Growing the UK Economy

Debate between Lord Fox and Lord Livermore

Monday 3rd February 2025 Lords Chamber

[Lord Fox (LD)]

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

and Tina McKenzie of the FSB said:

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


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

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

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

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

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

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

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

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

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

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

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

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

Public Finances: Borrowing Costs

Debate between Lord Fox and Lord Livermore

Thursday 9th January 2025 Lords Chamber

[Lord Livermore (Lab)]

I am happy to say to the noble Lord that the Government are absolutely committed to working in partnership with business to grow the economy and to doing what is required to do so. As he knows, the Government are committed to economic and fiscal stability. We have put in place those robust fiscal rules, and there is a significant fiscal consolidation during the course of this Parliament, taking borrowing as a share of GDP from 4.5% to 2.1%. If achieved, this would be the biggest current budget surplus in over 20 years.

[Lord Fox (LD)]

My Lords, the growth of which the Minister speaks will need investment and, given the state of the public finances, a significant proportion of that investment has to come from the private sector. In my experience, that sort of investment requires not just a realistic analysis of the present but a persuasive picture of the future. The Minister has rehearsed the analysis of the present, but does he agree that the Government have to step up and better articulate their vision of the future in order to attract the investment that this country so desperately needs?

[Lord Livermore (Lab)]

I agree with a lot of what the noble Lord says. He and I are both strong supporters of an industrial strategy. The Government’s new modern industrial strategy is a core component of what the noble Lord is asking for. We are introducing a new industrial strategy that will give the private sector the guidance it requires about the sectors that we would like to see investment coming into. We are doing planning reform, which is one of the biggest reforms that we can possibly do to unlock new levels of private sector investment in the economy. We are doing pension reform, which the Chancellor set out in her Mansion House speech. We are doing skills reform—another key component of unlocking investment in our economy. All those things will significantly boost growth in our economy, but none of them is yet included in the OBR’s forecast.

Economic Productivity

Debate between Lord Fox and Lord Livermore

Thursday 5th December 2024 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to my noble friend for his support for the policies we have announced for small businesses. He is absolutely right that we protected small businesses in the recent Budget. SMEs are, of course, an essential part of a growing economy. We set out clear plans for small businesses in our manifesto and we will deliver on those in the coming months.

[Lord Fox (LD)]

My Lords, the Minister was right to mention skills being central to bringing productivity up. Both our parties had large chapters on skills in our manifestos and, since coming into office, the Government have announced initiatives, consultations and suchlike. Will the Minister tell your Lordships’ House when the first cadre of employees who have benefited from any of the skills measures that the Government intend to bring in will reach the workplace?

[Lord Livermore (Lab)]

The noble Lord is correct to say that both parties are absolutely aligned on the importance of skills reform, which is why we have announced Skills England. We will be increasing the number of people in training and they will enter the workforce as soon as they graduate.

Exports to the European Union

Debate between Lord Fox and Lord Livermore

Wednesday 20th November 2024 Lords Chamber

[Lord Livermore (Lab)]

In the recent Mansion House speech, the Chancellor said that we will always stand up for

“free and open trade, especially with our most economically important partners. That includes the United States”,

obviously—it is one of our most important destinations for financial services trade, for example—and that there is great

“potential for us to deepen our economic relationship on areas such as emerging technologies”.

[Lord Fox (LD)]

My Lords, renewing—or rekindling—the relationship with Europe is very important. Does the Minister agree that one of the ways to make that harder is for UK product regulation to diverge from EU product regulation? Can the Minister confirm that we will work hard on the Product Regulation and Metrology Bill to make sure that we have an avenue to stay close to that EU market?

[Lord Livermore (Lab)]

I agree with much of what the noble Lord says and agree wholeheartedly with the sentiment behind his question.

Autumn Budget 2024

Debate between Lord Fox and Lord Livermore

Monday 11th November 2024 Lords Chamber

[Lord Livermore (Lab)]

My Lords, it is a privilege to close today’s debate on the Budget. I am grateful to all 75 noble Lords for their insights, differing perspectives and expertise. I join others in congratulating the noble Lord, Lord Booth-Smith, on his excellent maiden speech, bringing his valuable first-hand experience of government and policy-making to your Lordships’ House. I look forward to his further contributions in debates such as this.

