Government Performance against Fiscal Rules

Baroness Neville-Rolfe Excerpts

Tuesday 8th July 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, we on these Benches accept that fiscal rules are important, and we have noted the Government’s attachment to the current version and the widespread concern as to where they will turn for spending cuts or tax rises, as it is apparent that the rules are not going to be met. Today’s OBR Fiscal Risks and Sustainability report concludes:

“The UK’s public finances have emerged from a series of major global economic shocks in a relatively vulnerable position”.


We have heard from the OBR that the UK Government have the sixth-highest debt, the fifth-highest deficit and the third-highest borrowing costs among 36 advanced economies. In November, the Chancellor wrote to the Economic Affairs Committee in response to its robust and convincing report on the UK’s national debt. She said:

“The Budget took the necessary difficult decisions to put the public finances on a sustainable path—setting realistic plans for public spending while raising revenue—to create the conditions for growth”.


In the light of the dismal and depressing OBR report, does the Minister agree that this Statement and the Government’s entire economic strategy are in tatters and that the Chancellor needs to write another, more realistic letter?

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

The noble Baroness mentions many things. She mentions debt. Of course, the last Government doubled the national debt. There is one reason why we are where we are. It is because of the last Government losing control of the economy—something that this Government will not do. We will meet our fiscal rules at all times. I am not going to give a running commentary on those fiscal rules. Following the usual process, the Chancellor will ask the OBR to produce a new forecast in the autumn for the annual Budget, which will include an updated assessment of the Government’s performance against the fiscal rules. At that time, we will set out our fiscal plans in the usual way.

Financial Services and Markets Act 2000 (Regulated Activities etc.) (Amendment) Order 2025

Baroness Neville-Rolfe Excerpts

Monday 7th July 2025 Grand Committee

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

My Lords, I begin by extending my thanks to the Secondary Legislation Scrutiny Committee for the detailed and thoughtful consideration of this draft order in its report published last month; I will respond fully to the points raised by the committee. I also take this opportunity to welcome the support for these reforms from consumer groups, from firms offering buy now, pay later products, and from the Official Opposition, who first initiated the process which has led to this order.

The purpose of the legislation before your Lordships’ Committee today is to protect consumers and provide certainty and stability for business. I will begin by providing a brief overview of the issue which this order seeks to address before outlining the steps the Government are taking to mitigate these harms.

More than 10 million people in the UK now use buy now, pay later products, which allow consumers to pay for goods and services through interest-free instalments over a period of 12 months or less. Fintechs such as Klarna, PayPal and Clearpay typically partner with merchants, predominantly online retailers, which offer their buy now, pay later options to customers at checkout. When used responsibly, these products can help users manage their finances and make purchases more affordable, compared with using traditional, interest-bearing forms of credit such as credit cards and personal loans.

However, unlike these traditional forms of credit, interest-free buy now, pay later products are not currently regulated by the Financial Conduct Authority. This is because they fall under an exemption which was originally designed to help small businesses offer instalment payment plans to their customers: for example, a gym offering a 12-month payment plan.

The 2021 Woolard review, which investigated recent innovations in the consumer credit market, highlighted several potential risks facing people who use unregulated buy now, pay later products.

First, there are no rules on what information firms must give their customers. Too many people are left unclear about what they owe and when they need to repay it—and some do not even realise they have taken out credit at all. The Financial Conduct Authority previously found that nearly a fifth of buy now, pay later users were not aware they would be charged a late fee for missed payments from fee-charging providers.

Secondly, buy now, pay later firms are not required to check whether people can afford these products. This means that credit is being given to those who may not be able to pay it back.

Finally, firms are not required to check what an individual already owes. As a result, debt can quickly mount up when people take out several buy now, pay later products at once. For example, research from Citizens Advice found that almost a third of buy now, pay later users it surveyed had borrowed from elsewhere to pay off their buy now, pay later debts.

The Government believe that action must be taken to address these issues and protect consumers. That is why, under this draft order, buy now, pay later products offered by third-party lenders such as Klarna, PayPal, and Clearpay will be brought into regulation under the Financial Conduct Authority.

Under the new regulatory regime, firms will have to carry out robust affordability checks before lending to make sure that consumers are protected from taking on debt they cannot afford. Consumers will receive clear and transparent information about buy now, pay later products, including what support is available if they face financial difficulty.

