Spending Review 2025

Baroness Kramer Excerpts

Thursday 12th June 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, the spending review Statement, delivered by the Chancellor in the other place yesterday, made it clear, in no uncertain terms, that the Treasury has lost authority in determining how the Government spend taxpayers’ money. How else can the Treasury explain a spending review in which the Government will add another £140 billion to the national bill in extra borrowing, forecast over the period set out by the Chancellor? How else can the Treasury explain a cost burden so substantially increased that the Government are unable to rule out tax rises in the autumn? How else can the Treasury explain why it is subsidising tax reductions in Mauritius, but making decisions which will limit domestic economic growth?

Ministers are lauding a spending review which does not address the fundamental issues which we have raised in your Lordships’ House many times. Only a few weeks ago, we had an excellent debate on the crisis we face in light of the scale of our national debt. This situation has been made worse as a direct consequence of the spending review. Ensuring value for money in public expenditure—another issue we have raised time and again—has been virtually ignored.

However, I thank the Minister for the long overdue investment in nuclear at Sizewell C, on small modular reactors with Rolls-Royce and on the nuclear fusion prototype in Nottinghamshire. I just hope these will not take too long. They are essential to an energy balance, so we avoid the sort of problems we have seen in Spain.

Following on from our discussions last week on the transport package, I also welcome the extension of the £3 cap on bus fares, albeit only until 2027. London-based politicians do not understand how important buses are to so many of the less well-off in this country, especially in rural areas which are bearing the brunt of this Government’s policies in other ways. The introduction of a five-year planning cycle for capital is also positive.

However, I am very concerned at the way the Chancellor has hit police spending and defence to find yet more money for the NHS. Police chiefs are very anxious, and there is still no plan to reach the 3% we need on defence. The NHS is one of the major winners from the spending review, claiming over £29 billion per year in additional funding. But unlike our Conservative record, this new money from the Labour Government has come with no productivity conditions and no demands that services be improved or patient outcomes bettered. This is a major problem. In recent years, we have seen record levels of spending poured into the health service, yet productivity has not kept pace. According to the Office for National Statistics, NHS productivity still remains below pre-pandemic levels. We have an inverse ratio: the more money the Government give the NHS, the worse it functions.

What we are witnessing is a shortage not of funding but of effective reform. The NAO and other independent bodies have highlighted how much of this new funding has been absorbed by rising costs and staff pay.

I am grateful to the Government for allowing an extra 20 minutes for Back-Benchers to ask the many questions they will have on the detail of this Statement. To be honest, I would have preferred a full debate on this, as it sets the scene on expenditure choices for the rest of the Parliament.

Moreover, in the round, the Statement is a cause for concern. As the shadow Chancellor put it succinctly, “Spend now, tax later”. The fiscal rules have been loosened so the Government can borrow more and lay out a succession of goodies in a £190 billion spending spree.

There should have been much more focus on the nearly £100 billion of interest we are now paying on our national debt and on how to get that down—a debate on how we balance the nation’s books. Investment is separated out under the fiscal rules, but I am afraid it still has to be paid for. Is this investment being wisely invested?

To mention one angle, the promised new Green Book is not a new book but the findings of a review. It concludes—as I expected, given the changes that the Conservative Government made—that the current methodology is not biased towards certain regions. However, I was surprised to read that the existing Green Book puts too much emphasis on cost-benefit ratios and that a ratio of less than one might be fine. I am really worried about this as an encouragement to the approval of white elephants.

This, of course, is against a troubling economic background. Unemployment has hit a four-year high of 4.6%. A first estimate for May showed a 109,000 decline in jobs, which, if confirmed, would be the worst month since the height of the pandemic in April 2020. Since the Spring Statement, persistently higher gilt yields have blown a £5 billion hole in the Chancellor’s £9.9 billion buffer. Productivity was 0.2% lower in the first quarter of the year compared with the same period in 2024. The UK’s total rate of investment has been the worst in the G7, on average. On top of it all, the ONS today announced a 0.3% decline in GDP growth—partly, no doubt, because of the hikes in national insurance, which have hit businesses so hard. These are facts. The Chancellor should have taken corrective action in the spending review, but we can see that more taxes and higher council tax are coming.

Finally, I will come back to the Minister on a couple of points that he keeps making. He has alleged, often and aggressively, that when many new projects were announced by the Tories, no money was provided. That is, of course, because we rightly delayed the spending round until after the election. We, like the Government, would have allocated the money for what we had planned following a classic review.

This is linked to my other concern, about which I have been very patient with the Minister: that we had and have no plans for saving money to finance necessary spending. This is an inexactitude. Apart from the strong growth trajectory at the time of the election, undermined by Labour’s doom and gloom, we were on course to reduce the public sector. Instead, the civil service has risen in the past three months to over 516,000 full-time equivalent, the highest level since 2006—in contrast, according to Civil Service World, to the total of 384,000 FTE in September 2016, when I was serving in the Conservative Government.

This Government have chosen to give pay rises to the public sector costing £9 billion—and more, if you add on the future cost of their pensions—without the kind of link to productivity that any sensible managers insist on when a generous pay package is offered. Add to that the £30 billion for the Chagos Islands, which is funding reduced taxes in Mauritius not the UK, £8 billion on Great British Energy, and the abandonment of our ambitious plans for welfare reform and our attack on waste, of which, sadly, this week’s Blue Book is a pale imitation.

The truth is that the Government are busy creating their own black hole with all of this, and it has been topped up by the £1 billion reversal in the winter fuel allowance. We all understand why that was done, but it destroys confidence in the Chancellor’s determination not to raise taxes. My fear is that we will run into the autumn with anaemic growth, persistent inflation and a large new tax bill.

[Baroness Kramer (LD)]

My Lords, I recognise that the Chancellor faces real constraints, and this morning’s GDP figures for April underscore the problem. However, I am not going to use this opportunity to spend a lot of time talking about growth. It is such a big issue that we need some separate debate time set aside for it.

On these Benches, we are pleased with the significant allocations for the NHS and for housing in the spending review, though we are concerned that there are no targets for social housing, since we need at least 150,000 new social homes a year. I ask the Minister: given this additional money—which I know is only £3.9 million a year, but still, it is additional money—will we see that number of social homes come through annually? That really is the need that must be met.

However, nobody will be surprised that I was disappointed—almost to the point of devastation, quite frankly—to see adult social care overlooked, with no uplift until 2028, despite the reality that the situation is grim as we speak and that, without properly functioning adult social care, improvements to the NHS will be seriously undermined. If the Casey review is the hold-up, it should be and could be completed this year.

The Chancellor also suggested that she would back the fair pay agreement for adult social care workers sought by Care England. She absolutely should—care workers deserve every penny—but did I hear correctly that she will not fund it? The total package is £2 billion a year, and just the living wage and sick pay portion is £805 million a year. That kind of money puts in jeopardy not only many care providers but many local councils. If the Minister says that there was an uplift for councils, then not only does that rely on a 5% council tax increase in most councils but the additional money will be fully swallowed up by SEND, which is also in a dire situation. Will the Minister please explain what seems completely inexplicable: the overlooking of adult social care?