This was a Budget to fix the foundations; to restore stability by repairing the public finances; to rebuild our public services after years of neglect; to choose investment, rather than decline; and to keep our promises to working people. It was a Budget notable in scale, but commensurate with the challenging inheritance that we faced.

The noble Lord, Lord Johnson of Lainston, in his opening speech for the Opposition, began by denying the need to rebuild the public finances and the need to restore stability to our economy. He failed yet again to say sorry for the past 14 years, in particular for the disastrous Liz Truss mini-Budget. What he went on to defend was, in itself, very revealing. He defended second homes being bought up by foreign owners, pushing up prices for first-time buyers. He opposed reintroducing a reduced rate of inheritance tax above £3 million. He opposed VAT on private school fees, cutting £1.7 billion from state schools. He defended tax-relief pensions being used not as a retirement vehicle but as a tax-planning tool. It was very clear where the party opposite’s priorities lie, and the choices that it would make, and they would certainly not be for working people or public services.

Several noble Lords spoke in positive terms about this Government’s economic inheritance, including the noble Lord, Lord Lamont of Lerwick, and the noble Baronesses, Lady Finn and Lady Lea of Lymm. The reality is that, over the past 14 years, the UK’s economic performance was poor, as my noble friends Lord Hannett of Everton and Lord Bach, and the noble Baronesses, Lady Wheatcroft and Lady Kramer, said. Had the UK economy grown at the average rate of other OECD economies, our economy would have been £171 billion larger. Inflation peaked under the previous Government at 11.1%, as my noble friend Lady Crawley said, and was above target for 33 months in a row. It was the worst Parliament for living standards ever recorded. The UK was the only country in the G7 to have a lower employment rate and a higher inactivity rate than before Covid. As my noble friend Lord Eatwell said, public services were pushed to breaking point, with sewage in our rivers and our schools literally crumbling.

Some noble Lords focused on this Government’s fiscal inheritance and the £22 billion black hole, including the noble Lord, Lord Johnson of Lainston, who seemed to be confused by the fact that the numbers went up over time. It was mentioned also by the noble Lord, Lord Lamont of Lerwick, and the noble Baronesses, Lady Finn and Lady Lea of Lymm. The Treasury has provided to the OBR a line-by-line breakdown of the previous Government’s unfunded commitments—260 separate pressures. Noble Lords need not just listen to the OBR and the Treasury; they need look only at the outturn data. Central government current expenditure published by the ONS shows that, for the six months since March, the outturn is £11.8 billion higher than forecast. That is £11.8 billion over six months, well on course for £22 billion over the year.

This Government’s number one commitment is to economic and fiscal stability. That is why we support the fiscal framework, the OBR and the independence of the Bank of England, which the noble Lord, Lord Altrincham asked about. It is also why we have established robust fiscal rules, which put the public finances on a sustainable path while allowing a step change in investment to drive long-term growth. The stability rule brings the current Budget into balance so that we do not borrow to fund day-to-day spending, as my noble friends Lady Crawley and Lord Murphy of Torfaen said.

The noble Baroness, Lady Penn, mentioned borrowing. Borrowing as a share of GDP falls over this Parliament, from 4.5% to 2.1%, as we achieve the biggest current Budget surplus in over 20 years. Over the past 14 years, borrowing averaged 5.6% of GDP. Over this Parliament, it will average 2.6% of GDP. However, while being tough on spending, we must create the space for investment.

As the IMF has said, more public investment is badly needed in the UK, so the investment rule, as set out in our manifesto—despite the claim made by the noble Lords, Lord Lamont and Lord Bridges of Headley—will target debt falling as a share of the economy. It will be defined as net financial debt. I am grateful to the noble Lord, Lord O’Neill of Gatley, for his welcome of this move. He stressed the need for the guard-rails we have set out and the importance of what this investment is spent on. I am grateful, too, for the support of my noble friends Lord Liddle and Lord Chandos, the noble Lord, Lord Young of Cookham, and the noble Baroness, Lady Wheatcroft. As my noble friend Lady O’Grady of Upper Holloway pointed out, the previous Government planned to cut public investment, a recipe for continued decline.