In addition, for the first time, consumers will have the right to take their complaints about buy now, pay later firms to the Financial Ombudsman Service, guaranteeing access to fair and independent resolution if problems arise. These are rights and protections that users of other regulated credit products enjoy already; it is only right that users of buy now, pay later products receive them too.

The Government acknowledge concerns raised in the Secondary Legislation Scrutiny Committee’s report that buy now, pay later products offered directly by merchants will not fall under the new regulatory regime. We examined this issue carefully before publishing the order before your Lordships’ Committee. Protecting small businesses from regulatory overreach was central to our approach. Regulating buy now, pay later products offered directly by merchants threatens to capture simple, interest-free instalment plans, such as the gym membership example that I referenced earlier. Regulating these arrangements, which small businesses routinely offer to their customers, would create unjustified disruption for countless small businesses and their customers, imposing regulatory burden without sufficient evidence of consumer harm to support it. The Government are also confident that there are robust existing protections in place to safeguard consumers using merchant-offered buy now, pay later products; current consumer protection laws covering advertising, financial promotions and unfair trading practices apply to these products already.

Finally, our assessment is that it is inherently unlikely that many merchants will offer their own products because of the associated credit risk and the accrual of new liabilities on their balance sheet. Instead, we believe that many would be minded to create a subsidiary to supply the credit or to partner with separate credit providers—both of which arrangements would fall under the scope of these changes. We will, however, continue to monitor this market closely with the Financial Conduct Authority and through our regular industry engagement, and, if we see evidence of potential consumer harm, we will not hesitate to act.

The second key aspect of this order relates to the Consumer Credit Act 1974. The Secondary Legislation Scrutiny Committee’s report questions whether the Government should consider whether definitions in that Act can be amended to distinguish between low-risk buy now, pay later products offered by small businesses, such as private gym memberships, and buy now, pay later products offered by large-scale merchants. The Government agree that this is an important issue, which is why the forthcoming consultation on Consumer Credit Act reform will seek input from stakeholders to ensure that any potential changes we make to these definitions are appropriate.

I want also to touch briefly on the other provisions in the order as they relate to this Act. The order before us will ensure that users of buy now, pay later products will have protection under Section 75 of the Consumer Credit Act, making it easier to receive a refund if a supplier breaks a contract or misleads the customer. Under the current laws of contract, customers can seek compensation for defective goods or services only from the supplier for breach of contract. Our changes will strengthen consumer rights by making buy now, pay later lenders equally responsible for problems with purchases when they have provided the credit. This will give consumers a key statutory right enjoyed by users of currently regulated credit products.

Separately, consumers will also now receive clear and relevant information about buy now, pay later products, including details about what they owe and when payments are due. The new requirements will be set by Financial Conduct Authority rules, rather than the Consumer Credit Act. This change reflects feedback from both industry and consumer groups that current provisions on information disclosure do not suit interest-free, short-term buy now, pay later products. Although these changes will apply only to buy now, pay later products, the Government have also launched a consultation on reform of the Consumer Credit Act itself, which we are committed to doing at pace; the consultation includes proposals that would see the wider consumer credit industry benefit from modernised information disclosure requirements, too.

I turn finally to the impact of these changes on firms offering buy now, pay later products. The Government’s intention is that, while the changes outlined today will help protect consumers, they will also benefit providers. For years, buy now, pay later firms have faced regulatory uncertainty, stalling their growth and investment in the UK. This order ends that uncertainty and allows firms to innovate and invest in the UK. To ensure a smooth transition to the new regime, firms will also be able to continue lending under a temporary permissions regime while their Financial Conduct Authority authorisation is under review.

Twelve months after this order is made, the new regulatory regime for these products will come into force. In that time, the Financial Conduct Authority will consult on and finalise the rules that will govern buy now, pay later lending. The changes laid out in the draft order are fair, responsible and proportionate, and we are determined to deliver them promptly to protect consumers and to provide certainty for businesses. I beg to move.

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the Minister for introducing this order and for his thorough summary. It is an important measure, and the Committee is surprisingly thin today.

Borrowing with a defined repayment period is a long-standing practice, with many well-established advantages that most of us have benefited from: for example, in respect of mortgages on our homes. It is a good thing that innovation—buy now, pay later—has developed the lending market but, as always, we need to have an eye on the potential downsides. In this case, that refers above all to the possibility of unsophisticated borrowers getting into financial trouble, probably because of an inaccurate assessment by lenders of the likelihood of any loan being repaid. I accept that in such cases a degree of protection may be justified. That is the philosophical and economic background.

