Mackinlay and Lord Londesborough, for ensuring that these important matters have been addressed. On that basis, I hope that noble Lords are content not to insist on these amendments.

I turn now specifically to Amendments 1B, 1C, 2B, 2C, 6B, 6C, 7B, 7C, 8B, 8C, 12B and 12C, tabled by the noble Baroness, Lady Neville-Rolfe. These amendments would make commencement of the Act contingent on the publication of impact assessments on basic rate taxpayers, employees making student loan repayments and small and medium-sized enterprises.

Before addressing each of these in turn, it may be helpful if I remind your Lordships’ House of the documents that have already been published by the Government and the Office for Budget Responsibility. The tax information and impact note sets out the expected impacts of the policy on individuals, employers and the Exchequer. The policy costing note sets out details on the costings of the measure, including the tax base, static costing and a summary of behavioural responses expected by employers and employees.

The Office for Budget Responsibility published its economic and fiscal outlook, which provides the OBR’s independent scrutiny of the Government’s policy costings. The OBR also published a supplementary forecast note which provided additional information it received prior to last year’s Budget to further increase the transparency of this measure.

I should also like to remind noble Lords that the expected behavioural impacts of this measure have been set out in the policy costing note and both the OBR’s economic and fiscal outlook and supplementary note. Both the Government and the OBR have been transparent about the expected behavioural responses by employers and individuals.

I turn first to amendments which make the commencement of the Act contingent on the publication of economic and behavioural impact assessments on basic rate taxpayers. As set out in the Budget document, the £2,000 cap means that 74% of basic rate taxpayers who use salary sacrifice will be entirely unaffected by these changes. The remaining proportion of basic rate taxpayers who have contributions above the cap will still get national insurance contributions relief for the first £2,000 of contributions made by salary sacrifice in addition to the full income tax relief that is available to all employee pension contributions. Further, 87% of affected salary sacrifice contributions above the cap are forecast to be made by higher and additional rate taxpayers. This is a fair and pragmatic reform, and the distributional effects of it are clear. On this basis, the Government do not consider a separate and additional impact assessment on basic rate taxpayers to be needed.

I turn to amendments which make commencement of the Act contingent on the publication of economic and behavioural impact assessments on individuals repaying student loans. It is right that we focus on outcomes for younger generations, particularly given that, over the past 14 years, they have seen their fees trebled, interest rates increased and maintenance grants scrapped. Importantly, though, the £2,000 cap means that young graduates are broadly unaffected. In fact, the £2,000 cap means that 90% of graduates under the age of 30 repaying student loans who are saving into their pension are completely unaffected by this measure. Both this and the prior set of amendments make a broader point about pension savings and pensions adequacy for these populations. This is a real challenge for our pensions system, but the data is entirely clear that today’s salary sacrifice is not the answer. As discussed at earlier stages, salary sacrifice existed in the 2000s and early 2010s, yet there were falls in private sector pension saving during that period.

There has been a clear consensus throughout our debates that the key factor that has led to an increase in saving in recent years has been automatic enrolment. As a result, more than 22 million workers across the UK are now saving each month.

Although we all share a commitment to improving pensions adequacy, many groups at highest risk of undersaving, including the self-employed, lower earners and women, are not the most likely to benefit from salary sacrifice. Only one in five self-employed people save into a pension, but they are entirely excluded from salary sacrifice. Low earners are most likely not to be saving, but higher earners are more likely to be using salary sacrifice. Many women are undersaving for retirement, but many more men use pension salary sacrifice.

The pensions tax relief system remains hugely generous and there remain significant incentives to save into a pension. The £70 billion of income tax and national insurance contribution relief which the Government currently provide on pensions each year will be entirely unaffected by these changes.

I turn to the amendments seeking an impact assessment on small and medium-sized enterprises and charities. The Government agree on the importance of supporting small and medium-sized businesses and charities, but small businesses are much less likely to use salary sacrifice than larger businesses. Furthermore, the £2,000 cap means that 90% of employees in SMEs making pension contributions through salary sacrifice will be entirely unaffected. Indeed, the largest benefits from uncapped salary sacrifice accrue to larger businesses, not smaller ones. In practice, the changes in the Bill will help level the playing field between small businesses and their larger competitors.

The amendment also requires assessment of the expected impact on business and compliance costs. This analysis is already set out in the tax information and impact note. As set out in that document, the administration of this measure is estimated to result in a one-off cost of £75 and an ongoing £99 per business per year for those using salary sacrifice.

The Government recognise that these changes will impact those currently using salary sacrifice. That is why we chose a long lead-in time of April 2029 to give employers maximum time to prepare for these changes. As mentioned previously, HMRC is engaging with employers, payroll providers and software developers to deliver the changes in the most suitable way with the fewest administrative burdens for businesses of all sizes that use salary sacrifice. For the reasons I have set out, I respectfully ask that the noble Baroness does not press her Motions. I beg to move.