To address the points made by the noble Lord, Lord Johnson of Lainston, and the noble Baroness, Lady Penn, these rules are actually tougher than those of the previous Government. To stop fiscal commitments being endlessly deferred for five years, this is the last year when the fiscal rules will target the fifth and final year of the forecast. The rules must be met by 2029-30 at this Budget, and until 2029-30 becomes the third year of the forecast, at which point both rules will target the third year of the rolling forecast period. This is a much tougher constraint than the previous Government’s borrowing rule: to borrow up to 3% of GDP by the fifth year of the forecast.

To repair our public finances and rebuild our public services, the Budget raised taxes by £40 billion. It was therefore a very significant Budget, as the noble Baroness, Lady Penn, set out. It was, though, commensurate with the challenges that we faced. The noble Lord, Lord Lamont of Lerwick, described it as bold; it was of course the most fiscally significant Budget since his Spring Budget of 1993. The Budget meant taking difficult decisions, to address the point made by the noble Lords, Lord Burns and Lord Lamont. As a result of those decisions, we have now wiped the slate clean, meaning that we never have to do a Budget like this again. We have set tough fiscal rules, which we meet two years early, and set the envelope for the second phase of the spending review, which we will stick to.

The noble Lord, Lord Johnson of Lainston, helpfully quoted our manifesto, as mentioned also by the noble Baroness, Lady Penn. Let me be clear: this Budget keeps every single manifesto commitment we made to working people—to not increase their income tax, their national insurance or VAT. We went further by freezing fuel duty, on which I disagree with the noble Lords, Lord Londesborough and Lord Young of Cookham, and my noble friend Lord Whitty, who said that it should have been raised during a time of cost of living pressures. I also disagree with the noble Lord, Lord Londesborough, who said that we should have increased employees’ national insurance.

The choice made by the previous Government was to freeze income tax thresholds, costing working people nearly £30 billion. We could have extended that freeze but instead, from 2028-29, personal tax thresholds will be uprated in line with inflation once again. The noble Lord, Lord Sherbourne of Didsbury, mentioned how many more people had been pulled into tax.

This Budget does, though, involve some very tough decisions. Several noble Lords, including the noble Lords, Lord Burns, Lord Bilimoria, Lord Londesborough, Lord Oates, Lord Shipley, Lord Gadhia, Lord Razzall and Lord Northbrook, and the noble Baronesses, Lady Wheatcroft and Lady Penn, focused on the increase in employers’ national insurance contributions by 1.2 percentage points to 15% from April 2025. We of course recognise that this involves asking businesses to contribute more. We have acknowledged that the impacts of this measure will be felt beyond businesses too, as set out by the OBR.

The noble Lords, Lord Fox and Lord Northbrook, the noble Earl, Lord Devon, and the noble Baroness, Lady Kramer, mentioned small businesses and their importance to the economy. We are protecting the smallest companies by increasing the employment allowance from £5,000 to £10,500, meaning that 865,000 employers will not pay any national insurance at all, and that more than 1 million employers will now pay the same or less than they did before. The Federation of Small Businesses said in its Budget response:

“Against a challenging backdrop, today’s Budget shows a clear direction in business policy now for the whole of this Parliament to target support at small businesses … prioritising everyday entrepreneurs working in local communities in all parts of the country”.


Some noble Lords raised the issue of compensation, including the noble Lord, Lord Fox, and the noble Baronesses, Lady Tyler of Enfield and Lady Kramer. The Government have chosen to compensate the public sector with £5.1 billion to ensure there is sufficient funding to support our vital public services, including the NHS. We will work with departments to ensure that the funding set aside is allocated appropriately. The Department of Health will confirm funding for GPs for 2025-26 as part of the usual GP contract process later in the year, including through consultation with the sector. The spending review includes an investment of £100 million. The Government also provided a significant funding top-up to local government, which can be used for pressures including adult social care.

The Government of course recognise the need to protect the smallest charities. Like any other eligible business, they will benefit from the significant changes to the employment allowance, which mean more than half of businesses with NICs liabilities either gain or see no change next year. Charities will still be able to claim employer NICs reliefs, including those for under 21s and under 25 apprentices, where eligible.

The noble Lord, Lord Dobbs, asked about the impact on employment. Following the Budget, the Bank of England now expects that rather than unemployment increasing, as it had previously forecast, unemployment will now fall. According to the OBR, employment will grow over the forecast period by 1.2 million.

