Spring Statement

Lord Kennedy of Southwark Excerpts

Thursday 27th March 2025 Lords Chamber

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

My Lords, I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their questions and comments. Let me start with economic growth, this Government’s number one mission. The noble Baroness, Lady Neville-Rolfe, spoke about the global context in the Spring Statement, and the Chancellor yesterday quite rightly pointed both to the rapidly evolving global threat and to a global economy which is becoming much more uncertain.

The OECD recently downgraded its forecast for every G7 economy this year, and yesterday, the OBR revised down its growth forecast for 2025 from 2% to 1%. The noble Baroness, Lady Neville-Rolfe, blamed this on the decisions taken in the October Budget, which wiped the slate clean and repaired the public finances from the mess that we inherited. They were not easy decisions, but the truth is that they were the right decisions. Imagine if we were now facing this global economic uncertainty with a £22 billion black hole still in the public finances. What confidence would that have given to the Bank of England to cut interest rates? What signal would that have sent to investors about the stability and the resilience of our economy? What flexibility would that have provided for the Government now to increase defence spending in the face of this changing world?

The noble Baroness, Lady Neville-Rolfe, said that we need stability, but she opposes any action to get it. I am afraid that it simply is not credible to say that we should not have repaired our public finances nor rebuilt the foundations of our economy. Are we satisfied with the growth forecast? No, of course, we are not, which is why we are taking the serious action needed to grow our economy in the future and to go further and faster to invest in infrastructure with the Planning and Infrastructure Bill—which the party opposite opposes—and a third runway at Heathrow, increasing investment with pensions reform and a new national wealth fund, and dismantling red tape and burdensome regulation in every sector of our economy. This is a serious plan for economic growth with the right long-term decisions.

The noble Baroness, Lady Neville-Rolfe, focused on future growth, but she did not mention the pleasing fact that the Office for Budget Responsibility yesterday considered and scored one of the central planks of our plan for growth, concluding that our planning reforms will permanently increase the level of GDP by 0.2% by 2029 and by 0.4% of GDP within the next 10 years. That is the biggest positive growth impact that the OBR has ever reflected in its forecast for a policy with no fiscal cost. Again, the noble Baroness, Lady Neville-Rolfe, did not mention that the Chancellor was able to confirm yesterday that the OBR has upgraded its growth forecast next year and every single year of the forecast thereafter, so that by the end of the forecast, our economy is larger now compared to the OBR’s forecast at the time of the Budget.

The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, asked about tariffs. As they will know, we are pursuing an economic agreement with the US, and we are discussing what this means for the UK. That is our focus. We will continue to stand up for free and open global trade, because tariffs would damage both our economies. Those conversations continue. I am not going to give a running commentary, but we should see where we get to in the next few weeks.

The noble Baroness, Lady Kramer, asked me about the digital services tax. The Chancellor said very clearly yesterday that it is up to the UK Government to set tax policy for the UK economy. The digital services tax was intended to be temporary until there was a global agreement as part of pillar 1 and 2 of the OECD agreement, but we believe that companies should pay tax in the countries in which they operate. This is why we introduced the digital services tax in the first place, and our views on that have not changed.

The noble Baroness, Lady Neville-Rolfe, spoke about living standards, but she did not mention that living standards will now grow this year at double the rate expected at the time of the Budget and will rise twice as fast in this Parliament compared to the last. The noble Baroness, Lady Kramer, asked about inflation. Having peaked at over 11% under the previous Government, the OBR forecasts that CPI inflation will average 3.2% this year, falling quickly to 2.1% next year and meeting the inflation target of 2% from 2027 onwards. The noble Baroness, Lady Neville-Rolfe, asked about employment. The OBR expects employment to increase by 1.2 million over this forecast period and unemployment to fall to 4.1% by 2029.

Yesterday, the Chancellor also set out the consequences that increased global uncertainty has had on our public finances, and the noble Baroness, Lady Neville-Rolfe, spoke about the fiscal rules. I was disappointed to hear her follow the Liz Truss path of criticising the Office for Budget Responsibility. The fiscal rules are the embodiment of this Government’s unwavering commitment to ensuring economic stability, because we saw in the Liz Truss mini-Budget what happens when a Government lose control of the public finances. Mortgage rates soared, for which working people are still paying the price. That is why our fiscal rules are non-negotiable and why we will always deliver economic stability.

