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.

Autumn Budget 2025

Lord Massey of Hampstead Excerpts

Thursday 4th December 2025 Lords Chamber

[Lord Massey of Hampstead (Con)]

My Lords, I will make some general comments about the Budget and then some suggestions that might help the Government to generate some growth via the financial sector. I declare my interest as a director of a financial services firm.

This was a budget for politics, not economics. Other than restoring some financial headroom, this was a Budget for ideology at the expense of the promises made to voters about tax and growth. It was a reinforcement of the culture of dependency that is slowly but surely strangling the economies of western Europe. We are living in a society where rights and entitlements are everywhere, but duties and responsibilities no longer seem to matter. Of course, there should be a safety net, but we are now in a position where in many cases it is more remunerative, as many other noble Lords have said today, to stay at home than go to work. This is a disaster for our economy, our culture, and the development of our children, as my noble friend Lord Bailey said earlier.

The abolition of the two-child benefit cap magnifies the problem—and, which has not been mentioned, adds to the pull factors attracting even more immigration to this country, both legal and illegal. The dependency culture was illustrated by a radio interview given this week by the Chief Secretary to the Prime Minister, who described the additional benefits in the Budget as

“an investment in support for poorer families”.

The UK needs more investment, but transfer payments do not add to real growth or competitiveness. What we need is investment in the businesses of the future that can create jobs and wealth.

The Government recognise the importance of private sector investment, as the Minister said in his opening speech, and of scale-ups, and sensibly increased the thresholds for qualifying EIS and venture capital trusts in the Budget. This was welcome—but in the same breath the Chancellor reduced the incentive to invest in these high-risk companies by cutting the income tax relief from 30% to 20%. The last time the Government cut relief in this way was in 2007, which led to a catastrophic reduction in inflows into venture capital. Inflows actually fell by 80% over the subsequent years, and it took 16 years to recover to the original peak.

Investor demand in high-risk companies from private investors is, understandably, very sensitive to levels of tax incentives. We are already seeing a substantial reduction in demand for AIM stocks following last year’s reduction in the BPR from 40% to 20%. I urge the Government to look again at the impact of the reduction in tax relief, which may lead to a much sharper decline in investment than is currently envisaged.

In addition, it is worth looking at these measures in relation to AIM. The reductions in BPR and VCT relief affect listed companies, but not unlisted companies. EIS and unlisted IHT schemes now have a clear advantage over AIM. This may be an unintended consequence of these measures, as I know the Government are keen to promote London public markets as they are so important for scaling up.

Another source of potential growth for UK plc is the stocks and shares ISA. ISAs attract more than £100 billion of investment from private individuals. Two-thirds of this goes into cash ISAs. The Budget reduced the investable limit from £20,000 to £12,000. I understand this decision, as cash ISAs do little to generate growth. I will make a suggestion for the future of stocks and shares ISAs, which constitute a significant £30 billion of investment. The reality is that most of the investment going into these ISAs ends up in foreign companies, as is the case with our £3 trillion defined benefit pension schemes, where only 4% is invested in UK companies. Why do we provide tax advantages to invest in Microsoft of Nvidia when there are excellent investment opportunities here which would help grow our economy? Given our urgent need for investment—on which I think we all agree—now is the time for the Government to get a return on their tax breaks and require ISA investors to buy UK companies only. There is an opportunity here to kick-start a recovery—

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

I ask the noble Lord to bring his remarks to an end, as he is over the time limit.

Inheritance Tax: Pensions

Lord Massey of Hampstead Excerpts

Monday 17th November 2025 Lords Chamber

[Lord Livermore (Lab)]

I presume the noble Baroness is referring to the proposal of the noble Baroness, Lady Altmann, for a flat tax, and it is very interesting that she raises that. Currently, fewer than 10% of estates will have an inheritance tax liability. If you put a flat tax on all pensions, you are asking 90% of estates to pay more so that 10% of estates can pay less. I do not consider that to be fair.

[Lord Massey of Hampstead (Con)]

My Lords, interest charges for late payments of tax are charged at 8% per annum and apply to estates after six months. Does the Minister agree that, given potential complications in finalising and executing wills, six months is rather short and that a longer grace period of at least one year should apply before interest charges are levied?

[Lord Livermore (Lab)]

I understand the point that the noble Lord raises. As I understand it, six months is standard within the tax system.

Economic and Taxation Policies: Jobs, Growth and Prosperity

Lord Massey of Hampstead Excerpts

Thursday 13th November 2025 Lords Chamber

[Lord Massey of Hampstead (Con)]

My Lords, I thank the noble Lord, Lord Elliott of Mickle Fell, for initiating this important debate, and I congratulate him on his speech and his book. This is, of course, a very problematic time for the UK economy; we recognise this from all sides. We urgently need more growth and job creation. Yet while the Government have these objectives in mind, some of the measures taken in the last year actively undermine the stated ambition, as mentioned by the noble Baroness, Lady Foster.