However, there is a need for balance so that regulation does not simply close down the borrowing arrangements, which will make life harder for hard-pressed consumers and will risk pushing them into the hands of loan sharks. Another concern is the impact on small businesses, whether in financial services or retail, which we need to protect from overburdensome regulation. The spark of enterprise risks being snuffed out by this Government if they are not very careful about how they treat the smaller operators. Excessive red tape will simply reduce the services available to consumers and increase costs and prices.

Over the past few years, consumer spending habits in the UK have undergone a significant change. There has been a surge in the use of buy now, pay later schemes, with 14 million consumers recorded as using the agreements in the six months leading to January 2023. This is, however, still a much smaller market than credit cards. We recognise that there are growing concerns about consumer harm in the sector, with 44% of frequent users of such schemes overindebted in 2022, according to an FCA survey. Misleading promotions, lack of affordability assessments and the possibility of accumulating high debts are examples of the potential harms identified for consumers.

Under the previous Government, the 2021 Woolard review proposed the urgent regulation of buy now, pay later payments, but we did not have time to carry this through to completion, so I welcome today’s statutory instrument, which builds on this legacy and addresses lending practices that could harm consumers if they remain unchecked. The proposed order will require buy now, pay later product lenders to be authorised by the FCA, which will give consumers a wider range of protections, including access to the Financial Ombudsman Service for redress.

The instrument also requires firms to carry out affordability checks on borrowers and offer clear product information to consumers to prevent unaffordable borrowing. The proposed order rightly offers more protection for consumers, but we must also be sensitive to business voices operating in the buy now, pay later market. We must be conscious that being subject to FCA rules is not a walk in the park. I speak as a former non-executive director of a challenger bank. So I would like the Minister to explain how the FCA plans to develop and implement the buy now, pay later rules over the next 12 months and who they will affect. For example, would Klarna or Clearpay do all the consumer checks, or would they also pose a burden on the retailer—Boots, for example, or a specialist online retailer of the kind the Minister mentioned?

I also need an assurance that the regulator will have the capacity, and indeed the will, to approve the three significant suppliers and the others that are caught by the new regulations, and to do so comfortably within the 12-month timeframe. It will take time to develop the rules on creditworthiness and affordability, and a year is not long. In my experience, the FCA is much more concerned about its consumer duties than keeping business running and innovating. In the helpful impact assessment on this order, the compliance costs are assessed at some £19 million to £32 million over 10 years. This estimate seems far too low to me, from my experience of dealing with FCA regulation in three different entities. Of course we need to do the right thing, but the regulatory and legal costs in financial services such as these continue to mount, and that then hits innovation and growth.

So I would welcome some reassurance from the Minister on this score and an undertaking that there will be continued engagement between the industry and the Financial Ombudsman Service, because that can also be a vehicle for delay and inconsistency. To put the change in perspective, I would also appreciate an update on the current level of over-indebtedness by frequent users—the worrying figure of 44% that I quoted from 2022—and an indication of the proportion of the total number and value of buy now, pay later borrowers that they represent. I am interested in how many indebted purchasers there are and how significant in number they are in the big scheme of things.

--- Later in debate ---

[Lord Livermore (Lab)]

My Lords, I am very grateful to the noble Baroness for her comments and questions and for her support for these measures which, as she says, build on what the previous Government began. She rightly set out the importance of buy now, pay later products and pointed out the potential downsides, which we absolutely agree on, regarding borrowers getting into trouble and the need to prevent that. She also talked about the need for balance. She is right that the action that we take should not in any way close down an important route for consumers.

As I said in my opening remarks, these measures have been welcomed by consumer groups. Although these products can help people manage their finances by spreading the cost of purchases, they can put consumers at risk, particularly from unaffordable lending. The FCA will be able to apply appropriate, proportionate rules on assessing creditworthiness and affordability for buy now, pay later lending, so I am confident that it will not unduly close down these routes. It has been welcomed by the providers and consumer groups. The Government are committed to proportionate regulation.

On that point, the noble Baroness went on to talk about the impact on small businesses. Again, they have welcomed this measure to avoid the overly burdensome approach and the regulatory creep she spoke about. That is exactly why protecting small businesses from regulatory overreach was central to our approach. Regulating these products, offered directly by merchants, threatens to capture the simple gym membership example that we talked about. I am happy to give her those assurances on the approach and the way the FCA will approach that.

