Autumn Budget 2026
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My Lords, I thank the Minister for his introduction and his undertaking to respond to all noble Lords’ comments. I very much look forward to the maiden speeches of the noble Lord, Lord Neri, and the noble Baronesses, Lady Aglionby, Lady Kitching of Penistone and Lady Ussher. I also very much look forward to the contributions from such a large and distinguished gathering. This was Labour’s third Budget in office and the first delivered by the new Chancellor of the Exchequer. He was dealt a poor hand by his predecessor but, in summary, he has done little in this Budget to improve matters. We are in a bad way. Today’s figures were encouraging, but growth has been weak for a long time. Inflation is high, real wages are stagnating, unemployment is rising, taxation is approaching historic highs and, above all, the national debt approaches 100% of GDP and debt interest is increasing, thereby consuming an ever greater share of public spending. These are serious problems demanding serious decisions, yet what we received was a Budget of short-term fixes and promises of action tomorrow. This week, the NIESR warned that the Budget failed the credibility test. Its director, David Aikman, said: “A plan that is not believed adds to the premium the Government pays to borrow”. The OBR forecast growth of just 1.2% this year, falling to 1% in 2027. Inflation will remain above target until 2028, while the economy’s underlying productive capacity is expected to grow by only around 1.5% annually. The Minister cited the IMF’s endorsement of the Government’s deficit reduction plans, but the IMF did not give them a blank cheque; it told them explicitly to “stay the course” and warned against slippage. Since then, the OBR has revised borrowing upwards and reduced fiscal headroom to £15 billion, and the Government’s plans have not yet led to any reduction in the deficit, as we discussed in Grand Committee only last week. Further, the OBR forecasts no real earnings growth in 2027, followed by only very modest increases in subsequent years. Real household disposable income per person is expected to fall in the near term and, even by the end of the decade, to stand only around 2% above its pre-pandemic level. Yet the Government plan to meet their financial targets by “planning”—the word must be in quotation marks—to reduce public expenditure significantly in the last two years of their term. They should pull the other one. Taxation under this Government has increased enormously, mainly by freezing income tax thresholds and increasing national insurance in the Government’s unfortunate first Budget. Both eventually have the same effect as a tax rise on working people, whatever the Chancellor says. The Government have also imposed extra burdens on higher-rate taxpayers, but, in the end, part of that burden is also borne by those lower down the income scale. Even the OBR warns that taxation at these levels risks damaging incentives to work, save and invest. On this side of the House, we have not forgotten the debilitating effect of the application of IHT on family businesses, farms and pensions; or VAT on school fees; or the new mansion tax that will be in the Finance Bill. This Budget’s measures continue in the same vein, with a rise in savings and property taxes, so that a widow renting out a flat pays a higher rate than a footballer, and a tax surcharge on the banks, on which SMEs rely for investment. Britain cannot tax its way to prosperity. The way to the growth and prosperity that we all seek is to spend and tax less. What of those people who are not in work? Unemployment is forecast to exceed 5% in 2027, vacancies are falling and young people in particular are struggling to find work. Yet the Government have made employing people more expensive through higher employer national insurance, rising costs and increasing regulation. Their answer is a jobs guarantee, but another government scheme is not a substitute for a thriving private sector. We cannot afford a system in which fewer people work, those who do work pay ever more in tax, and the welfare bill continues to rise. Can the Minister point to where in this Budget the Government have seriously confronted this challenge? We on these Benches have struggled to find it. However, despite record taxation and enormous borrowing, the Chancellor has left himself just £15 billion of fiscal headroom. The OBR puts his chances of meeting his fiscal rule at barely 56%. Indeed, a one percentage point change in interest rates could increase debt interest costs by £16 billion, wiping out the headroom. Meeting a fiscal rule by the narrowest of margins is not the same as restoring the fiscal responsibility we need. In short, the great failure of this Budget was the absence of serious decisions on the greatest challenges facing our country. Where was the plan for welfare reform? Health and disability benefit spending alone is forecast to rise from £86 billion to £120 billion by 2031-32. This is plainly unsustainable, yet the Government continue to postpone the difficult reforms that are needed. Where is the plan for defence? The Chancellor himself, when resigning as Defence Secretary, warned that failing to commit to spending 3% of GDP by 2030 makes Britain less safe. He has failed the very test he set himself and failed to explain how the 3% will be funded. The Chancellor has chosen to defer difficult decisions. Postponing these decisions does not make the problems disappear; it simply makes them more difficult for the Chancellor’s successors. What would we have done? What should a serious Budget have delivered? First, a credible plan for growth. There are signs today that AI and services are helping, which is welcome, but today’s figures for construction are grim—down 0.7%. Job losses in the sector have also been reported today, and, as I have heard from the Institution of Civil Engineers, we see a disappointing government record on maintenance and delivery of infrastructure projects. Secondly, cheaper energy has been the key to growth historically. The Government’s temporary measures, set out clearly by the Minister, do nothing to address the underlying costs facing households and businesses. We need to go further. Our cheap power plan would remove carbon taxes and levies and abolish VAT on household energy bills for three years, reducing average household electricity bills by an estimated £200 a year. We also need to see the Rosebank field approved and the Fingleton report implemented. Thirdly, the Budget should have delivered action on housing. The OBR now forecasts substantially fewer homes being built than it expected in the spring. Unlike this Government, we would reduce unnecessary regulatory burdens, remove barriers to development and abolish stamp duty on primary residences. Fourthly, we would make work pay. We would halve employer national insurance for workers aged 21 to 24 and introduce our get to work programme, helping young people into employment. Above all, we would confront the question this Government refuse to answer: how do we control public spending without continually asking taxpayers to pay more? We have set out a programme of £71 billion in annual savings, including £36 billion from welfare reform. At least half would go towards reducing the deficit, with the remainder supporting lower taxes, enterprise and our national priorities. We would establish a funded path to spending 3% of GDP on defence by 2030, because economic security and national security must go hand in hand. The British people need a Budget that would confront the underlying problems facing our economy; instead, they received a Budget which left the major decisions for another day. It again relied on rising tax receipts to reduce borrowing, while leaving the largest structural pressures on public spending unresolved. Overall, it was a missed opportunity. Our ambition should be to build an economy that grows faster, rewards work, encourages enterprise and offers every generation the opportunity to enjoy a better standard of living than the ones before. Unfortunately, the Budget did none of that.
My Lords, it is an honour to follow the noble Lord, Lord Neri, and to congratulate him on his important maiden speech. I declare an interest: my wife is a prolific commissioner of new music and two of her commissions have recently won an Ivors Composer Award. I therefore cannot help but be particularly pleased to welcome to your Lordships’ House the chief executive of the Ivors Academy, who made those wise decisions. The noble Lord, Lord Neri, has had a remarkable, productive career in the music industry, culminating in the Ivors job. He has represented the well-known and he has supported the unknown, always in the cause of creating great music. He has also deployed that expertise, as we have heard, in the service of those trapped by dementia, who could be liberated by the medicinal power of music. I am sure that the whole House looks forward to the noble Lord focusing his creative energy on debate in your Lordships’ House. Having listened to his important maiden speech, we now know that we have much to look forward to. Now to the Budget. Embedded within it is a potentially powerful growth model built on the two fundamentals that drive investment. The first is support for the growth of demand from a 14.6% increase in public investment this year and from targeted public procurement. Without the prospects of growing markets, investment will falter. It is no accident that the growth of business investment is highly correlated with the growth of public investment.
My Lords, I add my congratulations to the maiden speeches we have heard today. There have been some excellent contributions, but we have also had some strong contributions from old codgers as well. A breathing space for today, hope for tomorrow: that was the slogan at the start of the Budget. The Minister provided us with his idea of what a breathing space might be, and I hope that younger travellers on the Underground will continue to give up their seat for him. However, the Budget delivered a breathing space for the Government and fear for most of the population of this country—business and ordinary working people. It delivered fear because we all know that the Budget did not address the real problems; it just kicked them further and further down the road. We all know that money is short and that, in the end, there is no escape from deep cuts in services and benefits, or big tax rises, or potentially a combination of the two. It will be painful. Fear of that is now tangible, even if it is not yet affecting the markets. People have been left in limbo. It is not so much a breathing space as a place of trepidation. Meanwhile, the Government boast of a few cash bungs to households, many of whom will see far more cash than they are given being clawed back because of the stealth tax of frozen thresholds. As the noble Baroness, Lady Neville-Rolfe, explained, and others have added, everything is being put off. Even the government reviews that report do not result in action. Implementation is what we need. The spending review will surely be backloaded so that any genuine cuts come way down the line.
That this House takes note of the Autumn Budget 2026.
My Lords, it is a privilege to open this Budget debate. I welcome the noble Baronesses, Lady Aglionby, Lady Kitching of Penistone and Lady Ussher, and the noble Lord, Lord Neri, and I very much look forward to their maiden speeches. I also pay tribute to the former Chancellor, the right honourable Member for Leeds West, for the work she led to create fiscal discipline and repair our public finances. She was ably assisted in that task by the noble Baroness, Lady Martin, and by my predecessor in this role, the noble Lord, Lord Livermore, whom I hold in high regard. I intend to keep my remarks today as factual and to the point as possible and, in the spirit of your Lordships’ House, to avoid the kind of political point-scoring that dominates the debate in the other place. I know we have more than 50 speakers and I may not be able to respond in full at the end. I have asked my staff to prepare a note on which I will comment and which I will circulate among Ministers and senior management at the Treasury so that the value I know we will get from this debate is transmitted to the Government. This Budget is part of a long-term programme of government, one that will reflect the vision articulated by the Prime Minister and the Chancellor in their speeches at the Labour conference, one which will find expression in the 10-year plan that we will publish in the coming weeks, and one that will be reflected in the spending review next year. This Budget is set at a time of considerable uncertainty in the world economy—two wars, a challenging ally in the United States, unpredictable oil prices and interest rates rising. As the Chancellor has made clear, we cannot wish these global economic storms away. We must instead set out a course to steer the country through them. The Budget therefore seeks to do a number of things. First, it shows how we will live within our means, within the fiscal rules. Secondly, it shows how we will fund defence, to which this Government are unequivocally committed. More than that, the Budget seeks to give breathing space to British people and—along with the conference speech and the 10-year plan—hope for the future. I will start with fiscal discipline. In this Budget, we have chosen to use some of the fiscal headroom established last year to absorb the impact of the Iran war to protect the economy, British businesses and family budgets. But let us be clear: we meet the fiscal rules in full, and for the first time since 2022, in the third year of the forecast. While there are challenges, we should be proud of the resilience of this economy. Today, the Office for National Statistics announced 0.7% growth for this third quarter; I hope I have done my arithmetic right, but I think that is 1.9% so far this year. This is stand-out resilience. Last year, new borrowing by the Government fell to its lowest level in six years as a percentage of GDP and will continue to fall across the forecast. While government debt is high and interest payments much higher than we would like, action is being taken. Kristalina Georgieva, managing director of the IMF, has said that the UK stands out as a country and is one where “action to reduce debt and deficit has been taken decisively”. It is a tough world, but business investment is up and people and businesses are resilient. The Government aim to underpin this resilience by providing breathing space for families and businesses. I have been asked what breathing space means. Let me use a metaphor. I commute to the House on the Tube; sometimes it is excessively crowded and stuffy, and I am older than I used to be. From time to time, a younger person will stand up and give me a seat. This is breathing space for me, but it is also more than that, because I feel grateful that they have understood how I felt in giving me their seat. This Budget does not solve all our problems, any more than the person who offered me the seat stopped the train being crowded. The world is still uncertain, but we can, as a Government, offer some breathing space. Here is one example. For British people, energy costs are a particular challenge, so we are delivering immediate measures to help with rising bills, including the £100 household energy payment paid directly to households living in council bands A to D in England. That is breathing space. This will be funded by a time-limited 3% increase in the bank corporation tax surcharge; I am grateful to the banks for making that possible. Alongside this, the Government are extending the removal of domestic VAT on electricity until July, extending the 5p cut on fuel duty and abolishing gas standing charges to give people more control over their bills. Overall, in 2026-27 households in England are estimated to benefit by an average of around £160 from the support we are providing on energy. The households on the lowest income are expected to benefit the most, with the bottom 20% benefiting by around £230, almost four times the top 20%. We know that higher energy bills are a challenge for businesses too, so we are reducing bills by up to 25% for more than 10,000 eligible businesses from next April through the British industrial competitiveness scheme. This will not solve every problem, but it does offer breathing space. Beyond energy, the Government are taking further action to support our lowest paid workers by increasing the national minimum wage and national living wage from April. To help those who use their vehicles for work, we are increasing the higher mileage rate and making permanent the increase in the standard milage rate announced earlier this year. To back businesses and high streets, we are taking 70,000 small retail, hospitality and leisure properties out of paying business rates altogether. For all other businesses in these sectors, we are freezing their business rates in real terms. If you want to remember two statistics from this Budget, remember 20 million and 70,000. There are 20 million households which will receive the household energy payment, and 70,000 high street businesses are no longer paying rates. These measures provide breathing space for now, but the only way we can keep British families and finances secure for the long term is through an economy that is growing strongly. We believe that needs a positive response from government and local government. For decades, decisions about economic growth have been taken by people who are miles away from the communities they are trying to serve. With the best will in the world, they cannot be responsive. As a result, Britain has become one of the most geographically unequal large economies in the world. So we will be delivering an ambitious devolution package, putting power in the hands of local leaders who know best how to drive growth in their areas. The Fiscal Devolution Roadmap, published alongside the Budget, sets out a plan for business rates to be retained locally by the end of the decade, and for mayoral strategic authorities to be assigned a share of the income tax generated from their area by 2028. Additionally, we are extending devolution and the advantages that come with it to 10 more areas in England, so that 90% of England’s population will be covered by a mayoral or foundation strategic authority. Good growth funds—flexible funding for local leaders to invest in local communities—will be rolled out across the country, supported by £285 million of capital grant funding, so that mayors and local leaders have more flexibility to invest in their own growth priorities. We are also delivering radical reform of our energy system, because our priority is to bring energy costs down and to help British businesses compete and British households cope. We will buy and build new projects only when they lower bills and can connect to the grid. We will break the grip of international gas prices on our bills by moving more of our old renewables on to fixed-price contracts. We will build cheaper, faster grid connections through GB Grid; and, crucially, we are putting an end to the practice of loading levy costs on to bills. Thirdly, we are supporting entrepreneurs. If you have a micro-business, you were formerly allowed £1,000 of income tax-free; now it is to be £3,000. We are going to pilot an entrepreneur scheme for young people. If your company is ambitious, we want you not just to start here but to scale, stay and prosper in the UK. The new capital gains founders’ relief will provide a 10% rate on lifetime gains, up to £10 million, for the founders of and early investors in high-growth innovative companies. To mobilise private investment in the UK, we are providing an additional £20 billion of capital to the National Wealth Fund and the British Business Bank. That is no small package for entrepreneurs, large and small. One final measure I should mention is that we are putting in £700 million to support artificial intelligence security, resilience, adoption and innovation in the UK. Complementing that, our new data centre covenant will introduce strict tests that strategic data centres must meet to invest in local communities, support local jobs and help to re-industrialise Britain. Finally, I would like to talk about some other big challenges facing our country. On defence, I think this House is absolutely united in understanding that defence of the nation is the first duty of a government. This Government have driven the biggest boost in defence spending since the end of the Cold War. At the Budget two weeks ago, we took the decision to reprioritise budgets across Whitehall to fund the defence investment plan in full. At the spending review next year, we will set out details of how we will meet our NATO commitment to spend 3.5% of GDP on defence by 2035. Crucially, this includes setting a target for 3% in 2030. The Secretary-General of NATO has welcomed our plans, confirming that they represent a credible path to meeting our commitments. He said: “The UK role in transatlantic security is vital”. This move puts Great Britain on a credible path “to ensure we’re all investing what’s needed to remain ready and able to deter aggression and defend our freedom and security”. Alongside this investment in defence, the Government are delivering a multi-billion pound package of financial support for Ukraine, because we will continue to stand by Ukraine for as long as it takes. Housing has become more difficult, and housebuilding is slower than we would have liked but we cannot give up on building. This Budget will put another £1.5 billion into social and affordable housing to deliver 10,000 additional homes. It will put £4.7 billion behind the Your First Home scheme for first-time buyers and cut unnecessary costs and delays for housebuilders. The focus is on getting more homes built and helping more first-time buyers through the door. We have already promised everyone sleeping rough a route off the streets this winter, and the Budget confirms a further £430 million to keep that offer open for the rest of this Parliament—not just this winter, but every winter. We will continue to invest in Britain’s public services. Since 2024, we have aimed to rebuild our public services. Our investment has made Britain’s streets and borders safer. It has fixed crumbling classrooms. It has helped restore the NHS. But there is still so much more to do. As we look ahead to the spending review, we start with ambition, but there will be choices we must make about prioritisation. We must continue to deliver efficiencies, building on the £16 billion of efficiencies and savings generated last year. We must continue to deliver an effective, efficient state of which people can be proud. On welfare, I think the Prime Minister and Chancellor have been clear that the bill needs to come down, but in a planned and sustainable way, following the guidance that we get from the Milburn and the Timms reviews. This is a Budget to deliver good growth, with growth in every postcode. It is part of a wider programme for government and for the nation. It is underpinned by fiscal discipline, the bedrock of the economy. It funds defence. It provides support to families and businesses now, and kick-starts work on the big changes needed to put this country on a better course, with breathing space today and fresh hope for the future. I look forward to our debate.
