Middle East: Economic Update
Lord Livermore Excerpts(2 days, 8 hours ago)
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Baroness Kramer (LD)
My Lords, if this war with Iran continues, and especially if the Strait of Hormuz remains closed as we approach autumn, the global economy will be in serious trouble and the crisis will impact severely—directly on energy prices and, more broadly, on the cost of living. There was far too little in the Chancellor’s speech to give ordinary folk, never mind the markets, real reassurance. People are not naive. Simply to repeat the steps that the Government planned for the economy anyway in the pre-Iran war world is not sufficient.
The Chancellor indicated that any support beyond changes that are already in the system would be targeted at those who are most in need. What does that mean? Is it limited to the 6 million people who claim welfare or pension credit? Is it correct that the Treasury lacks the capacity to identify and assist those who do not qualify for those benefits but are still very low earners? What should the earnings threshold be for support? Will the Chancellor act immediately to, at the very least, zero-rate VAT on heating oil and liquefied petroleum gas? Will she introduce a proper price-cap mechanism for off-grid fuels? Will the Government also reverse their senseless cuts to home insulation programmes, which will be important to a wide range of people?
In her speech, the Chancellor failed to recognise the dire position of small businesses. Inflation in January pre-war was at 3%. We have found today that UK business activity is growing at its slowest pace since September, with a huge jump in manufacturing input prices. At such a time, tax, NICs and other blows from the Budget will fall on small businesses in April—a few days away. This Government seem cavalier about loading small businesses with additional costs, even though they are the backbone of our economy and jobs, and sustain our local communities.
The Government know that small businesses face a broken energy market that leaves most of them paying inflated energy prices. Will they now instruct the Competition and Markets Authority to investigate suppliers that are blocking small business access to the best energy deals? Will they now change the business rate system so that small businesses can improve their energy efficiency without facing business rate penalties? Will they adopt the idea of an energy security bank to provide low-cost loans for households and small businesses to invest in energy efficiency?
When the country is anxious, it needs a speech from the Chancellor that recognises and responds to the changed reality. Will someone from the Government please give that speech before anxiety becomes a self-fulfilling prophecy?
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
I am grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their comments and their questions. As it is the last day before Recess, I wish both noble Baronesses a very happy Easter in advance.
The noble Baroness, Lady Neville-Rolfe, began her comments by welcoming what we are doing on nuclear, and I am grateful for her support on that and for her support as we implement the Fingleton review. As she knows, we have already begun to rewrite the story on nuclear for this country: we have begun construction at Sizewell C, we have agreed an extension to Sizewell B and we are due to sign the contracts on the UK’s first small modular reactor in Anglesey in partnership with Rolls-Royce. The Chancellor has also confirmed that we will legislate to implement the Fingleton review on nuclear and wider infrastructure in the next Session and has also written to industry and to regulators to get them to set out their plans to fast-track its implementation.
I was disappointed to see the noble Baroness indulge in some anti-EU rhetoric, which I know she does not actually believe. I think it makes absolute sense at this time of global instability that we deepen our economic relationship with our closest partners. It is clear that that is where maximum growth will come from for this country.
The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, spoke about the Competition and Markets Authority. It has stepped up its statutory monitoring of fuel prices and will publicly update on fuel pricing later this month. It is also working with Government to monitor the cost of household essentials, including groceries, for price rises and disruption. It has launched a market study into heating oil on top of its existing work to identify and tackle breaches of consumer law in the heating oil market. The Chancellor also announced this week that we are going further to make sure it has the bite it needs to detect and crack down on price gouging, bringing in a new anti-profiteering framework and considering time-limited targeted powers for the CMA and other regulators as needed. Yesterday, the Chancellor and the Business Secretary both met and convened the regulators’ council to discuss its work to protect consumers and small businesses, as the noble Baroness, Lady Kramer, mentioned.
On oil and gas, I agree with what the noble Baroness, Lady Neville-Rolfe, said. We will ensure the North Sea oil and gas plays an important role in our economy for years to come. Last week, the Chancellor met with the North Sea industry leaders to discuss their role in jobs, investment, growth and energy supply. The noble Baroness also mentioned energy security. She did not mention the fact that the last Government’s failure to invest in energy was a failure to protect our country. But, through determined long-term action, this Government are taking control of our own energy supply. We are investing in renewables, lifting the ban on onshore wind, streamlining grid connections, bringing the next renewables auction forward to this July and driving forward negotiations on the UK’s participation in the EU internal electricity market. We also ran the biggest ever floating offshore wind auction last year.
As I mentioned already, the noble Baroness, Lady Neville-Rolfe, welcomed nuclear, and we must guarantee that our domestic oil and gas industry can play a crucial role as well for years to come. So we are investing in tie-backs to make the most of existing production facilities. The Chancellor has also announced that she has instructed officials to develop plans to back critical energy projects with indemnities if their planning consent is challenged in the courts, so that we can build the infrastructure that we need.
The noble Baroness, Lady Neville-Rolfe, mentioned the OECD projections out this morning. As she knows, the war in the Middle East is not one that we started, nor is it a war that we have joined, but it is a war that will have an impact on our country. The OECD’s projections are highly sensitive to the duration of the shock and reflect the impact of higher energy prices, which the UK, as she knows, is more susceptible to. But, in an uncertain world, we have the right economic plan. The decisions we have taken have put us in a better position to protect the country’s finances and family finances from global economic instability.
Both noble Baronesses touched on the economic situation that we find ourselves in. The full economic impact of the conflict remains uncertain, but the spring forecast showed that the Government have the right economic plan, that we enter this period of global uncertainty with the fundamentals of our economy strong and that we are more prepared for a more volatile world. We have cut inflation, which now stands at 3%—a lower base than at the outset of Russia’s illegal invasion of Ukraine. We have prioritised growth to drive up living standards. The OBR forecast before this conflict showed that GDP per head was set to grow more than was expected at the Budget, with growth of 5.6% over the course of this Parliament. We have stabilised the public finances, having already reduced the deficit by £20 billion this year from 5.2% to 4.3% of GDP—its lowest level for six years and the fastest reduction in the G7. Of course, these forecasts predate the current conflict in the Middle East, but Britain today is in a stronger position to withstand whatever uncertainty comes our way.
The noble Baroness, Lady Noble-Rolfe, spoke about defence. We are delivering the biggest sustained increase in defence spending since the Cold War. The Chancellor has approved access to the Ministry of Defence to use the special reserve to deploy additional capabilities to the Middle East, meaning that the net additional cost of these operations will be funded by the Treasury. The defence investment plan will be published in due course. We are investing £270 billion over this Parliament, after years of our Armed Forces being neglected under the previous Government. We will increase defence spending to 2.6% of GDP from 2027, and we are increasing spending on defence by £5 billion in this year alone.
Finally, both noble Baronesses spoke about energy bills. The noble Baroness, Lady Neville-Rolfe, asked me what “responsible” means. It means that, as we respond to this crisis, we should learn from the mistakes of the past. The previous Government pushed up borrowing, interest rates, inflation and mortgage costs with an unfunded, untargeted package of support under Liz Truss that gave the most support to the wealthiest households. Between 2022 and 2024, under the last Government, households in the top income decile received an average of £1,350 of direct energy bill support. That left us with high levels of national debt—a cheque written then for a bill that is still being paid today. Contingency planning is taking place for every eventuality so that we can keep costs down for everyone and provide support for those who need it most, acting within our iron-clad fiscal rules to keep inflation and interest rates as low as possible.
The Deputy Speaker (Viscount Colville of Culross) (CB)
My Lords, the noble Lord, Lord Campbell-Savours, is taking part remotely. I invite the noble Lord to speak.
Lord Campbell-Savours (Lab) [V]
My Lords, on the background to this strategy and the shock referred to by the Minister, as post-conflict Iran at some stage moves from regional threat into a period of post-conflict reconstruction, do we intend to stand by and watch as Israel takes advantage of the situation by accelerating its programme of land annexation, thereby further promoting regional insecurity and international tension? These conditions challenge the very recovery projects and programmes we are funding, which were identified in the Statement. We all support Israel in its hour of need, but should we not be demanding in response and end to the settlement expansion, as it challenges the stability we all want? It will destabilise recovery.
Lord Livermore (Lab)
I am pleased to say that this is a Statement about the economic situation, and I do not think anyone would ever put me in charge of diplomacy. I am not going to stray into matters that are much more properly a subject for my colleagues in the Foreign Office, so I shall leave it there.
Lord Fuller (Con)
My Lords, I am a 40-year veteran of the fertiliser industry, and two weeks ago I raised for the first time the prospect of shortages of ammonia causing a fertiliser-led food security shock in this country. Last week, I highlighted the effects of the Iran war on our foundational chemical industries based on soda ash, aniline, vinyl, chlorine, ethylene and others. This morning, the Financial Times’ leading article echoes my concerns, and elsewhere there are reports that the EU is backpedalling fast on new carbon taxes and reviewing the emissions trading system. When are the Government going to announce a delay to the counterproductive food chain taxes that will turn an inflation disaster into a cost-of-living catastrophe by driving up the cost of beer, bread, biscuits, milk and cheese to new heights in short order?
Lord Livermore (Lab)
I am grateful to the noble Lord for his question. I know he has a great deal of expertise in the specific sectors that he mentioned. Of course, the Treasury and the Department for Business and Trade are constantly monitoring the impact of this crisis on those sectors and we will take action if necessary. It is not currently our intention to take the specific measures that he mentioned but, as I say, we will be reviewing and monitoring those sectors very closely.
The Lord Bishop of Norwich
My Lords, I welcome this Statement and join the Chancellor speaking in the other place in paying tribute to our Armed Forces. In particular, I welcome support for those families and households hardest hit; however, I share the concern of the noble Baroness, Lady Kramer, for small businesses, and extend that with a question around what we are doing to support the charitable sector: for example, from my recent experience, in the transport costs associated with food banks, in heating warm hubs and so on. We have a responsibility to care for those who care for others, and I ask what the Government are doing to support that work.
Lord Livermore (Lab)
I am grateful to the right reverend Prelate for his question and I agree with him and the noble Baroness, Lady Kramer, on the importance of small businesses to our economy. As the Chancellor said, we do not yet know what the full impact of this conflict will be, so we must be agile in responding appropriately at each moment. It remains the case that the best way to protect families and businesses, large and small, and charities, which the right reverend Prelate mentioned, is by the rapid de-escalation of this conflict.
He mentioned transport costs and we have already taken action: we have extended the fuel duty cut of 5p and have pushed out the cheaper fuel finder, empowering people to avoid rip-off prices. We are chasing down the last few filling stations, so that we can reach 100% compliance with that. He will also know that, when wholesale kerosene prices more than doubled overnight, we stepped in within a matter of days with £53 million of support for those who needed it most. From next week, households will benefit from £150 off their energy bills, thanks to the action that we took in the Budget. Also, the price cap is giving households certainty on their bills until July, ahead of the winter months when people use 78% of their gas.
Lord Redwood (Con)
My Lords, the Government say that they will directly reduce food bills by joining the EU SPS. Can the Minister give us a forecast of how much cheaper food is going to be? It certainly never worked when we were in the EU and it is a very complicated and expensive scheme.
Lord Livermore (Lab)
No, but I am certain that it will lead to lower food prices, just as I am certain that the Brexit that the noble Lord championed has led to all manner of difficulties for consumers, households and businesses. I am sorry that he is still unable to concede that very important point. As I have said before, at a time of global instability, getting closer to and building a deeper economic relationship with our closest partners is in our national, security and economic interest.