I also ask for clarification on defence spending. The Chancellor said she would raise it to 2.6% by 2027—which is the right direction—but is it correct that when she spoke, she treated spending on the secret services and on the Ukraine war as defence spending? If we speak in the terms that we have all been using up to now then the 2027 spend is, in my estimate, below 2.4%. I hope the Minister will tell me I have simply misunderstood. Will he help explain what exactly is going on with this defence spending? To me, all this confusion is underscoring the importance of cross-party talks, which my party has proposed, so that we collectively find a way to reach the necessary 3% well ahead of 2034. Boy, would I appreciate some clarification on what on earth is happening within that budget.

I am pleased to see new funds for the British Business Bank, whose greatest weakness, frankly, is its tiny size. However, to which bit of its activity is the additional money to be directed? I am particularly concerned about small business lending, and it could make a serious difference if much of the new funds are directed into the BBB’s Community ENABLE fund and its growth guarantee scheme. Who will make that call, is it dedicated, and does it have a target? Could the Minister please tell us more?

I could raise a lot of other questions, but I am anxious to hear properly from the Minister. I came away from the spending review, the Blue Book and the speech asking endless questions to which I could not find answers. I thought that I was going rather brain-dead. Then, I heard Paul Johnson of the IFS talk about the documents being so opaque that he was asking questions and could not find answers. If he cannot, we need help. Could we have clarity in the future, but in the meantime could the Minister please serve as our clarity?

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

I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their comments and questions on yesterday’s spending review Statement.

It would have been perfectly credible for the noble Baroness, Lady Neville-Rolfe, to say she cannot support any of this investment because she did not support any of the difficult decisions that we took to make this investment possible. It also would have been perfectly credible for her to come here today and say she has changed her mind, now supports the difficult decisions that we took and therefore will support the investment that those difficult decisions have permitted.

Unfortunately, the noble Baroness did neither of those things. We heard her support for the huge amounts of spending we announced yesterday for the nuclear programme—for example, £30 billion into nuclear. We heard her support the £3 bus fare cap, even though her party had refused to fund it any longer than last December. Yet she has opposed every difficult decision every time we have stood here for almost a year now. She has opposed every single difficult decision we have taken to repair the public finances and fund the public services. Even today, she was opposing the changes to the fiscal rules that enabled the additional investment spending we have made. She supported the nuclear spending, which is investment spending, but she opposed the fiscal rule change that enabled that spending. That simply is not credible.

The party opposite cannot support the investment in the spending review without supporting the money to pay for it. We all know exactly how we ended up with a £22 billion black hole in the public finances. That is exactly the approach that Liz Truss took in her mini-Budget, which crashed the economy and sent mortgage rates spiralling. We will not be repeating that mistake. The shadow Chancellor is distancing himself from the Liz Truss approach, and the noble Baroness should distance herself from that approach too. She talked about the money that is being allocated. I am not sure she understood the process of the spending review: the envelope was set by the Chancellor last spring. She cannot say in any way that we have lost control or are deviating from that envelope, because the Chancellor allocated every single penny of that envelope and not a single penny more. I fully understand what she is saying—that she understands that—but, in that case, I do not understand why she made the criticisms she did. The Chancellor was simply allocating the envelope that she set out in the spring.

The noble Baroness also said that the last Government delayed the spending review. We all know why the last Government delayed the spending review: because their sums did not add up. They had a £22 billion black hole at the heart of it, and they knew that the moment they did a spending review that black hole would be revealed. That is the reason why they delayed the spending review.

The noble Baroness talked about growth and the performance of the economy. In the first quarter of this year, the UK was the fastest-growing economy in the G7. Under the forecasts inherited from the previous Government, this year the UK would have been the slowest-growing economy in the G7. If she wants to compare growth stats, I am more than happy to do that with her all day. The figures out today show that April was a challenging month, given global headwinds. That was the month in which the tariffs were imposed by the US, and it was before we had agreed the trade agreement with the United States. If you dig into those growth figures, you can see that a lot of it is driven by a decline in exports because of that. It underlines the need to continue to deliver on our growth mission.

The noble Baroness talked about facts. The facts are that living standards are now forecast to grow four times faster than in the previous Parliament. Real wages have already grown by more in the first 10 months of this Labour Government than in the first 10 years of the previous Conservative Government. She often talks about productivity and GDP per capita, but GDP per capita fell in the last Parliament. It is now forecast to rise by 5.6% in this Parliament. On top of that, the IMF has upgraded our growth forecast, as did the OBR in the Spring Statement.

It is disappointing to me that the noble Baroness often says that she and I agree on growth, but she did not mention any of the growth-boosting measures included in this spending review. She did not mention that capital spending would increase growth by 1.4% in the long term. She did not mention the £39 billion affordable homes programme, which is vital for growth. She did not mention the record amounts of R&D funding rising to £22 billion a year. She did not mention any of the major rail projects to connect our towns and cities and make sure that growth is felt right throughout the United Kingdom. She did not mention the skills budget and the amount of money we are spending on skills. It is disappointing that she says she supports growth but then does not welcome or mention any of the investment that we are doing to get that growth.

The noble Baroness mentioned borrowing and the public finances. Average borrowing in this Parliament will be 2.8% of GDP, compared with 5.6% of GDP over the previous 14 years. She talked about the investment rule. Obviously, we have changed that fiscal rule—quite rightly—to enable the much-needed investment infrastructure to deliver stronger growth in the future. She opposes that change to that fiscal rule and yet somehow also claims to support the investment that the rule brings about.

The noble Baroness talked about tax. Yesterday’s spending review allocated the envelope set out by the Chancellor in the spring. These record settlements have been made possible only by the tough but necessary decisions we took in the Budget last October. On future decisions on tax and spending, I am not going to write four years’ worth of Budgets at this moment, even if that was in my power. The independent OBR will produce a new forecast in the autumn for the Budget. The Chancellor will take decisions at that point based on that forecast, and I will not prejudge those now.

The noble Baroness asked me about funding of the winter fuel during Question Time earlier. As she knows, we will set that out in full at the time of the Budget.

The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, both asked about defence. As the Chancellor made clear yesterday, increasing defence spending is a strategic necessity, and that is why we will be spending 2.5% of GDP on defence by 2027. The noble Baroness, Lady Kramer, asked about the precise definitions: 2.5% will absolutely be the case by 2027. If she wants to include the intelligence agency spending and the other spending she mentioned, it is 2.6%, but it is 2.5% excluding those things—I can give her that absolute certainty. Our ambition is to reach 3% in the next Parliament when fiscal and economic conditions allow, but we will not be putting arbitrary dates on when we will meet that.