The noble Lord, Lord Bilimoria, and the noble Baroness, Lady Penn, asked about the impact on living standards. The last Parliament saw living standards stagnate and was the worst Parliament for living standards ever recorded. The OBR forecast shows that real household disposable income will increase by an average of 0.5% in real terms each year. That is a world away from the stagnating living standards we saw under the last Government, and in the context of a Budget where we had to take some very difficult decisions to clean up the mess that we inherited.

Many noble Lords focused their contributions on economic growth. As several noble Lords mentioned, there was no bigger failure of the previous Government than their failure on growth. My noble friend Lord Whitty and the noble Lord, Lord Skidelsky, mentioned their austerity, their Brexit deal—which permanently reduced growth by 4%—and their disastrous mini-Budget, which, as my noble friend Lady Liddell rightly said, crashed the economy.

My noble friend Lord Liddle, the noble Lords, Lord Fox, Lord Razzall and Lord Shipley, and the noble Baroness, Lady Kramer, were right to reinforce the importance of this Government’s European reset to address the trade barriers that businesses now face.

When last week the Bank of England cut interest rates, it forecast that the Budget would add 0.75% to growth next year. Over the course of this Parliament, the OBR says growth is largely unchanged. The noble Lord, Lord Johnson of Lainston, said this Budget did nothing for growth, but over the longer term the OBR says that this Budget will permanently increase GDP by 1.4% due to the investment that his party is opposing. The noble Lord, Lord Lamont, also opposed that investment but called for more growth.

As the noble Lords, Lord Burns and Lord Young of Cookham, and my noble friend Lord Liddle said, we need to go further and we need to go faster. That is why economic growth remains this Government’s central mission.

The noble Baroness, Lady Neville-Rolfe, rightly focused on GDP per head and productivity. She raised an interesting suggestion which I will happily look at.

The noble Lord, Lord Bridges of Headley, mentioned debt. The OBR shows that the best way to make debt sustainable is to increase productivity.

As my noble friend Lord Eatwell set out, long-term reforms are vital. We have set out extensive planning reforms, a new national wealth fund and a modern industrial strategy, and created Skills England. I totally agree with my noble friends Lord Liddle and Lord Monks on skills and that we must go further.

We will shortly publish the “Get Britain Working” White Paper to tackle inactivity, and the Chancellor will set out pension reforms—which the noble Lord, Lord Howell of Guildford, asked about, and the noble Lord, Lord Gadhia, commented on—in her Mansion House speech later this week. All of these things will significantly boost growth, and none of them, as the noble Lord, Lord Gadhia, observed, are yet included in the OBR’s forecast.

The right reverend Prelate the Bishop of Newcastle and my noble friend Lord Sahota spoke about the importance of regional growth. In the Budget we set out the first steps in our approach to spreading growth across the country through devolution, investment and reform. We gave mayors greater control of their budgets by announcing the first integrated settlements for the West Midlands and Greater Manchester from 2025-26. We invested in major railway projects, and we confirmed funding for investment zones and freeports.

The noble Lords, Lord Fox, Lord Gadhia and Lord Forsyth, spoke about inflation and interest rates. The OBR is forecasting that inflation and interest rates will fall over the course of this Parliament. That is very different from the previous Parliament, when inflation peaked at 11.1% and was above target for 33 consecutive months, and when mortgages rose by an average of £300 a month following the Liz Truss mini-Budget.

My noble friend Lord Bradley spoke about the importance of growth to investment, and I agree with the points that he made. As several noble Lords set out, including the noble Lord, Lord Bilimoria, and the noble Baronesses, Lady Finn and Lady Moyo, private investment is a vital part of addressing the growth challenge. That is why this Budget delivers stability by putting on a sustainable path the public finances, which are an essential foundation for growth and investment. To ensure certainty, in the Budget we published a Corporate Tax Roadmap, which confirms our commitment to cap the rate of corporation tax at 25%, the lowest in the G7.

The noble Lord, Lord Londesborough, asked about enterprise. We have extended the enterprise investment and venture capital trust schemes until 2035. We have also taken action on late payments and non-financial reporting burdens. As my noble friend Lady Liddell said, at the recent international investment summit we saw over £60 billion of new investment creating nearly 40,000 new jobs.

I was surprised that the noble Lord, Lord Fox, spoke against the increase in the national living wage.

[Lord Fox (LD)]

I did not speak against the rise in the living wage. If the Minister goes through Hansard, he will find that to be the case.