Lord Livingston of Parkhead (Non-Afl)
My Lords, in coming back to the comment on oil and gas made by the noble Baroness, Lady Neville-Rolfe, the growth of green energy and the growth of oil and gas are often described as somehow at odds with each other. It is quite clear that we need both for our energy security. We should grow our green energy while oil and gas remain transitional fuels. Therefore, as Norway is doing, the UK should grow its energy and gas supplies so that we can support our tax base and improve our energy security. It may not affect prices, but it is an important role that the UK can play not just for itself but for other countries, and it is not at odds with the energy transformation.
Lord Livermore (Lab)
I agree with every word that the noble Lord said. We will ensure that North Sea oil and gas play an important role in our economy for years to come. Last week, the Chancellor met with North Sea industry leaders to discuss their role in jobs, investment, growth and energy supply. As the noble Lord and I have said, and I agree with him, we are investing in renewables at the same time. We are lifting the ban on onshore wind and streamlining grid connections. We ran the biggest ever floating offshore wind auction last year and have brought forward the next renewables auction to this July, and we are driving forward negotiations on the UK’s participation in the EU internal electricity market.
Lord Eatwell (Lab)
My Lords, could the Minister confirm the number in the OBR report which accompanied the Spring Statement that public sector real investment will increase by 12% this year? Could he explain to what degree that 12% is repairing the damage done by the previous Administration and increasing productivity for the future?
Lord Livermore (Lab)
I am grateful to my noble friend for bringing this to the House’s attention. I absolutely agree with what he said and am happy to confirm the figure that he set out. As he knows and we all know, investment was a particular failure of the previous Government over the last 14 years. When we won the election, private sector investment was the lowest in the G7. Public sector investment was no better and was set to fall again, from 2.5% to 1.7% of GDP. We have increased capital investment by £120 billion over this Parliament, ruling out a return to the austerity of the past. As my noble friend said, that is incredibly important for increasing growth and productivity in the economy.
The OBR has estimated that the eventual growth impact of this increase in capital investment will add 1.4% to GDP. Cutting this now and returning to austerity would be the worst thing that we could do for growth and the very definition of short-termism, yet that is precisely what previous Chancellors with previous fiscal rules have done. In the years following the financial crisis, austerity took demand out of the economy when it was most needed, undermining investment in critical infrastructure, weakening productivity and choking off growth. We will not repeat the mistakes of the past.
Earl Russell (LD)
My Lords, the Climate Change Committee was clear last week that the cost of another oil price crisis would be greater than the cost of reaching net zero by 2050, so these Benches fully support the need to roll out renewables at a faster rate. However, we continue to have high energy bills and there is a need to decouple gas, so I ask the Minister what further action the Government are considering in this space, so that we can bring down energy bills.
The Minister spoke about the need to target support so that it reaches the most vulnerable. I briefly want to ask whether he agrees that there is a need for the Government to do a greater piece of work on data, so that they can identify those people who are in most need of support with energy bills.
Lord Livermore (Lab)
I am grateful to the noble Earl for his question and his consistent support for the action we are taking on renewables. He is absolutely right that it is important that the Government enable the country to take control of its own energy supply. As he says and I have said, we are continuing to invest in renewables by lifting the ban on onshore wind and running the biggest ever floating offshore wind auction last year.
On household energy bills, I have said that contingency planning is taking place for every eventuality. I agree with what he says about data, and of course that work is ongoing. It is very important that we keep costs down for everyone, while providing support for those who need it most and acting within our fiscal rules to keep inflation and interest rates as low as possible.
Lord Bridges of Headley (Con)
My Lords, I hope I am not going to test the noble Lord’s legendary diplomatic skills in answering this question but, last year, the Prime Minister said that “security and defence” were
“not one priority amongst many others but the central organising principle of government. The first thought in the morning, the last at night, the pillar on which everything else stands or falls”.
In light of the Statement that the Chancellor delivered the other day, could the noble Lord confirm that that statement from the Prime Minister is still the case and that defence is the overall organising principle of government? Can he therefore explain when we will see a rapid rise in defence spending and why current forecasts show a welfare spending increase way above that of defence?
Lord Livermore (Lab)
I am grateful to the noble Lord for his question. He knows that the previous Government increased welfare spending by £88 billion in their last five years, which is quite a legacy for us to have inherited. He also knows that we are delivering the biggest sustained increase in defence spending since the Cold War. As I have said already, the Chancellor has approved access for the Ministry of Defence to use the special reserve to deploy additional capabilities in the Middle East.
He asked me how we will increase defence spending. We are investing £270 billion over this Parliament, after years of our Armed Forces being neglected under the previous Government. We will increase defence spending to 2.6% of GDP from 2027 and we are increasing spending on defence by £5 billion in this year alone. Our ambition is to reach 3% in the next Parliament, when fiscal and economic conditions allow. We are not going to put an arbitrary date on that percentage until we know exactly where the money is coming from.
I should also say that, this week, the Chancellor announced a new defence procurement mechanism. A core group of NATO allies—Finland, the Netherlands, the UK and other partners—have announced that they are exploring setting up a new mechanism for financing by 2027. The aim is to aggregate demand to drive joint procurement, accelerate defence investment and increase the availability of critical capabilities.
Baroness Primarolo (Lab)
My Lords, I am grateful for my noble friend the Minister’s Statement, for the steps the Government are taking, and that they will keep under review the impact on families and businesses, particularly small businesses. I return to the question of energy security. Is my noble friend in a position to give us more details on the work being done on the grid infrastructure to ensure its efficient use, speedily bringing down energy prices as we shift to more renewable sources? Will the Government consider returning to their considerations on zonal pricing as a way of bringing energy bills down?
Lord Livermore (Lab)
I am grateful to my noble friend for her question on energy security. As she rightly says, energy security for this country is about making the best use of all the resources at our disposal. It is why we are investing more in nuclear, as the noble Baroness, Lady Neville-Rolfe, said at the outset: we are investing in the construction at Sizewell C and have agreed an extension to Sizewell B, and we are due to sign the contracts on the UK’s first small modular reactor in Anglesey in partnership with Rolls-Royce SMR. It is why we must, as several noble Lords have said already, make the most of our oil and gas reserves—we will ensure that North Sea oil and gas plays an important role in our economy for years to come—and why we are meeting with industry leaders to discuss their role in jobs, investment, growth and energy supply. It is, of course, why—again, as several noble Lords have said—we must make the most of our transition towards renewables and why we should invest heavily in those, as we are doing. We are taking action, as my noble friend says, to streamline grid connections, and that work goes on. We are undertaking a series of very important initiatives in that respect. On zonal pricing, as I understand it, the Department for Energy Security and Net Zero has said that that is not the direction that it intends to go in.
Lord Hannay of Chiswick (CB)
My Lords, will the Minister tell us whether the Treasury has made any estimates of how much oil, in value, Iran needs to export before it drops below a way of maintaining any form of international economic viability? Has the Treasury estimated how Iran will cover its shortfall in foodstuffs and such materials that are, and have always been, needed by Iran beyond those that it grows itself?
Lord Livermore (Lab)
Those are both very interesting questions. I cannot say that I am aware of estimates on either of those—they certainly have not crossed my desk—but I am more than happy to look into them for the noble Lord. If I find anything, I shall write to him.
Lord Lancaster of Kimbolton (Con)
My Lord, I declare my interest as director of the Army Reserve. I listened carefully to the Minister’s Statement about the increase in defence spending, which is, of course, most welcome. Can the Minister perhaps then confirm to me that, next year, the Ministry of Defence will not be required to make significant in-year savings?
Lord Livermore (Lab)
As I think I have said clearly, the Chancellor has approved access for the Ministry of Defence to use the special reserve to deploy additional capabilities in the Middle East, meaning that the net additional costs of these operations will be funded by the Treasury.
Lord Tyrie (Non-Afl)
My Lords, as I understand it, the Government’s commitment on defence spending is to increase it from the 2.3% of GDP that it inherited to 2.6% of GDP, which the Minister has reiterated now. In the 1930s, in the five-year period after 1933, defence spending in this country increased from about 2.3% to 6.8%, which is a trebling. Do the Minister and the Government appreciate that, to deal with the scale of the threats with which we are now faced, we need to take dramatic action on defence—to increase it at considerable pace, far faster than the 0.3% to which the Government are committed at present?
Lord Livermore (Lab)
I think I have set out very clearly the pace at which we are increasing and will increase defence spending. From 2027, we will increase defence spending to 2.6% of GDP, and we are increasing spending on defence by £5 billion in this year alone. Our ambition is to reach 3% in the next Parliament, when fiscal and economic conditions allow.
Viscount Trenchard (Con)
My Lords, following on from the noble Baroness’s question about grid capacity and upgrading the grid, does the Minister not agree that the more small nuclear we can introduce instead of intermittent renewable sources—such as onshore and offshore wind—the better, because it is firm baseload power? Also, it reduces the need to upgrade the grid because, for example, high-temperature gas-cooled reactors—50-megawatt reactors—can be placed over the fence, alongside data centres or industrial clusters. Our Japanese friends have almost given up on us and are now considering working with different partners on commercialising their high-temperature gas-cooled reactor technology, which was originally a British invention. When will the Government confirm their commitment to early deployment of this very effective and useful technology?
Lord Livermore (Lab)
I am grateful to the noble Viscount, who clearly has a great deal of expertise in this matter. I agree with everything he said, certainly in the first part of his question. SMRs and AMRs being deployed in the UK will form an incredibly important part of our energy mix. We have set out and published a framework so that we can see more private sector investment in exactly those technologies. As he says, AMRs in particular can provide very high heat to decarbonise a lot of our industry, which is incredibly important. They do not need to connect to the grid, so they do not use up grid connections. That is exactly the kind of technology that we would like to see deployed more. As I said, we have published a framework so that we can see more private investment in exactly those technologies.
Lord Leigh of Hurley (Con)
My Lords, while the Minister is not transferring to the Diplomatic Service—we would miss him greatly—there does seem to be a sense of denial in the question by the noble Lord, Lord Eatwell, and the Minister’s answer. GDP is now expected to expand by just 0.7% this year, according to the OECD interim economic outlook, which he will know was published today. That is down by 0.5 percentage points from the organisation’s prior prediction of 1.2%. This would put the UK second last in the G7 growth table and represents the largest downgrade in growth projections for any G20 economy. Rather than denial, we need to face reality. I am particularly concerned that, in the debate on this matter in the other place earlier this week, the Chancellor kept referring to the fact that borrowing will fall. Does the Minister think she really understands the difference between deficit and debt?
Lord Livermore (Lab)
Yes, I am absolutely certain that she understands the difference between those two things. As I have said already, the war in the Middle East is not one that we started nor one we have joined, but it will have an impact on our country. The OECD’s projections are highly sensitive to the duration of the shock and reflect the impact of higher energy prices, to which the noble Lord knows we are more exposed than many other countries. But I am absolutely certain that, in an uncertain world, we have the right economic plan. The decisions we have taken have put us in a better position to protect the country’s finances and family finances from global instability.
HBOS: Fraud Investigation
Lord Livermore Excerpts(2 days, 8 hours ago)
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Lord Sikka
To ask His Majesty’s Government what assessment they have made of the adequacy of Lloyds Bank’s investigation of fraud at HBOS; and when they expect Dame Linda Dobbs’s review of the fraud to be completed and published.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, in 2017, Lloyds Banking Group independently launched the Dobbs review to assess the handling of the fraud, which took place in the early 2000s, and to determine what it knew or should have known and whether it reported it appropriately to the regulatory authorities. The Government understand that drafting is under way, and the review’s findings will be shared with the Financial Conduct Authority once completed, which will then consider what actions are appropriate to take.