My Lords, I thank the Minister for his introduction and his undertaking to respond to all noble Lords’ comments. I very much look forward to the maiden speeches of the noble Lord, Lord Neri, and the noble Baronesses, Lady Aglionby, Lady Kitching of Penistone and Lady Ussher. I also very much look forward to the contributions from such a large and distinguished gathering. This was Labour’s third Budget in office and the first delivered by the new Chancellor of the Exchequer. He was dealt a poor hand by his predecessor but, in summary, he has done little in this Budget to improve matters. We are in a bad way. Today’s figures were encouraging, but growth has been weak for a long time. Inflation is high, real wages are stagnating, unemployment is rising, taxation is approaching historic highs and, above all, the national debt approaches 100% of GDP and debt interest is increasing, thereby consuming an ever greater share of public spending. These are serious problems demanding serious decisions, yet what we received was a Budget of short-term fixes and promises of action tomorrow. This week, the NIESR warned that the Budget failed the credibility test. Its director, David Aikman, said: “A plan that is not believed adds to the premium the Government pays to borrow”. The OBR forecast growth of just 1.2% this year, falling to 1% in 2027. Inflation will remain above target until 2028, while the economy’s underlying productive capacity is expected to grow by only around 1.5% annually. The Minister cited the IMF’s endorsement of the Government’s deficit reduction plans, but the IMF did not give them a blank cheque; it told them explicitly to “stay the course” and warned against slippage. Since then, the OBR has revised borrowing upwards and reduced fiscal headroom to £15 billion, and the Government’s plans have not yet led to any reduction in the deficit, as we discussed in Grand Committee only last week. Further, the OBR forecasts no real earnings growth in 2027, followed by only very modest increases in subsequent years. Real household disposable income per person is expected to fall in the near term and, even by the end of the decade, to stand only around 2% above its pre-pandemic level. Yet the Government plan to meet their financial targets by “planning”—the word must be in quotation marks—to reduce public expenditure significantly in the last two years of their term. They should pull the other one. Taxation under this Government has increased enormously, mainly by freezing income tax thresholds and increasing national insurance in the Government’s unfortunate first Budget. Both eventually have the same effect as a tax rise on working people, whatever the Chancellor says. The Government have also imposed extra burdens on higher-rate taxpayers, but, in the end, part of that burden is also borne by those lower down the income scale. Even the OBR warns that taxation at these levels risks damaging incentives to work, save and invest. On this side of the House, we have not forgotten the debilitating effect of the application of IHT on family businesses, farms and pensions; or VAT on school fees; or the new mansion tax that will be in the Finance Bill. This Budget’s measures continue in the same vein, with a rise in savings and property taxes, so that a widow renting out a flat pays a higher rate than a footballer, and a tax surcharge on the banks, on which SMEs rely for investment. Britain cannot tax its way to prosperity. The way to the growth and prosperity that we all seek is to spend and tax less. What of those people who are not in work? Unemployment is forecast to exceed 5% in 2027, vacancies are falling and young people in particular are struggling to find work. Yet the Government have made employing people more expensive through higher employer national insurance, rising costs and increasing regulation. Their answer is a jobs guarantee, but another government scheme is not a substitute for a thriving private sector. We cannot afford a system in which fewer people work, those who do work pay ever more in tax, and the welfare bill continues to rise. Can the Minister point to where in this Budget the Government have seriously confronted this challenge? We on these Benches have struggled to find it. However, despite record taxation and enormous borrowing, the Chancellor has left himself just £15 billion of fiscal headroom. The OBR puts his chances of meeting his fiscal rule at barely 56%. Indeed, a one percentage point change in interest rates could increase debt interest costs by £16 billion, wiping out the headroom. Meeting a fiscal rule by the narrowest of margins is not the same as restoring the fiscal responsibility we need. In short, the great failure of this Budget was the absence of serious decisions on the greatest challenges facing our country. Where was the plan for welfare reform? Health and disability benefit spending alone is forecast to rise from £86 billion to £120 billion by 2031-32. This is plainly unsustainable, yet the Government continue to postpone the difficult reforms that are needed. Where is the plan for defence? The Chancellor himself, when resigning as Defence Secretary, warned that failing to commit to spending 3% of GDP by 2030 makes Britain less safe. He has failed the very test he set himself and failed to explain how the 3% will be funded. The Chancellor has chosen to defer difficult decisions. Postponing these decisions does not make the problems disappear; it simply makes them more difficult for the Chancellor’s successors. What would we have done? What should a serious Budget have delivered? First, a credible plan for growth. There are signs today that AI and services are helping, which is welcome, but today’s figures for construction are grim—down 0.7%. Job losses in the sector have also been reported today, and, as I have heard from the Institution of Civil Engineers, we see a disappointing government record on maintenance spending and delivery of infrastructure projects. Secondly, cheaper energy has been the key to growth historically. The Government’s temporary measures, set out clearly by the Minister, do nothing to address the underlying costs facing households and businesses. We need to go further. Our cheap power plan would remove carbon taxes and levies and abolish VAT on household energy bills for three years, reducing average household electricity bills by an estimated £200 a year. We also need to see the Rosebank field approved and the Fingleton report implemented. Thirdly, the Budget should have delivered action on housing. The OBR now forecasts substantially fewer homes being built than it expected in the spring. Unlike this Government, we would reduce unnecessary regulatory burdens, remove barriers to development and abolish stamp duty on primary residences. Fourthly, we would make work pay. We would halve employer national insurance for workers aged 21 to 24 and introduce our get to work programme, helping young people into employment. Above all, we would confront the question this Government refuse to answer: how do we control public spending without continually asking taxpayers to pay more? We have set out a programme of £71 billion in annual savings, including £36 billion from welfare reform. At least half would go towards reducing the deficit, with the remainder supporting lower taxes, enterprise and our national priorities. We would establish a funded path to spending 3% of GDP on defence by 2030, because economic security and national security must go hand in hand. The British people need a Budget that would confront the underlying problems facing our economy; instead, they received a Budget which left the major decisions for another day. It again relied on rising tax receipts to reduce borrowing, while leaving the largest structural pressures on public spending unresolved. Overall, it was a missed opportunity. Our ambition should be to build an economy that grows faster, rewards work, encourages enterprise and offers every generation the opportunity to enjoy a better standard of living than the ones before. Unfortunately, the Budget did none of that.
My Lords, like the noble Baroness, Lady Neville-Rolfe, I look forward to the maiden speeches later in the debate. The Budget was launched into a very challenging financial environment. That challenge was enumerated by the report from the Office for Budget Responsibility, and it is a tough read. However, while it was the Chancellor who was under pressure for a few hours during Budget Day, it is the British people who will be feeling the squeeze for years to come, with the poorest affected most. The OBR projects little or no growth in household income for the foreseeable future. Up and down the UK, families and individuals will find things very challenging. Despite claims to the contrary that we have just heard, this Budget will only play around the margins of those personal challenges. To employ a rather curious metaphor, the Minister’s metaphorical Tube train does not have enough seats to offer the breathing space that the British people need. We have already heard from the Government Benches about the IMF upgrades and we have heard some encouraging statistics today about growth. Indeed, we are doing better than some of the other G7 countries. But our growth, at best, even if everybody is right, will be sluggish and our debt is absolutely massive. In the face of this, the Chancellor set out a huge range of relatively small measures; in fact, he set out dozens, perhaps hundreds, of tweaks and adjustments. All that was a few weeks ago. Can anyone actually remember any of the details? If Chancellor Healey set out to deliver an invisible Budget, he basically succeeded. Perhaps he looked at the highly visible first Budget of his predecessor and resolved not to make the same mistake. As I am sure we will hear many times today, the unexpected rise in employers’ NICs heralded by that Budget hangs like a bad smell over UK business, scaring off investment and depressing job creation. It was, and remains, one of the biggest disincentives to growth that this Government have produced, although there are others. To be fair to Chancellor Healey, there were no NICs moments in his Budget. To be fairer still, there are significant external factors too—factors that not even our new Prime Minister can control, not least of which is the massive rise in energy costs caused by a war with Iran. I note that this war was initially supported by the Conservative Party. Sensibly, it seems to have changed its mind on that. As a result of this conflict, families across the UK face a brutal winter of rising bills and disappearing support. Energy bills are going up; petrol prices are going up; prices in the high streets are going up. VAT will go back on electricity bills in the spring, solar panels that generate cheap electricity will have VAT taken off them, and rail fares will be unfrozen. Some consumer energy support measures have been announced, as the Minister said, and the British industrial competitiveness scheme for manufacturers will kick in next spring, but, in the main, their effect will be more or less wiped out by the costs as they rise. Perhaps President Trump’s electoral drubbing will ride to our rescue. But even if the Strait of Hormuz opened to traffic tomorrow, the destruction of refining capacity and LNG facilities will take years to replace. The recent Bank of England rise in interest rates is driven by these inflationary fears. That rise means that mortgages will rise too. Subsidies to help first-time buyers will likely be wiped out as mortgage rates increase. I will say a brief word about our hard-pressed retail sector. The Chancellor trumpeted a freeze on its business rates. There is less to this than meets the eye. The Chancellor used the word “freeze”, but he actually announced that increases will be capped at inflation—an increase that will cost the sector an extra £250 million on top of the £7 billion that it is already paying. It is disproportionately the largest payer of business rates. Another reason why the Budget has faded in people’s memory, as the Minister illustrated, is the activity elsewhere. Welfare reform hangs in the balance. The Milburn report is now gradually being filtered out, and the Timms report we await. Even more breath is being baited in anticipation of Prime Minister Burnham’s 10-year plan. Indeed, the Minister took a big inhale as he was giving his speech. It is a plan that seems by many to have been touted as a universal panacea. I ask the Minister to commit to a full debate in your Lordships’ House early next year. If this report is published before the end of the year, we will have some Christmas reading and we will need to come back and have a full debate in your Lordships’ House. A 40-minute repeat of a Statement will not be sufficient if this 10-year plan is as important as the Minister tells us it is. Taken together, these policy announcements need to establish a solid platform from which traders can trade and investors can invest—a platform that supports consumers. It will be vital that there is consistency and stability to ensure that the UK builds the infrastructure we need to deliver green, low-carbon growth for future generations. Stability is also needed to attract private investment. Success will depend on a durable policy framework that can give long-term private capital the confidence to support the massive investment that this country needs. There are other ways in which the Government could help British business. The Chancellor touched on the drag of excessive and repetitive regulation. All his words made sentences, but will they make any change? Since the dawn of time, Chancellors have made similar comments about red tape, but there is undoubtedly a need for change, and perhaps we can help. Liberal Democrats have been listening hard to what business has told us about regulations across round tables, our national call for evidence, and our meetings with trade and professional bodies. Four messages are cutting through consistently. First, they said, “Ask me once. If I have had to prove who I am, what my product is or what my carbon footprint is, do not make me prove it again and again for the next bodies as they come”. Secondly, they said, “Make it fit my size. Do not hand a business of 10 people a rulebook for 10,000 people”. Thirdly, they said, “Tell me how long it will take. Give me a deadline for a decision and keep to that deadline”. Finally, they said, “Give me someone to turn to. When the rules clash, or something goes wrong on the border, or we have problems, I need one place and an answer that I can rely on”. Those are four rules that the Government can use and apply to every regulation that exists across our community. On that basis, we will set out a commitment to simplifying regulation while retaining the important consumer protections and safety issues. We aim to use this as a basis for ensuring that financial innovation supports consumer choice, competition and growth. No Liberal Democrat can make a speech without mentioning the European Union—it is written in our by-laws. In this case, I will highlight Brexit red tape that is being absorbed by British traders. Official data obtained by our Europe spokesman, Al Pinkerton MP, shows that between 2022 and 2025 the cost of extra regulation in trading with the European Union has hit businesses with a staggering £7.7 billion bill. That is 7.7 billion reasons why the Government must use the upcoming UK-EU summit to address the mounting economic crisis and stop ignoring the financial strain that Brexit has put on British businesses. A UK-EU customs union would wipe most of these costs away and make a huge injection of growth into the United Kingdom economy. There is even more at stake in our relationship with Europe. There is huge scope for economic and defence co-operation that would drive growth and help us meet our defence needs. This would benefit both the economic well-being and the security of every UK citizen. The Prime Minister talks about this quite a lot. We want to see him deliver. I have to disagree with the Minister. He did not show us how the country will pay for its defence and this Budget does not provide meaningful breathing space. In a sea of events, headlines and shocks, this Budget was out of its depth. The Chancellor seemed to acknowledge that he was over his head and his response was a Budget of small ideas. There is no theme, no strategy and no vision in this Budget, which is why most people have forgotten all about it already.
My Lords, I also welcome our new colleagues, and I look forward to the new Peers’ maiden speeches. In my judgment, the external circumstances warranted a Budget framework of not doing any harm. The running down of the fiscal buffer was, of course, not entirely risk-free but, in my judgment, in the circumstances it was probably wise, especially due to the then imminent, now past, US congressional elections. Not entirely surprisingly, the near 20% drop in crude oil prices since and the associated rally in global bond markets certainly suggest that the Chancellor was right to at least not raise more taxes to keep the buffer as high as it was previously. Already, it seems that the Budget arithmetic might be looking a bit better. This is especially true as, once again, the OBR’s short-term GDP forecasts looked rather odd at the time, perhaps because it made its forecasts so early, and certainly before the August GDP release. As we have heard already, based on the news today of a 1.9% year-on-year GDP performance in Q3, the economy is running at a rate considerably above the OBR forecast. Having recently seen the November Purchasing Managers’ Index, I think it very unlikely that we will now get the mathematical decline in Q4 GDP that would give any chance of the current official forecast happening. Unless oil prices start rising again, it also looks to me as though the OBR’s forecast for next year is rather cautious. Importantly, below all this improvement are tentative but continued signs, at last, of the beginning of a recovery in the UK’s productivity performance. This should be especially welcomed by everybody. It perhaps adds—although many do not seem to recognise it—to some of the momentum that had already started to pick up. In my view, it is not impossible that, if the somewhat chastened president of the free world returns to his oft-stated early goal of bringing about the end of various wars, a further significant drop in oil prices could happen. In such circumstances, if they come about, the economic performance next year looks—cyclically, at least—like it could be considerably stronger than the OBR’s latest, rather timid forecast. Despite this, and as we have heard, the Budget has, in essence, raised the importance of the soon-to-be-published Timms and Milburn reviews and, of course, the 10-year plan—all leading up to next year’s spending review. In my judgment, all these should be directly linked. More importantly, I believe that what I have often called the five sacred cows are all in the spirit of trying to encourage bold action to reward the golden opportunities. These five are: the triple lock, which has partially been announced already; proper welfare reform, including a path to significantly reduced expenditure; genuine housing tax reform; an honest and credible path to stopping the inexorable rise in NHS spending; and, of course, some kind of closer ties to the EU. If all five are central features of the 10-year plan and are then followed through, a real path to delivering growth in every postcode, through a major reduction in long-term interest rates, is deliverable. There are two other bold reforms that I would like to talk about briefly. First, while I have been, and remain, a fan of borrowing more to invest, it cannot be done by saying, “Trust me; I know best”. The right way, which I have talked about before in this place, is to transform the outlook for infrastructure in this country by taking NISTA out of the Treasury and turning it into an OBR for infrastructure with the powers, voice and transparency that is afforded the OBR. This could show which projects have major multiplier benefits, and, to judge by my many discussions with investor, it would be very popular. Secondly, also for investment in British, especially risky and less liquid assets, we need to change the risk/return profile in order that our vast pension insurance companies get the tax-free lump sum benefit for their customers only if the investments are in British companies. This would have a very large positive impact, both for our quoted stock market and for our venture and infrastructure markets. Let me finish by of course applauding—given my own background in the past decade or more—the steps announced on devolution. I presume that these are the beginnings of a genuine path to a true devolution revolution.
My Lords, it is a great pleasure to follow such a distinguished fellow Mancunian as the noble Lord, Lord O’Neill of Gatley. Like him and others, I am also looking forward to the maiden speeches we will be hearing today. I suspect that my right reverend friend the Bishop of Bath and Wells, who has his own maiden speech at some point in the future, will be picking up some tips in the course of this afternoon. My faith tells me that this side of heaven, nothing is perfect. So, although there is much in this Budget related to one of my lifelong concerns, housing and homelessness, that I warmly welcome, in the short time I have I will focus within that sphere on where I hope present progress can continue and where I would press the Government to go further. Having worked on reducing homelessness, over many years, with the former Mayor of Greater Manchester, I suspect that we are now seeing one of his personal passions come to the fore. A safe home is among the most basic of human needs. It is fundamental to human dignity. That this crisis is allowed to persist in one of the world’s wealthiest countries calls into question some of Britain’s most fundamental values. Hence, I was particularly encouraged by the additional £432 million for homelessness initiatives, the continued investment in social housing—I declare my interest as the chair of a housing association—and the devolution measures, referred to briefly by the noble Lord, Lord O’Neill, which will help address homelessness directly in our communities. I discovered when I was chair of the Manchester Homelessness Partnership, on behalf of the city and its partners, that schools in the city are now having to adapt their practices in order to support well over 1,000 children—it could even be 1,500 by now—living in temporary accommodation at any one time. Often, they are there for weeks or months. We have children arriving at school in the morning not knowing where the taxi will take them to sleep that same night. Councils are providing social support for care leavers, who are at increased risk of homelessness, as we know. They also have responsibilities to unhoused people, who are at risk of mental health crises. I am glad that the devolution measures in the Budget will further enable a joined-up approach to homelessness support, rooted in local knowledge and lived experience. We draw on those extensively in the Manchester Homelessness Partnership board. However, I am concerned that the measures do not yet add up to an adequately preventive approach. For those unable to heat their homes, with damp threatening their children's health, a one-off £100 payment will do little to provide lasting security. Indeed, the issuing of this payment in accordance with council tax bands—the noble Lord, Lord O’Neill, has already indicated that housing tax is an area that badly needs reform—means that hundreds of thousands of low-income households will miss out on the support entirely. If the Government are committed to tackling the cost of living, they must commit to greater investment in social security, even if welfare overall has to come down. I was therefore disappointed to learn that local housing allowance rates will remain frozen. With the sharp rent increases of recent years, the allowance has not met its target—except very occasionally—of covering the cheapest 30% of properties for quite some time. If we could commit to meeting that threshold, estimates from the Trussell Trust suggest that over 100,000 people could be lifted out of severe hardship by the end of this government. We must also acknowledge that some groups are more vulnerable than others as regards homelessness. Insecure immigration status is a leading driver, and yet the earned settlement reforms recently announced by the Home Secretary risk prolonging periods of financial insecurity and restricted access to support. Will the Minister clarify what consideration has been given to the compatibility of these reforms with A National Plan to End Homelessness? Finally, I turn to one more specific, perhaps domestic, housing issue that affects how faith communities, including my own, serve their communities. Many vicarages, not least in London and the south-east but some in Manchester too, where there are high property values, exceed the £2 million mansion tax threshold, even when the parish is relatively poor. The vicarage has to be big enough to hold the different sizes of families that may come to live in it. It is the parish system that enables the church to care for the whole life of the community, and to be led in that by a vicar who lives among them. Can the Minister confirm whether the intention is that churches that own properties—vicars do not own them themselves—should be caught by the tax? If it is not, can he give an undertaking that regulations will not accidentally catch these properties? The Government have framed this Budget as providing breathing space for families and businesses, but support must be targeted. It must go beyond tackling symptoms, even ones as egregious as homelessness, and attack the root causes of poverty.