I have two final points: the noble Baroness, Lady Neville-Rolfe, asked about efficiency and productivity. This is the first zero-based review done into spending for 18 years. The previous Government had 14 years to do a zero-based review, if they really cared about efficiency in public spending, and they did not do one at all over the course of 14 years.

The noble Baroness did not mention any of the reforms we are doing in the NHS. In fact, she sounded quite sceptical of additional money going into the NHS, which is a great shame as we know it is the most treasured public service in this country. She did not mention digitisation, for example—putting £10 billion into the NHS app to make it far more efficient in its spending. We are doing a great deal more on efficiency savings. All departments have identified at least 5% savings and efficiencies by 2028-29.

Finally, the noble Baroness, Lady Kramer, spoke about social care. I am grateful to her for welcoming some of the other additional spending, particularly on the NHS and housing, for example. She talked about social housing: we have made the £39 billion investment into the affordable homes programme. That is crucial for growth, as she said.

I pay tribute to the noble Baroness, who has consistently campaigned on social care. The spending review provides an increase of over £4 billion available for adult social care in 2028-29, compared with 2025-26. That includes an increase to the NHS’s minimum contribution to adult social care via the better care fund, in line with the Department of Health’s spending review settlement. This will support the sector to improve adult social care, with further details to be set out shortly.

The noble Baroness asked about the fair pay agreement. As the Chancellor said yesterday, we remain committed to delivering a fair pay agreement in line with our manifesto commitment, and we will set out further details of that shortly. She also asked about the British Business Bank. There will be an increase to £25.5 billion, and it will set out further details as to how that will be allocated. In the industrial strategy in a few weeks’ time—access to finance is obviously a major issue for all those sectors—we will set out how the British Business Bank can help with those access to finance issues.

Economic Growth

Baroness Kramer Excerpts

Wednesday 11th June 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. He did indeed show his characteristic objectivity. I will simply say that, where GDP per capita fell in the last Parliament, GDP per capita is forecast to rise by 5.6% over the course of this Parliament.

[Baroness Kramer (LD)]

My Lords, I hope the Minister will agree that to achieve growth in the UK we need a liquid and effective investor market. Despite London Tech Week, Wise plans now to shift its listing from London to New York and on Monday Spectris, Alphawave and Oxford Ionics, all key creative tech companies, announced that they would be taken over by US investors. In 2024, UK equity funds suffered £9.6 billion in outflows when most other equity funds had huge inflows—a pattern that dates from Brexit. I understand that the Government plan to press the pension sector to invest in UK companies, but what other steps are they taking to restore those key investment flows that used to come from Europe into the UK and to counter the US’s use of tariffs to incentivise the takeover of British tech?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. She mentions the outflows. The outflows in 2024 were less than in any previous year over the last 14 years so, although they are not what we want to see, they are perhaps not as doom-laden as she might want to make out. The Chancellor set out extensive capital market reforms in her last Mansion House speech. She has another Mansion House speech due on 1 July, at which point we will also publish the financial services growth and competitiveness strategy. I hope that will help to answer some of the questions that the noble Baroness asks.

Mansion House Accord

Baroness Kramer Excerpts

Wednesday 14th May 2025 Lords Chamber

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

I am grateful to the noble Baroness for her questions. I am sorry that she started her remarks with the word “disappointing”, because this is a really important initiative by the industry and one that the Government very much welcome. Of course, it builds on the work that the previous Conservative Government did, which the previous Conservative Chancellor began, so I hope that there is cross-party support for these steps. This is very important to our growth mission, by increasing investment in infrastructure, and it supports better outcomes for savers. As the noble Baroness will know, this is an industry-led, voluntary accord. Pension funds are choosing to do this, because evidence shows that high-growth assets can boost returns over time. We are confident that schemes are moving in the right direction, and this accord shows what government and business can achieve together, when working in partnership. The pension schemes Bill will contain more details about how these developments will be monitored to make sure that change is delivered.

[Baroness Kramer (LD)]

My Lords, we all want to see more investment in the UK’s productive economy, but what protection is to be provided for people with small DC pension pots who cannot risk losses and see their pensions as a savings product, not as an investment, especially if that investment is high-risk and illiquid, as envisaged in the original Mansion House accords?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. This commitment is voluntary and led by the industry, because the industry knows and is choosing to do this—because the evidence shows that higher-growth assets can boost returns to savers over time, as the noble Baroness, Lady Neville-Rolfe, said, in line with international counterparts, such as in Canada and Australia. Their pension funds and the levels of private asset allocation in those schemes is far higher. Pension savers will benefit from this accord through diversified savings, with potentially higher returns.

Bank Resolution (Recapitalisation) Bill [HL]

Baroness Kramer Excerpts

Consideration of Commons amendments and / or reasons
Monday 12th May 2025 Lords Chamber

[Lord Vaux of Harrowden (CB)]

My Lords, I want to ask the Minister a question that arises from this change. First, though, it is over six months since we debated these amendments. That does seem like an awfully long time for the Bill to disappear into limbo and come back, particularly when other Bills are being rushed through this House.

I wanted to ask the Minister to explain more about whether the resolution process could be used for larger banks, but I think he has actually answered that question. I am not sure his answer gives me an awful lot more confidence or comfort, but I am not going to oppose the Commons amendments. However, in the last six months, various comments have come from the PRA or the Bank of England about the fact that this Act, as it will be, may allow them to take some banks out of the MREL process. I wondered if the Minister might wish to comment on that and whether there are any consequences the other way round.

[Baroness Kramer (LD)]

My Lords, I have to say that I appreciate the explanation that we have just had from the Minister, but I and others remain disturbed by the Government’s decision not to accept the amendment, which was not just rational but well crafted, introduced by your Lordships in this House. The underlying Bill was initially presented to the House as providing a mechanism to save significant small banks from failing by recapitalising them from the Financial Services Compensation Scheme, rather than having to turn to the taxpayer. Regulated banks, as this House will know, are then required to replenish the FSCS when it is depleted for any reason, but, because the thrust of the language was around small banks—that was the intent, and that was the discussion that is in all the notes—this House very much agreed to it, with just a few probing points engaged with.

Thank goodness that we have a lot of very good brains in this House. The combination of my noble friends Lady Bowles and Lord Fox and the noble Baronesses, Lady Noakes and Lady Vere, realised that there was a significant loophole in the language. We did not realise in the beginning that any of this could be applied to the larger banks; that became clear only as those pursuing the legislation became more aware of the implications of its content. Now we have a Bill that permits the regulator to use the FSCS as its mechanism to rescue large banks. Let us be frank: it completely changes the whole profile of both risks and consequences. The amendment would have effectively closed that loophole.