Lord Sikka (Lab)
My Lords, I thank the Minister for his reply. It would be helpful to have a bit of background. Fraud at HBOS goes back to 2002. The regulators did little. In 2017, the Thames Valley Police and Crime Commissioner secured six criminal convictions. Still the FCA, SFO and the police did not fully investigate. The Government left it to Lloyds Bank, which owns HBOS and which then appointed Dame Linda Dobbs to investigate and prepare a report. There has been no report to date. Victims are still awaiting compensation, and many have died since. Does the Minister agree that it is a government duty to deliver justice to victims of bank fraud?
Lord Livermore (Lab)
The Government share the frustration at how long processes relating to this issue are taking to conclude. In 2017, Lloyds Banking Group independently launched the Dobbs review to assess the handling of the fraud, what it knew or should have known, and whether it reported it appropriately to the regulatory authorities. The noble Lord mentioned the FCA. The FCA has undertaken an investigation into this matter historically and has taken enforcement actions. The FCA previously investigated and, with the PRA, jointly reported on the failure of HBOS. There was a criminal investigation resulting in six convictions in 2017. The FCA investigated knowledge of these matters with HBOS and its communications with the FCA after the initial discovery of the misconduct. Lloyds Banking Group has informed the Government that it is providing all the assistance and resources that Dame Linda and the review have requested, and that drafting is under way. It has reiterated the point that it will make the findings of Dame Linda’s review available when completed and will co-operate with Parliament. The Government inherited a series of processes that are independent of government and not accountable to us or the FCA. With our having inherited that legacy, it is right that the Dobbs review, alongside the work of Sir David Foskett, is allowed to conclude.
Baroness Kramer (LD)
My Lords, I am going to press the Minister to take a stronger position on this issue, which was £1 billion of criminal financial manipulation by HBOS Lloyds. The FCA spectacularly failed to investigate, initiating a report only under strenuous insistence from Vince Cable. It then misrepresented, to this House and others, the conclusions of that report—as was exposed when the original document was leaked to the Treasury Select Committee. Given all that, will the Government now back Dame Meg Hillier, who has demanded that when this report is completed, it is published in full and unredacted, which is not the position that Lloyds appears to be taking?
Lord Livermore (Lab)
As I said before, the Government inherited a series of processes that are independent of government and not accountable to us or the FCA. With our having inherited that legacy, it is right that the Dobbs review, alongside the work of Sir David Foskett, is allowed to conclude. Lloyds Banking Group has informed the Government that it is providing all the assistance and resources that Dame Linda and the review have requested and that drafting is under way. It has reiterated the point that it will make the findings of Dame Linda’s review available when completed and will co-operate fully with Parliament.
Lord Tyrie (Non-Afl)
Will the Government reconsider their decision not to publish the report in full? I fully support what the noble Baroness, Lady Kramer, has said. I chaired the Treasury Select Committee through a substantial period during which these issues developed. It really is wholly unacceptable, so long after the development and exposure of this fraud, that people are not receiving compensation. We now need the publication and full transparency of that report.
Lord Livermore (Lab)
As I have previously said, Lloyds Banking Group has reiterated the point that it will make the findings of Dame Linda’s review available when completed and will co-operate fully with Parliament. The noble Lord mentioned compensation. As I understand it, the independent Foskett Panel was established by Lloyds Banking Group in 2020, in part following engagement with the FCA and the Treasury, to determine the right level of compensation in individual cases. That review is independent. I understand that it has made its determinations and settled compensation for the majority of victims, but there are a few outstanding cases and I very much hope that this work will conclude in the near future.
Lord Woodley (Lab)
My Lords, can the Minister assure the House that the victims of this incredible £1 billion HBOS fraud will have the opportunity to challenge and correct the published version of the Dobbs review?
Lord Livermore (Lab)
I am afraid I do not know the answer to my noble friend’s question. I will very happily check and write to him in due course.
Baroness Neville-Rolfe (Con)
My Lords, the truth is that this was an appalling state of affairs, with many small and medium enterprises driven into insolvency as a result of the HBOS Reading fraud. Following the 2017 convictions which the Minister has mentioned, courts made several Proceeds of Crime Act confiscation orders—for example, a £10 million order against David and Alison Mills—yet their criminal benefit was assessed to be far higher, at around £69 million. Can the Minister tell us how much has been recovered and returned to victims to date? Will the Minister commit to a victim-first distribution plan for any further recoveries?
Lord Livermore (Lab)
As I said to the House previously, the independent Foskett Panel was established by Lloyds Banking Group in 2020, in part following engagement with the FCA and Treasury, to determine the right level of compensation in individual cases. As I said before, the review is independent. I understand that it has made its determinations and settled the compensation for the majority of victims, although there are a few outstanding cases. I hope this work will be able to conclude in the near future.
Lord Davies of Brixton (Lab)
I speak as an officer of the All-Party Parliamentary Group on Investment Fraud and Fairer Financial Services. The Government have placed considerable reliance on developing financial services as an engine of growth in our economy. Does my noble friend the Minister agree that transparent and clear anti-fraud activity is an essential element and that any doubts about the effectiveness of our anti-fraud policy will weaken the opportunities open to us. As the noble Baroness, Lady Neville-Rolfe, said, the extent of the pain and problems caused by this fraud should not be underestimated. Somewhat oddly, it only really came to light because of the work of the Thames Valley Police. We really do need to get better on this.
Lord Livermore (Lab)
My noble friend is far more expert in these matters than me, and I think I agree with what he said. As I said, the Government share the frustration at how long processes related to this issue are taking to conclude. We very much hope that the findings of Dame Linda Dobbs’ review will be available very shortly. My noble friend mentioned the importance of the financial services sector, and I would like to reiterate that. The financial services sector is critical to the ambitions of our country; it is one of the largest and most productive sectors of the UK, worth around 9% of total economic output, employing 1.2 million people across the UK. So, I very much endorse what my noble friend says.
Lord Stirrup (CB)
Does the Minister accept that some of the difficult political challenges facing western societies today are a consequence of the destruction of the faith that people have in the effectiveness and fairness of the socio-political economic model following the financial crash of 2007 and the economic consequences? Therefore, issues such as the HBOS scandal are not just one-offs; they are not just a matter of dealing with certain financial consequences. If, as a society, we do not clearly address these things, the difficult political challenges that we currently see will continue and, indeed, get worse.
Lord Livermore (Lab)
It is very difficult to disagree with what the noble and gallant Lord says, and I am sure I agree with much of it. Substantial protections were put in place in terms of financial services after the financial crisis that he described, and those protections remain; that is, adherence to international standards, ensuring robust NRA remains in place, commitment to ring-fencing and the new FPC, FCA and PRA—that whole architecture. The reforms that were put in place post financial crisis are incredibly important in ensuring ongoing confidence in our financial services sector.
Lord Hamilton of Epsom (Con)
My Lords, can the Minister now answer the question from the Conservative Front Bench? How much money has been got back from the fraudsters and how much of that has ended up with the victims of this appalling crime?
Lord Livermore (Lab)
As I said before, that is a matter for the independent Foskett Panel, which was established by Lloyds Banking Group in 2020. The review is independent. I understand that it has made its determinations and settled the compensation for the majority of victims, although there are, of course, a few outstanding cases. I hope this work will be able to conclude in the very near future.
National Insurance Contributions (Employer Pensions Contributions) Bill
Lord Livermore ExcerptsWednesday 25th March 2026
(3 days, 8 hours ago)
Lords ChamberRead Full debate National Insurance Contributions (Employer Pensions Contributions) Bill 2024-26 View all National Insurance Contributions (Employer Pensions Contributions) Bill 2024-26 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 183-I Marshalled list for Consideration of Commons Reasons - (24 Mar 2026)
Lord Livermore
That this House do not insist on its Amendment 1, to which the Commons have disagreed for their Reason 1A.
1A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, in moving this Motion, I will also speak to Motions B, B1, C, D, E, F, F1, G, G1, H, H1, J, K, L, M and M1. The other place has disagreed with Amendments 1 to 12, as they would alter the financial arrangements made by the Commons. The other place did not offer any further reason, trusting that this reason is deemed sufficient.
While the Government disagree with the substance of these amendments, I am pleased that we have been able to discuss and debate these issues. I am very grateful to the noble Baronesses, Lady Neville-Rolfe, Lady Kramer and Lady Altmann, and the noble Lords, Lord Altrincham, Lord Leigh of Hurley, Lord Fuller, Lord Mackinlay and Lord Londesborough, for ensuring that these important matters have been addressed. On that basis, I hope that noble Lords are content not to insist on these amendments.
I turn now specifically to Amendments 1B, 1C, 2B, 2C, 6B, 6C, 7B, 7C, 8B, 8C, 12B and 12C, tabled by the noble Baroness, Lady Neville-Rolfe. These amendments would make commencement of the Act contingent on the publication of impact assessments on basic rate taxpayers, employees making student loan repayments and small and medium-sized enterprises.
Before addressing each of these in turn, it may be helpful if I remind your Lordships’ House of the documents that have already been published by the Government and the Office for Budget Responsibility. The tax information and impact note sets out the expected impacts of the policy on individuals, employers and the Exchequer. The policy costing note sets out details on the costings of the measure, including the tax base, static costing and a summary of behavioural responses expected by employers and employees.
The Office for Budget Responsibility published its economic and fiscal outlook, which provides the OBR’s independent scrutiny of the Government’s policy costings. The OBR also published a supplementary forecast note which provided additional information it received prior to last year’s Budget to further increase the transparency of this measure.
I should also like to remind noble Lords that the expected behavioural impacts of this measure have been set out in the policy costing note and both the OBR’s economic and fiscal outlook and supplementary note. Both the Government and the OBR have been transparent about the expected behavioural responses by employers and individuals.
I turn first to amendments which make the commencement of the Act contingent on the publication of economic and behavioural impact assessments on basic rate taxpayers. As set out in the Budget document, the £2,000 cap means that 74% of basic rate taxpayers who use salary sacrifice will be entirely unaffected by these changes. The remaining proportion of basic rate taxpayers who have contributions above the cap will still get national insurance contributions relief for the first £2,000 of contributions made by salary sacrifice in addition to the full income tax relief that is available to all employee pension contributions. Further, 87% of affected salary sacrifice contributions above the cap are forecast to be made by higher and additional rate taxpayers. This is a fair and pragmatic reform, and the distributional effects of it are clear. On this basis, the Government do not consider a separate and additional impact assessment on basic rate taxpayers to be needed.
I turn to amendments which make commencement of the Act contingent on the publication of economic and behavioural impact assessments on individuals repaying student loans. It is right that we focus on outcomes for younger generations, particularly given that, over the past 14 years, they have seen their fees trebled, interest rates increased and maintenance grants scrapped. Importantly, though, the £2,000 cap means that young graduates are broadly unaffected. In fact, the £2,000 cap means that 90% of graduates under the age of 30 repaying student loans who are saving into their pension are completely unaffected by this measure. Both this and the prior set of amendments make a broader point about pension savings and pensions adequacy for these populations. This is a real challenge for our pensions system, but the data is entirely clear that today’s salary sacrifice is not the answer. As discussed at earlier stages, salary sacrifice existed in the 2000s and early 2010s, yet there were falls in private sector pension saving during that period.
There has been a clear consensus throughout our debates that the key factor that has led to an increase in saving in recent years has been automatic enrolment. As a result, more than 22 million workers across the UK are now saving each month.
Although we all share a commitment to improving pensions adequacy, many groups at highest risk of undersaving, including the self-employed, lower earners and women, are not the most likely to benefit from salary sacrifice. Only one in five self-employed people save into a pension, but they are entirely excluded from salary sacrifice. Low earners are most likely not to be saving, but higher earners are more likely to be using salary sacrifice. Many women are undersaving for retirement, but many more men use pension salary sacrifice.