[Lord Livermore (Lab)]

I will check, but it did sound very much like it to me.

The noble Baroness, Lady Neville-Rolfe, spoke against the plan to make work pay. But, as my noble friends Lady O’Grady of Upper Holloway, Lord Monks and Lord Hallett of Everton pointed out, there is now a wealth of evidence that greater in-work security, better pay, more skills and more autonomy in the workplace have substantial economic benefits. A more secure and productive workforce is good for business and good for working people, because each depends on the success of the other.

Many noble Lords focused on some of the other tax measures contained in the Budget. The noble Lord, Lord Londesborough, asked about stamp duty, which was also mentioned by the noble Lord, Lord Elliott of Mickle Fell. We are reforming stamp duty land tax so that those who buy second homes pay two percentage points more than before. This will support an estimated 130,000 additional people to buy their first home.

Many noble Lords mentioned agricultural property relief. They included the noble Lords, Lord Fox, Lord Forsyth, Lord Bilimoria, Lord Dobbs, Lord de Clifford, Lord Young of Cookham, Lord Empey, Lord Berkeley of Knighton, Lord Northbrook and Lord Shipley, the noble Earl, Lord Devon, the noble Duke, the Duke of Wellington, the noble Baronesses, Lady Mallalieu and Lady Humphreys, and the right reverend Prelate the Bishop of Newcastle. In terms of inheritance tax, currently the largest estates pay a lower effective tax rate than smaller estates. That cannot be right, so we are reforming agricultural property relief and business property relief to reduce this unfairness, while protecting small family farms. Almost three-quarters of estates claiming the relief will be unaffected. It is expected to affect around 500 claims next year.

We should be clear that agricultural property relief is given on top of the normal inheritance tax thresholds. Individuals can pass up to £500,000 to a direct descendant, and then agricultural property relief will provide another £1 million tax-free allowance. This means a couple can pass up to £3 million tax free. Above that, there is a 50% discount on inheritance tax, so it is a rate of only 20% and any liability can be paid in 10 yearly instalments which, to answer the noble Earl, Lord Devon, will be interest free.

The noble Lord, Lord Fox, asked about valuing property for business property relief. There is an established process for valuing business property, which will continue to apply.

On inheritance tax on pensions, the noble Lord, Lord Johnson of Lainston, seemed unsure whether pensions are a savings vehicle or a tax planning vehicle. The fact is, as my noble friend Lord Davies of Brixton said, that these reforms remove distortions resulting from pensions tax policy over the past decade, which have led to pensions being openly used and marketed as a tax planning vehicle to transfer wealth rather than to fund retirement.

Several noble Lords raised the issue of VAT on private schools, including the noble Lords, Lord Johnson of Lainston, Lord Forsyth, Lord Berkeley of Knighton, Lord Moynihan of Chelsea, Lord Lexden and Lord Borwick. This raises £1.7 billion a year—money to benefit the 94% of pupils who attend state schools. The new leader of the Opposition has that said she will reverse this measure, so she will of course need to say where her cuts to state schools will fall. The impact assessment, published alongside the Budget, shows that 35,000 pupils will move to state schools—less than 0.5% of the state school population and lower than previous estimates had suggested.

The noble Lord, Lord Shinkwin, asked about children with special educational needs. Children with the most acute needs, whose places in a private school have been deemed necessary by local authorities, are protected from the VAT impacts because local authorities can reclaim VAT. To improve outcomes for the most vulnerable children and to ensure that the system is financially sustainable, the Budget provided a £1 billion uplift in funding for special educational needs—a 6% real-terms increase.

The difficult decisions this Budget takes are for a purpose—not just to repair our public finances but to rebuild our public services, as my noble friend Lord Bach observed. I happily join my noble friend Lady Thornton in welcoming the work of the Women’s Budget Group.

We have set the envelope for the second phase of the spending review, which we will stick to. That will involve some tough choices on spending. Several noble Lords asked about reform, including the noble Baronesses, Lady Finn and Lady Neville-Rolfe, and the noble Lord, Lord Young of Cookham. Our reform agenda will be central to improving services going forward, including our 2% efficiency target for all government departments.

