Spring Forecast Statement

Lord Skidelsky Excerpts

Tuesday 17th March 2026 Lords Chamber

[Lord Skidelsky (CB)]

My Lords, the eloquent speech this evening by the noble Lord, Lord St John, reminded me yet again of what this House is losing by chucking out its hereditary Peers.

I want to take advantage of the slightly longer time allowed to Back-Benchers to make a technical point about language, before going on to the question of policy. Whether intended or not, most of the OBR’s prose is unnecessarily unintelligible to the ordinary person. For example, paragraph 1.12 says:

“Labour market conditions continue to loosen”,


with entrants into the labour force facing “subdued hiring demand”. What this means is that unemployment continues to rise, with school leavers finding it harder to get jobs now. Why not say that? What is meant by “subdued hiring demand”? What is unsubdued hiring demand? Even in this august House, I doubt whether many Peers would be able to give an accurate answer to what unsubdued hiring demand means. There is a whole battery of theoretical assumptions behind that sort of phrase which need to be unpicked. My general point is that the OBR should spell out its theoretical positions so that the reader can grasp intuitively whether they make sense to them.

There is another issue here: the problem of forecasting, to which the noble Lord, Lord Redwood, and other noble Lords have referred. This arises from the obfuscation in OBR prose of the distinction between risk and uncertainty. In OBR-speak, those two terms are identical, but actually they are not. Risk gives you a set of probabilities; uncertainty means you do not have the foggiest what is going to happen. The whole business of forecasting outcomes over five years and then protecting oneself against inevitable failure by invoking stochastic shocks seems completely fraudulent. The biggest stochastic shock around at the moment is President Trump, yet you do not find any effect that he has on the smooth undulations of the five-year forecasts presented by the OBR.

Now for a breath of fresh air. The OBR ruminates that:

“If unemployment fell more sharply and returned to its equilibrium rate in 2027-28, two years earlier than our central forecast, borrowing could be lower by £16 billion a year on average from 2026-27”


onwards. In plain English, that means that if unemployment were lower, the budget deficit would be smaller. A striking thought: then why not make unemployment lower? There are many ways in which one might do it, but I will refer to just one. In 1929, the Liberal leader, Lloyd George, pledged to cut unemployment by half within a year by means of a £250 million investment programme. He never got the chance, but it may be of interest to translate it into today’s terms: as a share of GDP, £250 million in 1929 is equivalent to £80 billion to £90 billion today.

The noble Lord, Lord Livermore, has talked of an additional £120 billion programme that this Government have authorised over the length of this Parliament, but my understanding is that that is only £20 billion more than what the Conservatives had planned, and the stimulus of £1 billion to £2 billion in the next year is vanishingly small. I may be wrong, and I will happily be corrected if I am, but one needs to be clear about what stimulus the Government are actually giving the economy at this time.

It will be argued that the output gap today is much lower than it was in 1929, but is this true? Output gap estimates depend heavily on the unemployment rate—the higher the rate, the larger the gap. With headline unemployment only 1% above the equilibrium rate, the output gap seems very small, less than 1%, but is this a proper measure of spare capacity in the economy? Of course not. Our current headline unemployment rate of 5% excludes the 3.3% of involuntarily employed part-time workers—people who say they want to work longer but do not have the chance. If we put those two together, we have something like a spare capacity, accurately measured, of 8% or 9% underemployment. I would like the OBR—maybe the Treasury could instruct it—to put two charts side by side showing the unemployment rate and the underemployment rate, and then we could really see what the extent of our output gap actually was.

My last point is that unemployment is not the only measure of spare capacity. There are 1 million NEETs—young people between the ages of 16 and 24 not in education, employment or training. The Chancellor’s youth guarantee scheme guarantees only 55,000 places after 18 months’ unemployment. What is needed, as Paul Nowak, general secretary of the TUC, has often said, is a genuine youth employment/training guarantee on a far larger scale, organised locally as well as nationally, so that the jobs and training reflect the differing needs of different communities.

We are told that we cannot do any of this because of the fiscal rules. My answer to that is what Keynes said in 1933:

“Look after unemployment, and the budget will look after itself”.


That may be too bold for our rulers today, but I say to the Chancellor that if one wishes to gain anything then one needs to dare in order to gain something. The real risk is to do nothing and be overwhelmed by events.