The pensions tax relief system remains hugely generous and there remain significant incentives to save into a pension. The £70 billion of income tax and national insurance contribution relief which the Government currently provide on pensions each year will be entirely unaffected by these changes.
I turn to the amendments seeking an impact assessment on small and medium-sized enterprises and charities. The Government agree on the importance of supporting small and medium-sized businesses and charities, but small businesses are much less likely to use salary sacrifice than larger businesses. Furthermore, the £2,000 cap means that 90% of employees in SMEs making pension contributions through salary sacrifice will be entirely unaffected. Indeed, the largest benefits from uncapped salary sacrifice accrue to larger businesses, not smaller ones. In practice, the changes in the Bill will help level the playing field between small businesses and their larger competitors.
The amendment also requires assessment of the expected impact on business and compliance costs. This analysis is already set out in the tax information and impact note. As set out in that document, the administration of this measure is estimated to result in a one-off cost of £75 and an ongoing £99 per business per year for those using salary sacrifice.
The Government recognise that these changes will impact those currently using salary sacrifice. That is why we chose a long lead-in time of April 2029 to give employers maximum time to prepare for these changes. As mentioned previously, HMRC is engaging with employers, payroll providers and software developers to deliver the changes in the most suitable way with the fewest administrative burdens for businesses of all sizes that use salary sacrifice. For the reasons I have set out, I respectfully ask that the noble Baroness does not press her Motions. I beg to move.
Motion A1 (as an amendment to Motion A)
Lord Fuller (Con)
My Lords, once again, taken together, this is a further insult to working people. As we have heard this evening, it is about not the fat cats but the youngsters and the poorer paid who are starting off and trying to do the right thing, making their way in the world. There is already intergenerational unfairness, and this Bill amplifies it and makes it worse. The Government have a tin ear. When they say they are trying to look after the youngsters, they are speaking with a forked tongue. Youngsters just want a break, but this Government are beating them with a stick. We have got to stop it.
Lord Livermore (Lab)
My Lords, I am grateful to all noble Lords who have spoken in this debate.
On the topic of impact assessments, I remind noble Lords of the information that we have already published. The tax information impact note sets out the expected impacts of the policy on individuals, employers and the Exchequer. The policy costing note sets out detail on the costing of the measure, including the tax base, static costing and a summary of behavioural responses expected by employers and employees. The Office for Budget Responsibility published its economic and fiscal outlook, which provides the OBR’s independent scrutiny of the policy costing. The OBR also published a supplementary forecast note which provides additional information it received prior to last year’s Budget.
I also remind noble Lords that the expected behavioural impacts of this measure have been set out in the policy costing note and both the OBR’s economic and fiscal outlook and supplementary note. Both the Government and the OBR have been very transparent about the expected behavioural responses by employers and individuals.
The noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Londesborough, asked about the 2029 implementation date. As I have said already, we chose a long lead-in time of April 2029 to give employers maximum time to prepare for the changes. As I have mentioned before, HMRC is engaging with employers, payroll providers and software developers to deliver the changes in the most suitable way with the fewest administrative burdens for businesses of all sizes which use salary sacrifice.
The noble Lord, Lord Leigh of Hurley, spoke about small and medium-sized enterprises. I say again that the £2,000 cap means that 90% of employees and SMEs making pension contributions through salary sacrifice will be entirely unaffected. The noble Lord also mentioned students. He is absolutely right; as I said before, it is right that we focus on outcomes for younger generations, particularly given that, over the past 14 years, they saw their fees trebled, interest rates increased and maintenance grants scrapped. The £2,000 cap means that 90% of graduates under 30 repaying student loans who are saving into their pension are completely unaffected by this measure.
These are fair and balanced reforms. They give employers many years to prepare and they ensure that both our pensions system and the public finances are kept on a sustainable footing. The £2,000 cap protects lower-earning employees who use salary sacrifice to make pension contributions and preserves the tax benefit of salary sacrifice for all employees on the first £2,000 of their contributions.
Importantly, these changes leave the tax reliefs on regular pension contributions completely untouched. These reliefs are worth £70 billion a year and are available to all workers and employers, not just those who use salary sacrifice. For the reasons that I have set out, I respectfully ask the noble Baroness, Lady Neville-Rolfe, not to press her Motions. I beg to move.
Baroness Neville-Rolfe (Con)
My Lords, I am afraid that I am not satisfied with the Minister’s response, particularly on the question of the behavioural assessments that we have had. They are really not fit for purpose. I give notice that will I seek to test the opinion of the House on Motion A1 and, if successful, on further Motions.
Lord Livermore
That this House do not insist on its Amendment 2, to which the Commons have disagreed for their Reason 2A.
Lord Livermore
That this House do not insist on its Amendment 3, to which the Commons have disagreed for their Reason 3A.
Lord Livermore
That this House do not insist on its Amendment 4, to which the Commons have disagreed for their Reason 4A.
Lord Livermore
That this House do not insist on its Amendment 5, to which the Commons have disagreed for their Reason 5A.
Lord Livermore
That this House do not insist on its Amendment 6, to which the Commons have disagreed for their Reason 6A.
Lord Livermore
Moved by
That this House do not insist on its Amendment 7, to which the Commons have disagreed for their Reason 7A.
7A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.
Lord Livermore
Moved by
That this House do not insist on its Amendment 8, to which the Commons have disagreed for their Reason 8A.
8A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.
Lord Livermore
Moved by
That this House do not insist on its Amendment 9, to which the Commons have disagreed for their Reason 9A.
9A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.
Lord Livermore
Moved by
That this House do not insist on its Amendment 10, to which the Commons have disagreed for their Reason 10A.
10A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.
Lord Livermore
Moved by
That this House do not insist on its Amendment 11, to which the Commons have disagreed for their Reason 11A.
11A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.
Lord Livermore
Moved by
That this House do not insist on its Amendment 12, to which the Commons have disagreed for their Reason 12A.
12A: Because the Lords Amendment would alter the financial arrangements made by the Commons, and the Commons do not offer any further Reason, trusting that this Reason may be deemed sufficient.
Reducing Government Spending
Lord Livermore Excerpts(4 days, 8 hours ago)
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Lord Leigh of Hurley
To ask His Majesty’s Government, further to (1) data released by the Office for National Statistics on 20 March showing that public sector borrowing in February was £14.3 billion, and (2) the increase in 10-year gilt yields, what plans they have to reduce Government spending.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, UK markets are of course affected by global developments, but it is long-standing convention that the Government do not comment on specific market movements. Because of this Government’s economic plan, we are more prepared for a more volatile world, with lower inflation and more resilient public finances. This year the deficit will fall by £20 billion, from 5.2% to 4.3% of GDP—its lowest level for six years and the fastest reduction in the G7. Global financial market volatility means that it is more important than ever to have a robust fiscal framework. We will not repeat the mistakes of the previous Government by returning to austerity or cutting public investment. That was a short-term fix that has created long-term problems.
Lord Leigh of Hurley (Con)
My Lords, the ultimate judge and arbiter of the Government’s success is the bond market. As of this afternoon, 10-year gilts are at 4.91%, higher than in the famous Liz Truss era, which Members on the opposite Benches are so keen to reflect back at us, and the highest in the G7. The OBR had said that the UK’s fiscal position is vulnerable to external events, and so it proved. Will the Minister explain to us why we are in this position and what steps HM Government are taking to reduce government spend, particularly in welfare?
Lord Livermore (Lab)
As I said at the outset, of course UK markets are affected by global developments but it is a long-standing convention that the Government, as an issuer in gilt markets, do not comment on specific market moves. The noble Lord will be aware that the full economic impact of the conflict will depend on its severity and duration, but we enter this period of uncertainty with the fundamentals of our economy strong. The spring forecast showed that this year borrowing falls by almost 1 percentage point to its lowest level for six years, 4.3%. That is the largest fall in the deficit since 2016. Borrowing as a share of GDP will then fall in every year of the forecast, from 4.3% in 2025 to 1.6% in 2030. Borrowing will fall more than in any other G7 economy. This year, for the first time since 2004, we will be borrowing less than the rest of the G7 on average.
The noble Lord asked about welfare. It is right to point out that in the last five years of the previous Government, spending on welfare increased by £88 billion. No one believes that the system we inherited is working: it abandoned too many people to a life on benefits, it wrote off too many people as too sick to work and it condemned too many children to be too poor to eat. That is exactly why we are reforming the welfare system.
Lord Watts (Lab)
My Lords, I have a suggestion for saving money in the public sector. At the moment, billionaire farmers who do not pay any tax in the UK can claim farming subsidies. Is it right that we all pay them extra money at a time when they have not paid money into the system?
Lord Livermore (Lab)
I am sure my noble friend makes a very interesting point. It is notable, though, that the party opposite’s first instinct is to cut spending at a moment of instability such as this. That is precisely the stop-go pattern of investment that got us into the problems that our economy is now in. Cutting investment at this point and returning to austerity would be the very worst thing that we could do for growth—the very definition of short-termism—yet that is precisely what previous Chancellors with previous fiscal rules have done. In the years following the financial crisis, austerity took demand out of the economy when it was needed most, undermining investment in critical infrastructure, weakening productivity and choking off growth. Unlike today’s Conservative Party, we will not repeat the mistakes of the past.
Baroness Kramer (LD)
My Lords, despite these volatile times, the Debt Management Office, on behalf of the Treasury, still seems determined to issue £20.4 billion in index-linked gilts this year. The cost of servicing the UK’s national debt is already far more vulnerable to rises in interest rates than comparable countries, thanks to past issuances which have meant that 25% of our national debt is index-linked. Surely it is time to rethink this strategy.
Lord Livermore (Lab)
The Debt Management Office’s operations continue to see strong demand, with efficient pricing. As I have said already, this year the Government will reduce the deficit by £20 billion since last year from 5.2% to 4.3% of GDP, and global financial market volatility means it is more important than ever to have a robust fiscal framework, with fiscal rules that provide stability, ensure our public services are sustainably funded and reduce the burden on future generations.
Lord Bridges of Headley (Con)
My Lords, in January the Chancellor said that the UK is
“in a very strong position”
to withstand new shocks to the public finances without further tax rises. Can the Minister repeat that assurance?
Lord Livermore (Lab)
Of course, I agree with everything the Chancellor says. Since coming to office, this Government have implemented an economic plan to bring stability to the public finances and to strengthen Britain’s economy for the long term. The forecast from the Office for Budget Responsibility, published last month, showed that our plan is working and that we enter this period of global uncertainty with the fundamentals of our economy strong. We have cut inflation, which is standing now at 3%, a lower base than at the outset of Russia’s illegal invasion of Ukraine. We have prioritised growth to drive up living standards and have stabilised the public finances, having already reduced the deficit by £20 billion this year, from 5.2% to 4.3% of GDP.
Baroness Curran (Lab)
My Lords, can my noble friend spell out to the House the benefits of increased public expenditure on health and how this actually contributes to economic growth? Can he spell out the benefits of increased public expenditure on defence, which contributes to the safety of the United Kingdom? Does he agree with me that the years of Tory austerity directly damaged the defence standing of this country?
Lord Livermore (Lab)
I absolutely agree with everything my noble friend says. The legacy of underinvestment from the previous Government still affects the economy today. When we won the election, private sector investment was the lowest in the whole G7. Public sector investment was no better and was set to fall again from 2.5% to 1.7% of GDP. We have invested £120 billion of additional capital investment. The OBR estimates the eventual growth impact of this increase in capital investment as adding 1.4% to GDP. As I have said before, cutting this and returning to austerity would be the very worst thing that we could do for growth. Unlike today’s Conservative Party, we will not repeat the mistakes of the past.