The noble Baroness asked a number of questions about the FCA and the next steps on regulation. Regulation will commence 12 months after this legislation is made. The FCA will consult after the legislation is finalised. The consultation will include the FCA’s proposed conduct rules for regulating buy now, pay later. The FCA will then consider stakeholder feedback and decide whether it needs to amend its proposed approach before making its final rules. Firms will need a period in which to digest and prepare for the final rules before they come into force. The FCA is keen to give industry as much opportunity as possible to prepare its systems and processes before the final rules come into effect. The FCA intends to publish its policy statement and final rules in early 2026.

The noble Baroness asked about capacity and my confidence in the FCA. Obviously, that is complete. The FCA is an independent, non-governmental organisation. Its independence is vital to its role. However, it is fully accountable to the Government and Parliament for how it exercises its functions. This accountability is critical to ensuring it advances the objectives given to it by Parliament and is performing optimally. Ministers in the Treasury have a very close working relationship with the FCA. We work together very effectively to solve problems and are able to exchange views frankly.

The noble Baroness asked about the second consultation process. Although the consultation is split into two phases, the Government intend to implement the reforms via one legislative vehicle when parliamentary time allows. Once the legislation is in place, the FCA will consult on a policy approach and draft rules for a reformed regime.

The noble Baroness also asked about exemptions, which I think I touched on. As I said in my opening remarks, we absolutely have the intention to keep these under review and if further action is required, we will not hesitate to act. I think I have covered all the points that she raised.

[Baroness Neville-Rolfe (Con)]

The one point the noble Lord has not really touched on is growth and innovation, but I take it from the points he normally makes that he sees this sitting within that context. I think the Chancellor sent a letter to the FCA some months ago encouraging an approach to growth in the way it regulates. So he is right that it is independent and does its own thing but, equally, it is important that it minimises bureaucracy and tries to be efficient and helpful, because it plays such an important part in the economy and with business, but also in protecting consumers.

[Lord Livermore (Lab)]

I completely take what the noble Baroness says; my apologies for not covering that in my initial response. The intention with these specific measures is to be proportionate. That is why we responded in the way that we did to the scrutiny committee, for example. These measures should boost growth and investment. There has been uncertainty in the sector for too long and we are now correcting that.

The noble Baroness is absolutely right about the wider response to the regulation. In her first Mansion House speech, the Chancellor set out very clearly that she wanted to see us regulating for growth rather than risk, and for the pendulum to swing slightly further back the other way. The Chancellor has her second Mansion House speech next week; I am sure she will have more to say on that point then.

Unpaid Tax

Baroness Neville-Rolfe Excerpts

Monday 7th July 2025 Lords Chamber

[Lord Livermore (Lab)]

Yes, those discussions are ongoing.

[Baroness Neville-Rolfe (Con)]

My Lords, at the end of 2024, it was reported that HMRC injected an extra £300 million into its compliance and fraud operations. Estimates suggest that these teams now have nearly 28,000 staff—which probably includes some of the 5,500 the Minister mentioned. What is the estimated cost benefit of this significant investment? Will the Minister agree to report to Parliament on the cost and on the tax actually recovered on a regular and consistent basis? We all want to see the success of this initiative.

[Lord Livermore (Lab)]

We have committed an average of £660 million each year on measures to do so. By the end of the Parliament, that will raise an additional £5.7 billion per year. That is quite a good cost-benefit ratio. Each Budget will report progress against that.

UK Infrastructure: 10-year Strategy

Baroness Neville-Rolfe Excerpts

Tuesday 24th June 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, it is widely accepted that one of the problems that besets the UK economy is the low rate of capital investment in both the public and private sectors. It must be a good thing if the Government assess what will be needed in the way of capital investment and attract resources accordingly. I accept that, for many years, policies on all sides have been less than satisfactory, and I am not in a party-political mode today.

I am in favour of having a planned programme over a planned period, such as a five-year timeframe for capital spending. I welcome the new maintenance fund. My experience in business is that it is essential to provide for maintenance in respect of all capital investments. Having said all that, we are some way from having a coherent and detailed programme for future infrastructure, with the incentives that we need for success. Against that background, which is broadly supportive, I have a number of questions for the Minister.