The larger banks, as the Minister has said, already have their own dedicated process to recapitalise in case of failure, a process that was introduced after the 2008 crisis. The Bank of England requires each large bank to hold a tranche of MREL—in plain English, bail-in bonds—which can be converted to capital by the regulator in case of failure, with the consequence that the bank is thereby rescued. We need to understand why that is not considered by the Government to be an adequate system. The Minister has just said—if I understood him—that the regulators will always require that bail-in bonds are used first, and the FSCS is a resource of last resort. But that is not in the legislation. The legislation allows the regulator to turn first to the FSCS and ignore bail-in altogether. He will be very conscious that the Swiss regulator, with the failure of Credit Suisse, completely ignored the bail-in capability and chose other routes to manage the rescue of Credit Suisse.

Those who hold bail-in bonds—the investors who buy them—are extremely well remunerated for carrying the risk associated with a bail-in bond. I am trying to work out why they can now look at this legislation and begin to assume that they will have the benefits of receiving a risk premium for holding those bonds but never actually find that those bonds are forced into use in case of a failure. How can we rely on just a code to continue to determine that bail-in will be the first resort and not a later resort or no resort at all? Are the Government basically saying that there are now many circumstances they have identified in which bail-in is neither usable nor adequate? I refer to the Swiss example. What are the consequences for financial sustainability if we are saying that bail-in is a slightly busted system? Have there been blandishments from the various investors who have purchased bail-in bonds, trying to pressure the Government into creating an alternate route? What are the consequences for our small- and medium-sized banks if the FSCS is depleted by big bank failure?

The Minister says that the regulators will not ask for an unaffordable contribution from the various banks to replenish the FSCS, but it is our mechanism that ensures small depositors’ accounts. Who is going to do the replenishment if the number is too great to ask the banks to commit to it? I am quite troubled by this change in responsibility for where risk lies that is embedded in the Bill. If the Minister is so sure that the items in the code should be giving us reassurance, why have they not been introduced in this Bill as part of the legislation?

[Baroness Neville-Rolfe (Con)]

My Lords, this is an important Bill, which provides the Bank of England with extra flexibility to manage bank failures, particularly those of smaller banks, in a way that strengthens protections for taxpayers. It reflects proposals by the last Government in the light of experience with the demise of Silicon Valley Bank. As such, it had cross-party support and, starting in the Lords, was a good example of expert scrutiny across the House.

Special thanks go to my noble friend and predecessor Lady Vere, my noble friends Lady Noakes and Lady Penn, the noble Lords, Lord Vaux of Harrowden and Lord Eatwell, the noble Baronesses, Lady Kramer and Lady Bowles, officials on all sides—of course, not forgetting the Whips—and, above all, the Financial Secretary to the Treasury, the noble Lord, Lord Livermore. I thank him both for the government amendments, notably that which was made to Clause 3 on the involvement of the Treasury Committee and the House of Lords Financial Services Regulation Committee, and for the timely publication of the draft code of practice, which helped us to overcome some substantial difficulties, as he has already mentioned.

Banking and financial services are very important to the success of the British economy. In 2022, the UK financial system held assets of around £27 trillion and in 2023 the financial insurance services sector contributed £208 billion to the UK economy. Legal regimes which govern how our banking and financial sectors operate need to promote growth and competitiveness and be easy to navigate and use. They must also balance ambition with prudence—an understandable driver of the Bill.

Noble Lords will recall the amendment we successfully added that was championed by my noble friend Lady Vere. This sought to prohibit the use of the funds from the Financial Services Compensation Scheme to recapitalise large financial institutions, defined as those which had reached an end-state MREL. The object was to reflect in law the Government’s stated objective of using the resolution framework in the event of a smaller bank requiring intervention, thus preventing the associated risk of contagion. The truth is that the Banking Act 2009 provides a robust framework for dealing with the large banks that have achieved end-state MREL status. They and the Bank of England should not be taking comfort from the fact that they could fall back on an ex-post levy of the banking sector through the FSCS in times of trouble. Resources should be focused on the SME banking sector, as the noble Baroness, Lady Kramer, reiterated.

In view of this, I am joined by noble Lords across the House in expressing disappointment that Members in the other place voted to remove this amendment from the Bill. We are confident that it would have improved the Bill in meeting its objective and helped to embed the balance I spoke of. However, we must accept that Treasury Ministers, with their battalions of support in the other place, wish to maintain flexibility; for example, as the Minister explained, to deal with a large, unexpected redress claim leaving the taxpayer exposed, although this is very much a backstop arrangement, with a £1.5 billion cap, as the Minister confirmed. So I do not propose to test the opinion of the House again.

It was also disappointing to see the rejection of other prudent proposals put forward by colleagues in the other place in good faith. Regardless, I hope the Government will consider these proposals seriously as we try together to create a system which is balanced and simple and promotes growth—an objective that the Minister and I share.

We support the thrust of the Bill, which continues the work that we did in government to support our banking sector, protect consumers and safeguard the public finances. However, there are still outstanding questions which I hope the Government can address today or in writing. They are even more important now that the Vere amendment has been rejected.

The Financial Conduct Authority and the Prudential Regulation Authority have proposed an FSCS operating budget for 2025-26 of £109 million. This budget covers the FSCS’s administrative expenses and does not represent the total funds available for compensation payouts. Over the three financial years from 2021 to 2024, the FSCS paid just £10 million in compensation relating to deposit claims, due primarily to the defaults of 11 credit unions and one small bank. Will the Minister kindly outline the steps the Government are taking to minimise the operating costs of the FSCS?

The FSCS is a quango, which is overseen by a quango, in conjunction with another quango. The fact that it uses an industry funding model does not change this. The money in its operating budget is money that is not being utilised in the banking sector, which employs millions of people and contributes billions to our economy and to growth. Does the Minister agree that the FSCS should focus on efficiency and on keeping as much money as possible available to banks for their use and not tied up unnecessarily in its operating budget and that, like other regulators, it should have regard to the Government’s overall objective of growth?

I end by saying that this is a broadly sensible proposal designed to safeguard public finances, ensure the security of our financial sector and limit public risk. We will support the Government in their ambition to achieve the objectives of the Bill, but I hope the Minister will seriously consider the points that have been raised today and will take the opportunity to clear up some of the questions that have been asked.

Inheritance Tax: Impact on Rural Businesses

Baroness Kramer Excerpts

Thursday 1st May 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. As she may know, as is standard practice, we will publish a tax information impact note alongside the draft legislation before the relevant Finance Bill. My honourable friend the Exchequer Secretary has engaged extensively with stakeholders in this area, including with the Ulster Farmers’ Union. We have fully listened to the issues that the noble Baroness raises. However, it is worth saying that individuals will still benefit from 100% relief for the first £1 million of combined business and agricultural assets, and above that amount there will be 50% relief, meaning that inheritance tax will be paid at a reduced effective rate of up to 20%. That is considerably more generous than in any other part of the economy.