Motion A1 (as an amendment to Motion A)

Moved by

--- Later in debate ---

[Lord Fuller (Con)]

My Lords, once again, taken together, this is a further insult to working people. As we have heard this evening, it is about not the fat cats but the youngsters and the poorer paid who are starting off and trying to do the right thing, making their way in the world. There is already intergenerational unfairness, and this Bill amplifies it and makes it worse. The Government have a tin ear. When they say they are trying to look after the youngsters, they are speaking with a forked tongue. Youngsters just want a break, but this Government are beating them with a stick. We have got to stop it.

[Lord Livermore (Lab)]

My Lords, I am grateful to all noble Lords who have spoken in this debate.

On the topic of impact assessments, I remind noble Lords of the information that we have already published. The tax information impact note sets out the expected impacts of the policy on individuals, employers and the Exchequer. The policy costing note sets out detail on the costing of the measure, including the tax base, static costing and a summary of behavioural responses expected by employers and employees. The Office for Budget Responsibility published its economic and fiscal outlook, which provides the OBR’s independent scrutiny of the policy costing. The OBR also published a supplementary forecast note which provides additional information it received prior to last year’s Budget.

I also remind noble Lords that the expected behavioural impacts of this measure have been set out in the policy costing note and both the OBR’s economic and fiscal outlook and supplementary note. Both the Government and the OBR have been very transparent about the expected behavioural responses by employers and individuals.

The noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Londesborough, asked about the 2029 implementation date. As I have said already, we chose a long lead-in time of April 2029 to give employers maximum time to prepare for the changes. As I have mentioned before, HMRC is engaging with employers, payroll providers and software developers to deliver the changes in the most suitable way with the fewest administrative burdens for businesses of all sizes which use salary sacrifice.

The noble Lord, Lord Leigh of Hurley, spoke about small and medium-sized enterprises. I say again that the £2,000 cap means that 90% of employees and SMEs making pension contributions through salary sacrifice will be entirely unaffected. The noble Lord also mentioned students. He is absolutely right; as I said before, it is right that we focus on outcomes for younger generations, particularly given that, over the past 14 years, they saw their fees trebled, interest rates increased and maintenance grants scrapped. The £2,000 cap means that 90% of graduates under 30 repaying student loans who are saving into their pension are completely unaffected by this measure.

These are fair and balanced reforms. They give employers many years to prepare and they ensure that both our pensions system and the public finances are kept on a sustainable footing. The £2,000 cap protects lower-earning employees who use salary sacrifice to make pension contributions and preserves the tax benefit of salary sacrifice for all employees on the first £2,000 of their contributions.

Importantly, these changes leave the tax reliefs on regular pension contributions completely untouched. These reliefs are worth £70 billion a year and are available to all workers and employers, not just those who use salary sacrifice. For the reasons that I have set out, I respectfully ask the noble Baroness, Lady Neville-Rolfe, not to press her Motions. I beg to move.

[Baroness Neville-Rolfe (Con)]

My Lords, I am afraid that I am not satisfied with the Minister’s response, particularly on the question of the behavioural assessments that we have had. They are really not fit for purpose. I give notice that will I seek to test the opinion of the House on Motion A1 and, if successful, on further Motions.

--- Later in debate ---

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 2, to which the Commons have disagreed for their Reason 2A.

2A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

--- Later in debate ---

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 3, to which the Commons have disagreed for their Reason 3A.

3A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

--- Later in debate ---

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 4, to which the Commons have disagreed for their Reason 4A.

4A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

--- Later in debate ---

Moved by

[Lord Livermore]

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

5A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

--- Later in debate ---

Moved by

[Lord Livermore]

That this House do not insist on its Amendment 6, to which the Commons have disagreed for their Reason 6A.

6A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

--- Later in debate ---

Motion G

[Lord Livermore]

Moved by

That this House do not insist on its Amendment 7, to which the Commons have disagreed for their Reason 7A.

7A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Motion G1 not moved.

Motion H

[Lord Livermore]

Moved by

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

8A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Motion H1 not moved.

--- Later in debate ---

Motion J

[Lord Livermore]

Moved by

That this House do not insist on its Amendment 9, to which the Commons have disagreed for their Reason 9A.

9A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Motion J agreed.

Motion K

[Lord Livermore]

Moved by

That this House do not insist on its Amendment 10, to which the Commons have disagreed for their Reason 10A.

10A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Motion K agreed.

Motion L

[Lord Livermore]

Moved by

That this House do not insist on its Amendment 11, to which the Commons have disagreed for their Reason 11A.

11A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Motion L agreed.

Motion M

[Lord Livermore]

Moved by

That this House do not insist on its Amendment 12, to which the Commons have disagreed for their Reason 12A.

12A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.

Motion M1 not moved.

Reducing Government Spending

Lord Livermore Excerpts

Tuesday 24th March 2026 Lords Chamber

[Lord Leigh of Hurley]

To ask His Majesty’s Government, further to (1) data released by the Office for National Statistics on 20 March showing that public sector borrowing in February was £14.3 billion, and (2) the increase in 10-year gilt yields, what plans they have to reduce Government spending.