My Lords, this Budget is an important step on the painful journey to tackle Britain’s deep-seated economic problems and to create, I hope, a sustainable and growing economy. The Prime Minister’s first bold move was to reform the triple lock, much canvassed in this House, by increasing pensions in line with wages. This will save £50 billion by 2050, but none before 2030. The Chancellor’s decision to resist the temptation to change the fiscal rules has been well received by the financial markets and rewarded by a softening of yields on government debt and a reduction of the so-called moron premium inherited from the previous Government. A bank tax has funded a number of small but important and well-received measures to help the less well-off, the high street, some SMEs and entrepreneurs. Overall, a key fiscal measure, the current balance—the difference between the current year’s government borrowing and spending—has fallen from a deficit of 2.5% in 2024 to a deficit of 1.5% in 2025-26, and is forecast to be in surplus in 2028-29, another UK achievement praised in the recent IMF report. The Chancellor has continued the vital work of his predecessor to increase the chronically low level of public investment which has placed the UK at the bottom of the G10 over the last 30 years. Public investment has increased since 2024 from 2.5% to 3.5% of GDP to provide a useful boost to profit. I welcome the decision to devolve many of the capital investment decisions to the regions, which will have a better understanding of what is needed locally. But the increase in public investment, whether it is centrally or locally, reminds us that despite the excellent work of the infrastructure commission, the Government have a dire record of oversight of many capital projects; for example, the runaway cost of HS2 and the 20-year underspend on maintenance in the water industry. Beefed-up oversight is needed and should be provided by an independent, professionally staffed body with full statutory powers to investigate the projects, many of which are protected by their sponsoring ministry. Private investment has also increased by 7.5%, but high energy costs, elevated interest rates and a heavy regulatory burden present stiff headwinds. The Chancellor’s commitment to delink the price of electricity costs from the market price of gas can reduce our energy costs, which remain the highest in Europe, but so far, the benefits of the measure to reduce the regulatory burden remain elusive. Major challenges lie ahead. The results of the assured process of reforming welfare benefits to move funding from benefits to training are imminent. The Chancellor’s reaffirmation of the target to invest 3% in defence is welcome, but the funding plan will not be available until next year. That spending plan is also forecast to deliver an overall 2.6% reduction in spending, to be found by a challenging cut of 10% in non-protected areas. The heart of the 10-year plan must be a radical plan for growth based on innovation, the measured adoption of AI and investment in skills. It must include tax reform to remove the many barriers to business growth; it must reform personal tax and benefits to make it fair and progressive and to reward productivity. The decision to freeze personal tax thresholds in 2022 means that each subsequent year more people are dragged into paying higher tax. An additional 1 million people this year will be paying more tax on their earnings, which have generally increased barely enough to meet inflation. On top of that many lose benefits. It is an unfair system which particularly affects the low earners, but it acts as a major disinvestment to all. In my career, I helped to draft and deliver a number of long-term plans in both the public and private sectors. These plans were never short of ambition but, crucially, their success depended on early implementation. No plan can be delivered unless the necessary reforms and the tough financial decisions are tackled in the first 12 months. If that first year is done well, hope can indeed be transformed into reality.
My Lords, it is a pleasure to follow the noble Lord, Lord Hollick, and I also look forward to the maiden speech of the noble Baroness, Lady Ussher, and the other maiden speakers. I had a certain sympathy with the Chancellor giving his first Budget at very short notice in a difficult situation. But if the purpose of the Budget was simply to bring some much-needed calm and not to frighten the horses, I can see that he might have considered his first Budget something of a success. The huge number of very small measures—over 90—were largely performative, designed to show ordinary voters that the Government hear their concerns. The Government would have been pleased that a poll after the Budget showed that 42% of the public judged the Budget fair. But other people will have judged the Budget by differing criteria. Performative measures are not enough; there has been criticism of the dangerous lack of urgency in not addressing the challenges of defence, welfare and, above all, debt interest. The Minister has made much, not for the first time, of the IMF praise for the Government’s so-called deficit reduction strategy. But this strategy simply reflects the unreality of the fiscal rules which allow the Government to profile a declining deficit by writing in unrealistic spending and tax figures for the final year of the rolling plan. It makes no difference whether that plan is three years or five years. Paul Johnson, the former director of the IFS, said that the figures add up because the figures are made to add up. The Government have chosen to reduce the deficit more slowly than planned by the Conservative Government. In Rachel Reeves’ first Budget, the deficit for 2026-27 was put at £89 billion, up from the £69 billion expected by Jeremy Hunt. By March of this year, the deficit had become £116 billion; now, it is £132 billion, much the same as last year. As one critic put it, this is deficit reduction “on the never-never”. The biggest problem facing the country is the rising cost of debt interest. This makes us poorer as a country. This year’s £15 billion was added to what was expected to be paid in interest this year. If the same thing happens again in the next financial year, it could wipe out completely the fiscal headroom which the Chancellor has already reduced. This is a huge risk. The fiscal situation also finds its reflection in the prospects for living standards which the OBR projects to be hardly any higher at the end of this Parliament than at the beginning. The chief executive of the Government’s favourite think tank, the Resolution Foundation, has said that living standards will not rise without public spending cuts, and the choice is whether household incomes or spending departments take the cost of adapting to the debt interest. At least this Budget did not impose the whacking great tax increases we have seen in the previous two, but I very much regret the 2% increase in the tax on savings on top of the 2% already planned and announced. If we want to have a high level of investment, surely we ought to encourage savings, which the OBR projects to fall drastically. High-saving countries tend to be high-investment countries. There are some grey holes in the Government’s spending plans. It seems that part of the gap in defence spending is going to be met by some sort of international partnership, by which the private sector leases equipment to the defence department. It sounds all too like the PFI all over again; sometimes it seems as though the Government want to PFI the whole economy. By changing the debt target from public sector net debt, or PSND, to public sector net financial liabilities, or PSNFL, the Government have created a powerful incentive for themselves to channel public expenditure through the National Wealth Fund, the British Business Bank and the National Housing Bank. These institutions now have close to £200 billion capacity, which barely registers in the official figures for the national debt. These debts may be called assets, but will the loans be repaid? Will these state funding bodies make a profit? The record from the past is not encouraging. To conclude, this is a Budget for Mr Micawber. It is a missed opportunity. It solves nothing and I fear that, alas, we will be back looking at the same problems again.
My Lords, it is with great humility that I rise to give this, my maiden speech; humility not just because of the occasion, and the privilege of following the noble Lord, Lord Lamont of Lerwick, but because, as someone whose career has spanned macroeconomics, financial services, public policy research and, of course, politics itself, many of those speaking in this debate have been my personal inspiration over many years—I thank them for that. I am grateful to your Lordships and to the doorkeepers, police, Black Rod and his team, and all the staff and officers of this place, for the courtesy, welcome and, most of all, patience that has been granted to me as I find my place in your Lordships’ House. I thank also my introducers, my noble friend Lady Hodge of Barking, who I had the honour of serving as PPS some 20 years ago, I believe, and my noble friend Lord Khan of Burnley, who I have been proud to call my friend from the time that I served as Burnley’s MP in the 2005 Parliament. Although as the first ennobled Ussher my formal title takes no place, I chose to link my peerage to Burnley after the comma, to recognise the truth that representing that town was the honour of my life. My perspective as a constituency MP, and before that as an elected councillor in Lambeth, has had a profound impact on my parallel career as a macroeconomist, because what is the economy except the aggregate result of the individual decisions of millions of households and businesses, based on the stories that we all tell each other? As chief economist of the Institute of Directors, for example, I helped build the UK’s most timely indicator of business sentiment, using our member surveys. This enabled us to be ahead of the Bank of England in predicting the inflationary surge of late 2021 and the first to call for an interest rate response. As a current member of the Times Shadow Monetary Policy Committee, I find myself acutely sensitive to the consumer viewpoint to inform the likely effect on overall demand, and so future price pressures. This way of thinking has also driven my passion to explore wider public policy issues through the prism of market research, to ensure that the inferences we draw are driven by the behaviours of those whom we serve. I found deep intellectual fulfilment over many years in research projects across a wide range of policy areas, variously as chief economist of Demos, running my own research company, Tooley Street Research, and, most recently, as group head of policy development at Barclays, leading its global policy thought leadership team. By calling a relatively early Budget to update the official forecasts, and by championing everyday measures to support households and the high street, the Government have, as we saw from the GDP data this morning, mitigated the risk of fear creeping into the economy, which must always be a top priority. In this regard, I am an unapologetic Keynesian, but being an unapologetic Keynesian does not mean being an apologist for profligacy. In fact, it is the opposite. I am Keynesian in good times as well as bad. It is imperative that government debt is sharply reduced in normal times, so as to give room for manoeuvre in a crisis. As Economic Secretary to the Treasury during the global financial crisis, I witnessed at first hand how it was precisely because debt levels were then at a historic low that it was possible to intervene to the magnitude that was required. I am therefore glad to see that the OBR now projects a primary budget surplus in a mere two years’ time, an outcome not achieved in this country since 2002. Finally, my other perspective is around the need for strong yet supportive financial services regulation, a view that has only strengthened as a result of my practitioner experience, not just at Barclays but having served on the UK board at Revolut and in my current role as a non-exec director of the local government pension pooling asset management company for London, as well as through my time as a member of the FCA’s consumer panel. I end as I began, with a sense of humility at the opportunity I now have to bring this experience to bear in a new way, as I take my place in your Lordships’ House. I look forward to the other contributions to this debate.
My Lords, it is a great pleasure and privilege to follow my noble friend and congratulate her on her excellent maiden speech. She has done many things in her career, but I first met her when she took a job as special adviser to Patricia Hewitt when in the Government of the Blair era. At the time, we shared a passion for closer European ties as the best long-term strategy for Britain, and I look forward to working with her in this House, as I feel that enthusiasm is coming back in a big way. Kitty is no idealogue. As she explained, she worked for a long time for the Institute of Directors. She is not a sort of fancy economic theorist, and she would never describe herself, as my good friend Ed Balls once did, as a believer in post-neoclassical endogenous growth theory—she is not that type of person at all. She is pragmatic, and her experience covers an enormous range of practical public policy issues. More than that, and she brought this out very well in her speech, having been an MP for Burnley, she understands the social and economic legacy of once-proud industrial towns that had their economic backbone ripped out of them in the 1970s and 80s, which is one of the great social and economic problems we still face in this country. I feel very confident that she is going to make a distinguished contribution to this House. There is a long speakers’ list today, so I will make one personal comment, if I may. There is a name that is absent; someone I knew for 50 years, who sat on the Opposition Benches. That was John Horam, Lord Horam, who always had something interesting to say on economic questions. We miss him enormously. There is not much point my talking much longer, because I agreed with virtually every word of the speech by the noble Lord, Lord O’Neill. John Healey was right to be cautious and sensible at this period of huge international uncertainty. If Donald Trump draws the right lessons from his battering in the mid-term elections—what joy the election of a Black senator from Mississippi brings to the heart—then it could have a dramatic effect on the economic outlook for the UK. There is a real prospect that, if we can bring an end to the Gulf crisis, interest rates and inflation will fall and we will face a much brighter future. We have big problems of financial sustainability. I do not think there is anything socialist or social democratic in being in favour of lots of borrowing. I rather agree, as someone with great sympathy for Keynes, that you have to save in the good times if you are going to borrow in the bad times. We still face very big problems of fiscal sustainability, and the next spending review will be a huge challenge for the Government, with the need for more defence spending, the rising welfare bill and the Prime Minister’s ambitions for social care. It is going to be a great challenge. We need to pursue an economic approach that is not just about cutting spending. That is all Conservatives can talk about, and they do not present any analysis of the social damage that their proposed cuts in welfare spending would bring about, which surely they have to do. How much would homelessness rise because of what they propose on housing benefit, for one thing? Similarly, what will be the result of cutting welfare for young people with mental health difficulties? I believe that you should have tough welfare reform which offers help, and if you do not get the help then you should not get the benefits, but I cannot understand how the Conservatives believe they can make these huge savings without hugely damaging social effects, which they do not talk about. The policies we need should concentrate on a few areas. I am a great believer that we need to throw everything at growth. For me, that means getting much closer to Europe and rejoining the European single market. Secondly, we need radical tax reform; the problem with Britain is that the tax system has become so complicated that you cannot raise taxes without causing further disincentives for people. Thirdly, we need a sharp focus on public sector efficiency and productivity. It is a painful subject for the Labour Party, but we need to build a close partnership with the public sector trade unions so that people recognise that the only sustainable route to higher wages in real terms is through efficiency and manpower reduction. There are going to be tough decisions ahead, but I have great confidence in our Prime Minister and Chancellor and I am willing to back the tough decisions that have to be made.
My Lords, I wish the maiden speakers well today. Time does not permit me to give a sensible analysis or good advice on a very complex Budget with so many small measures, so let me just endorse the remarks of my noble friend on the Front Bench, who provided excellent analysis and very good policy advice, having had a little bit more time to do so. Let me instead press the Minister on a very important topic that hardly ever gets debated, which is at the heart of our fiscal and monetary policy. The OBR’s latest forecast says that between 2022, when the APF last made a profit, and 2033, when it thinks the bonds will have been dealt with in the APF, the total losses will be over £220 billion. The forecast loss for 2027-28 is £14.6 billion. When I last asked the Minister about this, I was told that the Bank of England is independent, and therefore he could not give an answer on these subjects. I refer the Minister to some correspondence on 17 September this year, when very major changes were announced in the handling of the £482 billion of bonds still held in the APF at the Bank of England. The Chancellor’s letter to the governor expressly says that he is authorising the changes, and the letter goes on to chronicle how, quite properly, there have been very serious and probably lengthy negotiations between the Treasury and the Bank about how these matters are going to be handled. I think the Commons and the Lords deserve a proper, detailed Statement from the Minister and the Government on what will be the fiscal and monetary consequences of the changes that have been agreed or are still being negotiated. There are two in particular that time might allow me to mention. First, the decision has been made that £120 billion of longer-dated paper will no longer be sold under the quantitative tightening programme. I believe that they will rest in the APF, which means that the APF will have to last for many decades pending their eventual redemption by the Treasury. I would like to know why they are doing that. I might even agree with it—it may make some sense—but we should know the numbers and the background of how that will probably help the fiscal position. Then there is the decision, which is still not fully detailed but which I think they intend to go ahead with, that in future, the medium-dated bonds, which they are still going to sell, will not be sold in the market next year and thereafter but sold direct to the Treasury. Why has the Chancellor accepted this and why does he wish to buy these bonds himself, direct into the Treasury? They will obviously be bought at the market price, not at the original purchase price, so it will trigger the need for the Treasury to send the loss money to the Bank of England. It will also mean that the DMO, the organisation controlled by the Treasury that issues new debt, will have to issue considerably more new debt to cover the costs of purchasing the bonds from the Bank of England. This is complicated and it does not make headlines, but these are very big numbers being moved around. We deserve an explanation of why they think it is worth moving these things around like this, and whether there is any point in doing it, given the size of the losses, which are probably going to be very big, however you arrange the accounting around them. Some say that these losses do not matter and that it is all very technical, but it is a long-term transfer from the public sector and taxpayers to the private sector. Those people and institutions who were bright enough to sell their bonds at very high prices to the Bank and Treasury—when they were offering ridiculously high prices, in my view—will be the beneficiaries if they now buy the bonds back from the Bank and the Treasury at much lower prices. So they have a very large profit, which matches the very large loss for the taxpayer. I ask the Government to come clean and give us some explanation—what went wrong and how are they paying the bills?
My Lords, I am humbled to follow some very distinguished speeches, and particularly the excellent maiden speech from my noble friend Lady Ussher. The day of the Budget was also the day that, in my role as chancellor of the University of Exeter, I assembled a distinguished group of university academics, business leaders and military commanders to explore developments in defence and security. The south-west has by far the largest number of people in defence-related employment of any region in the country, and Exeter is at the forefront of defence-related research and development. The university is a founding member of the Defence Universities Alliance. Among this group, the Budget was seen as a positive advance: further investments in defence; further growth in postcodes across the south-west; further innovation and deeper collaboration across boundaries. Lieutenant-Colonel Cressida McCarthy has commented profoundly that the next war will not be won with the knowledge we have now. We have to learn systematically as we go, and that means deepening these partnerships among researchers, businesses and the military. For example, Supacat, a south-west-based SME innovating in military vehicles, works with Babcock, a global defence company, and both together work with the University of Exeter on research and apprenticeships. Research is not a luxury; it is essential. Meanwhile, as expenditure on defence steadily increases, as it will, a challenging question needs to be on the agenda of every single government department: how do we ensure maximum value for every tax pound? The UK currently spends £3.75 billion every day; more sharply still, that is £2.6 million every minute. That means that my speech, if it finishes on time, will have cost £13 million. What are we doing to ensure that we get maximum value for every single one of those tax pounds? This surely is a task for every Minister and every civil servant, so how do we put it firmly on their daily agenda? How many Ministers ask, as they wrap up each meeting: what have we done today to enhance the value we get for every tax pound? Is the need to maximise public value embedded firmly in Civil Service performance reviews? Where, across public expenditure, could we achieve massively enhanced outcomes for the same, or even reduced, cost, and how do we incentivise preventative investment, to ensure that the next SR looks to the future? Please note: I am not advocating a crude cost-cutting agenda. On the contrary, I am advocating a public value agenda. There will be no shortage of causes, which we hear about every day in this House, for any savings released. I would like us to be able to convince the British taxpayer that every pound the Government take in tax is spent effectively and adds value to Britain. I am not saying that, currently, we do badly; I am saying that the British taxpayer, every now and then, has reasons to raise an eyebrow. There is plenty of room to do better. We can start now by putting public value firmly on the daily agenda of every government department. The months between a Budget and a spending review are surely an ideal opportunity to do exactly that. Let me conclude by congratulating the Treasury team and in particular my noble friend the Minister both on the Budget and on the excellence of his contributions since he joined the Front Bench.
My Lords, I am delighted to follow the noble Lord, whom I have known and admired over many years. I imagine he has been giving tutorials to Dame Antonia Romeo, given her excellent speech this week about how she is going to reform the public sector, so I hope he will be there. Most particularly, I welcome warmly the new Peers. I have looked at their CVs, as you would expect from a headhunter, and all of them bring wonderful skills—particularly the noble Lord, Lord Neri, who can sing, which must be a great asset in this House. Most extremely, I welcome my noble kinswoman Lady Ussher. My family was feeling unhappy about political balance, because my cousin, the noble Lord, Lord Hunt of Chesterton, died this year. We were really worrying about how we were going to get the balance back in the family, and along has come the most distinguished, incredibly intelligent woman of great integrity and application. She spoke brilliantly; that is how she will always speak. I liked a great deal that she referred to being a constituency MP. With no offence to anybody else, I am always very struck by the difference between those Members of this House who have been constituency MPs and those who have not, because we have a real desire to get back to the practical detail on the ground and have an example. When thinking what I was going to say today, I was so gloomy that I really depressed myself, so I thought: what is the best thing that has happened this week? This week, I was asked to go and see the Hurun research initiative. This is a wonderful organisation, which identifies and celebrates unicorns, that is run by a man called Rupert Hoogewerf. He has a great award ceremony for magnificent entrepreneurs: under 45, under 35, under 25, and some of them even teenagers. To talk to them about why they were in Britain was glorious. I was asked to talk about why Britain was such a good place to invest. Noble Lords know that we have magnificent universities—a point made by the noble Lord, Lord Barber—and we have the rule of law, language, time and a real commitment to technology. I believe that we should be really proud of those assets. Whatever else we do—as ever, do no harm—those universities are magnificent, and I heard tales from people brought up in India or China or around the world, who have come to the UK, to one of our best universities, then set up a business and made it great. Of course, they are being attracted widely by other countries; everybody wants them to go—America, the Middle East, India, China. All of us have been alarmed by the number of high-net-worth individuals leaving this country. It is something that the Government really have to take very seriously. Of those who were on the Sunday Times “Rich List” two years ago, an incredible number have left, and it should be a matter of great concern. In winding up, I am sure the Minister, whom I have known for many years, will make reference to founders’ relief and other steps the Chancellor named about helping founders and encouraging them to stay. For the avoidance of doubt, we have 80 unicorns—we are third in the world, after the US and China, and ahead of India, with more than Germany, France, Italy and Spain combined. That is the depth of our entrepreneurial achievement, and we should be proud of it and safeguard it. Now, I must get back to the gloomy side of my speech, for which I apologise. What troubles me about the Budget is not simply the extraordinary level of taxation or the weakness of the growth forecast but the absence of a sufficiently convincing plan for the prosperity and well-being of our country. It lacks courage and coherence. The Economist—I declare that I am a trustee—said: “Britain’s defensive budget did little to tackle deeper problems”. Such a view extends beyond politics: the CBI warned that “this Budget lacks the bold moves that would have made it easier for firms to invest, hire and grow”. The IFS said that the Budget “has a raft of fiddly measures but very little that will move the dial on growth”, and so on and so forth. Fiscal responsibility requires credible choices, not simply assumptions that difficult decisions can be postponed. “Kicking the can down the road” has so often been said. This is a Budget that buys time but ducks the hard choices.