My noble friend Lady Ramsey of Wall Heath set out the increased funding that the Budget provides to the NHS. The noble Baroness, Lady Tyler of Enfield, asked what the NHS funding pays for—it is for 40,000 more appointments a week, £1.5 billion for new diagnostic scanners and new surgical hubs, and an expansion of mental health support, to name just a few. I think I heard the noble Baroness saying that more should be spent while opposing the increase in employer national insurance contributions that pays for it.

As the noble Baroness, Lady Lea of Lymm, observed, and the noble Baroness, Lady Penn, mentioned, the situation we inherited from the previous Government—the only major economy where inactivity has not returned to pre-pandemic levels—is completely unacceptable. We will publish a White Paper to get Britain working; my noble friend Lord Davies of Brixton asked for a date, and I tell him that it will be later this month. Next year, we will publish a White Paper on sickness benefit reform.

The noble Lord, Lord Desai, spoke about the importance of the welfare state. My noble friends Lady Lister of Burtersett and Lady Wilcox of Newport mentioned that we provided £1 billion to extend the household support fund and discretionary housing payments to help those facing financial hardship with the cost of essentials. We have reduced the level of debt repayments that can be taken from a household’s universal credit payment each month, meaning that 1.2 million of the poorest households will keep more of their award each month, lifting children out of poverty.

As my noble friends Lord McConnell, Lady Liddell, Lady Wilcox of Newport and Lord Murphy of Torfaen said, we are providing funding to support public services and drive growth across Scotland, Wales and Northern Ireland, with the largest real-terms funding since devolution.

My noble friend Lord McConnell and the noble Lord, Lord Oates, spoke about spending on overseas development assistance. ODA budgets have been set for the next two years to enable the UK to spend 0.5% of GNI. I reassure them that the Government remain committed to restoring development spending to 0.7% of GNI as soon as the fiscal circumstances allow.

My noble friend Lord McConnell also asked about the Integrated Security Fund. The ODA programme budget, including the Integrated Security Fund, will increase by 2025-26 to £9.2 million.

I am short of time, so I shall write to my noble friend Lady Warwick of Undercliffe about her housebuilding and social housing questions.

The difficult decisions that we made in this Budget, which have been debated here today, were made for a purpose—to repair the public finances, restore stability, rebuild our NHS, invest in the national interest and protect working people. It was, of course, possible to make different choices, to ignore the problems in our public finances, to not rebuild public services or invest in the fabric of our nation and to fail to protect working people. But we should remember that, at the last election, the country voted for change. As many of my noble friends have pointed out, the British people did not overwhelmingly reject the previous Government because they thought the choices they had made were the right ones. They gave this Government a mandate to fix the foundations of our economy and to deliver change. That is exactly the mandate that this Budget delivers on.

We have made our choices. They are the only responsible choices—to protect working people, restore stability and invest in Britain’s future.

Public Spending: Inheritance

Debate between Lord Fox and Lord Livermore

Tuesday 30th July 2024 Lords Chamber

[Lord Fox (LD)]

My Lords, I want to follow up on my noble friend’s comments on the NHS and social care. All of us who were observing the hospital programme could see that it was foundering, costing money and not progressing, so yesterday’s announcement on its future was not surprising. However, the need for new NHS facilities and to upgrade and shore up the NHS estate remains. Communities may well have been sold a pup by the Conservatives, but their needs remain. What are the Government’s plans to pick up and deal with the legacy of a crumbling NHS estate?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his support for the announcements on the hospital building programme yesterday. As he knows, those plans were completely unfunded, behind schedule and overbudget. It is right that we have a full review of them. As I said to the noble Baroness, Lady Kramer, the coming spending review will prioritise the manifesto commitments that we made on public services, including the NHS. We will take forward our commitment to reform adult social care, as he mentioned, and will work towards building a consensus for the reforms needed to build a national care service.

European Investment Bank

Debate between Lord Fox and Lord Livermore

Wednesday 24th July 2024 Lords Chamber

[Lord Fox (LD)]

During his very good summing up at the end of Monday’s excellent debate, the Minister did not get a chance to answer some of the questions that I had asked about the national wealth fund, so I will ask one of them now and perhaps he can go through Hansard and look at the others. How will the national wealth fund decide what it is going to invest in? Will it be a strategic investment or purely commercial? Who will be setting the criteria for those investments?

[Lord Livermore (Lab)]

The national wealth fund will work on the same basis as the UK Infrastructure Bank in terms of allocating investment. I think that is the answer to the noble Lord’s question.