[Baroness Kramer (LD)]

My Lords, the problem is not just the damaging inheritance tax changes but delinked payment reductions, as we debated yesterday, sky-high energy bills, a botched trade deal and extreme weather. Defra anticipates that 7% or 8% of farms will not survive, and most people accept that that is on the optimistic end of the scale, and the sale will be to corporates that have no real link with, and put very little into, the local economy. In the analysis that the Minister says is coming, will there be a broader analysis of the state of the rural economy—not just macro-level analysis, and not even regional analysis, but something that genuinely focuses on the rural economy because it needs different solutions?

[Lord Livermore (Lab)]

It is worth saying that the Government are investing £5 billion across this year and next year to support the transition to a more sustainable and productive sector, including the biggest budget for sustainable food production and nature recovery in our history. I do not necessarily accept the characterisation that the noble Baroness seeks to put forward of what is going on and what this Government are doing. As I say, there will be a full impact assessment at the time when the legislation is published, and I am sure it will cover many of the things that the noble Baroness asks about.

Tax: Changes

Baroness Kramer Excerpts

Tuesday 29th April 2025 Lords Chamber

[Lord Livermore (Lab)]

No, we are not. The UK’s main rate of capital gains tax is lower than in any other European G7 country, as is our corporation tax rate. Our new residence-based regime is simpler and more attractive to new arrivals than the non-dom regime it replaces—the regime put in place by the party the noble Lord supported for 14 years.

[Baroness Kramer (LD)]

My Lords, my eldest granddaughter is a British subject and an American citizen. She lives in the UK and has started to earn some money, only to find that she cannot avail herself of something like an ISA because it would be taxed from day one in the US and vice versa. This is one of anomaly after anomaly and Catch-22 after Catch-22 that the UK Government have refused to address. Does the Minister understand that, with non-dom status gone, this is becoming a major problem and driving out people who are tax resident in more than one country?

[Lord Livermore (Lab)]

I absolutely understand the point the noble Baroness is making, but I do not necessarily agree that it is driving out the people she describes. I completely understand her point, but I am not sure I agree with the conclusions she is reaching.

National Debt: It’s Time for Tough Decisions (Economic Affairs Committee Report)

Baroness Kramer Excerpts

Friday 25th April 2025 Lords Chamber

[Baroness Kramer (LD)]

My Lords, first I congratulate the noble Lord, Lord Bridges, and the committee on taking on such a significant but challenging issue. I have great respect for the committee. I am one of its more distant alumni, if you like, but my years as a member were not just enjoyable but a brilliant opportunity to learn. I say to those who manage the parliamentary diary that bringing this debate seven months after the publication of the report, with four minutes for some of the most expert Back-Benchers we have, is simply not wise.

We are holding this debate in the age of Trump, when chaotic tariff wars have become a reality and the IMF has seriously downgraded growth forecasts for the UK and across the globe. The committee warned that we need sustainable debt which allows a contingency for unknown unknowns, of which Trump must be pretty much the worst possible, but I hope the committee acknowledges that this takes years to build. It is not within the capacity of a new Government, in less than a year in office, especially when handed a scorched earth by the last Government.

I also dispute the committee’s list of the shocks that have undermined our economy. Yes, it lists the financial crisis, Covid, Russia’s war in Ukraine, extended use of QE, but there is no acknowledgement in the report of Brexit. To ignore Brexit is in effect to get into a car and try to find your way forward while wearing a complete blindfold. A 4% scarring by Brexit, year in and year out, is the difference between a resilient UK and a struggling UK, and we have to recognise that.

I have a final disagreement. I am with those who believe that investment should be treated differently from day-to-day spending when we set debt targets if we are ever to tackle the short-term mindset that keeps undermining our economic future. I see this as essential for the growth agenda and for revival across all the regions of the UK, but I think we all acknowledge that, even without Trump and the reversal of globalisation that now seems under way, the UK faces very difficult economic headwinds. We have collapsed public services. We just listened to the noble Baroness, Lady Grey-Thompson, and I think everybody recognises that she speaks the truth. We have inadequate infrastructure and housing right across the country, an ageing population—others have spoken about the demographic challenge we face—but also economic inactivity. As the noble Lord, Lord Browne, says, we have inadequate defence spending in a very unstable world. We have low business investment, low productivity, high public debt and high taxes. Climate change, just like AI, is both an opportunity and a risk, depending on whether we drive to be a leader to seize the benefits and turn these into opportunities, or hang back and just bear the cost. I call for us to be a leader; indeed, green industries are currently a key growth area and one of our few areas of real success, which one would not know from listening to this debate.

I find it fascinating that, when I read the reports this week of the appalling figures from the ONS on soaring public debt and declining business activity, when I read the analysis and the follow-up, the focus falls on our failure and loss of exports. This is where I suggest we should concentrate our efforts. I believe that the Government need to move rapidly towards an EU customs union: we have to drive vigorously to revive our whole export profile. It has to be backed by a coherent, ambitious industrial strategy. I know that that is due soon, but it will be critical and it genuinely needs to tackle the full range of issues that are necessary for growth. Frankly, I think we should be taking full advantage of the brain drain from America. Growth was not the topic of this report, but the report says that this is where we should be focusing our conversations now. The noble Baroness, Lady Cash, talked about the young people who are our future: I can think of so many levers that would forward small business, scale-ups, new opportunities, and that is where we should be concentrating, rather than getting trapped in this current analysis.

Let me explain in part why. I do not think the report intends it, but it could easily be read as calling for us to focus on creating a new fiscal framework now. It is not the fiscal framework I would have chosen. If we were debating this back in September, when the report was published, I would have been talking about the Lib Dem manifesto at the last general election, which, whether you liked it or hated it, was certainly recognised as being fully costed. It would have been a very different kind of debate with a different focus. Now, I am looking at the world and saying that, at this time of absolute turmoil, when we do not even know that announcements that have been made today will change the growth profile to benefit it, disarm it or disadvantage it even more, when we face such a level of complete chaos, I hope that the Government will not feel that they have to jump forward and make immediate change, because, quite frankly, if the businesses that I talk to hear that there is going to be a dramatic change in the fiscal framework, they will basically be resorting to tranquillisers and therapy. There is a real need now for some measure of calm and stability; it is difficult, but the Government absolutely have to provide it.

The report says that we should not just muddle through, and that would be my normal instinct—do not muddle, seize the occasion and start making new decisions—but, at this point in time, I honestly have to say that muddling through until this chaos settles might actually start to look like success.

Basel 3.1

Baroness Kramer Excerpts

Thursday 3rd April 2025 Lords Chamber

Asked by

[Baroness Kramer]

To ask His Majesty’s Government what assessment they have made of the impact of delaying the implementation of Basel 3.1 on measures by the Prudential Regulation Authority and the Treasury to address base erosion and profit shifting.

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

My Lords, the Prudential Regulation Authority, in consultation with HM Treasury, decided to delay the implementation of the Basel 3.1 reforms in the UK until 1 January 2027, taking into account competitiveness and growth considerations, given the current uncertainty around the timing of their implementation in the US. The delay to Basel 3.1 has no bearing on the base erosion and profit shifting policy agenda, where the Government are committed to ensuring that multinationals pay their fair share of tax in the UK.