My Lords, I would like to follow the noble Baroness, Lady Bottomley, in her bipartisan praise for my noble friend Lady Ussher on her excellent maiden speech. I am confident that this House will benefit from her expertise as a macroeconomist, her understanding of business and financial services, combined with her understanding of the needs of her former constituents. I also look forward to hearing the other maiden speeches today. I will continue the congratulatory tone by congratulating my noble friend the Minister and my right honourable friend the Chancellor on a Budget that was able to deliver on its core aims of maintaining fiscal discipline while giving people some breathing space on the cost of living. The Budget has been criticised by some in this House for not being bolder, but it is important for us to remember, as my noble friend the Minister has said, that this Budget is part of a package of measures that includes the 10-year plan to be published later this year, and a spending review next year. It is right that this Budget is limited in the breadth of changes it made ahead of those announcements to come. We should also congratulate the Government on the calm reception that the Budget received from the markets, which recognised the limited space that the Chancellor had to effect change in a global environment of high energy prices creating higher inflation and rising interest rates. It is not a given that that was the reaction we would get and we should be grateful that we did. The OBR has also confirmed that the Government are on track to meet their fiscal rules and that the deficit is expected to halve by 2029-30, which is an impressive achievement in the current climate. As has been said, that was recognised by the IMF, which said that the UK is the only G7 country with a serious plan to reduce its deficit. We also received the good news today from the ONS that the economy grew by 0.7% in the third quarter. That growth is likely to be bolstered by the provisions in the Budget, with the Government providing support to business and innovation through the introduction of founders’ relief, the removal of business rates for many in the retail, hospitality and leisure sectors, the additional funding for AI, and the increased finance made available through the National Wealth Fund and the British Business Bank, which, as the British Chambers of Commerce has said, will give entrepreneurs an opportunity to start up and scale up. I also welcome the decision to time limit the increase in the bank corporation tax surcharge. Financial services are one of the sectors in which we are truly world-leading, but we operate in a competitive global environment. It is vital that we have a stable and predictable tax regime for everyone, including banks, which encourages investment and capital to come to Britain. I also support the decision to restore the limit on cash ISAs, as it is vital that we encourage people to save for their futures. I wholly support the Government’s aim of encouraging people to invest in the equity markets, but I believe we can do that through carrots—such as removing stamp duty on UK shares, as was suggested by Dame Julia Hoggett of the London Stock Exchange—rather than the stick of reducing the cash ISA. As we have heard, the Budget also contains a timely response to the challenges of defence, which have become ever more acute and which this Chancellor understands better than many of his predecessors. My noble friend the Minister kindly said that he is open to considering constructive ideas; as Christmas is coming, I thought this might be the time to put forward my wish list of ideas for the 10-year plan. It will need to prepare for a decade of unparalleled change, not least because of the likely impact of technology across our economy. First, I welcome the commitment to simplify and modernise the tax code; I hope it will be a key plank of the 10-year plan. We have an incredibly complex system that is difficult to administer and is gamed by the unscrupulous. We must also use the tax system to encourage employment, especially of young people, which the Milburn report seeks to address. Secondly, I agree with the noble Lord, Lord Fox, that deregulation and the simplification of regulation must continue and at a faster pace, whether in financial services—where we are beginning to make progress, as is reflected in the Financial Services and Markets Bill—or in our commitment to build 1.5 million homes. The UK has some of the highest costs for infrastructure development compared with our European neighbours, and we are the slowest to approve new projects; that clearly needs to change. The reality is that, if we give people incentives to invest, work, and build businesses, the Exchequer will benefit from the activity that will follow and we will achieve good growth in every postcode and hope in every heart. This Budget is an excellent start to ensuring that.
My Lords, I note my interest as a board member of the Bank of England but will speak in a personal capacity. In my first Budget debate in this Chamber in 2017, I highlighted the Augustinian challenge of the repeated deferral of fiscal discipline: the desire to become virtuous but not quite yet. Almost a decade and several Chancellors later, I fear little has changed. The Chancellor’s “do no harm” Budget is understandable after recent turbulence, but a Budget which postpones difficult decisions today while leaving Britain more exposed to tomorrow’s shocks is not necessarily a harmless one. The fiscal numbers should concern us. According to the OBR, Britain’s debt to GDP ratio has increased more than that of any other G7 economy since 2006. Public debt is forecast to peak above 97% of GDP while annual debt interest payments reach £160 billion by 2031-32. Much attention has focused on the Chancellor’s fiscal headroom, but the more fundamental issue is fiscal space: our capacity to withstand the next crisis without emergency measures or surrendering economic choices to financial markets. The OBR’s sensitivity analysis illustrates the risks. Higher energy prices could increase borrowing by £17 billion in 2027-28. Weaker productivity could add £40 billion later in the forecast. Higher interest rates could increase the annual deficit by £16 billion. These are all plausible scenarios, not remote possibilities, and each one alone would blow the headroom. Yet fiscal consolidation remains largely promised for the future, including the inevitably sensitive period approaching the next general election. I am reminded of Lewis Carroll’s White Queen, whose rule was “jam to-morrow and jam yesterday—but never jam to-day”. Fiscal prudence is always promised in the later years of the forecast, but it somehow never quite arrives in the present. Procrastination has a price. The OBR’s July Fiscal Risks and Sustainability report estimates that stabilising debt over the long term would require a permanent fiscal adjustment of 3.8% of GDP if undertaken in the early 2030s. Postpone that adjustment by two decades and the required correction more than doubles to 8% of GDP—roughly equivalent to the entire health budget. These are illustrative scenarios, but the message is unmistakable: the longer we delay, the more painful the eventual choices become. We cannot indefinitely kick the can down the road; eventually, we will run out of road. Our problem extends beyond fiscal arithmetic. Britain’s economic malaise is often described as a growth problem; I suggest it is also a crisis of decision-making and national ambition. Consider the evidence. Britain had the lowest investment rate in the G7 in the second quarter of this year, at just 19% of GDP. Our productivity performance remains disappointing, despite world-class universities, financial services, scientific research and advanced engineering. We possess the ingredients for prosperity but struggle to turn potential into performance. I see four mutually reinforcing constraints to growth. The first is political capacity: the willingness to make difficult decisions, the benefits of which extend beyond the electoral cycle. The second is institutional capacity: the ability to translate decisions into delivery, rather than endless planning, consultation and regulatory delay. The third is economic incentives: ensuring that work, investment, innovation and entrepreneurship are properly rewarded. The fourth is cultural aspiration: sustaining the belief that enterprise and effort can genuinely improve people’s circumstances. These weaknesses reinforce one another. Political indecision discourages investment. Weak investment undermines productivity. Stagnating living standards erode confidence and aspiration. Declining confidence makes difficult political choices harder still. Britain risks becoming trapped in a low-growth, low-confidence, low-aspiration equilibrium. We have become remarkably adept at protecting existing prosperity, but less effective at creating new prosperity. Perhaps the greatest danger is not that Britain lacks ambition but that too many people are losing faith in the rewards of ambition. The response cannot simply be higher taxes, more borrowing or another industrial strategy; it requires a political culture prepared to confront trade-offs, institutions empowered to deliver and an economic settlement that encourages productive wealth creation. Crucially, fiscal discipline and economic growth are not competing objectives; they are mutually reinforcing. The forthcoming spending review must therefore establish—
My Lords—
I am just winding up. The forthcoming spending review must therefore establish a credible, deliverable path towards lower debt, while protecting the investment and reforms that are essential for future prosperity.
I do not want to alarm the noble Lord, but I agreed with much of what he said. I declare my shareholding interest in Persimmon, a housebuilding company. I have three points to make. First, regarding housebuilding, on the tone and promises of the Budget Statement, other speakers have rightly said that never have so many words been used to so little substance. This was aptly summed up in a prescient way on 30 October on the cover of the New Statesman: “Britain’s most important fiscal event is nothing more than an elaborate charade”. It was right this time around not to give covering fire for a Government determined to put voter empathy and hopes way ahead of action and growth policy. No amount of tiny and temporary cost-of-living fixes will do anything to kick-start the desperately needed increase in household incomes through real and lasting economic growth. The promised myriad tiny fixes, stuck together, will not all even come fully into effect by 2029. On the broader scale, the 10-year plan promised in July, which seemed to vanish for a bit from the front pages, has come back. It was briefed by the normal authorised Treasury sources as, “There’s going to be a plan but it’s going to be a ‘high-level blueprint’”. This is urgently needed in order to have some grip on the tough decisions on welfare and defence spending which so many Members on both sides of the House have referred to. Yet we see how vague hopes of improving living standards, when they are left unfulfilled, will reap an electoral whirlwind, as President Trump experienced only last week. The Government should beware of making all these empathetic statements of “nice to have” this and “nice to have” that without delivering into people’s pockets. Secondly, the Government say that they want to help hard-working people. I would love the Government to define what they mean by “hard-working people”; it seems partial, to put it mildly. We certainly need hard-working and taxpaying people in all sorts of jobs—from truck drivers to financial services and back. They are exactly the same, yet the Government do not like openly to welcome the people who pay their taxes for welfare and defence, living as they currently do as financial driftwood, with the frozen thresholds dragging more and more people into marginal tax. Are these people welcome in the financial services? I would love to hear the Minister say that they may well be doing something useful, if only paying taxes. There is also little to encourage giving in the Budget, just in passing. We all value charities. British people are very good at charities, but there is nothing in the Budget to encourage charities, which are going through a very difficult time. Great charities such as Cancer Research UK and the British Heart Foundation are getting rid of paid staff and volunteers and shutting down their houses and property in high streets, which usually figure in those pictures of declining retail outlets with no one much left apart from charity shops. There are not going to be many charity shops anymore on those high streets. Lastly, on housing, there is no need to promote what the Prime Minister loves to have promoted—a national conversation. I have no idea what a national conversation is, but it is a much-loved trope of the Government. The national conversation needs to involve not just housebuilders and house owners but people who are renting. We have nothing in the housing sector to promote the two together. We have a hecatomb of bricks. This has been pointed out by brickmakers such as Ibstock and by the GMB trade union, which has an excellent research outfit that says it has more bricks than it knows what to do with. The GMB says that it has 500 million bricks—enough to build 50,000 homes. That is a mountain of bricks almost as high as the pile of government promises to build more houses, which are simply not going to be fulfilled.
My Lords, I declare my interests as a practising agricultural valuer and professor of practice in protected areas. It is with equal measures of trepidation and delight that I stand before your Lordships to make my maiden speech: trepidation because, as a committed non-conformist, this was not a Chamber I had expected to address as a Member; delight because the House of Lords provides such a crucial role in scrutinising legislation and probing government. I am honoured and humbled to have been appointed to work alongside such eminent, kind and experienced colleagues. I would like to thank Black Rod, his staff and the doorkeepers, as well as the Clerk of the Parliaments and her team, who managed my introduction with grace and patience. I also thank my supporters, my noble friends Lord Wallace of Saltaire and Lady Parminter, for introducing me. Today, at this Budget debate, I wish to touch on the allocation of public finances for farming, food and land management. For the last three decades I have been working to empower marginal farm businesses in protected landscapes and on common land to improve outcomes for nature, landscape, recreation, cultural heritage, water and climate resilience, alongside farmers’ core purpose of food production. I come to this House from my home county of Cumbria, as an agricultural valuer who focuses on negotiating environmental schemes on upland commons between people with conflicting interests. Through previous roles on the board of Natural England and from running the Foundation for Common Land, my interests stretch from Bodmin to the North York Moors, and from the New Forest to the Lake District. Alongside this, I have maintained a long-term research interest in Indonesian national parks. England’s protected landscapes, both national parks and national landscapes, cover 24% of England and are managed by over 21,000 farmers, many of whom are tenants and commoners. In my experience, the management of our countryside works best when we pay as much attention to building social relationships as to environmental outcomes and business profitability. In 2018, the Government made a commitment to fund farmers through a policy of public money for public goods, using environmental land management schemes. This commitment has been renewed by all successive Governments. My concern, when I reviewed this Budget and recent spending reviews, is that I remain to be convinced that this commitment can be delivered. This is because warm words are cold comfort without adequate finances or an effective delivery mechanism. This Budget appears blind to both these matters. With regard to the finances, over the last decade there has been a 60% decline, in real terms, in public payments to farmers and land managers. In terms of delivery, for too many farmers their experience of accessing environmental land management schemes is akin to being put at the top of a white-water canyon in a canoe, but without a paddle. The ride has been bumpy for almost everyone and catastrophic for too many. Demands on mental health services by farmers are ever increasing and the net result for society is missed opportunities to do more for nature, our rivers, the rural economy and climate adaptation. Do remember that our protected landscapes receive over 230 million visits each year. The proper management of the 70% of England that is farmed is not a “nice to have”; it is essential to our national security, especially in this time of rapid climate change and global instability. The reliable provision of healthy and affordable food supplies to nearly 70 million citizens is a core duty of government, for we all function better on three meals a day. That said, if I keep eating teacakes in the Peers’ Dining Room at my current rate, I will have in-built stores to more than meet the Secretary of State’s advised three days of reserves. Earlier this year, the Joint Intelligence Committee recommended investing in nature restoration for our national security, and Lieutenant General Richard Nugee’s 2021 Ministry of Defence report concluded that “climate change threatens peace”. Peace, in my view, is the dividend that we reap as a resilient and well-prepared nation that plays its part on the world stage, leading and demonstrating by example. But peace does not just happen because we wish it; we as a nation must invest public funds in building peace at home and abroad, through addressing the challenges of food, nature and climate. I therefore urge the Government to review their funding for sustainable food production and environmental land management. A great start would be to match the percentage spent in 2016 on farming and environmental schemes. In that year, the UK spent a heady 0.3% of public expenditure on the 70% of England that is farmed. Now, in 2026, that figure has halved. Restoring the 0.3% would increase England’s farming and countryside budget to approximately £3.7 billion: a good value-for-money investment in the essential building blocks for our national security, resilience and preparedness. Having decided to live adventurously and take the opportunity that membership of this House affords, I look forward, with the support of your Lordships, to each week bringing fresh from Cumbria the view from the fells and, as an enthusiastic outdoor swimmer, also the view from the river.
My Lords, it is a real pleasure and honour to follow my noble friend Lady Aglionby and to congratulate her on a maiden speech that was thoughtful, wise and—I hope the House agrees—rather good fun. I kindly point out that being put at the top of a white-water canyon in a canoe without a paddle worked quite well for Ed Davey, but I recognise that this is not a way to deal with our food security. My noble friend brings to this House something that we can never have too much of: real, practical, grounded experience. She has spent 30 years in professional practice as a land agent, negotiating on upland commons between people with very different interests. She has done so by building relationships as much as by reading budgets. This is a rare and valuable skill, on which this House will be delighted to draw. She also holds a PhD in law, so she will be well equipped to scrutinise the legislation that comes before us, and she will, I am sure, hold the Government to account with precision and passion. I must admit that I also admire the fact that she has never left the land behind her and still finds time to be a wild swimmer. She therefore speaks with an authority that cannot be learned from a briefing paper. She is, in the truest sense, a bridge from Cumbria to Westminster, and she represents the important voice of our farmers and our rural communities, who we know will be better heard in this place because of her practical experience. Her argument today was analytical, logical and persuasive: that warm words are cold comfort without adequate budgets and a working delivery mechanism. A 60% decline in the payments that our farmers and landowners receive is something that must be changed. I hope the Minister will listen carefully to her call for the 0.3%. I know she will be productive and powerful here as a campaigner for the environment, nature and the land management changes we so desperately need in these times of increasing uncertainty. I wish her well in this place and I hope that she continues to live adventurously. I also pay tribute to all the other noble Lords making their maiden speeches today. Turning to the Budget, I will focus on energy, climate and the cost of living. It is a Budget of small measures, temporary reliefs and short-term savings when what we require is a serious, detailed, long-term plan. Brent crude is up 60% and UK gas prices are up nearly 200%. Fossil fuels are proving yet again that they are volatile in price and insecure in supply. The OBR tells us that higher energy prices have pushed inflation to 3.5%. Real households will feel that economic pain, colder homes and even greater energy debt. The Chancellor’s principal response is £2.6 billion for payments of £100 to households in council tax bands A to D—a breathing space for 20 million, as the Minister put it. This will help, but it is blunt and poorly targeted. It is too small to meet the scale of the problem, yet broad enough to reach many households that do not require the support, while many people in genuine fuel poverty are left without enough. A one-off payment will not protect households from the next shock. Removing VAT from domestic energy bills until July 2027 is welcome, though it is worth only £45 a year. Abolishing the gas standing charge is the most significant, and a lower electricity-to-gas price ratio is essential if families are to choose heat pumps and electric vehicles. I ask the Minister to confirm what safeguards will protect fuel-poor households who cannot reduce their usage. There are too many contradictions in this Budget. The Government say they want cheaper energy and clean power, yet they have cut many of those very programmes. The warm home plan loses out by at least £1 billion. Funding for the boiler upgrade scheme is held at £400 million rather than growing as planned. Carbon Brief estimates that this could mean around 100,000 fewer heat pumps over the next three years. At the same time, VAT on solar heat pumps, batteries and insulation rises from zero to 5%. The Government are raising upfront costs just as they withdraw the grants. The new warm homes loan scheme is welcome, but loans are no substitute for grants for lower-income households. The response on the net-zero emissions vehicle mandate is delayed, amid briefings that it may be watered down. If that is the case, it would be the single most damaging decision this Government have taken on climate change. It is the biggest lever this Government hold, and it is working to support UK jobs and growth. It is a mandate, not a request. I call on the Government to hold firm. We should be making clean transport cheaper, not preserving subsidies for petrol while taxing clean forms of transport. I welcome the Prime Minister’s announcement at COP of the world’s first special representative for climate security. This summer, we saw extreme heat, drought and wildfires, 2,877 heat-associated deaths in England, 1,700 schools closed and an economic cost of £4.4 billion, yet this Budget offers no serious national programme for resilience, homes, cooling or public health preparedness. This is a health and national security issue. We need to fund a national retrofit programme, delivered through councils and mayors, aimed at first-time, low-income and poorly insulated homes. We need faster grid connections, simpler planning and market reforms that reward clean and homegrown power. The Chancellor speaks of a new course on energy, but that must be backed by coherent policy. This Budget salami-slices programmes that would reduce bills and emissions while preserving dependencies that keep bills high. Our case is simple: support households now, but target that support at those who need it most with our essential energy guarantee; invest in insulation, heat pumps, solar and grid infrastructure; reform the energy market so that clean power lowers bills; and give investors certainty.
