Spring Forecast Statement

Lord Massey of Hampstead Excerpts

Tuesday 17th March 2026 Lords Chamber

[Lord Massey of Hampstead (Con)]

My Lords, the key takeaway from the Chancellor’s speech is that the great plan for growth has now been supplanted by the more modest objective of stability. However, there are a couple of claims in the speech that need challenging.

The Chancellor claims that inflation is down but does not provide a timeframe; the reality is that inflation is higher today than when Rishi Sunak left office—3% versus 2%. She also says that interest rates are down, referencing the six cuts in base rates, which is true, but if we look at longer-term gilt prices, as my noble friend Lord Redwood mentioned, a very different picture emerges. The 10-year gilt when Sunak left office was 4.1%; it is now 4.5%—and this was prior to the Iran war. The 30-year gilt is now trading at 5.3%, higher than in the aftermath of the Truss mini-Budget, when the long gilt hit 5%. The market’s message is clear: it is more worried about long-term inflation and debt levels today than under Liz Truss, and much more worried than under Rishi Sunak.

Since July 2024, it is indeed the case that inflation is up, longer-term interest rates are up and unemployment, which was barely mentioned in the Chancellor’s speech, is at the highest level since Covid. It is surprising that unemployment was referenced only once in the speech as it is becoming a major issue worthy of more extensive consideration, especially the worrying growth in youth unemployment, mentioned by many speakers. Overall, unemployment has risen by 400,000 to 1.9 million since July 2024, which must be a major concern for a Chancellor who came into politics, as she says in her speech, to

“stand up for working people”.—[Official Report, Commons, 3/3/26; col. 732.]

The Chancellor references the OBR forecast that unemployment will peak this year and revert to lower levels later in the Parliament. But it is noticeable that this forecast is much more optimistic than the Bank of England’s and the average external forecast so should be treated with some caution. Indeed, if we read the small print, we see that the OBR warns of the “significant risks” facing the labour market. In the event of even a modest downturn, unemployment levels could rise to 7%, which is 2.3 million people, and we still do not know the effects of the NI increases or the employment impact of Al, both of which, of course, could make the situation worse. Youth unemployment now runs at 16%, with nearly 1 million NEETs, and this could be headed higher.

The Government are very aware of this, and I commend the measure announced yesterday by the Secretary of State for Work and Pensions, introducing financial incentives to employers to hire young people who have been out of work for six months or more. Using incentives in this way is the right financial path. I also agree with the theme of his speech that we need to change from being a welfare state to a working state. We need to make it easier and cheaper to employ young people but, as has been mentioned, recent government measures on the minimum wage, NI increases and extended employment rights have made it more expensive, and indeed riskier, for business to hire new people.

We are now seeing a decline in graduate employment prospects, with AI eating into entry-level jobs, as was mentioned by the noble Lord, Lord St John of Bletso, in his excellent valedictory speech. A study by Stanford researchers in the US found that the areas hardest hit by AI are entry-level occupations, with workers aged 22 to 25. They are experiencing a 16% relative decline in employment. It is likely that this trend will be repeated in the UK, so help for this graduate cohort would also be very welcome. Indeed, we have exempted under-21s earning less than £50,000 from employers’ NI and I ask the Minister whether the Government would consider extending this exemption to 24 year-olds, as graduate job creation also needs a kick-start.

The Chancellor’s objective from day one was to grow our way out of the headwinds of rising public spending and rising debts, but increasing benefits, promoting the interests of trade unions and raising taxes on wealth creators is simply not going to deliver that growth. It is just going to crowd out investment, stifle employment and demotivate entrepreneurs. As mentioned by the noble Lord, Lord Pitt-Watson, and my noble friend Lord Sherbourne, only business-friendly and employment-friendly policies will work, because at the end of the day only business can generate growth and jobs. Trying to achieve growth by bloating the state will simply not work, and we are witnessing this now in real time.

The Government want to be generous, and we saw their delight at the lifting of the two-child benefit cap, but these measures are funded by borrowing and serve to make work less financially attractive than living on benefits, as my noble friend Lord Lamont and others have said. The welfare bill grew by £16 billion last year and is on a trajectory to £400 billion. In the OBR forecast, it is one of the areas of public sector spending set to grow the most over the next five years.

The Government face a dilemma: they have to choose between advancing their political agenda and their aspiration to improve our balance sheet and generate growth. They cannot achieve both and the sooner they accept that reality, the better for our country.