[Baroness Kramer (LD)]

My Lords, seven mega US tech companies avoid some £2 billion a year in UK corporation tax by using base erosion and profit shifting. The 2% digital services tax clawed back £800 million of that this year, and it is due to be replaced under Basel 3.1, as agreed by the OECD, G7 and G20, with the undertaxed profits rule, put into UK law in the Finance Act last week. It would claw back significantly more. Can the Government tell us if they are prepared to abandon the DST and mothball the UPR at the behest of the Americans? How can UK companies compete when their US rivals are permitted in the UK to avoid at least two-thirds of the tax that UK companies have to pay?

[Lord Livermore (Lab)]

My Lords, as the Chancellor has said clearly, we will continue to make sure that businesses pay their fair share of tax, including businesses in the digital sector. The UK’s digital services tax is a fair and proportionate approach to taxing business activities undertaken in the UK, and it remains the UK’s intention to repeal it once a multinational solution is in place. We will continue to work with the US to understand its concerns and consider how these can be addressed in a way that meets both countries’ objectives. I will not give a running commentary now on those discussions.

--- Later in debate ---

[Lord Livermore (Lab)]

Yes, and this Government are absolutely clear: we are on the side of working people.

[Baroness Kramer (LD)]

My Lords, I will come back to the Minister, who has been trying hard to answer these questions without telling us too much. He will be aware that there have been different comments within his own Administration about whether the digital service tax is indeed in the mix in the trade negotiations that are apparently taking place with the States. We understand that there is great hope from the UK Government that there will be a positive outcome of those negotiations within the next two weeks. Is he telling us that the DST and the mothballing of the UPR are not on the table as part of that discussion?

[Lord Livermore (Lab)]

As I have said already, we will continue to make sure that businesses pay their fair share of tax, including businesses in the digital sector. We want the best deal for the UK, so I am not going to undermine negotiations by commenting on the talks or on what is or is not up for negotiation. The Prime Minister has been clear that we will only agree to a deal that is in our national interest.

National Insurance Contributions (Secondary Class 1 Contributions) Bill

Baroness Kramer Excerpts

Consideration of Commons amendments and / or reasons
Monday 31st March 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I simply thank the Minister and, again, all who have been involved in the passage of this difficult Bill, especially those who have supported me and my noble friend Lord Altrincham. We have had seven days of debate in the House and nine successful votes, in collaboration with other Benches. That demonstrated the serious concerns about this Bill, right across the House.

There is a strong feeling, echoed externally in our hospices, in hospitality, on the high street and in many other places, that the Bill is not the best way to meet the challenges that the country faces, and that it will endanger the growth we need so badly. However, this is a House of scrutiny, and the other place has taken a different view. As a responsible Opposition, we will not seek to defeat this Bill, no matter how deeply we feel about it. His Majesty’s Government must be able to set their tax policy, and of course we respect that.

I should add that I am grateful to the Minister for his closing words, especially in relation to SEND transport, and for his undertaking to monitor—as I think he said—the impacts and effect of the Bill going forward. We will hold him to that. Moreover, he knows that I and one or two others will continue to encourage the Treasury to learn from all of this and experiment with fuller sectoral assessments in the future.

[Baroness Kramer (LD)]

My Lords, the amendments that underlie Motions A and B that came from the House of Lords were in the name of my colleague and noble friend Lord Scriven. On his behalf, and on behalf of my Benches, we recognise that we have come to end the of the road on this Bill and we will not press for any further amendments.

I will make a couple of comments. I have just come from a fairly extensive meeting with R3, the insolvency and restructuring professionals’ body. Those around the table were telling me of the cascade of small businesses that are already going into voluntary insolvency because of the increasing costs that they face this April. When the Minister says that he will look at evaluating the Bill and its impacts, I hope he will make sure that his view casts across that territory, because it is obviously fundamental to the agenda for growth. Within those discussions, of course, were many private social care providers. A number of the smaller ones—at least three of the practitioners around the table—were dealing with insolvencies triggered over the last few weeks.

From what the Minister said, I hope that he and his Government will recognise that they now need to use other means to step in and shore up the key sectors that are faced with costs they cannot sustain and are therefore closing services which we absolutely need. I hope very much that his commitment to ongoing evaluation will incorporate all of that and be granular—we were hopeful when we heard his words on SEND transport, because that is quite a granular issue—rather than the overarching kind that we have been dealing with in this House.

However, the Minister has always been gracious. I understand that this has been exceedingly difficult and that the Government face very difficult and strenuous times. We recognise that, at this point, we can take this Bill no farther. We thank everyone who has participated, from all Benches, and all the people in our back offices and Whips’ offices who have provided so much support.

Spring Statement

Baroness Kramer Excerpts

Thursday 27th March 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

Let us start by standing back and considering this Statement—which is really an emergency budget—and the Government’s actions more generally against their stated economic objectives. The main one, emphasised by Ministers many times, is growth. Fine—we all want growth. One would expect, therefore, that the Government’s policies and actions would be consistent with that objective, but they are not. First, the Chancellor and other Ministers talked down the economy, ruining morale. Then she chose to put taxes up by £40 billion, depressing animal spirits further and taking tax in the UK to its highest level in the last 50 years. The most egregious announcements were the wholly unexpected jobs tax of £25 billion—devastating businesses and social enterprises such as hospices—and, out of the blue, the farms tax, which imposes IHT on family businesses and undermines confidence across the country.

The Government also gave large pay rises to their friends in the unions, without any productivity strings. Even today, they are proceeding with the Employment Rights Bill, which will undoubtedly have negative effects on the supply side and hence on growth. Interestingly, the OBR has said—ominously, for the Government—that it has yet to take a view on the Bill’s effect on growth, should it pass. If growth is the main objective, the Government’s economic policies are, quite simply, incoherent.

The Government are also in a mess about the position of the OBR. The OBR is given a status by the Government above anything warranted. UK fiscal policy now appears determined by the need to meet detailed targets derived from the Government’s rules and the OBR’s estimates. Instead, the Government need to take informed common-sense choices that promote growth and, crucially, confidence in our economy, using best estimates as a guide to sensible behaviour.

In short, the Chancellor appears, wrongly, to believe that openly fiddling with the numbers to please the OBR leads to positive economic outcomes. It does not. Paul Johnson, the director of the Institute for Fiscal Studies, concluded yesterday by saying that

“the Chancellor has all but guaranteed … another six months of damaging speculation and uncertainty over tax policy”.

It does not take an economist to see that these conditions are damaging for growth, business and people across the country. Our economy needs certainty and stability. The Chancellor’s Statement leaves our country vulnerable, and it will be British business and the British taxpayer who pick up the pieces when her plans come into contact with reality.