There remain areas of uncertainty around governance, delivery, capacity and funding. It would be helpful if the Minister could explain how and when these vital details will be revealed in future. It is really important to be clear, at a time when we are often reminded by the Government of the fiscal challenges they face, where the money is coming from.

It appears from the strategy that the Government hope that a substantial portion of this investment will come from off-balance-sheet public/private partnerships. Does the Minister recognise that this is an assumption from the Treasury rather than a hard pledge of cash? If sufficient private investment is not secured, does the noble Lord plan to use public money to fill the gap, or will the Treasury consider legislation to compel private funds to invest in government programmes—an approach that will deter investors in the UK?

Incorporating private finance into the new strategy is a welcome ambition, and I am glad to see the readiness to learn from the past. However, we must ask what changes the Treasury will make to how it engages in PPPs, given the failings around HS2, Metronet and Norfolk and Norwich hospital, to make sure we do not encounter these problems again.

Furthermore, the question that my honourable friend Richard Fuller raised in the other place was not properly answered. What proportion of the £725 billion is newly committed, as against previously announced money? As noble Lords will be aware, investment on this scale and across these timeframes must come with assurances of continuity and origin. I hope that the Minister can address these questions in his response.

The focus in the strategy is, rightly, centred on delivery. One important area in the strategy is housing. The Government have signalled their ambitious intention over the next five years to contribute 1.5 million new homes to the national stock. But the strategy actually funds 580,000 homes over 10 years through Homes England, an average of some 50,000 homes a year. Even on the lowest net migration forecast—350,000 a year—this is far below what is required each year just for migration-driven growth in housing demand. This is not the whole housing picture. However, our concern is that this offers so little net gain for current households waiting for a home. We will explore this further during the passage of the planning Bill, but I would welcome any clarification that the Minister can offer today.

Another area is aviation. The strategy and recent government announcements around aviation are welcome, both on infrastructure and on things such as aerospace redesign. However, as a recent debate in this place highlighted, limitations in the Government’s broader strategy around things such as the European geostationary navigation overlay service, EGNOS—known as the GPS on steroids—mean that these changes will have only a limited impact. Airports such as Exeter, Shoreham and Inverness previously relied on EGNOS to avoid costly infrastructure upgrades but will incur greater costs because they are no longer party to this service.

Does the Minister agree that we need to make sure that, alongside the new spending, we are pursuing non-fiscal policies that enable it to be effective? A key area is skills, which barely get a mention in the 10-year strategy. Yet I know from my time as chair of the Built Environment Committee and as a developer at Tesco that skills in construction, planning and environmental and community engagement matter a great deal. We have become increasingly short of the skills we need to build the hospitals, roads, railways, nuclear facilities, housing, prisons and water and flood defences that we need for a successful country and a successful strategy. I know from the Cabinet Office that, despite the very welcome advances in IT and AI, there is just not enough capacity in terms of skills or supply chains to build all we need. Is this something that concerns the Minister, and what plans does he have to solve the problem?

All of this speaks to the wider question of how we make sure that this money is spent intelligently to deliver value for money, and in a way that grows our economy and promotes productivity. A fundamental question is what our projected return on investment for this strategy actually is: £725 billion, albeit over a long period, is a great deal of money, so our net benefit must also be substantial in order to justify it. I hope the Minister can clear that point up for us.

A related question is: what sort of assessments went into choosing the areas to spend on? Transport spending is welcome, but is the Minister directing investment into the forms of transport that local communities benefit from the most, or does he risk further white elephants? How have the choices been made? Ensuring that we spend infrastructure money wisely, strategically and with an eye to the future is essential if we are to see the sorts of improvements in growth that the Chancellor and the whole country want. In doing so, we must target spending, combine it with wider enabling policy changes and ensure that we do not allow reforms to the Green Book and to local investment to lead to funding for white elephants.

We support the ambition behind this strategy. Long-term investment in infrastructure is a vital step if we are to address the real challenges facing our economy, our services and our communities, but this cannot be an exercise in headline figures or lofty announcements. If this plan is to succeed, the Government must show how the money will be secured, how it will be spent wisely and how it will deliver, for each project, tangible long-term benefits across the whole country—not just for now but for a changing economy and for future generations. How this policy fits in with yesterday’s industrial strategy will also be a vital consideration that we will examine carefully.