The first problem has been the decision, as mentioned by many colleagues, to raise NI and the minimum wage, which creates disincentives to employ and has led to a creeping up of unemployment now to 5%, which is a four-year high. The Employment Rights Bill, which has been much debated and amended in this House, would exacerbate the situation further by reducing the flexibility of the labour market and imposing more regulation on business. This matters because it is businesses that will drive our economy forward, not transfer payments and debt-fuelled capital spending by government. We have now hit the 45% level of public spending as a proportion of GDP, and historically that is a peak which has proved unsustainable. I believe the Government recognise this, but in branding spending cuts as a return to austerity, they have boxed themselves in. They are now choosing to raise income tax, under pressure—some might say—from the left wing of their parliamentary party.

The Prime Minister has made it clear that the impact of these tax increases should fall on those with “the broadest shoulders”. He should take note that these broad-shouldered citizens are the same people who already pay 30% of income taxes, create the real jobs we so desperately need and run the businesses that can compete internationally. Rather than penalising this highly productive cohort, why do the Government not look at the benefit bill and take the political risk of tackling benefits, which now account for 15% of GDP and rising? As the noble Baroness, Lady Fall, and the noble Lord, Lord Young, have both mentioned, this could be a cross-party effort to reform this whole structure.

High levels of benefits are a double whammy—they impact the borrowing requirement, but they also lead to more immigration. The jobs that the local population cannot or will not take on still need to be filled, be they in the NHS, the care sector or hospitality. The result is increased net migration with all the negative side-effects on public services, rent levels and—some would argue—social cohesion, to which the noble Lord, Lord Goodman, also alluded.

The Government’s number one priority must be to get the economically inactive back to work; I do not think that is controversial in this House. For the upcoming Budget, I urge the Government to avoid two measures that would seriously undermine wealth creation and growth. Raising capital gains taxes or, even worse, equalising them with marginal rates of income tax will reduce risk-taking and produce no revenues for the Exchequer. Investors will simply hold on to assets and invest new money into bonds. It will reduce equity investing, which we urgently need, especially in small and mid-sized UK companies. Another tax to avoid at all costs—this has been mentioned by several Peers—is an exit tax, which would be a disaster for the UK’s reputation as a business-friendly country. However tempting it might be from a redistribution point of view, the idea of financially trapping people in this country will serve only to demotivate not only those who are running businesses here but those who would come here to build the businesses of the future.

We are at a crossroads for the economy, and I recognise that the political choices are very difficult for the Government. In a sense, there is a conflict between their ambitions for growth and their political ideology, but the opportunities for growth are there for the UK to seize. We can be a leader in the AI revolution and benefit from the productivity gains which can flow from its evolving capabilities but, for the UK to benefit from this, businesses need to be incentivised to take up these opportunities, not burdened by increasing regulation, rising taxes and higher interest rates, which result from excessive spending.

GDP Per Capita

Lord Massey of Hampstead Excerpts

Monday 20th October 2025 Lords Chamber

[Lord Livermore (Lab)]

Yes, I can absolutely confirm that that remains our mission. Our growth mission is to have the fastest-growing economy in the G7. We are currently the fastest-growing economy in the G7, and the IMF recently revised up the growth forecast for this year, the second time it has done so. I think both the IMF and the OECD currently forecast that the UK will be the second fastest-growing G7 economy this year. Our growth mission also includes living standards; since the election, living standards are up 2.1% compared with the 1.8% fall over the last Parliament—the only Parliament on record in which living standards were worse at the end of it than at the start. We also have a commitment on GDP per capita, as the noble Lord rightly says; the OBR currently forecasts GDP per capita to rise by 5.6% over this Parliament.

[Lord Massey of Hampstead (Con)]

My Lords, the ONS reported recently that 53% of the population are net recipients of state benefits and therefore make a very modest, to say the least, contribution to GDP. Meanwhile, 1% of the population are producing 13% of GDP and paying 28% of our tax. Whether we like it or not, the UK is becoming ever more financially dependent on its top earners but at the same time making it less attractive for them to stay and contribute to the UK. The evidence is mounting—we saw it from France yesterday—that people are considering moving their assets abroad and potentially leaving the country. So does the Minister agree with me that, whatever your ideological view of wealth distribution might be, the UK needs to focus on retaining its high earners, and does he recognise that if only 10% of the top 1% leave—that is 35,000 people—our fiscal black hole would increase very substantially?

[Lord Livermore (Lab)]

That is a very long question but I can give the noble Lord a very short answer. Yes, of course, I agree with him. It is very important that we retain our high earners and retain as much talent in this economy as we possibly can.