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

My Lords, UK markets are of course affected by global developments, but it is long-standing convention that the Government do not comment on specific market movements. Because of this Government’s economic plan, we are more prepared for a more volatile world, with lower inflation and more resilient public finances. This year the deficit will fall by £20 billion, from 5.2% to 4.3% of GDP—its lowest level for six years and the fastest reduction in the G7. Global financial market volatility means that it is more important than ever to have a robust fiscal framework. We will not repeat the mistakes of the previous Government by returning to austerity or cutting public investment. That was a short-term fix that has created long-term problems.

[Lord Leigh of Hurley (Con)]

My Lords, the ultimate judge and arbiter of the Government’s success is the bond market. As of this afternoon, 10-year gilts are at 4.91%, higher than in the famous Liz Truss era, which Members on the opposite Benches are so keen to reflect back at us, and the highest in the G7. The OBR had said that the UK’s fiscal position is vulnerable to external events, and so it proved. Will the Minister explain to us why we are in this position and what steps HM Government are taking to reduce government spend, particularly in welfare?

[Lord Livermore (Lab)]

As I said at the outset, of course UK markets are affected by global developments but it is a long-standing convention that the Government, as an issuer in gilt markets, do not comment on specific market moves. The noble Lord will be aware that the full economic impact of the conflict will depend on its severity and duration, but we enter this period of uncertainty with the fundamentals of our economy strong. The spring forecast showed that this year borrowing falls by almost 1 percentage point to its lowest level for six years, 4.3%. That is the largest fall in the deficit since 2016. Borrowing as a share of GDP will then fall in every year of the forecast, from 4.3% in 2025 to 1.6% in 2030. Borrowing will fall more than in any other G7 economy. This year, for the first time since 2004, we will be borrowing less than the rest of the G7 on average.

The noble Lord asked about welfare. It is right to point out that in the last five years of the previous Government, spending on welfare increased by £88 billion. No one believes that the system we inherited is working: it abandoned too many people to a life on benefits, it wrote off too many people as too sick to work and it condemned too many children to be too poor to eat. That is exactly why we are reforming the welfare system.

[Lord Watts (Lab)]

My Lords, I have a suggestion for saving money in the public sector. At the moment, billionaire farmers who do not pay any tax in the UK can claim farming subsidies. Is it right that we all pay them extra money at a time when they have not paid money into the system?

[Lord Livermore (Lab)]

I am sure my noble friend makes a very interesting point. It is notable, though, that the party opposite’s first instinct is to cut spending at a moment of instability such as this. That is precisely the stop-go pattern of investment that got us into the problems that our economy is now in. Cutting investment at this point and returning to austerity would be the very worst thing that we could do for growth—the very definition of short-termism—yet that is precisely what previous Chancellors with previous fiscal rules have done. In the years following the financial crisis, austerity took demand out of the economy when it was needed most, undermining investment in critical infrastructure, weakening productivity and choking off growth. Unlike today’s Conservative Party, we will not repeat the mistakes of the past.

[Baroness Kramer (LD)]

My Lords, despite these volatile times, the Debt Management Office, on behalf of the Treasury, still seems determined to issue £20.4 billion in index-linked gilts this year. The cost of servicing the UK’s national debt is already far more vulnerable to rises in interest rates than comparable countries, thanks to past issuances which have meant that 25% of our national debt is index-linked. Surely it is time to rethink this strategy.

[Lord Livermore (Lab)]

The Debt Management Office’s operations continue to see strong demand, with efficient pricing. As I have said already, this year the Government will reduce the deficit by £20 billion since last year from 5.2% to 4.3% of GDP, and global financial market volatility means it is more important than ever to have a robust fiscal framework, with fiscal rules that provide stability, ensure our public services are sustainably funded and reduce the burden on future generations.

[Lord Bridges of Headley (Con)]

My Lords, in January the Chancellor said that the UK is

“in a very strong position”

to withstand new shocks to the public finances without further tax rises. Can the Minister repeat that assurance?

[Lord Livermore (Lab)]

Of course, I agree with everything the Chancellor says. Since coming to office, this Government have implemented an economic plan to bring stability to the public finances and to strengthen Britain’s economy for the long term. The forecast from the Office for Budget Responsibility, published last month, showed that our plan is working and that we enter this period of global uncertainty with the fundamentals of our economy strong. We have cut inflation, which is standing now at 3%, a lower base than at the outset of Russia’s illegal invasion of Ukraine. We have prioritised growth to drive up living standards and have stabilised the public finances, having already reduced the deficit by £20 billion this year, from 5.2% to 4.3% of GDP.