[Baroness Kramer (LD)]

My Lords, like my colleagues in the other place I welcome this strategy, which if well managed can significantly improve the UK’s potential for growth. My colleague, the MP Sarah Olney, who responded to this Statement in the other place, focused very much on the absence of a serious discussion of skills in the paper. She did not get a very satisfactory answer. I hope that we will hear something more from the Minister today, because that is the Achilles heel of a great deal of this Statement. However, I am going to focus not on the specific projects or on the issues that were covered in the other place but on some critical aspects of the financing.

As the noble Baroness, Lady Neville-Rolfe, indicated, the strategy proposes an updated version of public/private partnerships. I was recently privileged to chair a round table. Under Chatham House rules, I cannot tell you who was there by name, but there were leading developers, contractors and, basically, the money. To my amazement, and completely in contrast to most public statements, everyone started out by arguing against such a flawed model. Through an hour’s discussion, we identified some conditions under which a PPP could work. I will happily share that report, when it is prepared, with the Minister. The most significant condition was that the public sector has to field an educated buyer team with world-class negotiating skills, with world-class engineering, legal and financial knowledge in support. According to the people we talked to, such teams have not been in evidence.

The second most significant condition was that the projects must be specified in very fine detail, far more so than for a conventional financing and, especially if outcomes-based, allowing only for minimal variances. This condition, which many people will agree is essential for successful PPPs, seriously limits the eligible projects. I would like to hear from the Minister how much of a gap this might mean if these issues are pursued, as I hope they will be.

My second finance issue is specific to London, which will not receive government funding for much new infrastructure, even though it drives the national economy. If that is to be the case, London needs to be able to go directly to the financial markets at scale, to raise money against future value added, to build projects—and without the constraints associated with the current tax increment financing schemes, which are heavily laden with Treasury control. Once refined, this could extend to other parts of the country. I stress the urgency of dealing with this issue. London is the UK’s golden goose.

My last issue is to warn the Government again against abusing the regulated asset base as a mechanism to finance small modular nuclear reactors. In the Conservative era, the estimate that we were given on the Economic Affairs Committee for the then Government’s plans was an £80 increase to annual energy bills for ordinary people—£10 for each of eight SMRs. It was clearly an underestimate then and would be even more so now.

Does the Minister agree that the ordinary bill payer must not be treated as the stuffee—believe it or not, that is the common-parlance term—who must carry the risks and costs while others take both the immediate and future profits?

Business Rates Reform

Baroness Neville-Rolfe Excerpts

Monday 23rd June 2025 Lords Chamber

[Lord Livermore (Lab)]

I am very happy to take that away and discuss it with my colleagues in MHCLG.

[Baroness Neville-Rolfe (Con)]

My Lords, we on these Benches broadly support BIDs and would not want to upset the good arrangements that exist. I welcome the Minister’s assurances on these issues, as far as they go, but could he undertake to come back to the House and inform us if developments suggest that their future is in doubt, given their importance right across the country?

[Lord Livermore (Lab)]

Yes, absolutely, although I do not quite see why their future would be in doubt; as I said, we have set out our intention to strengthen them. We will bring forward proposals to do exactly that. I do not see that the wider business rates reform agenda we have set out would in any way impact the important work that they do.

Spending Review 2025

Baroness Neville-Rolfe 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?

Winter Fuel Payment

Baroness Neville-Rolfe Excerpts

Thursday 12th June 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. He knows much more about the tax and benefits system than I do, I suspect, having spent many more years working on it than me. The answer to his question is that it is the latter: it is up to and including £35,000, so it will be at £35,001 where that happens. At that point, they will lose the winter fuel payment in its entirety.

[Baroness Neville-Rolfe (Con)]

I am glad of the opportunity to wish the Minister a happy birthday from these Benches.

We welcome the decision by the Government partially to reverse their decision on the winter fuel allowance. That will ensure that our oldest and most vulnerable citizens are better protected through the dark and cold of the winter months. However, when he answered questions before, the Minister did not adequately answer how this £1.25 billion reversal will be funded. Can he tell us today whether it will result in further tax rises, in departmental spending cuts or in increases in borrowing, and, if not, where the money will come from?

[Lord Livermore (Lab)]

I am very grateful to the noble Baroness for her kind words. We are setting out these changes now to ensure that more pensioners are able to receive support this winter. That is important. As she knows, we have moved to just one fiscal event a year, so, as is now normal, these changes will be fully funded at the next fiscal event, which is the Budget in the autumn. This will ensure that final costings and funding decisions come alongside a full forecast from the OBR—something that the previous Government did not do—and we will ensure that the fiscal rules are met at all times.