My Lords, it is a great pleasure to follow the noble Earl, Lord Russell. We are blessed in this debate to have four maiden speeches. I am delighted to have listened to two of them and look forward to the remaining two. I want to say a word or two about the noble Baroness, Lady Ussher. I am sorry that she is not in her place to hear them. It is always good when someone says something nice about you if you are there in person, but I am sure that she will have the chance to read it afterwards. She was in the House of Commons from 2005 to 2010, which was my first term in the House of Commons. I saw her in action as a Treasury Minister, and I thought her speech today demonstrated her enormous experience from that role and her considerable economic experience in a number of roles since. I am sure she is going to make a tremendous contribution to the House. My noble friend on the Front Bench, Lady Neville-Rolfe, in the time she had, was able to set out a comprehensive critique of the Budget. I agreed with everything she said, so it is not necessary for me to repeat much of it. There are a couple of points I want to focus on. Budgets are fiscal events, front and centre, and that means we should judge them on their tax and spending measures. The Treasury and the Chancellor seem to be very cross that people are judging the Budget on the tax and spending measures, but that is fundamentally what a Budget is. The IFS came to the conclusion that the tax and spending measures were minimal and are not going to make a significant difference. The other big opportunity you have in a Budget as a Chancellor is to drive forward significant supply-side reforms that are going to improve the performance of the economy and drive up growth rates. I am afraid there were none of them either. The Budget was a big missed opportunity. It kicked into the future decisions on welfare, social care and defence. Those were missed opportunities. If you are a new Prime Minister, as Andy Burnham is, with a significant majority, my experience is that you need to take those decisions early because they take time to come to fruition. The key thing I want to talk about is where we go in our relationship with the European Union. I am afraid I draw the opposite conclusion from that set out by the noble Lord, Lord Liddle. If we look at the growth figures today and the growth in the economy this year, the fastest-growing sector has been information and communication. The OBR itself says that a lot of that is driven by investment in artificial intelligence and related industries. That says to us that the debate about the EU is in great danger of being backward-looking, looking at the industries of the past rather than the industries of the future. If this country is to have high growth, we will have to be successful in those industries of the future. I will give one example. On artificial intelligence, the regulatory regime that we have chosen in the UK is one much more likely to deliver fast growth in artificial intelligence and fast economic growth as a result. The EU has taken, as it does in many areas of policy, a much more risk-averse, anti-growth policy framework. If we are to get closer to the European Union, we will end up regulating artificial intelligence closer to its model rather than to the much more successful model that we have. That will set growth backwards. There may be advantages to be gained from industries of the past, those that are not fast-growing, and we may get some economic gains there, but any economic gains in those areas will be dwarfed by the gains we will miss out on by regulating areas of the economy that will be fast-growing in the future. The final thing I want to say—again, this is connected to the Government’s European Union approach—is about unemployment, particularly for younger people. My noble friend on the Front Bench referred to the OBR’s forecast for unemployment going up. The big issue of today and the next week will be Alan Milburn’s report about NEETs. It seems to me that the Government have made two policy choices that make that more difficult: they put up employers’ national insurance contributions, particularly hitting hospitality and retail, the sectors of the economy that employ younger people; and they have put £5 billion of costs on businesses through the Employment Rights Act. Then there is the impact of the youth mobility scheme, which is a terrible idea. If we sign up to a scheme that will potentially see up to 100,000 young people coming to the United Kingdom from Europe, there is no way that it will help get British young people back into work. The Government are therefore in great danger of having a backward-looking European Union policy that will damage our economic growth prospects and the unemployment rate, and will not deliver the economic growth prospects for the future that all of us in this House want to see.
My Lords, it is always interesting for me to follow the noble Lord, Lord Harper, partly because I disagree with so much of what he says but, further, because he manages to speak for five minutes—or more than five minutes—with no notes, which is very impressive. I welcome all the new noble Lords we have—even though one of them is trying to escape—and hope that they enjoy their days, weeks, years and decades here in our House. Turning to the Budget, I do not doubt for a moment the Minister’s sincerity on this, and I am sure he has high hopes for the Government and this Budget. There were a couple of bright moments, such as tackling homelessness, which is something that I have always cared very much about; I hope that it can happen. I do not want to spend the whole of my allocated speaking time moaning about the climate crisis deficit and the Government’s lack of understanding about where we should be going in challenging our climate crisis, but, for a Green, this was a huge missed opportunity, and it is very difficult not to feel moments of despair. However, I will suggest solutions, and I hope that the Minister will include them in his reporting back. Overall, it is a complete waste of time for the Prime Minister to be at COP today after presenting a Budget that drags his country backwards on climate change, even if he has appointed Dame Madeleine Alessandri as a special representative for climate security. I would be interested to know what powers she has, if any. As we all know, this is likely to be the warmest year ever, and climate change is accelerating. The UN is now saying that we could hit a disastrous 2 degrees of warming in the next 14 years. But instead of any hope that we can turn this around, we have victory after victory for the oil and gas lobby: the disastrous go-ahead for Jackdaw drilling in the North Sea and the go-ahead for airport expansion, with a laughable plan for sustainable aviation—aviation can never be sustainable. These decisions are the result of fossil fuel money lobbying MPs and Ministers. Politicians and political parties should be banned from taking any money from the businesses that are wrecking the planet. Once again, we have the cancellation of the fuel duty increase, the cancellation of the EV target for 2030 and a go-slow on the warm home scheme. I do not see this Government cancelling the tax breaks for oil and gas companies operating in the North Sea. They cannot even commit to things such as electrification of the railways or switching households over to heat pumps. They say it is all too expensive, but these investments would cut bills in the future. One quick win would be to switch funding away from the overpriced and redundant Sizewell C nuclear plant and unpopular carbon capture and storage schemes such as Peak Cluster, which is in an area extremely vulnerable to flooding where drilling of any kind, however far offshore—it is out at sea—could have awful consequences for residents. I have a question that I would like the Minister to answer, if not today then in writing, please. Did the Government do an independent value-for-money assessment before public funding was committed to the Peak Cluster scheme? It is a lot of money for an untested technology. At the moment, taxpayers and consumers are made to spend billions of pounds in subsidies for nuclear power, while the Chancellor says there will be no money for renewables next year if they produce too much energy. I agree that it is ridiculous to have wind farms in Scotland and elsewhere being paid not to produce energy, but surely we could use that energy in some other way. Where is the industrial strategy to create the battery storage revolution—or possibly the hydrogen storage revolution? We could do it. We have the skills, but we just do not have the willpower coming from government. We can save energy on the days when the sun shines and the wind blows and we can use it for later. We can pump water uphill and let it down to generate hydroelectricity. We can do all that; we have the skills. A Green Prime Minister would stand up at COP and showcase a cost-effective energy economy run on renewables, combined with an energy storage revolution. Trump and his corporate friends in big oil would not like that very much—obviously, they might not be around for much longer—but it would guarantee lower bills, energy security and the planet’s future. This Government have got it wrong. I would so like them to pick up a few of the ideas in the Green Party’s manifesto. They are all costed, they are all sound, and they will all be accepted in 10 or 20 years, but that will be too late.
My Lords, I congratulate my noble friend Lady Ussher on her incredible maiden speech, setting the tone as I make mine. I express my sincere gratitude to all noble Lords as I make my maiden speech. This is an unusual but very special place, and the warmth I have experienced from right across the House has been both generous and welcoming. To those noble Lords who thought they could trick me and have me vote in the wrong Lobby, I forgive you. This really is a precious moment, and words cannot convey my true appreciation. My personal thanks go to Black Rod, the doorkeepers, the clerks and the wider teams right across the Palace. I would like to make a very special mention of Garter King of Arms, who left the best possible first impression on the journey I was about to undertake, and of my incredible supporters, my noble friends Lady Kennedy of Cradley and Lord Kennedy of Southwark. My mum and dad were physically absent during my introduction, but not in spirit. They would have been so proud of their youngest. My Italian father became maître d’ of the Ritz and later the Savoy—places where service was of the highest gold standard, serving royalty, including the Queen and the Queen Mother, referring to him as Mr Bruno. In the 1980s and 1990s, he would reject famous celebrities for not wearing a tie. He would have been a great doorkeeper in this place. He knew exactly how to treat and respect people, and worked a long six-day week. Meanwhile, my mother, born in Essex and true Labour, kept the house going with four children—and we were a handful. It was my mother who I saw work hard at first hand. She used the house telephone to make deals happen, from buying and selling shares to securing the best retail offers, all pre-internet. Learning from her negotiation skills and commerciality became a huge influence. In his final 10 years of living with dementia, my father had a steady decline—a very difficult period for my family. It was heartwarming to hear the Prime Minister speak so passionately about reforming the care system. I could not have coped if it was not for my wife, Michelle. It was just too much. The most useful aid and relief during my father’s final years was the power of music. When he forgot his granddaughters’ names, or even mine, playing him Puccini, in particular songs from “La Bohème”, suddenly awoke emotion, rekindling memories and, most importantly for us, remembering who he was in the room with. For the past seven years I have been a trustee of Music for my Mind, a charity whose goal is to build the perfect music playlists for patients with dementia. The medical proof is available and we are now helping patients like my late father. The power of music is also where my profession took me. In my 27th year of working in the music industry, I am currently chief executive at the Ivors Academy and a director at UK Music. I also sit on the British Copyright Council and wider creative industry groups outside of music. What benefits or hurts one sector tends to impact another. A current example is that a vast number of greeting-card illustrators have lost employment to generative AI. This has largely gone unnoticed. Let us heed the warning and protect our actors, musicians, composers and authors from being replaced—and, indeed, our British creative culture. In 2024, the creative industries contributed the most in GVA to the UK economy at £145.8 billion. Let us be robust and protect the future of creators and the integrity of intellectual property, and strengthen our copyright framework with cross-party unity. Just as artificial houseplants lack oxygen, artificial intelligence lacks soul and emotion. In parallel with AI comes the threat of a dwindling talent pipeline. Schools struggle to meet the requirements of the creative curriculum due to timetable pressures caused by external scrutiny of academic subjects over the arts. Let us not forget that to be a scientist or a mathematician you need to be a creative thinker. Creativity is the heart of what makes us human; without it there is no invention. Picasso famously warned us that everyone is a creator until someone says that they are not. Let that not be us. Since 2010, the total share of GCSE and A-level entries in arts subjects has shrunk by around 50%. Nottingham University recently closed down its music department, with others considering following suit. To return to the debate, creators are entrepreneurs but are writing and performing alongside second or third jobs. The new measures taken in the Budget recognise that support is desperately needed. The tripling of the trading allowance of £3,000 will mean that those who are starting to turn their passion into a profession will be able to keep more of their money. Expanding parental pay will go to freelance creators for the first time. At a time of great need, it is also welcome to see that music venues will see a 20% reduction in their business rates. Thank you for indulging me. I look forward to conversations regarding what I have opened with and to working with as many noble Lords from across the Chamber as I can.
My Lords, it is an honour to follow the noble Lord, Lord Neri, and to congratulate him on his important maiden speech. I declare an interest: my wife is a prolific commissioner of new music and two of her commissions have recently won an Ivors Composer Award. I therefore cannot help but be particularly pleased to welcome to your Lordships’ House the chief executive of the Ivors Academy, who made those wise decisions. The noble Lord, Lord Neri, has had a remarkable, productive career in the music industry, culminating in the Ivors job. He has represented the well-known and he has supported the unknown, always in the cause of creating great music. He has also deployed that expertise, as we have heard, in the service of those trapped by dementia, who could be liberated by the medicinal power of music. I am sure that the whole House looks forward to the noble Lord focusing his creative energy on debate in your Lordships’ House. Having listened to his important maiden speech, we now know that we have much to look forward to. Now to the Budget. Embedded within it is a potentially powerful growth model built on the two fundamentals that drive investment. The first is support for the growth of demand from a 14.6% increase in public investment this year and from targeted public procurement. Without the prospects of growing markets, investment will falter. It is no accident that the growth of business investment is highly correlated with the growth of public investment. The second major component is the provision of finance for investment. This is predominantly via the uplift in the lending capacity of the British Business Bank by £5 billion and the National Wealth Fund by £15 billion. That £20 billion boost will be multiplied by private funds bailed in by the public commitment. This investment by public financial institutions is crucial because it is focused on real investment in equipment, research and innovation. This is in stark contrast to the so-called investment of the majority of UK financial institutions that typically amounts to bidding for shares in secondary markets with little discernible impact on real capital formation. This persistent private sector failure to finance investment in real productive capacity also comes at a time when British bank lending to non-financial companies has fallen to a level last seen in 1998. Small and medium enterprises have been particularly hit, with SME loans almost halved over the last 15 years. Real investment grows when there is a prospect of growing demand and funding is available—hence the important role of the venture capital funding that the British Business Bank and National Wealth Fund seek to stimulate. But—there is a but—there is a limiting factor in this growth model: the venture capital industry in the UK is far too small. Only around £8 billion was invested in venture-stage businesses in 2025, compared with around £250 billion in the US, where the venture capital industry is over 30 times bigger than ours in an economy that is just eight times bigger. No wonder so many successful British SMEs seek their scale-up funding in the US. British innovation vanishes into American ownership because of the persistent failure of UK finance to back British creativity on the scale that is needed. The importance given to the British Business Bank and the National Wealth Fund in stimulating private sector investment is a recognition of that persistent failure; they do a valuable job, but they are too small. Their work is also hampered by the cultural risk aversion of the UK public sector. If the UK is to attain the higher growth performance it needs and to enjoy the lead in the technologies of the future that it deserves, then radical innovation is required in UK financial services. UK private sector financial expertise must be committed to real investment to creativity, innovation and scale-up. Allow me to illustrate what I mean by radical innovation. Today, regulators demand specific capital and liquidity commitments on financial institutions’ balance sheets. These regulatory requirements are defensive; they are designed to make financial institutions more secure and reduce risk-taking. Suppose a new requirement is introduced that encourages risk-taking: as a condition of having a banking licence, all banks in the UK with a balance sheet in excess of £100 billion would be required to commit 1% of their balance sheet to venture funding, either by venture funding themselves or by investing in venture funding companies. The result would transform not only the scale of venture funding available to the UK industry but the commitment of private sector expertise to venture funding and, to attain the 1% necessary, the risk appetite of UK financial institutions—an enhanced risk backed by huge balance sheets. To reindustrialise Britain, the funding of real investment requires radical reform. This is one way it could be done.
My Lords, it is an honour to follow the noble Lord, Lord Eatwell. He is a distinguished economist, although, of course, economists never agree. There is always a dialogue between us. We have had some sizzling maiden speeches. I was very glad to hear the noble Baroness, Lady Ussher, say that she was a full-blown Keynesian, or had become one. When I arrived as a student at King’s College, Cambridge, Keynes had been dead a few years, but his spirit was just around the corridor. No conversation could take place without people saying, “Maynard says this” and “Maynard says that”, and often there were wrong interpretations of what he said. I remind your Lordships that he was against the conventional economic theories of the day, particularly those about balancing budgets and so on, and argued that you could get to a better, more purposeful and more stable society, in which there would be more investment and a better social atmosphere, if some of the tighter rules that economists were for ever laying down were disregarded. I think he would be saying exactly the same today, though obviously not on the same points, because what he said in the 1930s would be very inflationary now. However, I think he would point out that the economists are once again putting us in a prison over the alleged size of the fiscal headroom—whether it has drained down or gone up, and what it does to confidence and the bond markets. There is a lot of theory spinning around that seems to stand in the way of common sense in these matters. I will come back to that in a few seconds if I have time. The Governor of the Bank of England, Andrew Bailey, says he can “see the argument” for further rises in interest rates. Presumably he can also see—I hope he can—the case for lower interest rates, which might become available in response to a significant cut in state spending and borrowing. Of course, he believes—as he is entitled to do, as an independent operator—that that is a hopeless cause and a pipe dream in the present political and world climate, and that he has only one unpalatable route forward. He is right that the options are extremely limited. In the public debate, they seem to have been reduced to talk about cutting welfare—no one is too specific about the timescale, as it is very difficult—or doing without adequate defence. Again, no one is too specific about what that now means in the conditions of modern warfare, or how we defend ourselves against 100,000 or 1 million drones or unstoppable high-velocity rockets. The figures are certainly very daunting. As we know, the bill due this year just to service the national debt is set to be £133 billion, apparently rising to £160 billion in a couple of years. That is 4.2% of GDP. One wishes that the governor and others would see the argument for an altogether less costly and damaging pathway to stability. It seems that this black and white, bipolar, binary approach to the whole of our present dilemma ignores by far the most promising and achievable option of all, which is hardly discussed: starting here and now with a systematic and sharp shift—I think one noble Lord mentioned this earlier—of specific functions away from the hopelessly overloaded state and into new methods of co-operation between private funding, investing and enterprise on the one hand and public needs on the other. These are devices and new methods that many countries around the world are now trying, including a better version of PFI. I know that PFI has a bad reputation here, reflected in my noble friend Lord Lamont’s speech. Nevertheless, countries such as Japan, Sweden, the United States, Poland and Turkey—the list goes on—are trying new, more constructive methods of combining private resource with public needs. That is not all. Billions of state payments in the UK are index-linked directly to the retail prices index or the consumer prices index. It is hard to measure exactly which, as there are many complications, but there is a large compulsory addition to state spending for every extra increased point, or fraction of a point, in interest rates. This is a fruitless debate, leading us nowhere. Is something missing? Yes, I think there is. What is missing is a readiness to bring forward the schemes that are being tried all around the world for whole programmes, services and commitments to be taken off government accounts altogether. Other nations are doing it. The sceptics will say it cannot be done, but it is already being done in numerous other advanced economies and I hope the Treasury is watching closely.