[Baroness Curran (Lab)]

My Lords, can my noble friend spell out to the House the benefits of increased public expenditure on health and how this actually contributes to economic growth? Can he spell out the benefits of increased public expenditure on defence, which contributes to the safety of the United Kingdom? Does he agree with me that the years of Tory austerity directly damaged the defence standing of this country?

[Lord Livermore (Lab)]

I absolutely agree with everything my noble friend says. The legacy of underinvestment from the previous Government still affects the economy today. When we won the election, private sector investment was the lowest in the whole G7. Public sector investment was no better and was set to fall again from 2.5% to 1.7% of GDP. We have invested £120 billion of additional capital investment. The OBR estimates the eventual growth impact of this increase in capital investment as adding 1.4% to GDP. As I have said before, cutting this and returning to austerity would be the very worst thing that we could do for growth. Unlike today’s Conservative Party, we will not repeat the mistakes of the past.

[Baroness Neville-Rolfe (Con)]

My Lords, the facts that were included in my noble friend’s Question show that we face a very troubling position on the public finances. I think the Chancellor’s Statement has done nothing to reassure the markets today. The Government’s economic policy is not fit for purpose, if it ever was. Do the Government recognise the seriousness of the position, and what do they propose to do about it?

[Lord Livermore (Lab)]

We do. As I said already, and as we know, the full economic impact of the conflict will depend on its severity and duration, but this year borrowing falls by almost one percentage point to its lowest level for six years, 4.3%. This is the largest fall in the deficit since 2016. For the first time since 2004, we will be borrowing less than the rest of the G7 on average, something the previous Government did not achieve in their 14 years in power. I should point out that these falls in borrowing are as a result of some tough decisions that we have taken on the public finances. The noble Baroness and the party opposite have opposed every single one of those decisions we have taken to get the public finances under control.

[Lord Eatwell (Lab)]

My Lords—

--- Later in debate ---

[Lord Eatwell (Lab)]

My Lords, does my noble friend agree that the Question asked by the noble Lord, Lord Leigh, and the reaction of the Opposition Front Bench illustrate three things—first, the folly of criticising a medium-term policy of stability on the basis of one month’s figures; secondly, a failure to understand that the gilt rate is determined in international markets and that, for example, the rate on US treasuries has risen rather more in percentage terms than the rate on UK gilts; and, thirdly, the persistent addiction of the Conservative Party to the economics of austerity?

[Lord Livermore (Lab)]

My noble friend is far more expert than me, and I agree entirely with all three points that he makes. I do not seek to add very much to what he says, but I agree most of all with his last point that returning to austerity would be the very worst thing we could do at this point for growth.

[Lord Dobbs (Con)]

I hope the House will forgive me, but I can scarcely keep up with the good news that the Minister keeps showering upon us, so may I ask him for an indication—not a guarantee or promise but an indication—that he will put his noble name to? One thing he has not mentioned is when unemployment will start coming down. Can he tell us whether it will be in 2027, 2028 or 2029, or have the workers’ Government forgotten about the unemployed?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. I can only go by what the OBR says, and it says it will be 2026. The OBR said that unemployment will peak later this year before falling for the remainder of the forecast period, ending the Parliament lower than the rate we inherited at the election. Clearly, the economic impact of the situation in the Middle East will depend on its severity and duration, but the OBR forecasts that over the course of this Parliament, employment will rise and the unemployment rate will fall.

Spring Forecast Statement

Lord Livermore Excerpts

Tuesday 17th March 2026 Lords Chamber

Moved by

[Lord Livermore]

That this House takes note of the Spring Forecast Statement.

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

My Lords, it is a privilege to open this debate on the spring forecast and the Second Reading of the finance Bill. I very much look forward to the valedictory speech from the noble Lord, Lord St John of Bletso.

On taking office, this Government inherited three major crises: a crisis in the public finances, a crisis in our public services and a crisis in the cost of living. That is why we have repeatedly taken the action necessary to bring stability to the economy. The choices we have made are the responsible ones. The spring forecast showed that the economic plan that we have been driving forward since the election is the right one.

In our first Budget, we took action to fix the foundations of the economy by repairing the £22 billion black hole in the public finances left by the previous Government. At the spending review last summer, we stuck to our non-negotiable fiscal rules, keeping a tight grip on day-to-day spending while investing an additional £120 billion in growth-driving infrastructure and getting debt on a downward path. In the Budget last November, we built greater resilience by doubling the headroom against the stability rule and cutting borrowing as a share of GDP in every year of the forecast.

Our economic plan is built on three pillars: stability in our public finances, investment in our infrastructure and reform to Britain’s economy. Stability is the cornerstone of this plan because it is the single most important precondition for economic growth. That is why we have committed to one fiscal event a year, limiting major policy changes to the Budget, helping to give businesses and households the certainty that they need to plan and to invest.