My first area of questioning is: how would the Treasury react to adverse events—if, for instance, the UK were to become the victim of tariffs, which seems all the more likely this morning? It has no reserve for a rainy day. The OBR’s model suggests that the introduction of tariffs could

“entirely eliminate the headroom against the fiscal mandate”.

Can the Minister say which taxes the Government would hike, or which services he would cut, to keep in line with the Chancellor’s recklessly tight limits?

We are not in a good place, as can be seen from the numbers published yesterday. Public spending is far too high as a share of GDP. It is forecast to rise to 45% in 2025-26 and will still be at 43.9% in 2029-30, according to the OBR. Moreover, debt interest is at an appalling £101.3 billion, rising to £105.9 billion in 2029-30. The prospects for improving the position are modest. The OBR has halved its forecast for growth from 2% to 1% this year, and growth thereafter remains relatively anaemic, despite some welcome policy changes that I will come on to.

As we have discussed on previous occasions, growth and productivity are intimately linked, and we desperately need productivity to grow, especially in the public sector. The measures announced so far will not go very far to improve it. If we want growth, we need a step change in the public sector and a bigger share of the economy in the more productive private sector.

Defence spending was a key element of the Statement, and we on these Benches support an increase in funding for our Armed Forces. However, the Chancellor has not been clear about how and where the money from overseas development aid is going. Can the Minister kindly clear this up?

We support reform of planning and more housebuilding, on which the growth forecasts depend. However, can this be realised quickly? The plan is to invest £2 billion in social and affordable housing in 2026-27, which is, I understand, lower than the average under the previous Government. I welcome the £625 million to train up to 60,000 more construction workers. However, with my experience of the sector, I have doubts as to whether the proposed changes will speed up planning sufficiently or provide the skills needed in the building and planning trades quickly enough to fill current gaps and fire up major expansion.

We also believe that welfare reform is necessary, but it must be done in the right way and the process in the run-up to this Statement was, frankly, shambolic. For a very complicated subject, this is no way to proceed.

Before I sum up, perhaps the Minister can clear up one puzzle. I cannot understand how the OBR can legitimately assume—see the table on page 10 of the Green Book—that employment is going to rise by 400,000 people this year when everything seems to be going in the opposite direction.

The Chancellor’s decision to leave herself with such little headroom means that the Government’s fiscal policy is not about making the right decisions to support our economy in the long run. It is now about fiscal fine-tuning, which leaves us inflexible, vulnerable to external events and liable to future tax rises—which the Chancellor failed to rule out. Since the Budget, our economy has been wallowing in the doldrums of stagflation. Unemployment is up, the gilt rate has remained sky-high, businesses are staring down the barrel of crippling national insurance hikes, and we face the punitive Employment Rights Bill.

When we discuss all these technical terms and percentages, we need to be clear that what the Chancellor announced yesterday will hit taxpayers in this country hard. They will notice the effects of this Statement in their everyday lives. That includes those who are affected by her welfare changes, those who will be made redundant as a result of her national insurance hikes, and those who may find themselves paying more tax come the Budget later this year. It is these factors which affect living standards. We need to build an economy that supports investment, rather than encourages some of our most talented entrepreneurs to move overseas; to see high levels of employment; to allocate money sensibly to efficient public services; and to show flexibility in the light of external events—thus directly improving the lives of people across our wonderful country.

I am afraid that the Statement delivered by the Chancellor yesterday did not meet these standards. We need a Treasury, and a Chancellor, willing to make the decisions needed to support business, promote growth and confidence, and make Britain productive again.

[Baroness Kramer (LD)]

My Lords, when I listened to the Chancellor yesterday, the only thought that kept chasing through my head was that this is someone who is completely out of touch with the real experience of people today. The whole Statement glossed over a halving of the growth forecast for this year to 1%, and the reality of benefit cuts. These and ongoing high inflation—an average of 3.2% forecast for this year—are pains that people will experience in their daily lives.

The average loss for an individual on PIP is £4,500 a year. According to the Resolution Foundation, a couple on universal credit, where one is disabled and the other is a full-time carer, could lose £10,300 a year.

We all agree that people need to work if they can, but this is not primarily a back-to-work programme; it is a cutting programme. It does not just hit vulnerable individuals; it hits their communities and will have a knock-on effect particularly in disadvantaged areas of the country. It looks to me as though the cuts are very much front-loaded and back-to-work support is back-loaded. Can the Minister tell me if that is correct?

As a result of the cuts, a quarter of a million people of working age will now fall into poverty, and worse, 50,000 children—I am using the Government’s own numbers. Was this really Labour’s goal? Should this not have been the time to revive the bank levy, raise tax on online gambling, close capital gains loopholes and increase the digital services tax? I will say more on that tax in a moment.

Even at the end of the forecast period, despite all the pain, borrowing is expected to be £3.5 billion higher than forecast in October, and the Chancellor will be faced with very little headroom—only £9.9 billion. Can the Minister tell us how much of that headroom disappeared just last night with Trump’s tariff announcements? The headroom also relies on very uncertain expectations of a major increase in productivity. In other words, uncertainty about tax rises and spending cuts will continue; they were not ended by this Statement. That uncertainty will further undermine any possible growth scenario.

Since the focus of this Statement was supposed to be growth, why was there nothing in it for small businesses, which face a crunch in just a few days as the rise in employer NICs kicks in? It is no wonder that the Federation of Small Businesses reports the lowest levels of confidence post-Covid. When the Chancellor spoke of cutting red tape, she could at the very least have focused on the endless Brexit red tape. If she had announced negotiations on rejoining the customs union and removing the current trade barriers, small businesses would be quickly planning a return to exporting and recovery of their roles in European supply chains.

And there was nothing in the Statement to shore up social care, GPs, dentists, hospices and all the services which are crucial to the NHS and to the return-to-work project, but which are making cuts now as higher employer NICs hit home.

I conclude by pressing the Government on the digital services tax. This exists not as some kind of windfall tax or as a special punishment for tech companies; it is a modest attempt to claw back a portion—some £800 million this year—of aggressive tax avoidance by the mega US tech companies. We have just voted into law with the Finance Act an undertaxed profits rule, which would let us claw back much more of that money lost to tax avoidance by this group, in the range of £2 billion to £3 billion a year. However, the Government are now hinting that the digital services tax will be cancelled and the undertaxed profits rule mothballed if they offend the Americans—I refer the Minister to a Treasury press release on 17 January.

The Chancellor spoke, as she should, of reducing tax avoidance by British people and companies, but why should American firms be exempted? Will the Minister give me an answer? Are the Government going to turn a deliberate blind eye to aggressive tax avoidance by the US mega tech companies in the faint hope of winning favour with President Trump, while at the same time they slash benefits to disabled people, burden social care and small businesses, eviscerate overseas aid and need to increase spending on defence?