Baroness Neville-Rolfe (Con)
My Lords, the facts that were included in my noble friend’s Question show that we face a very troubling position on the public finances. I think the Chancellor’s Statement has done nothing to reassure the markets today. The Government’s economic policy is not fit for purpose, if it ever was. Do the Government recognise the seriousness of the position, and what do they propose to do about it?
Lord Livermore (Lab)
We do. As I said already, and as we know, the full economic impact of the conflict will depend on its severity and duration, but this year borrowing falls by almost one percentage point to its lowest level for six years, 4.3%. This is the largest fall in the deficit since 2016. For the first time since 2004, we will be borrowing less than the rest of the G7 on average, something the previous Government did not achieve in their 14 years in power. I should point out that these falls in borrowing are as a result of some tough decisions that we have taken on the public finances. The noble Baroness and the party opposite have opposed every single one of those decisions we have taken to get the public finances under control.
Lord Eatwell (Lab)
My Lords, does my noble friend agree that the Question asked by the noble Lord, Lord Leigh, and the reaction of the Opposition Front Bench illustrate three things—first, the folly of criticising a medium-term policy of stability on the basis of one month’s figures; secondly, a failure to understand that the gilt rate is determined in international markets and that, for example, the rate on US treasuries has risen rather more in percentage terms than the rate on UK gilts; and, thirdly, the persistent addiction of the Conservative Party to the economics of austerity?
Lord Livermore (Lab)
My noble friend is far more expert than me, and I agree entirely with all three points that he makes. I do not seek to add very much to what he says, but I agree most of all with his last point that returning to austerity would be the very worst thing we could do at this point for growth.
Lord Dobbs (Con)
I hope the House will forgive me, but I can scarcely keep up with the good news that the Minister keeps showering upon us, so may I ask him for an indication—not a guarantee or promise but an indication—that he will put his noble name to? One thing he has not mentioned is when unemployment will start coming down. Can he tell us whether it will be in 2027, 2028 or 2029, or have the workers’ Government forgotten about the unemployed?
Lord Livermore (Lab)
I am grateful to the noble Lord for his question. I can only go by what the OBR says, and it says it will be 2026. The OBR said that unemployment will peak later this year before falling for the remainder of the forecast period, ending the Parliament lower than the rate we inherited at the election. Clearly, the economic impact of the situation in the Middle East will depend on its severity and duration, but the OBR forecasts that over the course of this Parliament, employment will rise and the unemployment rate will fall.
Finance (No. 2) Bill
Lord Livermore ExcerptsTuesday 17th March 2026
(1 week, 4 days ago)
Lords ChamberRead Full debate Finance Act 2026 View all Finance Act 2026 Debates Read Hansard Text Read Debate Ministerial Extracts Amendment Paper: Report Stage Amendments as at 11 March 2026 - (11 Mar 2026)
Lord Livermore
That the Bill be now read a second time.
Scottish and Welsh legislative consent granted. Relevant document: 3rd Report from the Economic Affairs Committee.
Spring Forecast Statement
Lord Livermore Excerpts(1 week, 4 days ago)
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Lord Livermore
That this House takes note of the Spring Forecast Statement.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, it is a privilege to open this debate on the spring forecast and the Second Reading of the finance Bill. I very much look forward to the valedictory speech from the noble Lord, Lord St John of Bletso.
On taking office, this Government inherited three major crises: a crisis in the public finances, a crisis in our public services and a crisis in the cost of living. That is why we have repeatedly taken the action necessary to bring stability to the economy. The choices we have made are the responsible ones. The spring forecast showed that the economic plan that we have been driving forward since the election is the right one.
In our first Budget, we took action to fix the foundations of the economy by repairing the £22 billion black hole in the public finances left by the previous Government. At the spending review last summer, we stuck to our non-negotiable fiscal rules, keeping a tight grip on day-to-day spending while investing an additional £120 billion in growth-driving infrastructure and getting debt on a downward path. In the Budget last November, we built greater resilience by doubling the headroom against the stability rule and cutting borrowing as a share of GDP in every year of the forecast.
Our economic plan is built on three pillars: stability in our public finances, investment in our infrastructure and reform to Britain’s economy. Stability is the cornerstone of this plan because it is the single most important precondition for economic growth. That is why we have committed to one fiscal event a year, limiting major policy changes to the Budget, helping to give businesses and households the certainty that they need to plan and to invest.
The forecast from the Office for Budget Responsibility, published last month, shows that our plan is working and that we enter this period of global uncertainty with the fundamentals of our economy strong. We have cut inflation, which stands now at 3%—a lower base than at the outset of Russia’s illegal invasion of Ukraine. We have prioritised growth to drive up living standards. The OBR forecast showed GDP per head set to grow more than was expected at the Budget, with growth of 5.6% over this Parliament. We have stabilised the public finances, having already reduced the deficit by £20 billion this year from 5.2% to 4.3% of GDP.
These forecasts pre-date the current conflict in the Middle East. The full economic impact of that conflict will depend on its severity and its duration. The movements on energy markets that we have seen are likely to put upward pressure on inflation in the coming months. Our economic approach will be responsive to a changing world and responsible in the national interest. As the Government have demonstrated time and again, we will take the necessary decisions to help families with the cost of living and to protect the public finances.
This Government are delivering the biggest uplift in defence spending since the end of the Cold War. The Chancellor has also approved access for the Ministry of Defence to the special reserve to deploy additional capabilities in the Middle East, meaning that no net additional costs of these operations will be funded by the Ministry of Defence, but instead will be funded by the Treasury.
Last week, following her call with other G7 Finance Ministers, the Chancellor set out her further priorities for international co-operation: for immediate de-escalation and a return to a diplomatic process; guaranteeing the security of vessels passing through the Strait of Hormuz; supporting a co-ordinated release of collective International Energy Agency oil reserves, the release of which has since helped to stabilise international oil markets; and setting out how the UK will play its part as the global hub of maritime insurance. On Friday, the Chancellor met petrol retailers and energy suppliers to make it clear that the Government would not tolerate any company exploiting the current situation to make excess profits at consumers’ expense.
While we do not yet know how long this conflict will last, it underlines the importance of building a stronger, more secure economy able to withstand whatever instability we may face. The strength of our economy and public finances is possible only because of the Budget last year and the measures contained in the finance Bill before us today.
That Budget had at its heart three pro-growth choices. First, by choosing to maintain economic stability, getting inflation and interest rates down, we helped give businesses the confidence to invest and our economy the room to grow. Secondly, by choosing to reject austerity, we protected £120 billion of additional investment in growth-driving infrastructure. Thirdly, by choosing to back the fast-growing companies of the future, we supported the investment, innovation and economic dynamism that will increase growth in the next decade and beyond. That includes measures in the Bill to make Britain the best place in the world for firms to start, scale and stay. We are doing that by widening eligibility for our enterprise incentives so that scale-ups can attract the talent and the capital that they need. We are expanding the enterprise management incentive so that more companies can offer tax relief share options, and we are re-engineering our enterprise investment and venture capital trust schemes so that they do not back just early-stage ideas but stay with companies as they grow. For all businesses, large and small, we are also maintaining the lowest corporation tax rate in the G7 and the joint most generous capital allowances in the OECD.
In her Mais Lecture today, the Chancellor went further on our growth agenda by setting out how we will deepen our economic relationship with our European partners, how we will back innovation and harness the power of AI, and how we will take the necessary action to build growth on a broad, stable basis right across the UK.
Of course, the pro-growth choices we made in the Budget need to be paid for, and that means asking everyone to make a contribution. The previous Government froze the main income tax thresholds from 2021 to 2028. This finance Bill maintains all income tax and equivalent national insurance thresholds at their current level for a further three years from 2028. I accept that maintaining these thresholds is a decision that will affect working people. The Chancellor and I both said this in 2024 and I will not pretend otherwise now.
However, while we are asking everyone to make a contribution, we are keeping that contribution as low as possible through reforms to our tax system to make it fairer and to ensure that the wealthiest contribute the most. That includes increasing taxes on property, dividend and savings income to narrow the gap between tax paid on work and tax paid on income from assets. Currently, a landlord with an income of £25,000 will pay nearly £1,200 less in tax than their tenant with the same salary because no national insurance is charged on property, dividend or savings income. That is not fair. That is why this finance Bill increases the basic and higher rate of tax on property, savings and dividend income by 2 percentage points, and the additional rate of tax on property and savings income by 2 percentage points. Around two-thirds of the revenue from these increases are expected to come from the top 20% of households.
We are also reforming the tax system to ensure that it keeps pace with a fast-changing economy. This finance Bill increases taxes on online gaming and online betting, while protecting UK horseracing and abolishing bingo duty. It prevents private hire vehicle operators exploiting a tax administration scheme so that everyone pays fairly. We are going further to close the tax gap to ensure that everyone pays the tax that they owe. Reforms contained in this finance Bill will help to collect more unpaid taxes and modernise the tax system to make it easier for taxpayers to get their tax right first time.
We have listened carefully to feedback from the farming community and family businesses, and the Bill raises the threshold for the 100% rate of relief on agricultural property and business property from £1 million to £2.5 million. This means that a couple will now be able to pass on up to £5 million of agricultural or business assets tax free on top of the existing allowances such as the nil-rate band.
Since coming into office, this Government have implemented an economic plan to bring stability to the public finances and to strengthen Britain’s economy for the long term. The spring forecast shows that this plan is the right one, with lower inflation and borrowing, higher living standards and a growing economy. Britain today is in a stronger position to withstand whatever uncertainty comes our way, but that is possible only because of the action we took in the Budget last year and the measures contained in this finance Bill. They are the right choices to protect families and businesses in an uncertain world, and they demonstrate that this Government have the right economic plan for Britain’s future. I beg to move.
Lord Livermore (Lab)
My Lords, it is a pleasure to close this debate on the spring forecast and the Second Reading of the Finance (No. 2) Bill. I am grateful to all noble Lords for their contributions, which I have enjoyed listening to. I pay tribute to the noble Lord, Lord St John of Bletso, for his valedictory speech and his service to your Lordships’ House over many years. It was a wide-ranging speech spanning Nelson Mandela, energy policy and AI, among other issues. In this, it was a perfect representation of the experience he has brought to our debates. I wish him very well for the future.
On taking office, this Government inherited three major crises: in the public finances, in our public services and in the cost of living. That is why we have repeatedly taken the action necessary to bring stability to the economy, as welcomed by my noble friend Lord Barber of Chittlehampton. The choices we made were the responsible ones, and the spring forecast showed that the economic plan we have been driving forward since the election is the right one.
I agree with the noble Lord, Lord Sherbourne of Didsbury, that growth comes from businesses and investors. That is why our economic plan is built on the three pillars, as my noble friends Lord Chandos and Lady Gill reminded us, of stability in our public finances, investment in our infrastructure and reform of Britain’s economy.
My noble friends Lady Bi and Lord Brooke of Alverthorpe rightly spoke about the importance of having just one fiscal event a year and the stability that brings. The OBR forecast published last month showed that our plan is working and that we enter this period of global uncertainty with the fundamentals of our economy strong, as my noble friend Lord Barber said.
The noble Baroness, Lady Neville-Rolfe, spoke about inflation, neglecting to mention that it hit 11% under her Government. We have cut inflation, which now stands at 3%, a lower base than at the outset of Russia’s illegal war on Ukraine. She also mentioned interest rates, forgetting to mention not only that they have been cut six times under this Government but that they were set soaring by the Liz Truss mini-Budget.
We have prioritised growth to drive up living standards. The OBR forecast showed GDP per head set to grow more than was expected at the Budget, with growth of 5.6% over the Parliament. As my noble friend Lord Pitt-Watson said, we have stabilised the public finances, having already reduced the deficit by £20 billion this year from 5.2% to 4.3% of GDP.
The noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Moynihan of Chelsea, spoke about the growth forecast. Average growth over the next five years is broadly unchanged, with slightly lower growth this year and slightly higher growth next year and the year after that. The noble Lord, Lord Hintze, and the noble Baroness, Lady Kramer, spoke about the importance of GDP per head. GDP per capita is now set to grow faster than was forecast in the autumn; with growth of 5.6% over this Parliament, GDP per capita is £2,300 higher in the last year of the forecast compared with the first.
My noble friend Lord Davies of Brixton and the noble Baroness, Lady Kramer, spoke about the potential for falling migration to impact OBR forecasts going forward. As my noble friend Lady Gill said, Britain was the fastest-growing G7 economy in Europe last year. That is why we have the right economic plan to deliver higher long-term economic growth.
The noble Lord, Lord Skidelsky, spoke about the language used by the OBR to describe unemployment, which I am afraid I am not responsible for. Many noble Lords focused on unemployment, including the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, and the noble Lords, Lord St John of Bletso, Lord Bilimoria, Lord Lamont of Lerwick, Lord Elliott of Mickle Fell, Lord Northbrook, Lord Altrincham and Lord Massey of Hampstead. Employment is historically high. There are only two peacetime years out of the past 150 when the average annual employment rate has been higher than it was in 2025.
Forecasts from the OBR show that unemployment will peak later this year and then fall progressively for the remainder of the Parliament, ending the Parliament lower than it was when we took office. There is, though, action needed to address in particular the number of young people out of work, something that has been focused on in the contributions of many noble Lords. That is why we are providing £2.5 billion across the youth guarantee to tackle youth unemployment and, through additional investment in the growth and skills levy, to reform apprenticeships and prioritise young people. This will support almost 1 million young people and help deliver up to 500,000 opportunities to earn or learn.
The noble Lords, Lord Lamont of Lerwick and Lord Hintze, spoke about living standards. The last Parliament was the worst on record for living standards. Living standards are now rising. GDP per capita is set to grow more than was forecast in the autumn. Real wages have grown more in the first year of this Government than in the first 10 years of the previous one.
The noble Baroness, Lady Neville-Rolfe, spoke about inflation. We have cut inflation, which now stands at 3%, a lower base than at the outset of Russia’s illegal war in Ukraine. The OBR forecasted last month that inflation would fall faster than predicted in November and will return to target this year rather than next year.
Clearly, these forecasts took place before the current conflict in the Middle East began. Movements on energy markets, as we have already seen, are likely to put upward pressure on inflation in the coming months. As the Government have demonstrated, we will take the necessary action to help families with the cost of living and protect the public finances.
My noble friend Lord Pitt-Watson talked about the need to build growth in partnership with business, something I agree very much with. The noble Lord, Lord Sherbourne, talked about business experience, and he referenced what he described as the Government’s lack of business experience compared with the previous Government. We inherited an economy from the previous Government where the UK was the only G7 country with private sector investment that was below 20% as a share of the economy.
Since the Government came to office, we have secured a record £360 billion of private investment. Retail sales are rising, and the S&P global PMI rose to a 17-month high in January. As several of my noble friends have said, business confidence comes from stability, and that stability underpins our economic plan.
I very much agree with my noble friend Lady Bi on her comments about the value of London and the international importance of the City of London in terms of financial and professional services. I also agree with my noble friend Lord Brooke of Alverthorpe about the importance of public/private partnerships.
The noble Lord, Lord St John of Bletso, spoke about procurement, the role of AI and the potential consequences of AI on the labour market. They are all timely points, following the Chancellor’s Mais Lecture this lunchtime, which focused on all the points that the noble Lord raised. I completely agree with him on the importance of using procurement wisely, and we have set out reforms today to do exactly that. On AI in the labour market, the Chancellor announced that we will establish an AI economics institute to develop policies exactly along the lines that the noble Lord mentioned in his speech.
I agree very much with what my noble friend Lady Gill said about the benefits of deepening our economic relationship with the European Union—something the Chancellor herself set out in her Mais Lecture today.
The noble Lord, Lord Patten, asked about the cost of producing the spring forecast. The Treasury does not calculate or record a stand-alone cost for producing the spring forecast; it is delivered using existing departmental resources across policy and analytical teams and forms part of routine fiscal and economic reporting obligations. As such, no additional or exceptional spending is incurred beyond normal staffing costs.
Several noble Lords, including the noble Lords, Lord Bilimoria, Lord Lamont and Lord Redwood, my noble friend Lord Davies of Brixton and the noble Baroness, Lady Kramer, spoke about the impact of the conflict in the Middle East on the OBR’s most recent forecasts. The forecasts from the OBR, of course, pre-date the current conflict in the Middle East. Clearly, the full economic impact of the conflict will depend on its severity and duration.
The movements of energy markets, as we have already seen, are likely to put upward pressure on inflation in the coming months. Our economic approach will be both responsive to a changing world and responsible in the national interest. As the Government have demonstrated time and again, we will take the necessary decisions to help families with the cost of living and protect the public finances.
Any forecast is, of course, inevitably subject to uncertainty, particularly when global events are moving quickly. Although we do not yet know how long the conflict will last, it underlines the importance of building a stronger and more secure economy that is able to withstand whatever instability we may face.
In the Budget last November, we took £150 off the costs of energy bills. Yesterday, the Government announced immediate support for vulnerable heating oil customers, providing £53 million for the households most exposed. The noble Lord, Lord Lamont, endorsed the view that any support should be targeted.
The noble Baroness, Lady Neville-Rolfe, asked about fuel duty. The UK benefits from a strong and diverse security of energy supplies. The decisions we have taken since the Budget in 2024 will save the average motorist over £90, or 8p to 11p per litre, compared with the plans we inherited from the previous Government.
As my noble friend Lord Chandos said, the Chancellor has written to the Competition and Markets Authority, asking it to remain vigilant across heating oil prices and recommending that it acts to tackle unjustified price increases. The Government are clear that we will not tolerate profiteering or unfair practices, and we urge customers to share any evidence of price manipulation with the CMA.
I agree with what many noble Lords—including the noble Baroness, Lady Neville-Rolfe, and the noble Lords, Lord St John of Bletso, Lord Bilimoria, Lord Lamont and Lord Redwood—said about the importance of the North Sea. Domestic oil and gas must continue to have an important role in the energy mix for decades to come. That is why the Chancellor met with North Sea industry to discuss the consequences of this uncertain period. I also endorse what my noble friend Lord Barber said about critical minerals.
The noble Baroness, Lady Neville-Rolfe, spoke about increasing defence spending. We are delivering the biggest uplift in defence spending since the end of the Cold War. That equates to over £270 billion invested over the spending review period. Defence spending will rise to 2.6% of GDP next year—a level not seen since 2010. We are committed to spending 3% in the next Parliament when economic and fiscal conditions allow.
Although we do not yet know how long this conflict will last, it underlines the importance of building a stronger and more secure economy that is able to withstand whatever instability we face. The strength of our economy and public finances are possible only because of the Budget last year and the measures contained in the finance Bill before us today.
I pay tribute to my noble friend Lord Liddle for chairing the Finance Bill Sub-Committee of the Economic Affairs Committee, as well as to other members of that committee: the noble Lords, Lord Altrincham and Lord Leigh of Hurley, and the noble Baroness, Lady Fairhead.
The noble Lord, Lord Lamont of Lerwick, and the noble Baroness, Lady Neville-Rolfe, asked about the impact on working people from further freezes to the national insurance thresholds. As I am sure noble Lords know, the Government are not increasing the headline rates of income tax, national insurance or VAT, in line with our manifesto, but we are clear that the decisions made in the Budget in November involve asking people to contribute more.
In reference to the points made by my noble friend Lord Sikka, this finance Bill raises revenue in a fair way, reforming the system to ensure that those with the broadest shoulders pay their fair share while limiting what we ask from ordinary workers.
My noble friend Lord Liddle focused in his comments on his concerns about the inheritance tax treatment of unused pension funds and death benefits, as did the noble Baroness, Lady Fairhead, and my noble friend Lord Davies of Brixton. This was a point also mentioned by the noble Baroness, Lady Kramer. This measure removes distortions resulting from changes that have been made to pensions tax policy over the last decade, which have led to pensions being openly used and marketed as a tax-planning vehicle to transfer wealth, rather than as a way to fund retirement. As a result of these changes, more than 90% of estates will still pay no inheritance tax each year, and most estates will not pay inheritance tax on the pension, wealth and income tax that is due only from beneficiaries on inherited pensions in certain circumstances.
My noble friends Lord Liddle and Lord Davies of Brixton, the noble Baroness, Lady Fairhead, and the noble Lord, Lord Leigh of Hurley, raised the issue of personal representatives. Personal representatives who are already responsible for administering the rest of the estate will be liable for reporting and paying inheritance tax on any unused pension funds and death benefits from 6 April 2027. This is the same as the current process for non-discretionary pension schemes and other assets which do not pass directly through the estate but are in scope of inheritance tax. Since the announcement that the liability for paying inheritance tax on pensions will sit with personal representatives, officials have been engaging directly with tax and legal industry professionals to fully understand their concerns.
Budget 2025 announced that, where personal representatives reasonably expect inheritance tax to be due, they can direct pension scheme administrators to withhold 50% of the taxable benefits for up to 15 months from the date of death. Personal representatives can then direct pension scheme administrators to pay the inheritance tax due to HMRC before releasing the rest of those benefits to pension beneficiaries. If the instruction is withdrawn or the period ends, the remaining funds can be paid out. This will not apply to exempt benefits, funds under £1,000 or continuing annuities. Personal representatives will be discharged from liability for pensions discovered after they have received clearance from HMRC.
We are reforming the tax system to ensure it keeps pace with a fast-changing economy. We are going further to close the tax gap to ensure that everyone pays the tax they owe. Having listened carefully to feedback from the farming community and family businesses, this Bill raises the 100% rate of relief on agricultural property relief and business property relief from £1 million to £2.5 million. My noble friend Lord Liddle and the noble Lord, Lord Leigh Hurley, spoke about these reforms to agricultural property relief and business property relief. The status quo is not sustainable and there is a clear need to reform agricultural property relief. A very small number of claimants benefit from a very significant amount of agricultural property and business property relief. The increase in the planned allowances from £1 million to £2.5 million further reduces the number of estates forecast to pay more inheritance tax and further reduces the liability for many of the remaining estates, meaning that a couple can leave £5 million completely free of tax on top of the usual reliefs and allowances.
My noble friend Lord Liddle spoke in favour of taxing wealth. The Government are committed to taxing wealth fairly. That is why, in the Autumn Budget Statement in 2024, we announced reforms to taxation of wealth and the wealthy that will raise over £8 billion, including reforms to non-domiciled tax, mentioned by several noble Lords this evening. We are now building on that action by reforming property taxes so that the highest value homes in England pay the most, and addressing reliefs in capital gains tax and inheritance tax that have grown in cost to the benefit of the wealthy. My noble friend Lord Liddle is absolutely right that we must reward and encourage enterprise, which we are doing, including in measures contained in this finance Bill.
Since coming to office, the Government have implemented an economic plan to bring stability to the public finances and to strengthen Britain’s economy for the long term. The spring forecast shows this plan is the right one, with lower inflation and borrowing, higher living standards and a growing economy. Britain today is in a stronger position to withstand whatever uncertainty comes our way, but that is possible only because of the action we took in the Budget last year and the measures contained in this finance Bill. They are the right choices to protect families and businesses in an uncertain world and they demonstrate that this Government have the right economic plan for Britain’s future.