The forecast from the Office for Budget Responsibility, published last month, shows that our plan is working and that we enter this period of global uncertainty with the fundamentals of our economy strong. We have cut inflation, which stands now at 3%—a lower base than at the outset of Russia’s illegal invasion of Ukraine. We have prioritised growth to drive up living standards. The OBR forecast showed GDP per head set to grow more than was expected at the Budget, with growth of 5.6% over this Parliament. We have stabilised the public finances, having already reduced the deficit by £20 billion this year from 5.2% to 4.3% of GDP.

These forecasts pre-date the current conflict in the Middle East. The full economic impact of that conflict will depend on its severity and its duration. The movements on energy markets that we have seen are likely to put upward pressure on inflation in the coming months. Our economic approach will be responsive to a changing world and responsible in the national interest. As the Government have demonstrated time and again, we will take the necessary decisions to help families with the cost of living and to protect the public finances.

This Government are delivering the biggest uplift in defence spending since the end of the Cold War. The Chancellor has also approved access for the Ministry of Defence to the special reserve to deploy additional capabilities in the Middle East, meaning that no net additional costs of these operations will be funded by the Ministry of Defence, but instead will be funded by the Treasury.

Last week, following her call with other G7 Finance Ministers, the Chancellor set out her further priorities for international co-operation: for immediate de-escalation and a return to a diplomatic process; guaranteeing the security of vessels passing through the Strait of Hormuz; supporting a co-ordinated release of collective International Energy Agency oil reserves, the release of which has since helped to stabilise international oil markets; and setting out how the UK will play its part as the global hub of maritime insurance. On Friday, the Chancellor met petrol retailers and energy suppliers to make it clear that the Government would not tolerate any company exploiting the current situation to make excess profits at consumers’ expense.

While we do not yet know how long this conflict will last, it underlines the importance of building a stronger, more secure economy able to withstand whatever instability we may face. The strength of our economy and public finances is possible only because of the Budget last year and the measures contained in the finance Bill before us today.

That Budget had at its heart three pro-growth choices. First, by choosing to maintain economic stability, getting inflation and interest rates down, we helped give businesses the confidence to invest and our economy the room to grow. Secondly, by choosing to reject austerity, we protected £120 billion of additional investment in growth-driving infrastructure. Thirdly, by choosing to back the fast-growing companies of the future, we supported the investment, innovation and economic dynamism that will increase growth in the next decade and beyond. That includes measures in the Bill to make Britain the best place in the world for firms to start, scale and stay. We are doing that by widening eligibility for our enterprise incentives so that scale-ups can attract the talent and the capital that they need. We are expanding the enterprise management incentive so that more companies can offer tax relief share options, and we are re-engineering our enterprise investment and venture capital trust schemes so that they do not back just early-stage ideas but stay with companies as they grow. For all businesses, large and small, we are also maintaining the lowest corporation tax rate in the G7 and the joint most generous capital allowances in the OECD.

In her Mais Lecture today, the Chancellor went further on our growth agenda by setting out how we will deepen our economic relationship with our European partners, how we will back innovation and harness the power of AI, and how we will take the necessary action to build growth on a broad, stable basis right across the UK.

Of course, the pro-growth choices we made in the Budget need to be paid for, and that means asking everyone to make a contribution. The previous Government froze the main income tax thresholds from 2021 to 2028. This finance Bill maintains all income tax and equivalent national insurance thresholds at their current level for a further three years from 2028. I accept that maintaining these thresholds is a decision that will affect working people. The Chancellor and I both said this in 2024 and I will not pretend otherwise now.

However, while we are asking everyone to make a contribution, we are keeping that contribution as low as possible through reforms to our tax system to make it fairer and to ensure that the wealthiest contribute the most. That includes increasing taxes on property, dividend and savings income to narrow the gap between tax paid on work and tax paid on income from assets. Currently, a landlord with an income of £25,000 will pay nearly £1,200 less in tax than their tenant with the same salary because no national insurance is charged on property, dividend or savings income. That is not fair. That is why this finance Bill increases the basic and higher rate of tax on property, savings and dividend income by 2 percentage points, and the additional rate of tax on property and savings income by 2 percentage points. Around two-thirds of the revenue from these increases are expected to come from the top 20% of households.

We are also reforming the tax system to ensure that it keeps pace with a fast-changing economy. This finance Bill increases taxes on online gaming and online betting, while protecting UK horseracing and abolishing bingo duty. It prevents private hire vehicle operators exploiting a tax administration scheme so that everyone pays fairly. We are going further to close the tax gap to ensure that everyone pays the tax that they owe. Reforms contained in this finance Bill will help to collect more unpaid taxes and modernise the tax system to make it easier for taxpayers to get their tax right first time.

We have listened carefully to feedback from the farming community and family businesses, and the Bill raises the threshold for the 100% rate of relief on agricultural property and business property from £1 million to £2.5 million. This means that a couple will now be able to pass on up to £5 million of agricultural or business assets tax free on top of the existing allowances such as the nil-rate band.

