Middle East: Economic Response

Lord Wilson of Sedgefield Excerpts

Monday 1st June 2026 Lords Chamber

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

I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their comments and questions. The noble Baroness, Lady Neville-Rolfe, ended her remarks with her usual doom and gloom and talking down the British economy. Unfortunately, she did not mention any of the positive economic news that we have heard in the last few weeks.

She shares with us a belief in the importance of growing the economy and knows that that is our number one objective. She did not mention the fact that last week’s figures confirmed that Britain’s economy was the fastest growing in the G7 for the first quarter of this year. She did not mention that we beat the OBR’s spring forecast, with economic growth at 0.6% in the three months to March. She did not mention the fact that, because of the resilience in our economy, last week the IMF upgraded Britain’s growth forecast for this year.

She also did not mention the positive news on public finances that borrowing last year was £20 billion lower than in the previous year and is falling in every year of this Parliament. She did not mention the fact that the IMF backed our economic plan, saying that the Government’s fiscal framework strikes

“a good balance between deficit reduction and growth-friendly spending”.

She did not mention any of the things that we are doing to ease the cost of living, including that interest rates have been cut six times since the election, that real wages have continued to rise in every month of this Government and that inflation fell in April faster than expected, making the UK the only G7 economy where inflation fell last month. She did not mention any of those things, and I think that continuing to talk down the economy when we are doing all that we can to help it through this difficult period, with the war in the Middle East, does not benefit anyone.

She talked about the cost of the measures that we are introducing and about the foreign branch profits. I hope she will agree with us that, when a country faces challenges because of higher oil and gas prices, we must ensure that those who benefit from increased prices and volatility pay their fair share.

She will remember that, in our first Budget, the Government extended and increased the energy profits levy, last year we announced a new permanent windfall tax regime for oil and gas price shocks, and last month we increased the electricity generator levy, alongside further action to weaken the link that the noble Baroness, Lady Kramer, mentioned between high gas and electricity prices.

Now, the Government are making specific changes to the taxation of foreign branch profits, changing how companies are taxed in relation to their overseas activities. The noble Baroness will know that, until now, some businesses have structured their affairs with taxable branches to pay little or no corporation tax on UK profits. The change that we are introducing removes the ability to achieve disproportionate relief for overseas costs without UK taxation or future profits. The change, from 1 September 2026, for oil and gas-extracting UK resident companies will ensure that the UK continues to have a robust and effective corporation tax regime in line with international best practice and will ensure the effective taxation of profits attributable to UK activities.

The noble Baroness talked about the cost. She is absolutely right to say that we expect these reforms to raise hundreds of millions of pounds per year and that they will fully fund the package of measures announced by the Chancellor. The costings will be certified by the OBR forecast in the usual way at the next fiscal event.

The noble Baroness talked about zero tariffs and rightly said that they are out for consultation. Obviously, that is the case and I am pleased that she agrees with that. She mentioned the impact on trade deals. These are temporary suspensions to tariffs and so will lapse long before any trade deals are negotiated. So I think we will be able to see immediate improvements in the cost of living, and perhaps over time there will be trade deals that achieve that more permanently.

The noble Baroness talked about high energy costs and blamed them on the drive to net zero. I think we had an Oral Question in this House when the IMF put out its previous forecasts, and she will know that the IMF said that we faced higher energy costs in this country exactly because the previous Government had failed to take action to make the UK more self-sufficient in energy. So blaming the solution to the problem and saying it is the problem itself is a little perverse. The problem for the UK is that we are too exposed to imports of energy and we are, as she knows, taking action as a Government to reverse that.

The noble Baroness knows I agree with her when it comes to oil and gas production from the North Sea and how important and valuable that is. She asked me specifically about two fields, Jackdaw and Rosebank. She will know that the development proposals are a matter for the North Sea Transition Authority and the Offshore Petroleum Regulator for Environment and Decommissioning. I am unable to comment on the specifics of any individual project while the regulatory process is under way, or on the investment decisions of individual operators. As I understand it, the Secretary of State for Energy Security and Net Zero will be making a decision regarding the environmental impact assessments of these projects in the coming months.

I am pleased that the noble Baroness welcomed the support for the ceramics industry. She is right to say that there are far longer-term issues at play in terms of the competitiveness of many of our industries: the foundational sectors so important to the industrial strategy. That is why we have already increased support for our most energy-intensive companies through the British industry competitiveness scheme that we announced a couple of weeks ago.

The noble Baroness asked me about defence spending. As she knows, the defence investment plan is the first zero-based review of defence spending in almost two decades. It will set out the MoD’s plans to ensure that resources are directed effectively to meet its priorities. The Government are working hard to facilitate this and to ensure that the plan delivers the outcomes the UK needs for defence and for taxpayers. I shall repeat what I said previously: it will be published shortly.

The noble Baroness asked about supermarkets, finally. As she knows, it is quite right that we have discussions with supermarkets, as we have with fuel retailers and high street banks, to discuss ways we can work together to ease the cost of living on households. But, as I said to her, I think in a previous Private Notice Question, this is not about price caps, as some speculation has suggested; we would never advocate for that, and it is not for us to tell supermarkets how to run their businesses.

The noble Baroness, Lady Kramer, focused primarily on quite a long shopping list of support that her party would like to see introduced. Obviously, we did introduce some support last week, as the Chancellor set out, but I am not convinced that the funding that the noble Baroness thinks is there for her package of support actually is. Unfunded commitments are not the way to ease the cost of living crisis. We saw exactly that with the Liz Truss Government, and we saw exactly that with the previous Conservative Party Government. Introducing unfunded support now would mean higher inflation and higher interest rates in the long term, meaning that the very people we are trying to help now would pay more for their rent, bills and mortgages in the long term. I do not believe that is a sustainable way to help people with the cost of living crisis.

[Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)]

Before we move on to Back-Bench questions, I have been asked to remind noble Lords that the next 20 minutes are only for Back-Bench questions and not for Front Benches.

--- Later in debate ---

[Lord Fuller (Con)]

My Lords, over three months ago, I was one of the first people to raise in this House the consequences on food security from the war in the Gulf. I declare my interest as somebody involved in the fertiliser industry, which makes me one of the better-informed commentators in this space. All around the world, nation states are taking steps to secure supplies. The EU is modifying its scheme to increase supply and mitigate costs. Other nations are implementing export bans. Ukrainian strikes on Russian production, taken together with the damage in the Gulf, are putting 50% of the world’s nitrogen fertiliser production at risk, and that has not been fully appreciated. Now, of course, sulphur shortages are creating a phosphate catastrophe. In this country, we hardly have tariffs on imported fertiliser, so announcing that as a concession is not going that far. The Government’s response, thus far, has been to propose insane fertiliser taxes that will drive food price inflation to new heights, increasing the price of beer, bread and biscuits. With the Cereals event, where British farmers congregate, next Tuesday and Wednesday—

[Lord Wilson of Sedgefield (Lab)]

Will the noble Lord get to the question, please?

[Lord Fuller (Con)]

With the Cereals event next Tuesday, what good news can the Minister give to farmers who are planning for harvest 2027? When are the Government going to take the impact of this seriously and can these extra charges, which do nothing to reduce carbon emissions globally and increase the importation of the most polluting fertilisers produced from coal fire in China?