My Lords, the overwhelming message that I took from the Budget is hope: hope that families will feel they have a Government who are on their side, and hope that the Government are making the long-term choices that are needed to put the country on a better course. I will focus on housing but, before I do, I congratulate our three maiden speakers today. We have had some stunning speeches and I think we are very fortunate. I congratulate them all. I want to focus on housing because there were several very welcome announcements for housing in the Autumn Budget. Taken together, they represent further welcome progress towards rebuilding our social housing system and tackling homelessness. At a time when 1.3 million households are on social housing waiting lists and 177,000 children are living in temporary accommodation, it is vital that we continue to increase investment in the genuinely affordable homes this country desperately needs. The additional £1.5 billion for the social and affordable homes programme has the potential to unlock significantly more social and affordable housing over the coming years. We know that a council housing boom is central to the Government’s vision, but this investment is particularly important because not-for-profit housing associations also have the ambition and capacity to build more homes. Some were held back because their bids could not be funded through the initial SAHP allocations. Recent research from the National Housing Federation found that, outside London, housing associations could have delivered around 41,000 additional homes over the next decade had all their bids to the social and affordable homes programme been fully funded. Crucially, many of these homes are ready to go. Around 15,000 of the additional homes could start construction before the next election. This demonstrates the scale of the opportunity. Housing associations have sites, development pipelines and proven delivery capacity, and further government support and investment can help turn that capacity into new homes for people who desperately need them. Can my noble friend set out how the additional £1.5 billion will be used to unlock this existing capacity, including schemes that are ready to progress but could not be funded through the initial allocations? The Budget provides significant further investment in tackling homelessness and rough sleeping. I endorse most of the points made by the right reverend Prelate the Bishop of Manchester, who emphasised this very strongly. There is no doubt that this is going to be life-saving, but getting somebody off the street must be the beginning rather than the end of our ambition. Ending homelessness for good means preventing people reaching crisis in the first place. The Chancellor’s decision to introduce a new category of preventive spending at the next spending review provides an important opportunity to put that principle into practice. Supported housing is a clear example where preventive spending delivers clear results. Sadly, the reduction in funding during the previous Government has pushed the supported housing sector into crisis. Commissioned funding for housing-related support fell by 75% between 2010-11 and 2019-20. National Housing Federation research has found that 50,000 supported homes are at risk of closure. Without supported housing, 41,000 more people would be homeless, a further 30,000 would be at risk of homelessness, 14,000 additional in-patient psychiatric places would be needed, along with 2,000 more places in residential care. Importantly, supported housing saves the public purse £3.5 billion each year, reducing pressure on hospitals, adult social care, temporary accommodation and the criminal justice system. Supported housing is exactly the kind of service that preventive spending should support. Looking ahead to the 10-year plan and next year’s spending review, will my noble friend urge the Government to establish a sustainable long-term funding settlement for supported housing? The huge increase in temporary accommodation that I referred to earlier was not inevitable. It was the consequence of years of failing to build enough social homes. The Budget demonstrates that this Government have chosen a different course. For families who have waited years for the security of a home, that offers something desperately needed: hope. After years of near despair, we finally have the opportunity not just to manage homelessness but to prevent it and, ultimately, to end it.
My Lords, I start by congratulating those noble Lords who have given their maiden speeches today and welcome them to this House. It is invidious to pick out one of those noble Lords, but let me welcome the noble Baroness, Lady Ussher, to her place. Our paths have crossed in a professional capacity and it is a great pleasure to see her here—and I congratulate her on an extremely good speech. It would be churlish not to start by acknowledging today’s GDP figures, as the Minister did when he spoke. They are indeed welcome. My issue is what the Chancellor reads into them and, to a certain extent, what the Minister did. The Chancellor said this morning that the UK has “standout resilience”. I gently question that. Resilience rests on many things: strong defence—that is pretty obvious—but also a sustainable national debt, debt interest costs that are under control and a buffer to cushion the economy against shocks. Looking at the Budget and ahead into next year, on all the metrics that show whether our economy is indeed becoming more resilient, we are heading in the wrong direction. Everything we want to go down is going up, and everything we want to go up is going down. The forecast for growth next year: down. Living standards: down. Inflation: up. Unemployment: up. Debt: up. Debt interest: up. I completely concede that these forecasts may be overly pessimistic. The noble Lord, Lord O’Neill, is not in his place but, as he said, tough decisions are undoubtedly needed, no matter what happens, as regards spending. Here, as I have said before, I believe that this Government are taking the wrong decisions, or taking no decisions at all. That is weakening, not strengthening, our nation’s resilience. My noble friends Lord Lamont and Lord Howell both spoke about the rising costs of debt interest. I want to focus on another D: defence. I welcome the commitment by the Government, mentioned by the Minister, to increase defence spending to 3% of GDP by 2030-31. My question is whether we are doing enough and doing it speedily enough. Surely, if we were building a resilient nation, we would be accelerating the increase in defence spending while reducing welfare spending. But we are not. The OBR forecasts that defence spending will rise from 2.6% of GDP to 3% by 2030-31, with most of that increase—reportedly £11 billion—deferred until the final year. Meanwhile, annual spending on health and disability benefits will rise by £22.4 billion between 2026-27 and 2030-31. Whatever Mr Milburn might say about this in his review, the welfare bill will not come down in this Parliament. That is what the Chancellor said a couple of weeks ago; I would be grateful if the Minister could confirm today that that is still so. Secondly, what will this increase in defence spending be spent on? Our nuclear deterrent and programmes reportedly account for around one-fifth of the defence budget, with that share expected to rise. Pay, pensions and other costs add further pressures. How much of the additional defence spending will reach the conventional front line? Will spending on equipment, ammunition, training and operational readiness rise in real terms over the next four years? Thirdly, how is this increase in defence spending being paid for? Some £1.7 billion from the Treasury’s capital reserve is being used to fund the defence investment plan—note the phrase “capital reserve”. Can the Minister explain why investment in a planned defence programme, which the Government have known about for many months, is being funded from money set aside for unforeseen emergencies? Under what provision of the Treasury’s rules has this been authorised? How much genuinely uncommitted contingency remains to meet the next unforeseen shock? That brings us to the Chancellor’s wider fiscal strategy. There are many figures in the OBR’s report which show just how weak it is. If nominal GDP growth were just 0.1 percentage points lower each year, £5 billion of the £15 billion fiscal headroom would disappear. Overall, our fiscal buffer of £15 billion compares with an average of approximately £33 billion before November 2022, less than half the historical level. This illustrates a simple, worrying point: our finances are not resilient but fragile, with the Government putting off difficult decisions on spending, hoping something will turn up. More of the same is not good enough, the Prime Minister told his party conference. But that is precisely what this Budget gives us—more spending, more debt and more denial that we are spending beyond our means. Resilience is built before a crisis, not during one, and it is built by taking difficult decisions today, not leaving them for tomorrow.
My Lords, I worked for John Healey for perhaps 10 years. He was a team leader with a difference; he was the best leader I have ever worked for because he listens. So, it is not surprising that I support all 98 features of his Budget. I will not go through all 98, but I will touch on, as did the noble Baroness, Lady Warwick, the issue of housing. Housing is so central to people’s lives. Housing divides society in terms of economic performance and success, as well as dividing society even more sharply. I am a boomer. Most people in this House are boomers or sub-boomers; we lived through history’s most famous generation. We saw our standards of living, on balance, improving every year, even in housing. I was brought up in a council house, and there were no problems. We had stability of tenure and sensible rent increases. You did not think that you were a second-class citizen; you felt that this is how people live and it was a good way of living. Bad housing and sleeping rough are an absolute disgrace. Everybody should be concerned with avoiding it. One of the advantages of spending on council housing, so-called affordable housing and so on, is that it will create growth. Growth is the issue I wish to finish on. Lack of growth poisons society because it creates economic divisions, divisions in education and divisions in skills. Too much of society lives in a second-class standard, particularly younger people. When I was young—an awfully long time ago now—jobs were plentiful and progress was possible. Meritocracies were, to a surprising extent, there. We must try to return to that situation. To do it, the only solution is successful and sustained growth. There are four things that can impact on the economy. I am sure a proper economist could find 40, but there are four. There is the external environment—trade treaties and that sort of stuff. There is expenditure, and taxation. Fourthly, there is borrowing. I argue that we should have a different way of thinking about borrowing. If there is a need for cash, the Government should borrow it and inject it. It is all about trends. Once you get trends going, the rest of society will generate its cash. More cash for research and more cash for that transition from small business to large business is necessary. What does this come up against? It comes up against fiscal rules. Fiscal rules are supposed to be saving us. Well, may the Almighty be on our side. Fiscal rules meant something in Gordon Brown’s day, when they did not change for 12 years. Since that time, counting from the useful work done by the committee, they seemed to have changed 23 times. There is nothing firm about 23 times in that relatively modest period. Fiscal rules seem to be lines in the sand for us to manage the markets, but what do we know about the markets? A number of people in this Chamber perhaps know them intimately, but I do not. I do know that the other three variabilities are understood and debated, so I want the Government to pause after this Budget is put through, but before we firm up on the 10-year plan, and to give to borrowing money the same amount of attention we give to expenditure and taxation. I went through the period of PFIs. PFIs were the biggest fiddle known to mankind, but they work. They were not as good as the Government giving me the money and then me spending it—I would have done a better job than the PFI—but there was no alternative. We had PFIs all over the place. The PFI took money screaming into the Underground’s 10 years of renewal and expenditure. Let us put the best minds in the country—I include the noble Lord, Lord O’Neill, in that—to inventing another system of charades that makes government borrowing respectable and effective again, recognising that the only way you get change is through having really good ideas developed by good people, and then backing them with sufficient funds for them to become productive.
My Lords, I add my congratulations to the maiden speeches we have heard today. There have been some excellent contributions, but we have also had some strong contributions from old codgers as well. A breathing space for today, hope for tomorrow: that was the slogan at the start of the Budget. The Minister provided us with his idea of what a breathing space might be, and I hope that younger travellers on the Underground will continue to give up their seat for him. However, the Budget delivered a breathing space for the Government and fear for most of the population of this country—business and ordinary working people. It delivered fear because we all know that the Budget did not address the real problems; it just kicked them further and further down the road. We all know that money is short and that, in the end, there is no escape from deep cuts in services and benefits, or big tax rises, or potentially a combination of the two. It will be painful. Fear of that is now tangible, even if it is not yet affecting the markets. People have been left in limbo. It is not so much a breathing space as a place of trepidation. Meanwhile, the Government boast of a few cash bungs to households, many of whom will see far more cash than they are given being clawed back because of the stealth tax of frozen thresholds. As the noble Baroness, Lady Neville-Rolfe, explained, and others have added, everything is being put off. Even the government reviews that report do not result in action. Implementation is what we need. The spending review will surely be backloaded so that any genuine cuts come way down the line. Then there is the 10-year plan. We can all dream, and long-term ambitions are no bad thing, but if a week is a long time in politics then a decade, and planning for one in the age of AI, is better left to Gypsy Rose Lee. What we and the country need is action, and we need it now. We need to know how we are going to deal with social care and we need to start doing it, rather than talking about it. We need to fund defence now and we need to know how it is going to be done, because the threat is real. In many people’s eyes, this country has been at war now for several years; we just have not acknowledged it. We cannot pussyfoot around any more. We need to deal with the problem and fund it. I hope that John Healey, having resigned once because he did not have the money he needed, is going to find it and tell us how. If the Government really wanted to make it easy for people and give everybody a bit of breathing space, there is one very easy thing they could do: embrace the idea of simplification. Even in this anaemic Budget, there were almost 100 tax and fiscal changes. The Red Book says: “The government recognises the importance of a stable and predictable tax system”. They must be joking. Instead, what we get is constant change. Our tax system is ludicrously complicated. Tolley’s Tax Guide now runs to more than 1,000 pages. The amount of time and effort people must spend filling in their tax forms could be spent in so many more productive ways. I ask the Minister to let us know whether he will consider bringing back the Office of Tax Simplification and what he intends to do to simplify tax. While he is dealing with that, could he also address the problems in the probate system, which make life anything but easy breathing for a lot of people in this country, just at the worst possible moment in their lives, and give us all a real breathing space?
My Lords, I add my congratulations on the excellent maiden speeches given today. I know, because I can remember it clearly from only a few weeks ago, that it is a nerve-wracking moment. Although the big picture was ably presented by the noble Lord, Lord O’Neill, who is not in his place, I will narrow it down to an area I have more expertise in: the small business world. I welcome the important help that the Budget provided for the retail, hospitality and leisure industry—the 70,000 businesses will certainly welcome that—and the increase in small business rate relief is central to supporting the high street businesses that we need across the UK. I was also very pleased to see that 14 out of the 15 recommendations of the Small Business Regulatory Taskforce have been accepted by the Government. With the increase in trading allowance, this is a welcome reduction in bureaucracy which holds back many businesses, so it is clearly a good step. There is, however, one issue that could cause serious problems for the UK’s 3 million self-employed. The Government are going to ask them to pay for the previous and current tax year liabilities in 2029-30, which will have a major impact. The OBR estimates that this will take £17 billion from these businesses in this one year. Can my noble friend the Minister please reassure me that the Government will help these businesses and provide the support they need?
My Lords, the noble Lord, Lord Fox, said that this was a Budget playing around the margins. I scanned the papers this morning and, perhaps unsurprisingly, there was little mention of the Budget, apart from a telling comment piece in the Financial Times from Janan Ganesh. He talked about the literary device of bathos, a “sudden drop from a grand and elevated tone to a mundane one”. It seems that our English graduate Prime Minister has been studying literary forms, because what else could you describe it as, when we have gone from talking about ending 40 years of neoliberalism to this Budget. I can only hope, for the sake of the nation, that the Prime Minister and the Chancellor do not plan to follow the same model for the much-hyped 10-year plan, which we are promised before Christmas. I echo the call by noble Lord, Lord Fox, for us to have a proper debate on that. We have seen how much change is being demanded around the world, from the Serbian elections to the American mid-terms, and there is no doubt that this nation is similarly hungry for change. Sir Kier Starmer promised it and failed to deliver. Andy Burnham has little time to demonstrate that he is on a significantly different path, despite the presence of so many neoliberal Blairite figures in his team. This is a Budget that, understandably, made the public wonder whether they were not trapped in a history in which “no change” is a recurring literary motif. I turn to our debate. The noble Lord, Lord Pitt-Watson, said that this was an unpredictable world, but it is entirely predictable that we are on a fast-warming, unstable planet in the middle of an utterly unprecedented El Niño. My noble friend Lady Jones focused on the gaping hole on climate in the Budget, so I will not go over the same ground, but we are also in a world where biodiversity—the health of the more than human world—is in a terrible decline and, with it, our health as human animals. Last night, on the Health Bill, I talked about antimicrobial resistance. Just this morning, the latest national surveillance data came out, showing that the rate of reported, serious such infections has risen again in the past year: 406 cases per week. That is one case study of the general direction of travel of the health of our society. Human bodies are the foundations of the economy. It is not finance or technology, but the living, breathing but far from flourishing bodies of our communities that are the foundations of our economy, as is the more than human world in which they operate. But I do not expect the Treasury to understand that, despite the fact that it has been given the overriding power by successive Governments to decide the direction of our society. The noble Lord, Lord Pitt-Watson, said that we have resilient people and resilient businesses. I am afraid that is not a description that I or very many people in this country will recognise. We have a fragile society, fragile individuals and fragile businesses. That is not the fault or failure of individuals, but rather a failure of those 40 years of neoliberalism that the Prime Minister says he understands. Most businesses in the UK are small and medium-sized enterprises. They are, as many will say, the foundations of our economy. Yet we have an economy that is, in most sectors, overwhelmingly dominated by a handful of large multinational companies that have an oligarchic hold not just on our society but on our governing classes. Just this morning, a study came out about how awful ultra-processed food is—“big food” is providing terrible food and dominating our societies and our communities. That has economic implications, but I am afraid I do not expect the Treasury to understand that. I have one final comment on the speech by the noble Lord, Lord Pitt-Watson. He said that we are “one of the most geographically unequal large economies in the world”. I have to declare an interest, as I have just this afternoon been elected president of the National Association of Local Councils. I hope the Treasury recognises—but I expect it will not—that it does not understand what is happening in communities up and down our land. It has to be local decision-making for local people, and they need the resources—parish and town councils are an important part of that—to start healing our society and economy.
My Lords, I congratulate the three maiden speakers we have heard and look forward to the fourth. It is always good to start with a bit of good news. I am the halfway point. After my speech, noble Lords will be heading towards the end of the debate. I am sure that will please a few people. This is a very odd debate because we know the Chancellor has ruled out cutting benefits in this Parliament. Two reports are being produced, one by Stephen Timms and another by Alan Milburn, on the future of various benefits. I have been to meetings with both and have had a private meeting with Stephen Timms. They are not postponing the decisions; they will produce reports that will start another large series of rows, as our House will say that we should implement the reports and a bit more, while the House of Commons, I suspect, will say that it does not want any cuts at all because their grannies will starve. We have hit a major problem, because, although we have put off the decisions, the fact is that the review does not foresee any reduction at all. My noble friend Lord Hammond, whom we do not see here very often these days, once said to me that his time in the Treasury was spent interviewing MPs from the Conservative Party, who said that they believed in savings but that they had to be made from Labour’s benefits, and people from the Labour Party, who said that they wanted him to invest to save. Investing involved spending government money, and he told me he had never seen any savings coming into the Treasury from doing so. I have a certain amount of sympathy with the Chancellor in trying to get his way round this conundrum. What has happened is that the Governments of both parties have failed to control public spending. It has been edged up for many years by a very compliant Civil Service. I was amazed when I learned that the Department for Work and Pensions was incentivising civil servants to clear people off the applications for certain benefits. They were being decided over the phone, and the key was that you were a good civil servant if you approved a lot of benefits, because if you did not approve them then you got letters from MPs and Ministers and life was made very difficult. So the first thing I say to the Government is let us look for cross-party agreement to get the benefits bill down, because it has to come down. My final point—we do not have that long—is that the freeze on middle-class aspiration has to stop. As some noble Lords know, I have been president of two TUC trade unions: those of the dietitians and the pilots. Both of them, especially the pilots, are high-earning, but they are also hard-working. Pilots are often on the other side of the world when their child has a birthday or is in the school play. Their wives—the pilots are mainly men—are, in effect, one-parent families. They have had this £100,000 threshold for several years now, and it appears that it will never be lifted. It is a new way of raising money, but it is also a new way of disincentivising people. It says to people: leave the country and move abroad, and do less work. We need a Government who put more incentive back into the achievers and strivers in society, to encourage them to work harder, to increase the wealth of the country, and, in doing so, to make the country and their families more prosperous, not to feel that the Government are the eternal enemy, as many of them feel at the moment.
My Lords, it is a pleasure to follow the noble Lord, Lord Balfe. I congratulate today’s fantastic maiden speakers. I welcome this Budget. It creates breathing space for the British people, and its steady approach has already reassured the markets. I want to use my time to talk about one aspect of the Budget: the commitment to ring-fence spending on prevention, which matters more than its length suggests. I have spent much of my working life funding and evaluating prevention. Until this summer, I led Impact on Urban Health and, over the last few years, spent around £60 million of philanthropic funding to improve the health of people in south London and in towns and cities across the country. That work taught me three things. First, good health is created mostly outside of the health service. It is made by the homes we live in, the food we can afford, the air we breathe and the work we do. In our most deprived urban neighbourhoods, people die from preventable causes at more than two and a half times the rate of those in the least deprived. Secondly, prevention tends to lose by default; nobody actively needs to decide to cut it. Acute need can have a queue that stretches outside a hospital door; prevention does not. To use that health example, between 2006 and 2022, the hospitals’ share of the NHS budget rose from 47% to 58%, and, over the last decade, the public health grant decreased by more than a quarter per person—all while prevention had cross-party support. Thirdly, prevention works best close to home. It works when the people who live on an estate help decide what changes on it and services join up around them. That is the promise of neighbourhood health. I hope that it will sit at the heart of the new prevention ring-fence. The Chancellor said that he will ring-fence prevention just as we ring-fence capital spending. That comparison is important. It treats the health of our people as an asset that the country invests in, like a railway or a power line. It also says something about growth. We sometimes talk as if growth comes only from business and that the state’s job is to stand aside. The record says otherwise, and here I will borrow from a couple of American examples. In its early years, Tesla took a half-a-billion-dollar investment from the United States Government. The research that ultimately became Google was funded by America’s National Science Foundation. Public investment came early and private enterprise built on it. Health works the same way, and every sector has a part to play. Philanthropy can take risks and help show what works, employers can help to keep people well and in work, and the public sector can invest in health at scale and for the long term. Much of today’s debate has emphasised the £15 billion of fiscal headroom. I understand why, but the state will spend almost £1.5 trillion this year. We are talking about the 1%, not the other 99%. I worry that we have become like a public company, trapped in its quarterly reporting cycle and unable to take the long view. The best companies do the opposite: they speak to their investors and make it clear why they are investing in the long term. The UK needs to do the same. I look forward to the Government’s 10-year plan. I hope it will say plainly how and why we will invest in prevention, devolution and rejuvenating our economic model. The model should not turn away from private enterprise; it should ask the public, private and social sectors to build together. Taking the long view does not mean a long wait for at least some results and evidence of progress. Prevention can start paying off in this Parliament. The Budget’s own example of rough sleeping is one where help that comes early enough can save money within months. I do not expect my noble friend the Minister to define the new prevention ring-fence today. I ask only that two thoughts go back to the Treasury: first, that work on the wider determinants of health belongs inside this ring-fence; and, secondly, that councils, charities, funders and employers that have done this work for years should help define the prevention ring-fence. Prevention may prove the most serious growth policy in this Budget. I hope that the Government will back it for the long term and that the markets will give it time to pay off as well.
