Spring Forecast Statement

Viscount Chandos Excerpts

Tuesday 17th March 2026 Lords Chamber

[Viscount Chandos (Lab)]

My Lords, I am very grateful to my noble friend the Minister for his characteristically clear and cogent introduction to today’s debate on the Spring Statement and the finance Bill, timed also to allow us to take into account the Chancellor’s Mais Lecture, delivered early this afternoon. I very much enjoyed and admired the valedictory speech of the noble Lord, Lord St John, and pay tribute to his service; I also thank him for his friendship. I think he was a veteran aged 24 when I arrived in the House as a new boy of 29.

I strongly support the active and strategic state advocated in the Mais Lecture by my right honourable friend the Chancellor, with its three priorities—stability, investment and reform—which have guided her and the Government’s economic strategy since being elected in July 2024. The restoration and promotion of stability has had to be the primus inter pares of priorities for the Government over the past 21 months. The legacy from the Conservatives’ destructive time in office no longer needs enumerating in detail, but a toxic ABC combination of austerity, Brexit, and concealment has presented a formidably challenging starting point from which to rebuild confidence and stability.

Just as that task had been substantially achieved, the latest of a series of geopolitical shocks has posed new challenges. The attack on Iran by Israel and the US and the indiscriminate response by Iran, creating a wider conflict in the Middle East, will inevitably impact the global economy, including that of the UK. The Government are right to be vigilant in calling out price-gouging and profiteering in the energy and other sectors, as my noble friend has mentioned.

The rise in gilt yields and consequent increase in government borrowing costs are unwelcome but reflect the financial market’s recognition, in the US and the eurozone as much as in the UK, of potential inflationary pressures and other risks. The Bank of England will face difficult decisions in relation to interest rates against this background, with increases in energy prices having inflationary and potentially recessionary implications. I hope and believe that the MPC will strike a wise balance in that context. As my noble friend the Minister said, if the Government had not made the difficult decisions encapsulated in the finance Bill that we are debating today, the UK economy would have been less resilient and less able to absorb this latest geopolitical shock, let alone the unprecedented continuing levels of uncertainty and unpredictability that characterise the current US Administration.

The Government have, in parallel with their restoration of stability, planted the seeds to increase and stimulate investment. This has already begun to bear fruit. As my noble friend Lord Eatwell pointed out even before the Budget Statement last November, PwC predicted—and has confirmed since the Spring Statement—a record increase of £13 billion in public investment in 2026-27, unlocked by the sensible, prudent changes made by this Government as to how capital investment is treated in the public accounts and the fiscal rules.

The OBR applies a factor of 0.3 to the impact of public investment on private sector investment, so £13 billion should catalyse £4 billion of incremental private sector investment. However, it acknowledges that the factor in some circumstances could be as high as 2.0—the quality of public investment is as important as quantity, with policy, governance and management all critical determinants of that. What are the Government doing systematically to ensure that these are all pursued to the highest standards, so that the direct return from public investment is maximised and the indirect return from the highest possible factor of private sector investment is being catalysed?

I end by picking up on one point from the finance Bill. The introduction with effect from 2028 of the eVED tax band on the mileage of electric vehicles reflects a decision to balance the need to encourage the switching to EVs with the need to replace revenues from fuel duty and ensure that drivers of EVs contribute fairly to the maintenance of the road infrastructure. I support the balance that is being struck in this case.

Another stimulus for the switch to EVs is the highly concessionary levels of benefit in kind applied by HMRC to company car drivers: 3% of the on-the-road price of the car concerned, rising to 5% in 2027-28. This represents a huge tax saving for the drivers, with no cap on the price of the car to which the benefit in kind applies. By my calculation, a high-end driver of an EV may pay a tax rate that is as low as 5% on the true cost of that benefit. Does my noble friend the Minister agree that this tax should be given further scrutiny and, at the very least, that a cap on the value of cars to which the benefit in kind applies should be examined?