Supply and Appropriation (Anticipation and Adjustments) (No. 2) Bill
Lord Livermore ExcerptsThursday 12th March 2026
(2 weeks, 2 days ago)
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National Insurance Contributions (Employer Pensions Contributions) Bill
Lord Livermore ExcerptsThursday 12th March 2026
(2 weeks, 2 days ago)
Lords ChamberRead Full debate National Insurance Contributions (Employer Pensions Contributions) Bill 2024-26 View all National Insurance Contributions (Employer Pensions Contributions) Bill 2024-26 Debates Read Hansard Text Watch Debate Read Debate Ministerial Extracts Amendment Paper: HL Bill 164-R-I Marshalled list for Report - (3 Mar 2026)
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, the cost of pension salary sacrifice was set to treble to £8 billion a year by the end of this decade. That increase has been driven mostly by high earners, with additional rate taxpayers tripling their salary sacrifice contributions since 2017. This includes individuals sacrificing their bonuses without paying any income tax and national insurance contributions on them. The status quo is neither fair nor fiscally sustainable. We simply cannot afford to allow the cost of pension salary sacrifice to balloon, benefiting predominantly higher earners.
The Bill therefore introduces a cap of £2,000 under which no employer or employee national insurance contributions will be charged on any pension contributions. It protects ordinary workers by using salary sacrifice and limits the impact on employers while ensuring that the system remains fiscally sustainable. The majority of those currently using salary sacrifice will be unaffected.
Saving into a pension, including via salary sacrifice, will also remain hugely tax-advantageous under these changes. The Government currently provide over £70 billion of income tax and national insurance contributions relief on pension contributions each year. That spend will be entirely unaffected by these changes. These are fair and balanced reforms. They protect lower and middle earners. They give employers many years to prepare. They preserve the incentives that underpin workplace pension saving and they ensure that the tax system is kept on a sustainable footing. I beg to move.
Baroness Neville-Rolfe (Con)
My Lords, as we said at Second Reading, in Committee and again on Report, this is a poorly conceived Bill, because it prioritises the hope of short-term tax gain over the far more important task of sustaining a system that encourages and rewards responsible pension saving. Throughout the Bill’s passage, we have sought to examine it line by line to see what the Government’s policy will actually mean in practice, and what has become clear is deeply troubling.
This measure risks deterring pension savings. It will hit those on lower and middle incomes, including some earning under £30,000 a year. It will impose yet more compliance, payroll and administrative burdens on business, particularly on small businesses and charities that are already under considerable strain. It will particularly penalise those who are repaying student loans.
Against that background, I am proud of the scrutiny that the House has brought to the Bill. Your Lordships have approached it with care, expertise and determination to improve it where we can. As a result, with unusual speed, good order and good humour, the House agreed five amendments last week which seek to limit some of the Bill’s most damaging consequences.
First, our Conservative amendments ensure that basic rate taxpayers, those on the lowest incomes, are protected from the NICs charge. If the Government insist that this policy is directed at higher earners, not those on modest incomes trying to save for their retirement, this should be explicit in the Bill.
Secondly, we proposed an exemption for small and medium-sized enterprises and small charities. These organisations are the backbone of our economy and our communities, and they should not be burdened with yet more payroll, compliance and administrative costs as a result of this policy. We have all seen the impact on them of last year’s £25 billion hit.
Thirdly, we proposed that most of the regulations under the Bill should be subject to the affirmative procedure. Given the uncertainty that surrounds how these provisions will apply, it is only right that Parliament has the opportunity to scrutinise those regulations properly.
Fourthly, my noble friend Lord Leigh of Hurley successfully secured an amendment to limit the impact of the Bill on those repaying student loans, who would be hardest hit by the measure.
Finally, the amendment by the noble Baroness, Lady Kramer, raised the cap to £5,000, helping to mitigate some of the worst impacts of the Bill on those least able to bear them.
In recognition of the seriousness of the issues raised by the Bill and the progress made here, I shall take a moment to thank a number of noble Lords for the diligence with which they have scrutinised it. I am particularly grateful to my noble friends Lord Leigh of Hurley, Lord Fuller, Lord Ashcombe and Lord Mackinlay of Richborough, and the noble Baroness, Lady Altmann. They have worked tirelessly, both with me and my noble friend Lord Altrincham, and their amendments have prompted important debates. I am also grateful to our Whips’ Office team, especially my adviser Oliver Bramley, for their unstinting and effective support, and I thank the noble Baroness, Lady Kramer, for the constructive way in which she has engaged with us during the course of the Bill. Hers has been a powerful voice in holding the Government to account.
More broadly, I thank other noble Lords across the House, including the noble Lords, Lord de Clifford, Lord Londesborough and Lord Freyberg, for their thoughtful contributions in scrutinising the legislation. Finally, it would be remiss of me not to thank the Minister for the way in which he has engaged with the House during the passage of the Bill. I am particularly grateful to him and his officials for their response to the letter I sent following Committee. It addressed a number of the questions raised during our debates and was both timely and informative.
I hope that, as the Bill proceeds, the Government will reflect carefully on the points raised and show a willingness to move on the issues that have united so many across this House.
Baroness Kramer (LD)
My Lords, this was a very short Bill but, frankly, I do not know how it got through the House of Commons and came to this House without clarity on the fundamental issue of whether we were talking about a cap that was per employee or per employment. I thank the noble Lord, Lord Livermore, for seeking the answers to that and making sure we were informed on Report. We were looking at two different Bills, not knowing which one we were working on, until we reached that point in the conversation, so I thank him.
I also join in saying that this was a collaborative effort, not in opposition to the Government but because we were of common mind across the Conservative Benches, my Benches and the Cross Benches—the noble Lords, Lord Londesborough, Lord de Clifford and Lord Freyberg, as the noble Baroness, Lady Neville-Rolfe, mentioned, all played a crucial role in this. I particularly congratulate my Benches on taking a vow of omertà not to speak on many occasions on the Bill so that we moved it rapidly through the House. I think the whole House was grateful that, on Thursday, when we finally came to vote, we were done in less than two hours rather than delaying everyone from departing on a Thursday. I thank my team very much for their discipline. I also thank Ulysse Abbate in our Whips’ office, who is new to this kind of work, but my goodness is he good at content and co-ordination.
This was a good example of people, having realised they are taking the same position, working together to make sure that it is effective. I very much hope that the Commons will appreciate the significance of the amendments passed to the Bill. Of all the Bills I have ever seen, this contains so many unintended consequences that, even if you believed in the fundamentals behind it, you would need to make substantial change for it to be in any way workable and not ending up targeting unintended groups, such as those on basic incomes. It would be devastating for people repaying student loans, which has to be fixed, and very difficult for SMEs. We chose different routes to try to make those changes and ended up with a very solid group of amendments. I thank the House for co-operating on this issue.
Lord Livermore (Lab)
My Lords, I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer. I beg to move.
Small Businesses: VAT Threshold
Lord Livermore Excerpts(3 weeks, 2 days ago)
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Lord Londesborough
To ask His Majesty’s Government what assessment they have made of HMRC data showing that an increasing number of small businesses in the UK are earning below the VAT tax threshold.
The Financial Secretary to the Treasury (Lord Livermore) (Lab)
My Lords, the data referred to does not show that an increasing number of small businesses in the UK are earning below the VAT threshold. It shows only the number of voluntarily VAT-registered businesses below the VAT registration threshold of £90,000 and does not include unregistered businesses. Of the 5.8 million businesses in the UK, 2.3 million are registered for VAT and 3.5 million are unregistered.
Lord Londesborough (CB)
I thank the Minister for his reply, but we have double trouble. First, an increasing number of registered small businesses are earning less than the VAT threshold of £90,000. Secondly, there has been a big drop in those earning £90,000 to £150,000—in fact, there was a decline of 26,000 businesses in the year 2025. Is that because some are deliberately suppressing their growth to avoid the additional tax and admin burden of complying with VAT, or is it because higher employment costs and taxation have choked off their incentive to grow? Either way, it is surely time to reset this threshold.
Lord Livermore (Lab)
I am grateful to the noble Lord for his question. It is neither of the things that he set out. As I have said, the data cited by the noble Lord relates only to VAT-registered businesses and does not include unregistered businesses, so I do not think it shows what the noble Lord claims that it shows. If a business is already registered for VAT, it has no incentive to suppress turnover to avoid VAT, because it is already charging VAT and would need to continue to do so even below the threshold. Why would they do what the noble Lord suggested? That would not make any sense. If he looks at a longer time series of this data, he will clearly see that it moves around significantly, so the conclusions he is trying to draw are very difficult to sustain.
Lord Fox (LD)
My Lords, if the Minister could open his mind beyond the data of the Question, there is no shortage of studies from very reputable organisations—the IMF, the OECD and others—that there is significant bunching around a threshold, and that is not a surprise. Where they do not agree is whether the brake on growth would be improved by raising or lowering the threshold. Can the Minister tell your Lordships’ House that the Treasury will not succumb to a Goldilocks effect and conclude that, because some say it should be higher and others say it should be lower, it is happy to leave it where it is? Can he assure us that sensitivity studies are being run to look at where the threshold should be? Getting it right will open up more growth.
Lord Livermore (Lab)
I am very happy to open my mind in response to the noble Lord’s question. The existence of bunching around the VAT threshold is well established and has been analysed by the Office for Budget Responsibility. The OBR has explained that, where a registration threshold exists, some firms will cluster just below it to avoid the administrative and pricing consequences of entering the VAT system. That is an inevitable consequence and recognised feature of a threshold-based tax system. He will know that decisions on tax and thresholds are taken only at fiscal events. Raising the threshold further would reduce burdens for some firms, but it would also carry significant fiscal cost. The UK threshold is already high by international standards. The UK threshold of £90,000 compares to an average in OECD economies of £30,000. It could be argued, as I think the noble Lord is doing, that lowering the threshold could support growth by reducing the distortions created by the cliff edge of the threshold, but the Government are also mindful of the impact this could have on small businesses.
Lord Howell of Guildford (Con)
Is the Minister aware that, according to official statistics, 99.18% of all British businesses are defined as “small”—those with 50 employees or fewer. It sometimes seems, in the answers we get, that the Government have not quite understood that.
Lord Livermore (Lab)
I fully understand that, and I am grateful to the noble Lord for reminding me of it. Last year, the Government published their plan for small and medium-sized businesses, setting out support for smaller firms. We are partnering with industry to unlock productivity growth through the adoption of digital technologies. We are legislating to tackle late payments, which cost the UK economy £11 billion a year. We have launched a new Business Growth Service to make it easier to access advice and support. We are making SMEs a national priority in our new procurement policy system. We are expanding the UK Export Finance capacity by £20 billion and creating a small export builder insurance product. I assure the noble Lord that we are very aware of the points he raises.
Lord Watts (Lab)
My Lords, are the Government concerned about what seems to be the growth of cash-only businesses? They are not there for the customers’ benefit but, in some cases, for the business to avoid tax and other things.
Lord Livermore (Lab)
Yes, absolutely, the Government are very aware of the points that my noble friend raises. HMRC has recently engaged in increased enforcement activity around those exact points.
Lord Leigh of Hurley (Con)
The Minister will be aware of the successful campaign that Retailers Against VAT Abuse Schemes and I ran to ensure that online marketplaces are required to collect VAT on certain transactions involving non-UK established sellers. The problem is that the current system has been exploited by proxy directors, proxy companies and artificial fragmentation. The chairman of the British Independent Retailers Association has written to the Exchequer Secretary to the Treasury to ask for urgent consultation on this issue, which is probably costing HM Treasury £700 million a year. Can the Minister use his influence in HM Treasury to ensure that urgent consultation takes place immediately with the retailers who signed that letter?