My Lords, I declare my interests as chairman of Amey, of Acteon and of Buckthorn Partners. I also congratulate those who have made their maiden speeches and will make the maiden speech to follow. The lifeblood of a healthy economy is energy that is cheap and, as my noble friend Lord Bridges said, resilient. Without it, we cannot compete and will not grow. Yet British industry now pays up to six times more than China for electricity and four times more than the United States. That is untenable. For all its talk, this Budget barely scratches the skin of the energy elephant in the Treasury. When we left office in 2024, the UK’s fossil fuel dependency had fallen to 75%—a record low and a legacy we handed to this Government. Under Labour, our fossil fuel dependency has risen to 76.6%. That alone should have driven the Chancellor to maximise production from our own North Sea reserves instead of importing more. Domestic oil and gas production from the North Sea strengthens our defence and resilience. It brings in billions in Treasury receipts. It sustains jobs and growth. Most importantly, it produces far lower emissions than shipping in liquefied gas from the other side of the world to meet our requirement, which is unlikely to change in the medium term. So why do the Minister and the Government dither over Rosebank? It is included in the OBR forecast, but it has not been approved. The Energy Minister in this House says that the OBR forecast would have to be ripped up and rewritten if Rosebank is not approved, yet, despite assurances, Rosebank appeared in neither of the last two OBR reports and has not been approved. There is a contradiction behind this at the heart of government. Only yesterday, before the international tribunal in Hamburg, the Attorney-General argued that halting the Sea Lion field north of the Falklands in the South Atlantic would inflict “devastating” financial harm and cost billions essential to the islands’ development. Who signed that off? The Foreign Secretary signed off Sea Lion and now is known, unsurprisingly, as the Member for Port Stanley. He backed the 1.5 billion barrel new Sea Lion oilfield in the South Atlantic, yet calls the possible approval of Rosebank in our North Atlantic waters, which would be well under half its size, “climate vandalism”. We need firm power, and we will need oil and gas for decades to come. Offshore Energies UK has identified 111 projects within existing licences that could unlock £50 billion of private investment. Why did the Chancellor not fast-track them? Why are we the only country in the world refusing to develop its own reserves at pace? The consequences of high electricity and energy prices are already here. Two of the six remaining refineries have closed, on this Government’s watch. Ministers then went cap in hand for an exemption from our own Russian sanctions, so that we can import aviation fuel refined in India from Russian crude, while our own oil stays in the ground. That money fills the coffers of the Kremlin, which spends it on weapons used against the people of Ukraine, and that fuel is in the mix of every flight from London—from Heathrow and Gatwick—including the Prime Minister’s flight to COP 31. Ministers tell us that our renewables are clean and homegrown. They are an absolutely important part of the energy mix, but they are neither clean nor homegrown. We import nearly 70% of our solar panels directly from China. Some 90% of the polysilicon in those panels is made in China from coal-fired furnaces belching CO2 emissions, in a country whose human rights record is under the spotlight. Global warming is a global problem. We cannot claim moral leadership in the UK while pretending that emissions begin only when products arrive on our shores. When the Prime Minister trumpets the new Vanguard offshore wind farms at COP 31, let him tell the world the following: around 99% of the hardware will be imported from Denmark, Poland, Italy and Spain, with the rare earths and magnets made in China. It is we who should be building that manufacturing capability here and now, and that should be the Chancellor’s priority. It is no wonder that Gary Smith, general secretary of the GMB, called this Government’s energy department “the ministry for P45s”. He was right. It is time to scrap the carbon taxes and adopt the Conservative’s cheap power plan. Without it, we will be heading blindly into a high-cost energy emergency, and households suffering from the high costs of living will be fortunate to get through this winter without power cuts.
It is a real pleasure to take part in this debate. Because of the time limit, I make an all-too-brief welcome to those who have made their maiden speeches and to one whose speech is forthcoming. I welcome the Budget in broad terms—a breathing space is welcome. Nevertheless, I have two questions for my noble friend the Minister on Budget measures where I think the Government have not gone far enough. First, while I welcome the announcement in the Budget of the changes in the surplus sharing arrangements in the Mineworkers’ Pension Scheme, it is ultimately the members’ money, and it is right that they should get their benefit. Nevertheless, it is unfortunate that the agreed transfer of the remaining guarantor’s fund has been delayed. I should mention that, in the past, I have advised the National Union of Mineworkers about these arrangements. May I press my noble friend to update the House on the position and give a commitment that the transfer of ownership will be made in a matter of days, rather than a period of weeks, as suggested by my right honourable friend the Chancellor in the Commons last week? All the administration is in place; the payments could and should be made to members before Christmas. The second question for my noble friend is whether the Government have considered collecting the income tax that is due on state pension benefits through PAYE. This question arises because of the introduction in the Budget of the pension tax allowance for the next three years. It has to be admitted that, given the problem they face, this answer is a bit of a bodge. The problem arises because income tax has never been deducted from payments of state pension—unlike earnings, they are outside the PAYE system—but tax is still due on pensions in excess of the personal allowance. This is not a theoretical point. Many pensioners have significant amounts of earnings-related state pension in addition to their basic and new state pensions that they accrued between 1978 and 2016. The result is that a large number of pensioners are already paying income tax on their state pensions. The fact that there are pensioners paying tax on their state pension is not new; it is just that there is now an increasing number of them, given the freeze in the personal tax allowance. It also means, crucially, that it is so visible: there is an easy comparison between the amount of the new state pension and the personal tax allowance, and the visibility of the issue has forced the Government into taking action. In such cases, where tax is due, it is currently collected from pensioners’ other sources of income—in most cases, from their private pensions—by adjusting the relevant tax code. This obviously poses a problem for low-income pensioners caught by the personal allowance with little or no other sources of income. The point I wish to make is that, had state pensions been subject to PAYE, the issue just would not have been as visible or as administratively complex and, hence, the pension tax allowance introduced in the Budget would not have been needed. In truth, it has been introduced essentially for short-term political reasons rather than as a desirable and logical part of the income tax structure. There is no real reason why pensioners with an income slightly over the personal allowance should have this relief and workers with an income slightly over the personal allowance should not be receiving equivalent relief. The problem arises from the freezing of personal tax allowances. The practical question we must answer is, given that this measure has been presented as a three-year fix, what happens at the end of that period? I suggest that extending PAYE to state pensions should be an important part of the answer.
My Lords, yesterday, I reread the Budget Statement and was struck that for such an underwhelming Budget, the Chancellor used extraordinarily grandiloquent language. In particular, he boasted that the Government’s vision was “burned into every line of this Budget Statement”.—[Official Report, Commons, 28/10/26; col. 314.] Unfortunately, he did not actually tell us what the vision was. No doubt the scribblers in No. 10 are now having to work it out as they put together the 10-year plan, which I thought the Prime Minister had as he came into Downing Street. We have to wait, I think, until next year before we see the 10-year plan and the new economic model. The Budget was conspicuously absent of the model or the vision. I want to focus today on a certain obfuscation in the Budget. I had hoped to see a simple table setting out government revenue and government expenditure side by side. There is no such table. The Red Book has 150 pages. When you finally get to pages 149 and 150, you see two pie charts. That is the most you get of what I regard as the most fundamental thing of a Budget, which is revenue and expenditure. This is all part of the problem that Governments have, which is trying to disguise from people how much tax they are paying. I would have liked to have seen a table setting out what the tax burden was for families of different sizes. That does not appear anywhere in the 150 pages of the Red Book. We know that Governments of all parties, not just this Government, to be fair, want to hide from the public how much tax they pay. When you go to a shop to buy goods, you do not see the VAT. You do not know how much tax you are paying at the petrol station, unlike in America. If you are on PAYE, when you get your pay, you look at your net pay; you do not really see how much tax you are paying. Of course, when you are lifted out of a lower tax band into a higher tax band, there is no announcement that you are going to be paying more tax. It just happens to you. However, if you ask anybody how much they pay in council tax or for their TV licence, they will know exactly how much they are paying. I will give some figures. Average pay is about £35,000 a year. One-third of that goes on direct and indirect tax. In the 1990s, about 26 million people paid income tax. Today, it is about 40 million. I shall make a suggestion to the Minister and, through him, to the Treasury. Can the Red Book next year publish some very simple tables that ordinary people can understand, that I can find quickly and that can be reproduced in the media so that people know exactly what the Budget is doing to affect their lives? By the way, as the Government keep talking about the need to educate 16 year-olds when they get the vote, it would not be a bad idea to make sure that they understand what happens to their tax when the Government impose these changes. I want to raise one other point, about defence. I looked back at what John Healey said when he resigned as Defence Secretary. He said: “I am certain that a headmark date for 3% of GDP on defence in 2030 is what Britain must set. This commitment”— that was his word— “would have strong cross-party support”. He called for a commitment to spend 3% of GDP on defence in 2030 and complained that the Treasury was unwilling to commit the resources. Now that he is Chancellor, he can do it—but no, he has watered down the commitment to what he calls a “target”. He is simply calling for a target. A few days after the Budget, the new Defence Secretary, Wes Streeting, said: “I understand why John can’t at this stage say we are going to spend 3 per cent in 2030”. Well, he may understand it, but I do not. I am not sure whether the Minister does, but perhaps he could at some point explain exactly why we cannot be told that.
My Lords, it is a pleasure to follow my fellow No. 10 alumnus, the noble Lord, Lord Sherbourne of Didsbury. I am grateful to be able to speak in this debate and I pay tribute to those making their maiden speeches today. I welcome the Budget and the choices this Labour Government have made. At a time of considerable international uncertainty, the Chancellor has balanced two important objectives: providing immediate relief to families and businesses while making the long-term investments on which our prosperity and security depend. The measures to help households with energy bills, to freeze fuel duty and to reduce business rates for thousands on the high street are not performative, as some on the other side have suggested, but will make a real difference to people’s lives. Also welcome are the commitments to build more social and affordable housing, invest in the NHS and create new opportunities for young people through employment and apprenticeships. It is right that the Government have stressed that these ambitions must be underpinned by fiscal discipline. Economic stability is not an alternative to investment in our future; it is the foundation on which that investment depends. I want to concentrate on the Government’s commitments on defence and, in particular, their continuing support for Ukraine. Put simply, our economic security and national security cannot be separated. The prosperity we seek to build at home depends on our ability to defend our country, uphold alliances and maintain the international order on which our society and prosperity depend. I therefore welcome the commitment to fully fund the defence investment plan, alongside the commitment to increase defence spending towards 3.5% of GDP by 2035. By the way, for all the faux outrage that we have seen on the Benches opposite, it is entirely logical, given that the commitment has been made, that the detail of these longer-term decisions will be set out in a spending review—a spending review that will confirm that this Government are spending far more on defence than the Tories ever came close to in their 14 years in office. I am pleased to see the investment announced and jobs promised in the UK’s defence industries through the National Wealth Fund and British Business Bank. It is vital that we strengthen our manufacturing capacity, improve procurement and ensure that the UK has the sovereign capabilities it needs. Nowhere is the importance of these commitments clearer than in Ukraine. For more than four years, the Ukrainian people have demonstrated extraordinary courage in defending their country against Russia’s illegal invasion. They are fighting for their own freedom and independence, but they are also defending principles fundamental to the security of every democracy: that borders cannot be changed by force, that sovereign nations determine their own future and that aggression must not be rewarded. Supporting Ukraine, therefore, is not simply an act of solidarity; it is an investment in our own economic and national security. That is why I welcome the Government’s announcement of more than £10 billion of additional financial support for Ukraine, alongside their continuing commitment to £3 billion a year in military assistance. And the additional £500 million for air defence this winter is especially important as Russia continues to attack Ukraine’s energy infrastructure and civilian populations. These are substantial commitments. However, we know there is still a 2027 funding gap for Ukraine. Given this, I want to push the Government on whether there is more we can do regarding frozen Russian sovereign assets. The principle is straightforward. Russia must pay for the damage it has caused in this illegal war, but we must do more than simply freeze Russian assets and wait for reparations at the end of the war. Ukraine needs support now. Some €200 billion of Russian assets remain immobilised in the European Union, much of it in Belgium. The Belgian Government has legitimate concerns about the legal and financial risks of releasing those funds, but those risks should not fall on Belgium alone. So I ask my noble friend the Minister: will the British Government work with our European and G7 partners to establish the guarantees and risk-sharing arrangements necessary to unlock those assets now, as an advance against the reparations Russia will ultimately owe? As I say, Ukraine needs the money to defend itself now and rebuild today, not simply at some uncertain point in the future. In conclusion, I welcome this Budget, the breathing space it provides for today, the hope for the future and in particular its commitments on defence and Ukraine, because there can be no lasting prosperity without security and no lasting security without the willingness to defend the values and principles on which our democratic societies depend.
My Lords, I will focus on two points: the NEETs crisis and the essential role of businesses and entrepreneurs in addressing the crisis. The NEETs crisis—the almost 1 million young people not in education, employment or training—was conspicuous by its absence from the Budget, despite the Prime Minister’s welcome acknowledgement that it is an “economic catastrophe and moral failure”. We have the publication of Alan Milburn’s review into young people and work to look forward to next week, as my noble friend Lord Balfe referred to in his speech, but, having hoped the review would be published before the Budget, with key measures implemented in the Budget, I want to underscore the fact that this delay will have human consequences and urge the Government to act on the review at pace. In June, the noble Lord, Lord Wilson of Sedgefield, told your Lordships’ House that the report would be out “some time in September or October”.—[Official Report, 4/6/26; col. 986.] The media were briefed that it would be published ahead of the Budget to allow speedy implementation. Having spoken to many young people about the difficulty they are having in finding work, I was disappointed that the Budget did not include any measures of substance to address the NEETs crisis, even if the publication of the full review needed to be delayed. We will now have a further six or 12 months of delay until Alan Milburn’s recommendations for the Treasury are actioned in either the Spring Statement or next year’s Budget. The million NEETs are a cohort of people who have spent much of their lives waiting. They put their lives on hold for two years during the Covid pandemic. Now they are facing a potential two-year delay from the commissioning of the Milburn review until its implementation. And this delay is not costless. It has real impact on young people’s lives. Alan Milburn’s interim report found that two-thirds of young people who are NEET for less than a year return to education, employment or training the following year. One-third—a very significant number—do not. For those who are unfortunate enough to be NEET for over a year, just 25% stop being workless. That means 75% continue being workless. So the delay in announcing and implementing the review’s recommendations could be catastrophic for people’s lives. With the review being published next week, I am sure the Minister will already be familiar with its contents. I am not expecting him to reveal the details in his response today, but can he share with us whether the Treasury is looking to implement them in the Spring Statement or whether we will have to wait until next year’s Budget for them to be actioned? Putting the Milburn review to one side, I turn to the impact of the wider business environment on the employment prospects of young people. At the end of every journey from welfare to work is a job either being provided directly by a business or paid for by the taxes generated by businesses. High energy costs, rising employment costs and an expanding regulatory burden are all making it more difficult for businesses to create jobs. This shows up in the unemployment rate. Rewinding to the 2024 Budget, the OBR’s forecast for the unemployment rate in 2026 was 4%. The same thing in this year’s OBR forecast is 5%. Current unemployment this year is therefore set to be 25% higher than forecast in Rachel Reeves’s first Budget in 2024. This can be reversed only by encouraging and incentivising entrepreneurs to work hard and invest to create jobs for young NEETs and other jobseekers. The Chancellor promised a Budget for “bloody-minded entrepreneurs”: what we got was thin gruel. The new flagship proposal in the Budget to support entrepreneurs was founders’ relief, but the bar for founders to qualify is hugely restrictive as it stands. I find it astonishing, for example, that DeepMind would not have qualified when it was sold to Google. At the other end of the spectrum, the attack on sole traders will have a devastating effect on those beginning their entrepreneurial journey, and the halving of the business asset disposal relief lifetime limit from £1 million to £500,000 will disincentivise people from starting their entrepreneurial journey. We should always remember that incentives matter. If you tax the risk takers, you lose the job makers, and we need more job makers to help the NEETs. Some have described this as the “Do no harm” Budget, but inaction makes life no better for the 1 million young people still waiting. I hope they are not kept waiting much longer. It is time for action because, to quote the Prime Minister, inaction on the NEETs crisis is an “economic catastrophe and moral failure”.