Since coming into office, this Government have implemented an economic plan to bring stability to the public finances and to strengthen Britain’s economy for the long term. The spring forecast shows that this plan is the right one, with lower inflation and borrowing, higher living standards and a growing economy. Britain today is in a stronger position to withstand whatever uncertainty comes our way, but that is possible only because of the action we took in the Budget last year and the measures contained in this finance Bill. They are the right choices to protect families and businesses in an uncertain world, and they demonstrate that this Government have the right economic plan for Britain’s future. I beg to move.

--- Later in debate ---

[Lord Livermore (Lab)]

My Lords, it is a pleasure to close this debate on the spring forecast and the Second Reading of the Finance (No. 2) Bill. I am grateful to all noble Lords for their contributions, which I have enjoyed listening to. I pay tribute to the noble Lord, Lord St John of Bletso, for his valedictory speech and his service to your Lordships’ House over many years. It was a wide-ranging speech spanning Nelson Mandela, energy policy and AI, among other issues. In this, it was a perfect representation of the experience he has brought to our debates. I wish him very well for the future.

On taking office, this Government inherited three major crises: in the public finances, in our public services and in the cost of living. That is why we have repeatedly taken the action necessary to bring stability to the economy, as welcomed by my noble friend Lord Barber of Chittlehampton. The choices we made were the responsible ones, and the spring forecast showed that the economic plan we have been driving forward since the election is the right one.

I agree with the noble Lord, Lord Sherbourne of Didsbury, that growth comes from businesses and investors. That is why our economic plan is built on the three pillars, as my noble friends Lord Chandos and Lady Gill reminded us, of stability in our public finances, investment in our infrastructure and reform of Britain’s economy.

My noble friends Lady Bi and Lord Brooke of Alverthorpe rightly spoke about the importance of having just one fiscal event a year and the stability that brings. The OBR forecast published last month showed that our plan is working and that we enter this period of global uncertainty with the fundamentals of our economy strong, as my noble friend Lord Barber said.

The noble Baroness, Lady Neville-Rolfe, spoke about inflation, neglecting to mention that it hit 11% under her Government. We have cut inflation, which now stands at 3%, a lower base than at the outset of Russia’s illegal war on Ukraine. She also mentioned interest rates, forgetting to mention not only that they have been cut six times under this Government but that they were set soaring by the Liz Truss mini-Budget.

We have prioritised growth to drive up living standards. The OBR forecast showed GDP per head set to grow more than was expected at the Budget, with growth of 5.6% over the Parliament. As my noble friend Lord Pitt-Watson said, we have stabilised the public finances, having already reduced the deficit by £20 billion this year from 5.2% to 4.3% of GDP.

The noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Moynihan of Chelsea, spoke about the growth forecast. Average growth over the next five years is broadly unchanged, with slightly lower growth this year and slightly higher growth next year and the year after that. The noble Lord, Lord Hintze, and the noble Baroness, Lady Kramer, spoke about the importance of GDP per head. GDP per capita is now set to grow faster than was forecast in the autumn; with growth of 5.6% over this Parliament, GDP per capita is £2,300 higher in the last year of the forecast compared with the first.

My noble friend Lord Davies of Brixton and the noble Baroness, Lady Kramer, spoke about the potential for falling migration to impact OBR forecasts going forward. As my noble friend Lady Gill said, Britain was the fastest-growing G7 economy in Europe last year. That is why we have the right economic plan to deliver higher long-term economic growth.

The noble Lord, Lord Skidelsky, spoke about the language used by the OBR to describe unemployment, which I am afraid I am not responsible for. Many noble Lords focused on unemployment, including the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, and the noble Lords, Lord St John of Bletso, Lord Bilimoria, Lord Lamont of Lerwick, Lord Elliott of Mickle Fell, Lord Northbrook, Lord Altrincham and Lord Massey of Hampstead. Employment is historically high. There are only two peacetime years out of the past 150 when the average annual employment rate has been higher than it was in 2025.

Forecasts from the OBR show that unemployment will peak later this year and then fall progressively for the remainder of the Parliament, ending the Parliament lower than it was when we took office. There is, though, action needed to address in particular the number of young people out of work, something that has been focused on in the contributions of many noble Lords. That is why we are providing £2.5 billion across the youth guarantee to tackle youth unemployment and, through additional investment in the growth and skills levy, to reform apprenticeships and prioritise young people. This will support almost 1 million young people and help deliver up to 500,000 opportunities to earn or learn.

The noble Lords, Lord Lamont of Lerwick and Lord Hintze, spoke about living standards. The last Parliament was the worst on record for living standards. Living standards are now rising. GDP per capita is set to grow more than was forecast in the autumn. Real wages have grown more in the first year of this Government than in the first 10 years of the previous one.

The noble Baroness, Lady Neville-Rolfe, spoke about inflation. We have cut inflation, which now stands at 3%, a lower base than at the outset of Russia’s illegal war in Ukraine. The OBR forecasted last month that inflation would fall faster than predicted in November and will return to target this year rather than next year.