Lord Livermore (Lab)
Yes, I am grateful to the noble Lord for his campaigning work and raising this with me on a number of occasions. He knows that we are reviewing the online marketplace rules established under the previous Government. As part of that review, those consultations will take place. I will bring it to the attention of my colleague, the Exchequer Secretary to the Treasury, to make sure that he consults with the businesses that the noble Lord mentioned.
Baroness Neville-Rolfe (Con)
My Lords, for many small businesses, the VAT threshold is only one part of a much wider cumulative burden, which includes rising national insurance contributions, business rates and minimum wage pressures, and the increasing complexity of employment regulation. That all hits enterprise and dampens the ambition and animal spirits that we need to get this country growing. Does the Minister therefore see a case for lifting this and other thresholds, and for exempting SMEs from some of the ever-growing burden of regulations that we are seeing? If so, where would he start?
Lord Livermore (Lab)
In a previous answer, I discussed the issues surrounding changing the threshold. The noble Baroness may know that the Windsor Framework imposes an upper limit of just over £90,000 on the threshold in Northern Ireland. The Windsor Framework is relevant by extension to the Government’s decisions in Great Britain too, so there are limitations to what we can do. She talked about the other decisions that the Government have taken, which she has consistently opposed—for example, raising the minimum wage. However, it is only because of these decisions that the Chancellor was able to tell Parliament, the day before yesterday, that living standards are now rising, having fallen under the previous Government, and that by the next election people will be £1,000 a year better off.
Lord Bellingham (Con)
My Lords, small businesses are the key driver for creating jobs and employment. Can the Minister confirm that unemployment is now 5.6%—higher than during the Covid pandemic—while youth unemployment is 15.9%? What is going wrong? The Minister spent 18 months blaming the £22 billion black hole and everyone from Liz Truss to Boris—he even blamed the Tories for repealing the corn laws. When will he take responsibility for what is going wrong?
Lord Livermore (Lab)
It is a little rich for the party opposite to ask anyone else to take responsibility after the 14 years they inflicted on this country. Last week’s labour market statistics show that there are 381,000 more people in work since the start of 2025. Of course there is more to do. However, the updated forecast from the OBR this week shows that unemployment will peak later this year before falling for every remaining year of the Parliament, ending lower at the end of the Parliament than it was at the beginning—the rate that we inherited from the noble Lord’s Government.
The Earl of Effingham (Con)
That is the 322nd time that noble Lords opposite have used the phrase “14 years”. Will they please listen to Sir Tony Blair, who said this week:
“Labour’s policies are harming growth and undermining young people’s job prospects”?
Does the Minister agree with Sir Keir Starmer, who said of the previous Government that they were lurching
“from crisis to crisis and U-turn to U-turn … To correct one error, even two, might make sense. But when they’ve notched up 12 U-turns and rising, the only conclusion is serial incompetence”?
Lord Livermore (Lab)
Well, that was a most enjoyable question from the noble Earl. I am grateful for the opportunity to talk about the last Government’s 14 years in power. We had austerity, followed by Brexit, followed by Liz Truss. The growth record of the previous Government was an absolute catastrophe. He will know from the forecast presented to Parliament this week that growth has been increased for next year and the year after. That is only possible because of the stability that we have brought about. Borrowing will be £18 billion lower over this Parliament. It will fall every year of the forecast and will be below the G7 average for the first time—something that the previous Government did not achieve in 14 years. It is only because of those decisions that we are seeing the stability and growth of this economy, decisions that the party opposed at every turn.
Duty Relief Exemption: Small Parcels
Lord Livermore Excerpts(1 month ago)
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Baroness Hoey
To ask His Majesty’s Government what assessment they have made of the new tax on small parcels entering Northern Ireland from Great Britain as a result of the EU’s change to the duty relief exemption.
The Financial Secretary to the Treasury (Lord Livermore)
My Lords, the Government are committed to the smooth flow of goods from Great Britain to Northern Ireland under the Windsor Framework. The Government are aware of the EU’s plans to remove its relief for low-value imports from 1 July 2026. The facilitations under the Windsor Framework are unaffected by this change, meaning that goods moving between Great Britain and Northern Ireland can continue to move under the UK Carrier Scheme and the UK Internal Market Scheme without the need to pay duty.
Baroness Hoey (Non-Afl)
My Lords, I thank the Minister for that. Responding recently to two questions from me and the noble Lord, Lord Empey, he said that we would continue to engage with the EU. Now that the regulations have been published just two weeks ago—written in the normal EU way that is quite difficult to understand, but I am sure the Minister does—can he clarify for us whether the new rules will operate subject to EU regulation 2023/1128 such that any trusted trader on the UK Internal Market Scheme need not pay any duty? Can he also clarify whether the duty will be paid by the person sending the parcel in GB, the person receiving the parcel in Northern Ireland or both? Does he agree that we need detailed clarification on this? People are very worried about it—maybe wrongly, maybe rightly. Will the Minister make sure that there is clarification on exactly how this is going to work and how it will affect people in Great Britain sending parcels to their relatives in Northern Ireland?
Lord Livermore (Lab)
Yes, I can give the noble Baroness the clarification she seeks. The answer to the first question she asked is yes. As I said in my opening Answer, in May last year the Government introduced important new arrangements for freight and parcel movements to ensure that goods can continue to move smoothly from Great Britain to Northern Ireland. These facilitations under the Windsor Framework are unaffected by the EU’s change to its duty relief exemption. Goods travelling from Great Britain to Northern Ireland can continue to move under the UK Carrier Scheme and the UK Internal Market Scheme without the need to pay duty.
Baroness Ritchie of Downpatrick (Lab)
My Lords, I thank my noble friend the Minister for his detailed and clear response. Does he agree that one should be very careful about what you argue and campaign for, because sometimes you get what you want? Does he agree that those who argued for the hardest possible Brexit got the Windsor Framework? I agree with that.
Lord Livermore (Lab)
My noble friend is absolutely right that back in 2016, Sir John Major and Sir Tony Blair very clearly said that Brexit will present very specific challenges for Northern Ireland, given its land border with an EU member state and the importance of safeguarding the Good Friday agreement. Unfortunately, many of those concerns were dismissed, but now that the reality of Brexit does not match up to the fantasy version that other people imagined, they seek to blame others for the consequences of their own actions. My noble friend is equally right, though, that the Windsor Framework is the best possible solution to Northern Ireland’s unique circumstances.
Lord Leigh of Hurley (Con)
My Lords, the Minister will be pleasantly surprised to hear that I agree with him: the GB-NI movement of goods is covered by Article 5 of the Windsor agreement. The issue is about the movement of goods into Northern Ireland post 5 July, when the EU rules change. Can he clarify whether the €3 charge and the €2 handling charge will be applied from 1 July, and will that money go to the EU, not the UK? Furthermore, can he explain why France and Italy are bringing in these changes now, and the UK is having to wait until 2029 to implement this revenue-generating initiative?
Lord Livermore (Lab)
Yes, I can. The noble Lord asks about goods sent from the rest of the world; the EU has only just published its legislation—sorry, it was the EU handling fee that he asks about. Although the EU has published its legislation relating to the matters I was describing previously, it has not yet published its legislation relating to the EU handling fee. We are obviously aware that the EU is considering plans to introduce a handling fee for every consumer parcel imported by November this year. It has not yet finalised its plans or published final legislation, so we have not yet carried out an assessment of its implications at this point.
The noble Lord also asks about our own reforms, which I know he has championed for many years. As he knows, the Chancellor announced at the previous Budget that the Government will remove low-value import relief by March 2029 at the latest, but it is important that we consult on those arrangements and how they will affect retailers. That consultation will close next month, on 6 March.
Lord Fox (LD)
My Lords, the Minister has already agreed with our view that this situation is really caused by the appalling nature of the deal that the Conservative Party negotiated on Brexit. Does he also agree that it demonstrates that the rapid agreement of a customs union and other alignments with the EU would not only have huge financial benefits to the United Kingdom but smooth out issues like this that were caused by those in Northern Ireland who advocated for Brexit in the first place?
Lord Livermore (Lab)
The noble Lord knows that I absolutely agree with his analysis of the problem, and I greatly admire the consistency with which he has pursued his policy for a customs union. The points he makes are obviously factually correct. This Government are pursuing an EU reset. The UK and the EU have agreed to negotiate an SPS agreement, which aims to significantly reduce barriers to trade in agri-food goods, support simplified movements between Great Britain and Northern Ireland and the EU, and boost our exports. Negotiations that we are taking forward on electricity and emissions trading will have a similar effect on businesses trading with Northern Ireland and the EU.
Lord Dodds of Duncairn (DUP)
I thank the Minister for the answers that he has given thus far. He mentioned the EU reset negotiations. Can he tell us whether this issue is part of those negotiations and, more generally, what the timetable is for the outcome of the negotiations? Is the pursuit of free, untrammelled internal trade within the United Kingdom something that he and other Government Ministers have at the forefront of their consideration, given that the current restrictions are doing enormous damage to business and consumer confidence in Northern Ireland, as illustrated in the recent report by the Federation of Small Businesses, which I urge every Member of this House to read in detail?
Lord Livermore (Lab)
I am grateful to the noble Lord for the points that he makes. As I said, the EU negotiations will cover an SPS agreement, which will have significant advantages for trade and the movement of goods between Great Britain and Northern Ireland and the EU, and help boost our exports. Similarly, the negotiations on electricity and emissions trading will have beneficial effects for businesses trading with Northern Ireland and the EU. On his question about the Windsor Framework, goods will continue to benefit from the Windsor Framework facilitations, including manufactured goods which are not within the scope of new agreements that we are taking forward with the EU. On the recent report on the Windsor Framework from the Federation of Small Businesses, as the noble Lord knows, the Government recently accepted all the recommendations made by my noble friend Lord Murphy in his Independent Review of the Windsor Framework. This included recommendations that align with the points raised by a wide range of stakeholders, including those set out by the Federation of Small Businesses.
Baroness Neville-Rolfe (Con)
Returning to the issue of small parcels, we must ensure that all those concerned are aware of the rules governing trade with Northern Ireland, including all exporters into Northern Ireland, families sending parcels and, of course, Northern Ireland businesses and consumers, who will bear the cost, with the revenue going to the EU. Can the Minister reassure us that the Government are on top of all this and will introduce the new sets of payments—the £3 duty or the £2 handling charge—alongside existing rules in a clear, unbureaucratic and timely manner? It is unclear for the individual just what they have to do.
Lord Livermore (Lab)
The Government are on top of it, perhaps slightly more so than the noble Baroness, given that her question was incorrect. I have already clearly said that these facilitations under the Windsor Framework are unaffected by the EU’s change to its duty relief exemption, and therefore there will be no need to pay duty.
Lord Bew (CB)
My Lords, what is ultimately at stake here is the stability of the institutions of the Good Friday agreement. The EU, to its credit, stretched itself in the lead-in to the Windsor Framework, opening negotiations with the Truss and Sunak Governments. A moment was reached that allowed the Windsor Framework to be part of that process and to return the functions of the institutions. Since then, the EU seems to have returned slightly to its older ways—a series of interventions that are causing destabilisation and strengthening the forces in Northern Ireland that are politically opposed to the Good Friday agreement. In dealing with the EU, will the Minister please make it clear that the survival of the institutions of the Good Friday agreement is fundamental, and that actions that strengthen the support of those hostile to the Good Friday agreement should be avoided at all costs?
Lord Livermore (Lab)
Absolutely. We are fully committed to implementing the Windsor Framework in good faith and protecting the UK internal market. The Windsor Framework is the best workable solution to Northern Ireland’s unique circumstances. We will work constructively with all stakeholders—the EU, the Northern Ireland Executive, businesses, political parties and civic society in Northern Ireland—to achieve this aim, taking into account the implementation deadlines.