My Lords, I congratulate my noble friends Lady Ussher and Lord Neri on their excellent maiden speeches, and also the noble Baroness, Lady Aglionby, and I look forward to hearing shortly from the noble Baroness, Lady Kitching. I welcome the fact that the Budget provided targeted help to households facing continuing cost of living pressures. The household energy payment, the abolition of gas standing charges and the extension of the fuel duty freeze will make a real difference to millions of families. In opening the debate, my noble friend Lord Pitt-Watson mentioned that there would be a saving of between £160 and £230 annually on energy bills, depending on family circumstances. These are targeted measures that address everyday concerns, but nobody would suggest that they are anything other than short-term measures. On the flip side of the coin, tax rates on property and savings income will rise from next April, but 84% of taxpayers are unaffected and half the anticipated revenue will come from the top 10% of households. That, again, is thoughtfully targeted. The Chancellor announced support for the high street and local communities. Retailers, hospitality businesses, pubs and leisure venues are important employers as well as important community social assets. The enhanced business rates relief will help preserve those jobs, although there is a need for investment to support the revival of town centres, too many of which—as many noble Lords will know—are now in a rather sorry state. With Labour in Government since 2024, the economy has seen meaningful growth. The noble Lord, Lord O’Neill, pointed to growth of 1.9% up to the third quarter of this year, which, as he said, is considerably higher than the OBR had forecast. GDP is 2.5% higher than it was at the start of this Parliament and the Government will have £15 billion of headroom in the year 2029-2030 and £22 billion in 2030-2031, again according to the OBR. We can only hope that that also turns out to be an underestimate. The Budget recognised that fiscal discipline matters and the Chancellor did of course remain within the manifesto red lines. That is something I personally regret; I believe that this was an occasion for a new Prime Minister and a new Chancellor to be bolder. I also believe that their predecessors should have been bold in this regard, because of a truism coined by my personal, political and economic hero, John Maynard Keynes, the most influential macroeconomist of the last century. Indeed, he is widely accepted as the father of macroeconomics. I was delighted to hear my noble friend Lady Ussher declare “I am Keynesian”, although she did say it as if it was something of a revelation. I would like to think that would be a description that fits all on these Benches, but perhaps I am a little out of date. In her powerful maiden speech, it was heartening to hear my colleague, with her vast experience and influence, pinning her colours firmly to the Keynes mast, because it was he who said: when the facts change, I change my opinion. That was the case, I would argue, within six months of the general election, when the state of the economy had been properly evaluated. The economic facts that existed—or were thought to have existed—when Labour framed the manifesto and came to power were quickly shown to be something else entirely. On that basis, I think a change of opinion was appropriate and could have been defended, allowing for greater borrowing in order to invest. That has not happened, but, at the midpoint of this Parliament, there is still much to build on, and the eagerly awaited Milburn report, the 10-year plan and the spending review will present ample opportunities for that. I was greatly encouraged to hear the Chancellor announcing a road map for fiscal devolution. From next year, 20% of business rates revenues will go to mayors, and from 2028, an unspecified share of income tax receipts will go to mayors. By the end of the decade, 100% of business rates revenues will be retained locally. My noble friend Lord Pitt-Watson referred to the fact that the Budget will facilitate 10 more areas having mayors or becoming strategic authorities, which very much fits the Prime Minister’s agenda, but the elephant in the room is what happens to the remaining 10% of areas. They face being placed in a kind of no-man’s land. I hope that my noble friend will be able to say what plans the Government have to address that anomaly. Many noble Lords have mentioned the Milburn report, which is expected to be published next week. The acquisition of skills will be central to that, and the Budget included some practical, welcome steps towards revitalising the skills landscape. Expanding mayoral apprenticeship powers, enforcing training in public procurement, re-entering Erasmus+, restoring the union learning fund and funding specialised technical academies are all significant measures. I find all the Budget measures that I have touched on not just encouraging but exciting. If they are meaningfully developed, I believe it is more than possible that many people will have begun to see positive changes in their lives by the time we ask for their support for the next stage of the 10-year plan.
My Lords, I congratulate all those who have made their maiden speeches today and I look forward to the maiden speech of the noble Baroness, Lady Kitching of Penistone, who is a fellow councillor. If we are to have growth, we need to build more homes and the infrastructure that this country needs, yet the OBR reduced its forecast for housebuilding by 190,000. This Government are on track to deliver fewer than the 1 million homes delivered by the previous Conservative Government, and the latest growth statistics show that private housebuilding is down by 4.7%. It is not only an economic failure but a moral failure. There is a housing crisis in England. Our new Prime Minister has said he wants to end rough sleeping, yet 136,000 households are living in temporary accommodation, including 177,000 children, which is up 5% a year. The OBR report identifies that the cumulative impact of regulatory and fiscal changes outside the planning system have increased the cost, complexity and timescales associated with residential development. With mortgage rates up, housebuilding is simply unviable at a price that people can afford to pay in many parts of the country, which is why we have seen a decline from 182,000 new homes in England in 2022 to 125,000 last year. In London, it is particularly bad, with planning applications down 96% in the last 10 years, and only 754 homes applying for planning permission in the last two months. The recent report from the CPS estimates that 57% of the cost of building a two-bedroom apartment in Camden is derived from government and mayoral levies and regulations; that is £442,000 out of £775,000. That is a huge burden, which is ultimately paid for by buyers. While it is better outside of London, with fewer mayoral impositions, it is still £224,000 out of £535,000, to given an example from Chelmsford. London has affordable housing, stamp duty, CIL, corporation tax, developer tax, mayoral CIL, the building safety levy, Section 106, landfill tax, dual aspect, second staircase, the future homes standard, balconies, carbon offset and planning, and that is before we consider environmental costs, nutrient neutrality, biodiversity net gains, the jobs tax and so on. Does the mayor really need to mandate balconies and dual aspects? Surely a buyer can see these for himself or herself, and make their own decision on whether they represent good value. The private rental market is also suffering. The OBR notes that the increase in property income tax rates and previous measures collectively risk leading to a steady rise in rents. Then there is the impact of the Renters’ Rights Act. Rightmove recently reported a 9% drop in homes available to rent in London, compared with a 6% increase in demand. Despite the much-vaunted affordable homes programme, which the Minister again highlighted, we are also seeing a decline in the building of affordable homes. As we raised during the passage of the Social Housing Bill, curtailing right to buy will see thousands fewer council homes built as there are no proceeds to reinvest. With the Government’s housing policy failing, what action will they take to get building in our cities and address the huge government and mayoral-imposed costs? How many new social homes will be completed and occupied in this Parliament as a result of the £40 billion social housing programme? What will the Government do to encourage and stimulate the private rental market so that those who wish to rent have the availability that they need? This is a sorry tale. It needs to see confusing and inconsistent regulation and levies reduced, while safety standards are maintained, and it needs simpler taxes. There is a solution, as proposed by my honourable friend in the other place: a £50,000 reduction in the burden of regulation, combined with a single infrastructure levy.
My Lords, I rise a little warily as speaker 38 of 57. I suspect parliamentlive.tv’s viewing figures may not trouble the scorers for a six-hour debate on a Budget of little content that seeks to do as little harm as possible, admittedly having learned some of the lessons from the two previous Budgets. Indeed, the markets barely reacted. I will give some credit to the Chancellor for not disturbing our recent GDP growth momentum; today’s third-quarter figures are encouraging and underscore the need for an AI economic strategy. I will focus on SMEs and the bloody-minded entrepreneurs, but first I will make some brief comments on our public finances. I will follow up on the comments from my noble friend Lady Wheatcroft about the term “breathing space”. To me, this is the act of tinkering at the margins while another year slips by without us addressing the pressing economic issues of our time: debt, deficits, borrowing and a tax burden lurching towards 40% of our GDP. Our interest bill has climbed from £40 billion to £120 billion per annum in the last five years alone, and the OBR tells us that this will structurally settle at between £160 billion and £190 billion in the 2030s—and remember that the OBR has a history of optimism bias. From debt and deficits, let us turn to three other “D” words: defence, demography and dependency. We have pledged to increase defence spending by some 40%, and it is proving politically impossible to reduce our health, pension and welfare spending, given our ageing and increasingly unhealthy society. That brings me to the final “D” word: devolution. I thought that devolution was the central plank of the Prime Minister’s strategy for growth, but the Budget announcements were small fry: a £1.5 billion borrowing facility and £285 million for good growth funding next year, presumably to be spread to every postcode. Like the noble Lord, Lord Bridges, with all these “D” words, I detect a distinct lack of urgency. I shall focus on our bloody-minded entrepreneurs. I declare that I was one once, my son is one now, and I work with a range of start-ups and scale-ups, ranging from online platforms to canine matchmaking and community pubs. If we are to turn the dial from 1% to 1.5% growth in GDP to that mission-critical 2.5%, we must nurture and incentivise our small and medium-sized scale-ups that have a vital impact on economic growth. This group has suffered a bloody period: huge increases in employer NICs, outsized minimum wage hikes, restrictive employment practices and soaring energy bills and business rates. This Budget spared them further punishment, but almost nothing has been done to make employment more affordable or to deal with energy bills. While the Minister has trumpeted the fact that business rates relief is going to apply to 70,000 businesses in the high street, what is happening to the other 400,000? The Chancellor has signalled the return of capital gains tax founders’ relief, which I very much welcome. However, as the noble Lord, Lord Elliott, said, on reading the small print one discovers that founders qualify only if they have delivered three consecutive years of 25% growth in both revenue, which must exceed £10 million, and headcount. That will exclude the vast majority of deserving founders, including those who, despite these headwinds, have created scores or indeed hundreds of valuable new jobs at a steady and sustainable rate over many years. One entrepreneur texted me this morning: “It’s like being asked to reach for the stars after two years of knee-capping”. He points out that the 50% reduction in business asset disposal relief looks set to hit a much larger group of entrepreneurs. I would very much welcome the Minister’s comments on these important measures, because the devil is very much in the detail. This Budget is an improvement on its predecessors and has taken care not to inflict more damage on SMEs, but tough decisions have been delayed yet again and we still await a strategy for enterprise and economic growth.
My Lords, I declare my interest as an adviser to and director of companies working in artificial intelligence, technology and AI policy. I congratulate noble Lords who made their maiden speeches today. I welcome the Government’s investment in AI; it can help businesses to grow, improve public services and raise living standards. People need to see what its promise means for them. For a business, it means being able to adopt AI with confidence. For a young person, it means a fair chance of finding work. These investments should be judged by the security and the opportunity they bring. First, there is the £40 million for the national agentic security unit. As AI agents take on more tasks, we need to be ready when they behave in unsafe or unintended ways. Will my noble friend the Minister publish an implementation plan setting out when the unit will be operational, which Minister will be accountable and how its readiness will be tested? That plan should give businesses and public bodies a clear route for reporting incidents, with regular progress reports to Parliament that protect sensitive information. Preparedness has to be tested before a crisis. Secondly, there is the additional £23 million for the AI Economics Institute. For a young person seeking a first job, the question is simple: where will I gain the experience that employers require? Early research shows weaker entry-level hiring but does not establish that AI is the cause. The institute must help us to understand what is changing and why. In answering my Written Question this week, following the warning by the IMF of an AI tsunami, the Minister confirmed that further analysis would be published. Can he give us a timetable for that work on jobs and wages and explain how the findings will shape funded apprenticeships, entry-level opportunities and support for workers whose jobs will change? The Early Careers Jobs Alliance offers a way to bring employers into that effort. Young people need opportunities to learn on the job as work changes. Thirdly, I welcome the National Cyber Security Centre’s new AI centre of excellence in Manchester. Its expertise must reach the public services that need it. A council or hospital adopting AI needs people who can assess security risks and help staff use it safely. Will my noble friend set out how the centre will be funded, how public bodies will access its expertise and how the Government will assess the difference it makes? These investments deserve to succeed. We should be able to show how this money is making services safer and helping people find their place in a changing economy. The measure of our leadership should be the security and opportunity that it brings to people’s lives.
My Lords, I feel honoured to be addressing this House for the first time on such a pivotal event in the political calendar as the Budget. However, unlike many noble Lords who have made contributions today, I make no claims of any economic expertise and will instead offer some brief personal insights to add to today’s broad-ranging debate. First of all, some thanks: I have been overwhelmed by the warmth of welcome that I have received since my introduction to the House just 10 days ago. That welcome has come from noble Lords across the House, as well the amazing staff in this historic—and rather baffling—building. My thanks go to Black Rod’s team, the doorkeepers, clerks, attendants, librarians and other staff, many of whom have noticed me looking lost and pointed me in the right direction. I consider myself truly lucky that I arrived in this House to work alongside noble friends who I have known for many years, and who have been so instrumental in my political career so far. I give particular thanks to my noble friends from Yorkshire who introduced me: my noble friends Lady Pinnock, of Cleckheaton, and Lord Mohammed of Tinsley. They are both passionate champions of the power of local government, of Yorkshire and of the opportunities to change people’s lives by doing politics well. I know I will continue to learn from them and from other noble friends on these Benches for many years to come. I also thank the staff in the Liberal Democrat Whips’ Office, whose knowledge, insight and understanding I have already relied, and will continue to rely, on. We learn by being curious and by asking questions, and I rarely consider a question too stupid to be asked. I wish to pay tribute to the town that is my home and that has given me my title: the market town of Penistone, in South Yorkshire. But, first, I must make a confession. I am not actually from Yorkshire. When I first stood for election in 2018, for the role of Mayor of South Yorkshire, the campaign involved extensive media coverage and scrutiny. I was well briefed by my noble friend Lord Scriven, but one question caught me out: what football team did I support? I had to admit to my lack of Yorkshire birthright, my lack of interest in football generally and my preference, if pressed, for supporting Leicester City. Perhaps that is why I lost out in that particular election. Despite having lived there now for more than 20 years, believing that Yorkshire Tea is the only tea worth drinking, and having two wonderful Yorkshire-born daughters and a husband who has never lived, and would never live, in any other county, I know that I will always be a “comer inner”, as they call them in Penistone. Instead of being born and raised in Penistone, I chose it as my home and the place to raise my family—and to represent on Barnsley Council—because it is a place that I love. For those that do not know Penistone, it is a historic market town, mentioned in the Domesday Book as Pengestone, and situated on the edge of the beautiful Peak District. It is well connected by road—though certainly not by rail—to Sheffield, Leeds and Manchester, and it is forever grumpy about the 1974 local government reorganisation that took it out of the West Riding of Yorkshire and lumped it in with Barnsley Metropolitan Borough Council. That particular move disbanded Penistone Urban District Council and formed the successor parish of Penistone Town Council, of which I am honoured to be a councillor, the current chair and, therefore, town mayor of Penistone, a role I will hold until May next year. In that role, I am a champion of Penistone and all its village communities—something I intend to continue in this House. We have many wonderful things to recommend Penistone to any visitors. Some highlights are our heritage cinema, the Penistone Paramount, where films have been shown continuously since 1914; a beautifully scenic stretch of the trans-Pennine trail, which is a multi-user route that replaced the legendary Woodhead train line; Penistone Cricket Club, which offers cricket facilities for all ages and genders, with its brand new pavilion that opened this summer; and displays and information from talented local historians who have unearthed a fascinating claim to Penistone being the birthplace of modern association football—with apologies to anyone from Sheffield in the Chamber who may disagree. What do all these projects have in common? They have an element of support and funding from local government. As a Barnsley borough councillor for eight years until I step down this year, and still as a town councillor, I fight continuously for Penistone to get its fair share of council funding, not just for projects such as those listed above but for everyday basic services. I know that this is a familiar battle for many noble Lords with experience in local government. But I am not naive. I know that running any council is a deeply challenging job, made harder by a desperate shortfall in funding for even statutory services, such as social care, SEND and home-to-school transport. Colleagues in local government are forced to tinker round the edges of council budgets to secure money for projects that make a positive difference to our communities, while at the same time lacking adequate, long-term, stable funding for essential services. They are creative at accessing grant funding, match funding and combined authority funding—anything to try to do more with less. I know that it is easy in opposition to ask for more for local government, and it is disappointing when this Budget is yet another that does not deliver on that. As I start my work in this House, I look forward to and welcome the debates and conversations on this and on many other issues. It truly is the honour of my life to be given the opportunity to work here, with noble Lords from all sides, to make a difference to the lives of people in Penistone, Yorkshire and beyond.
My Lords, what a privilege it is to speak after the thoughtful maiden speech by my noble friend Lady Kitching of Penistone and to have the opportunity to say a few words about her. Her speech today showed the warmth, humour and practical determination she has, which will make her such a valued colleague. I know that she will be a real asset to these Benches and to the whole House. I must confess that I was made up to hear her surprising admission that, behind all that Yorkshire pride, my noble friend is in fact, like me, a Leicestershire lass; I knew she was a sound appointment. My noble friend Lady Kitching of Penistone brings huge experience to the House after a decade working as an NHS physio specialising in adult neurology; I wonder whether she might even be the only physio in this House. She went on to work in the NHS workforce in organisational development roles. Alongside raising her two daughters and local politics, she then supported the family’s steel manufacturing business, giving her valuable insight. My noble friend built a formidable reputation in Barnsley as a political leader and campaigner, and as a voice for young people, not just in her beloved hometown of Penistone but across South Yorkshire. She has given tireless service, too, to the Liberal Democrats, as an opposition leader on Barnsley Council and as chair of the Yorkshire regional party. I asked whether this proved that she had the ability to handle warring factions, to which I was told that my noble friend did not permit factions—so be warned. My noble friend remains a town councillor, as she said, and is currently town mayor of Penistone. I know she will bring passion and pragmatism to this House, alongside a real commitment to championing the importance of local government. I hugely look forward to her future contributions. There were also outstanding and very classy maiden speeches earlier by the noble Baroness, Lady Ussher, the noble Lord, Lord Neri, and my noble friend Lady Aglionby. My noble friend Lady Aglionby addressed the need to support famers to invest in land, rivers and nature. It is to these themes that I return in my contribution. I will speak about the need to put nature and the environment at the heart of our economic strategy. The natural world is the foundation of a flourishing, sustainable economy and vital for national security. Yet nature featured very little in the Budget Statement. Government strategy to support nature is fragmented, contradictory and poorly aligned across departments. There is a paucity of ambition. So much more would be possible by integrating support for nature recovery with the devolution agenda, spatial planning and public health, but nature is absent from cross-government decision-making and missing from economic forecasts. Research over the last decade shows our economy is embedded in nature, including in the Dasgupta review in 2021, commissioned by the Treasury itself. In 2024, the Green Finance Institute highlighted that nature-related risks are as significant a factor for the economy as climate change. Yet although the potential impact of climate change is now included within long-term OBR forecasts, there is no similar assessment about the impact of nature depletion, soil health or biodiversity. Environmental damage is already slowing the UK economy. Estimates from the Green Finance Institute suggest that it could lead to a reduction in GDP of 12% in coming years, more than the impact of Covid or the global financial crisis, potentially hitting agriculture, manufacturing, utilities and the financial sector. Furthermore, the Joint Intelligence Committee has warned of the risk of ecosystem collapse by 2030, with impacts so serious they have national security implications. In the face of such apocalyptic warnings, there are still plenty of success stories that demonstrate that nature recovery projects can support wildlife, drive economic growth, boost jobs, enhance public health, mitigate climate change risks, and promote resilience and biosecurity. New research by the RSPB finds that £5 billion to £6 billion a year of investment for nature recovery would yield £80 billion of new economic output over 10 years, creating 80,000 long-term skilled jobs, most in rural communities, and a further £1 trillion of benefit to society through public health and climate change mitigation. There is growing interest in how to value so-called natural capital in decision-making but, frustratingly, the Government’s response has so far been limited to Defra’s supplementary guidance, which has very little clout. Current fiscal rules do not allow the Government to borrow to invest in nature-based green capital projects, just grey infrastructure, so even if restoring peatland or creating a wetland would be an effective local solution to flooding, concrete barriers are the only solution that would satisfy Treasury borrowing rules. However, projects like the Medmerry coastal realignment scheme in West Sussex show that nature-based solutions can tackle flooding and produce many wider benefits. Polling tells us that people want to live close to green space. We instinctively grasp that contact with the natural world has health benefits, yet it is the poorest urban communities that have the least access. In that context, it is hard to see how changes announced in the Budget to biodiversity net gain rules for developments on smaller brownfield sites would not just make this even worse. The scale of the finance gap to restore nature in the UK is very significant indeed. We need a coherent green finance strategy that sets out the ambition, the scale of the challenge and a road map to attract the mix of public and private investment needed.
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