Clearly, these forecasts took place before the current conflict in the Middle East began. Movements on energy markets, as we have already seen, are likely to put upward pressure on inflation in the coming months. As the Government have demonstrated, we will take the necessary action to help families with the cost of living and protect the public finances.

My noble friend Lord Pitt-Watson talked about the need to build growth in partnership with business, something I agree very much with. The noble Lord, Lord Sherbourne, talked about business experience, and he referenced what he described as the Government’s lack of business experience compared with the previous Government. We inherited an economy from the previous Government where the UK was the only G7 country with private sector investment that was below 20% as a share of the economy.

Since the Government came to office, we have secured a record £360 billion of private investment. Retail sales are rising, and the S&P global PMI rose to a 17-month high in January. As several of my noble friends have said, business confidence comes from stability, and that stability underpins our economic plan.

I very much agree with my noble friend Lady Bi on her comments about the value of London and the international importance of the City of London in terms of financial and professional services. I also agree with my noble friend Lord Brooke of Alverthorpe about the importance of public/private partnerships.

The noble Lord, Lord St John of Bletso, spoke about procurement, the role of AI and the potential consequences of AI on the labour market. They are all timely points, following the Chancellor’s Mais Lecture this lunchtime, which focused on all the points that the noble Lord raised. I completely agree with him on the importance of using procurement wisely, and we have set out reforms today to do exactly that. On AI in the labour market, the Chancellor announced that we will establish an AI economics institute to develop policies exactly along the lines that the noble Lord mentioned in his speech.

I agree very much with what my noble friend Lady Gill said about the benefits of deepening our economic relationship with the European Union—something the Chancellor herself set out in her Mais Lecture today.

The noble Lord, Lord Patten, asked about the cost of producing the spring forecast. The Treasury does not calculate or record a stand-alone cost for producing the spring forecast; it is delivered using existing departmental resources across policy and analytical teams and forms part of routine fiscal and economic reporting obligations. As such, no additional or exceptional spending is incurred beyond normal staffing costs.

Several noble Lords, including the noble Lords, Lord Bilimoria, Lord Lamont and Lord Redwood, my noble friend Lord Davies of Brixton and the noble Baroness, Lady Kramer, spoke about the impact of the conflict in the Middle East on the OBR’s most recent forecasts. The forecasts from the OBR, of course, pre-date the current conflict in the Middle East. Clearly, the full economic impact of the conflict will depend on its severity and duration.

The movements of energy markets, as we have already seen, are likely to put upward pressure on inflation in the coming months. Our economic approach will be both responsive to a changing world and responsible in the national interest. As the Government have demonstrated time and again, we will take the necessary decisions to help families with the cost of living and protect the public finances.

Any forecast is, of course, inevitably subject to uncertainty, particularly when global events are moving quickly. Although we do not yet know how long the conflict will last, it underlines the importance of building a stronger and more secure economy that is able to withstand whatever instability we may face.

In the Budget last November, we took £150 off the costs of energy bills. Yesterday, the Government announced immediate support for vulnerable heating oil customers, providing £53 million for the households most exposed. The noble Lord, Lord Lamont, endorsed the view that any support should be targeted.

The noble Baroness, Lady Neville-Rolfe, asked about fuel duty. The UK benefits from a strong and diverse security of energy supplies. The decisions we have taken since the Budget in 2024 will save the average motorist over £90, or 8p to 11p per litre, compared with the plans we inherited from the previous Government.

As my noble friend Lord Chandos said, the Chancellor has written to the Competition and Markets Authority, asking it to remain vigilant across heating oil prices and recommending that it acts to tackle unjustified price increases. The Government are clear that we will not tolerate profiteering or unfair practices, and we urge customers to share any evidence of price manipulation with the CMA.

I agree with what many noble Lords—including the noble Baroness, Lady Neville-Rolfe, and the noble Lords, Lord St John of Bletso, Lord Bilimoria, Lord Lamont and Lord Redwood—said about the importance of the North Sea. Domestic oil and gas must continue to have an important role in the energy mix for decades to come. That is why the Chancellor met with North Sea industry to discuss the consequences of this uncertain period. I also endorse what my noble friend Lord Barber said about critical minerals.

The noble Baroness, Lady Neville-Rolfe, spoke about increasing defence spending. We are delivering the biggest uplift in defence spending since the end of the Cold War. That equates to over £270 billion invested over the spending review period. Defence spending will rise to 2.6% of GDP next year—a level not seen since 2010. We are committed to spending 3% in the next Parliament when economic and fiscal conditions allow.

Although we do not yet know how long this conflict will last, it underlines the importance of building a stronger and more secure economy that is able to withstand whatever instability we face. The strength of our economy and public finances are possible only because of the Budget last year and the measures contained in the finance Bill before us today.

I pay tribute to my noble friend Lord Liddle for chairing the Finance Bill Sub-Committee of the Economic Affairs Committee, as well as to other members of that committee: the noble Lords, Lord Altrincham and Lord Leigh of Hurley, and the noble Baroness, Lady Fairhead.

