Spring Forecast Statement

Baroness Neville-Rolfe Excerpts

Tuesday 17th March 2026 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, my first point is that the world economic situation now is very different from that existing at the time of the Spring Statement, let alone that in place when the finance Bill was introduced—different and significantly worse. The Middle East war has overturned economic expectations, especially optimistic ones.

A major factor in this deterioration is, of course, increased oil and gas prices, which are an inevitable consequence of political instability in the Middle East. This exacerbates the unfortunate effects of the Government’s own policies, which all agree have led to the highest fuel prices in the developed world. The resulting inflation, already mentioned by the Minister, adds to of the elevated levels we have already experienced during the Chancellor’s time in office. That in turn risks pushing interest rates higher, meaning rising mortgage costs for homeowners and greater pressure on household finances.

Investors are now pricing in a 70% chance that the Bank of England will increase rates by a quarter point before the end of the year having previously expected two quarter-point cuts this year; unfortunately, gilt yields have jumped here more than in any other G7 country.

Public finances are already under severe strain. Borrowing is running higher than forecast when the Government took office, and the country is now spending well over £100 billion a year simply servicing debt.

Since this Government came into office, gilt yields are up, growth is down, inflation is up, unemployment is up, debt is up, and the UK goes into this potential energy crisis already facing some of the highest energy prices in the world. It is extraordinary that Mr Ed Miliband, at a time when we face some of the greatest fuel insecurity in modern history, is content for the country to rely on oil from the Middle East but is against investing in the oil and gas from our North Sea.

This is a very serious moment. When the global outlook darkens, our domestic economic resilience matters more than ever. Yet the Government’s stewardship of the economy has left the country more exposed to shocks like this, and, when that happens, it is ordinary taxpayers who end up paying the price.

A lot has been said about the Government’s level of preparedness on the military front, but what is also true is that they were poorly prepared on an economic front. The economy that has developed under this Government and this Chancellor is profoundly precarious—and we are finding ourselves at the mercy of events.

The Minister has again waxed lyrical about the legacy of the last Government. There were things we did wrong, notably on immigration, but I remind the House that we had to cope with the legacy of the financial crisis, Covid and the Ukraine war, but we still delivered low inflation and an economy that was growing, and we now have a new Conservative leader with a refreshing determination to change things.

I turn to the Spring Statement. This was largely a non-event. Once the rhetoric—feeble rhetoric at that—is stripped away, it is difficult to identify any clear substance in what the Chancellor had to say. There were a few fairy tales, such as the Chancellor’s willingness to blame everyone else, from Trump to Putin, for the state of our economy—when, the last time I checked, she is the Minister responsible.

Looking at the statistics, we see that unemployment is rising sharply, hitting a staggering 7.6% in the capital, including a nine-year high for young Londoners. Youth unemployment in London is above that for the eurozone because of massively tightened employment regulations and much-reduced economic incentives to employ them through changes to NICs and the minimum wage. Yesterday’s youth jobs grant is a drop in the ocean and a poor attempt by the Government to cover up the immense harm they have done to employment in this country since assuming office.

Meanwhile, the OBR has predicted that the Government will spend £333 billion on welfare this year, at 10.9% of GDP, and by 2030-31 it is forecast to be £407 billion, at 11.7% of GDP. Working people will be asked to pay ever more in tax to fund the Government’s failure to get people back to work. Above all, the OBR has downgraded its forecast for growth from 1.4% to just 1.1%, which in truth amounts to growth that is barely there at all. When elected, the Prime Minister and the Chancellor talked endlessly about growth as their prime objective, promising planning reform, speedy infrastructure investment, world-leading AI and a skills revolution—all good things which I supported—but the delivery has been abysmal. Now, they have almost stopped talking about growth, in favour of vain efforts to subsidise the cost of living. History tells us that subsidies do not constitute a viable long-term strategy. Indeed, the OBR warns that inflation is expected to rise again, bringing with it the real prospect of higher mortgage rates and higher borrowing costs for the Government.

The reality for working people is stark. Wages are being eroded by rising prices, while taxes continue to climb. Millions more people will be dragged into higher tax bands by the so-called stealth tax of frozen income tax thresholds, now locked in place until April 2031. Despite all this, the Chancellor has boasted that her economic plan is the right one for Britain. I really doubt whether anyone believes that. What Britain needs is growth, jobs and investment. What the Chancellor has delivered is rising unemployment, ever- expanding welfare and a flatlining economy. The failure to tackle welfare reform is particularly worrying when we need to fund extra defence spending to protect ourselves and our citizens in an increasingly dangerous world. As it is, we are not yet on the path to prosperity.

I now turn to the Bill. First, perhaps the Minister can kindly confirm that the fuel duty increase of 5p provided for in the Bill is being delayed. With oil prices sky-high, this makes good sense, as we have argued.

This Bill lays bare the Government’s priorities. It makes a clear and deliberate choice to raise taxes on those who work, save and invest and to use a substantial share of that money to expand the welfare bill. In doing so, the Government are targeting and taxing precisely those people who sustain the productive heart of our economy—namely, savers who put money aside, investors who back enterprise, and the businesses that create jobs and growth.

Take the continued freezing of the income tax thresholds. This is fiscal drag on an enormous scale. Around 800,000 people will be pulled into the basic rate of income tax and around 1 million more will be dragged into the higher rate. By 2030, it is expected that one in four taxpayers will be paying either the higher or the additional rate of income tax. It does not stop there. In addition to the unfair arrangements for salary sacrifice, which this House has voted against, the repayment threshold for student loans is frozen, in effect imposing another hidden tax on younger generations starting their careers. Even those citizens who rely solely on the state pension are now at risk of being pulled into the income tax net.

The Government are reaching into the pockets of those who invest in Britain. The 2% increase in the tax on dividends, a £1.2 billion tax grab, sends exactly the wrong signal. Instead of encouraging investment in British companies and rewarding those who take risks to build and grow businesses, it penalised them. It is no surprise that 16,500 of them last year signalled their intention to move abroad.

We then come to the deeply troubling changes to IHT, the family farm and family business taxes. Just before Christmas, under enormous pressure, the Government attempted a partial retreat, but let us be clear: this so-called concession does not solve the problem. Many farms and family businesses may own valuable land or machinery, but they operate on tight margins. A paper valuation is not the same as spare cash sitting in the bank. The consequences are predictable. When faced with this kind of uncertainty, businesses do not expand; they pull back, they postpone investment, they do not buy new equipment or improve their restaurants, and, as we have seen, they reduce employee numbers.

Before I close, I should refer to the troubling letter that I have received from the Chartered Institute of Taxation about the difficulties that the various IHT changes will cause for personal representatives of the deceased, the costs in administration due to the Bill’s complexity and the defects of the tax avoidance provisions. It will not be easier for taxpayers, as the Minister suggested.

When we step back and look at the Spring Statement and the finance Bill, a clear picture emerges of the direction in which this Government are taking the country. Instead of policies that reward work, encourage investment and drive growth, we see rising taxes, a growing welfare bill and a struggling economy. The people who carry the greatest burden under this Government are precisely those who sustain our economy: the families who work hard and pay their taxes, the entrepreneurs who take risks to start and grow businesses, the investors who back innovation, and the farmers and family farms who keep our communities and supply chains alive. A healthy economy is built on confidence—the confidence to invest, the confidence to hire and the confidence to plan for the future. The Spring Statement and the finance Bill will give no confidence to anybody. On the evidence before us today, it is clear that the Government are moving in precisely the wrong direction, at a time of international challenge. Against that rather difficult background, I very much look forward to the valedictory speech of the noble Lord, Lord St John of Bletso.