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

My Lords, I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their questions and comments. Let me start with economic growth, this Government’s number one mission. The noble Baroness, Lady Neville-Rolfe, spoke about the global context in the Spring Statement, and the Chancellor yesterday quite rightly pointed both to the rapidly evolving global threat and to a global economy which is becoming much more uncertain.

The OECD recently downgraded its forecast for every G7 economy this year, and yesterday, the OBR revised down its growth forecast for 2025 from 2% to 1%. The noble Baroness, Lady Neville-Rolfe, blamed this on the decisions taken in the October Budget, which wiped the slate clean and repaired the public finances from the mess that we inherited. They were not easy decisions, but the truth is that they were the right decisions. Imagine if we were now facing this global economic uncertainty with a £22 billion black hole still in the public finances. What confidence would that have given to the Bank of England to cut interest rates? What signal would that have sent to investors about the stability and the resilience of our economy? What flexibility would that have provided for the Government now to increase defence spending in the face of this changing world?

The noble Baroness, Lady Neville-Rolfe, said that we need stability, but she opposes any action to get it. I am afraid that it simply is not credible to say that we should not have repaired our public finances nor rebuilt the foundations of our economy. Are we satisfied with the growth forecast? No, of course, we are not, which is why we are taking the serious action needed to grow our economy in the future and to go further and faster to invest in infrastructure with the Planning and Infrastructure Bill—which the party opposite opposes—and a third runway at Heathrow, increasing investment with pensions reform and a new national wealth fund, and dismantling red tape and burdensome regulation in every sector of our economy. This is a serious plan for economic growth with the right long-term decisions.

The noble Baroness, Lady Neville-Rolfe, focused on future growth, but she did not mention the pleasing fact that the Office for Budget Responsibility yesterday considered and scored one of the central planks of our plan for growth, concluding that our planning reforms will permanently increase the level of GDP by 0.2% by 2029 and by 0.4% of GDP within the next 10 years. That is the biggest positive growth impact that the OBR has ever reflected in its forecast for a policy with no fiscal cost. Again, the noble Baroness, Lady Neville-Rolfe, did not mention that the Chancellor was able to confirm yesterday that the OBR has upgraded its growth forecast next year and every single year of the forecast thereafter, so that by the end of the forecast, our economy is larger now compared to the OBR’s forecast at the time of the Budget.

The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, asked about tariffs. As they will know, we are pursuing an economic agreement with the US, and we are discussing what this means for the UK. That is our focus. We will continue to stand up for free and open global trade, because tariffs would damage both our economies. Those conversations continue. I am not going to give a running commentary, but we should see where we get to in the next few weeks.

The noble Baroness, Lady Kramer, asked me about the digital services tax. The Chancellor said very clearly yesterday that it is up to the UK Government to set tax policy for the UK economy. The digital services tax was intended to be temporary until there was a global agreement as part of pillar 1 and 2 of the OECD agreement, but we believe that companies should pay tax in the countries in which they operate. This is why we introduced the digital services tax in the first place, and our views on that have not changed.

The noble Baroness, Lady Neville-Rolfe, spoke about living standards, but she did not mention that living standards will now grow this year at double the rate expected at the time of the Budget and will rise twice as fast in this Parliament compared to the last. The noble Baroness, Lady Kramer, asked about inflation. Having peaked at over 11% under the previous Government, the OBR forecasts that CPI inflation will average 3.2% this year, falling quickly to 2.1% next year and meeting the inflation target of 2% from 2027 onwards. The noble Baroness, Lady Neville-Rolfe, asked about employment. The OBR expects employment to increase by 1.2 million over this forecast period and unemployment to fall to 4.1% by 2029.

Yesterday, the Chancellor also set out the consequences that increased global uncertainty has had on our public finances, and the noble Baroness, Lady Neville-Rolfe, spoke about the fiscal rules. I was disappointed to hear her follow the Liz Truss path of criticising the Office for Budget Responsibility. The fiscal rules are the embodiment of this Government’s unwavering commitment to ensuring economic stability, because we saw in the Liz Truss mini-Budget what happens when a Government lose control of the public finances. Mortgage rates soared, for which working people are still paying the price. That is why our fiscal rules are non-negotiable and why we will always deliver economic stability.

The Chancellor yesterday restored in full the headroom against the stability rule, moving to a surplus of £9.9 billion in 2029-30. The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, said that this was insufficient, but it is considerably higher headroom than the £6.5 billion headroom left by the previous Government, and we are of course not now carrying a £22 billion black hole in the public finances. We believe that we have got the balance right, and nobody should be in any doubt about how seriously we take the fiscal rules.

The noble Baroness, Lady Neville-Rolfe, asked about the savings from our reforms to welfare. When the Secretary of State for Work and Pensions set out the Government’s plans, she rightly said that the final costings will be subject to the OBR’s assessment. The OBR has said that it anticipates the package will save £4.8 billion in the welfare budget.

The noble Baroness, Lady Kramer, in her assessment ignored the fact that we are investing £1 billion to help people back into work. She also knows that the impact assessment that she referred to does not take into account in any way the consequences of that £1 billion investment; it does not take into account the consequences of anyone getting back into work. She will rightly know that the OBR will do that assessment and come back in the autumn with updated figures.

The noble Baroness, Lady Neville-Rolfe, asked about our spending plans. She said spending was too high, so I would be fascinated to know now where she intends to cut that spending from. The Spring Statement confirms that day-to-day spending is growing in real terms in every single year of the forecast period—by an average of 1.2% a year, in real terms, from 2025 to 2029. The spending review envelope is fully protected. That means we are spending £50 billion more on day-to-day spending in 2028-29 than the previous Government’s plans. I would be interested to know what, of that £50 billion, the noble Baroness, Lady Neville-Rolfe, would like to cut.

In the Budget last October, we increased capital investment by £100 billion over the course of the Parliament, including investing in transport, beginning the delivery of 1.5 million homes, supporting new industries and protecting record R&D funding. The OBR has looked at the growth impact across a decade; it is clear that particularly our capital investments—which the party opposite opposed—will lead to a significant 0.4% increase in growth. We are not cutting capital spending, as the party opposite did time and time again, because that choked off growth.

The noble Baroness, Lady Neville-Rolfe, asked about tax. I know she would not expect me, even if I could, to write the next Budget now. The Government are delivering on the fiscal strategy set out at the Budget last October, and we are going further and faster on growth because our planning reforms show that changes to tax and spend policy are not the only way to strengthen the public finances.

Over the past nine months, this Government have restored stability to our economy, giving the Bank of England the confidence to cut interest rates three times since the general election. We have begun to rebuild our public services with record investment in our NHS, bringing waiting lists down for five months in a row. We have increased the national living wage to give 3 million people a pay rise from next week. The backdrop to this Spring Statement was a world changing before our eyes. The responsible decisions we have taken mean that we can now act quickly and decisively in this more uncertain world to secure Britain’s future and deliver prosperity for working people.