The noble Lord, Lord Lamont of Lerwick, and the noble Baroness, Lady Neville-Rolfe, asked about the impact on working people from further freezes to the national insurance thresholds. As I am sure noble Lords know, the Government are not increasing the headline rates of income tax, national insurance or VAT, in line with our manifesto, but we are clear that the decisions made in the Budget in November involve asking people to contribute more.

In reference to the points made by my noble friend Lord Sikka, this finance Bill raises revenue in a fair way, reforming the system to ensure that those with the broadest shoulders pay their fair share while limiting what we ask from ordinary workers.

My noble friend Lord Liddle focused in his comments on his concerns about the inheritance tax treatment of unused pension funds and death benefits, as did the noble Baroness, Lady Fairhead, and my noble friend Lord Davies of Brixton. This was a point also mentioned by the noble Baroness, Lady Kramer. This measure removes distortions resulting from changes that have been made to pensions tax policy over the last decade, which have led to pensions being openly used and marketed as a tax-planning vehicle to transfer wealth, rather than as a way to fund retirement. As a result of these changes, more than 90% of estates will still pay no inheritance tax each year, and most estates will not pay inheritance tax on the pension, wealth and income tax that is due only from beneficiaries on inherited pensions in certain circumstances.

My noble friends Lord Liddle and Lord Davies of Brixton, the noble Baroness, Lady Fairhead, and the noble Lord, Lord Leigh of Hurley, raised the issue of personal representatives. Personal representatives who are already responsible for administering the rest of the estate will be liable for reporting and paying inheritance tax on any unused pension funds and death benefits from 6 April 2027. This is the same as the current process for non-discretionary pension schemes and other assets which do not pass directly through the estate but are in scope of inheritance tax. Since the announcement that the liability for paying inheritance tax on pensions will sit with personal representatives, officials have been engaging directly with tax and legal industry professionals to fully understand their concerns.

Budget 2025 announced that, where personal representatives reasonably expect inheritance tax to be due, they can direct pension scheme administrators to withhold 50% of the taxable benefits for up to 15 months from the date of death. Personal representatives can then direct pension scheme administrators to pay the inheritance tax due to HMRC before releasing the rest of those benefits to pension beneficiaries. If the instruction is withdrawn or the period ends, the remaining funds can be paid out. This will not apply to exempt benefits, funds under £1,000 or continuing annuities. Personal representatives will be discharged from liability for pensions discovered after they have received clearance from HMRC.

We are reforming the tax system to ensure it keeps pace with a fast-changing economy. We are going further to close the tax gap to ensure that everyone pays the tax they owe. Having listened carefully to feedback from the farming community and family businesses, this Bill raises the 100% rate of relief on agricultural property relief and business property relief from £1 million to £2.5 million. My noble friend Lord Liddle and the noble Lord, Lord Leigh Hurley, spoke about these reforms to agricultural property relief and business property relief. The status quo is not sustainable and there is a clear need to reform agricultural property relief. A very small number of claimants benefit from a very significant amount of agricultural property and business property relief. The increase in the planned allowances from £1 million to £2.5 million further reduces the number of estates forecast to pay more inheritance tax and further reduces the liability for many of the remaining estates, meaning that a couple can leave £5 million completely free of tax on top of the usual reliefs and allowances.

My noble friend Lord Liddle spoke in favour of taxing wealth. The Government are committed to taxing wealth fairly. That is why, in the Autumn Budget Statement in 2024, we announced reforms to taxation of wealth and the wealthy that will raise over £8 billion, including reforms to non-domiciled tax, mentioned by several noble Lords this evening. We are now building on that action by reforming property taxes so that the highest value homes in England pay the most, and addressing reliefs in capital gains tax and inheritance tax that have grown in cost to the benefit of the wealthy. My noble friend Lord Liddle is absolutely right that we must reward and encourage enterprise, which we are doing, including in measures contained in this finance Bill.

Since coming to office, the Government have implemented an economic plan to bring stability to the public finances and to strengthen Britain’s economy for the long term. The spring forecast shows this plan is the right one, with lower inflation and borrowing, higher living standards and a growing economy. Britain today is in a stronger position to withstand whatever uncertainty comes our way, but that is possible only because of the action we took in the Budget last year and the measures contained in this finance Bill. They are the right choices to protect families and businesses in an uncertain world and they demonstrate that this Government have the right economic plan for Britain’s future.

Motion agreed.

Finance (No. 2) Bill

Lord Livermore Excerpts

2nd reading & Committee negatived & 3rd reading
Tuesday 17th March 2026 Lords Chamber

Moved by

[Lord Livermore]

That the Bill be now read a second time.

Scottish and Welsh legislative consent granted. Relevant document: 3rd Report from the Economic Affairs Committee.

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

I beg to move.

Bill read a second time. Committee negatived. Standing Order 44 having been dispensed with, the Bill was read a third time and passed.