The Chancellor yesterday restored in full the headroom against the stability rule, moving to a surplus of £9.9 billion in 2029-30. The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, said that this was insufficient, but it is considerably higher headroom than the £6.5 billion headroom left by the previous Government, and we are of course not now carrying a £22 billion black hole in the public finances. We believe that we have got the balance right, and nobody should be in any doubt about how seriously we take the fiscal rules.

The noble Baroness, Lady Neville-Rolfe, asked about the savings from our reforms to welfare. When the Secretary of State for Work and Pensions set out the Government’s plans, she rightly said that the final costings will be subject to the OBR’s assessment. The OBR has said that it anticipates the package will save £4.8 billion in the welfare budget.

The noble Baroness, Lady Kramer, in her assessment ignored the fact that we are investing £1 billion to help people back into work. She also knows that the impact assessment that she referred to does not take into account in any way the consequences of that £1 billion investment; it does not take into account the consequences of anyone getting back into work. She will rightly know that the OBR will do that assessment and come back in the autumn with updated figures.

The noble Baroness, Lady Neville-Rolfe, asked about our spending plans. She said spending was too high, so I would be fascinated to know now where she intends to cut that spending from. The Spring Statement confirms that day-to-day spending is growing in real terms in every single year of the forecast period—by an average of 1.2% a year, in real terms, from 2025 to 2029. The spending review envelope is fully protected. That means we are spending £50 billion more on day-to-day spending in 2028-29 than the previous Government’s plans. I would be interested to know what, of that £50 billion, the noble Baroness, Lady Neville-Rolfe, would like to cut.

In the Budget last October, we increased capital investment by £100 billion over the course of the Parliament, including investing in transport, beginning the delivery of 1.5 million homes, supporting new industries and protecting record R&D funding. The OBR has looked at the growth impact across a decade; it is clear that particularly our capital investments—which the party opposite opposed—will lead to a significant 0.4% increase in growth. We are not cutting capital spending, as the party opposite did time and time again, because that choked off growth.

The noble Baroness, Lady Neville-Rolfe, asked about tax. I know she would not expect me, even if I could, to write the next Budget now. The Government are delivering on the fiscal strategy set out at the Budget last October, and we are going further and faster on growth because our planning reforms show that changes to tax and spend policy are not the only way to strengthen the public finances.

Over the past nine months, this Government have restored stability to our economy, giving the Bank of England the confidence to cut interest rates three times since the general election. We have begun to rebuild our public services with record investment in our NHS, bringing waiting lists down for five months in a row. We have increased the national living wage to give 3 million people a pay rise from next week. The backdrop to this Spring Statement was a world changing before our eyes. The responsible decisions we have taken mean that we can now act quickly and decisively in this more uncertain world to secure Britain’s future and deliver prosperity for working people.

[Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)]

My Lords, I have doubled the time available for Back-Bench questions to 40 minutes. The House wants short, sharp, succinct, to-the-point questions, not speeches. We will go around the Chamber, seeking to get as many noble Lords in as possible. Please note that, when a noble Lord asks a question, it is unlikely that the next question will come from the same Benches.

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[Lord Lansley (Con)]

My Lords—

[Captain of the Honourable Corps of Gentlemen-at-Arms and Chief Whip (Lord Kennedy of Southwark) (Lab Co-op)]

We will hear from my noble friend Lady Hayter and then from the noble Lord, Lord Lansley.

[Baroness Hayter of Kentish Town (Lab)]

I congratulate the Government on grasping the nettle of the security challenge caused by Putin to the integrity of both Ukraine and the UK, and on repairing the damage that the party opposite did to our Armed Forces and growing it now for new challenges. Does my noble friend the Minister agree that our own national security and economic stability are absolutely linked? Does he also agree that we need a strong, resilient economy independent of global uncertainty and that the welcome increase in defence expenditure will boost jobs and growth across the whole of the UK?

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[Lord Davies of Brixton (Lab)]

My Lords—

[Lord Kennedy of Southwark (Lab Co-op)]

We will hear from the noble Lord, Lord Wigley, next and then from my noble friend Lord Davies of Brixton.

[Lord Wigley (PC)]

My Lords, is the Minister aware that in a Radio Wales interview this morning on yesterday’s Spring Statement, the Chancellor of the Exchequer did not seem to be aware that the First Minister of Wales, Eluned Morgan, had written to her two weeks ago about the serious financial issues facing Wales and still had not had a substantive reply? The Chancellor also did not seem to be aware that housing is a devolved matter in Wales or of how many new jobs her announcement about Newport will generate. In these circumstances, will the Government appoint a Welsh MP to a ministerial role in the Treasury explicitly to deal with matters relating to Wales?