Economic Growth

Baroness Neville-Rolfe Excerpts

Wednesday 11th June 2025 Lords Chamber

[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.

[Baroness Neville-Rolfe (Con)]

My Lords, the Government’s tax hikes last year are believed—by the Bank of England, no less—to have reversed the frankly anaemic growth we have seen in the last couple of months, and we shall see what happens in the coming months. Since growth is the Government’s stated economic priority, which I agree with, it is unfortunate that today’s Statement by the Chancellor does so little to improve the position—for example, by boosting productivity across the economy. How do the Government plan to improve the situation, particularly in the coming months?

[Lord Livermore (Lab)]

My Lords, the noble Baroness says that growth was anaemic under this Government. As I said before, the UK was ranked seventh out of seven for projected 2025 growth when this Government took power but is now the fastest-growing economy in the G7. We all know what the Tory record on growth was; had the economy grown over their 14 years at the average of other OECD economies, it would have been £150 billion larger. The noble Baroness asked what was in the spending review to boost growth. I have already listed some of the measures: record investments in housing, R&D, transport and skills, more money to reduce inactivity, more money for childcare, access to finance and a record investment in nuclear. Every single penny of that her party opposes. She says she supports growth, but she does not support a single one of the measures to get it.

Social Care and Special Education Charities: Employer National Insurance Contributions

Baroness Neville-Rolfe Excerpts

Monday 9th June 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the right reverend Prelate for his question. The answer is yes; I think I committed to doing so during the during the legislative process of that Bill. As I said then, the Government do not expect the changes to national insurance to have a significant impact on home-to-school travel for children with SEND. The Government have increased funding for the core schools budget by £2.3 billion, increasing per-pupil funding in real terms in 2025-26, and £1 billion of this funding will go towards supporting the special educational needs and disabilities system. The Chancellor will set out funding for schools as part of the spending review on Wednesday.

[Baroness Neville-Rolfe (Con)]

My Lords, the fact is that these increases have devastated the charitable sector. For example, Noah’s Ark Hospice in north London said recently that the rise in national insurance represented

“basically a £100,000 tax on us that we hadn’t budgeted for”.

Yet the need for these services has never been greater, as the Minister has just acknowledged. Will he assure the House that the Government will not increase national insurance contributions again and that his review will look sectorally in detail at the effect on charities, hospices and social care before the next Budget?

[Lord Livermore (Lab)]

On the first half of the noble Baroness’s question, as she knows, as part of the changes to national insurance, the Government recognised the need to protect the smallest businesses and charities, which is why we more than doubled the employment allowance to £10,500, meaning that more than half of businesses with national insurance liabilities will either gain or see no change this year. The Government provide a great deal of additional support to charities via our tax regime, which is among the most generous anywhere in the world, with tax reliefs for charities and their donors worth just over £6 billion for the tax year to April 2024.

Regional Growth

Baroness Neville-Rolfe Excerpts

Thursday 5th June 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, the Statement given in the other place yesterday made many references to the benefits of growth, and the Chief Secretary to the Treasury could hardly contain his excitement when he said that increases in regional productivity could grow the economy significantly. We on this side of the House would of course welcome the prospect of economic growth. However, although the Statement mentioned “growth” nine times, there was little to no detail on how these proposals would in fact boost our economy.

One vital question is whether this level of investment—if it is in fact new money—will require an increase in taxation, given that national debt is already at around 100% of GDP. As we know from the country’s experiences with inheritance tax and the NICs hike, tax rises are bad for growth and bad for our economy. I hope that the Minister can provide the House with some clarity on this question. Can he confirm to the House what the net figure is for the projected cumulative impact of this policy on British economic growth by the end of the Parliament? Can he assure the House that this policy will not be met through any new or increased taxes?

This Statement also gives me a sense of déjà vu, because the measures announced are incredibly similar in scale and form to the funding announcements made by the previous Government under the City Region Sustainable Transport Settlements in 2023. In 2023, we promised £2.64 billion for the West Midlands, and the Government have announced £2.4 billion for the West Midlands. We promised £2.1 billion for West Yorkshire; now, the Government have announced £2.1 billion. We promised £2.5 billion for Greater Manchester; they have announced £2.5 billion. Indeed, much of this investment touted by the Government appears to have been recycled—money already announced in different forms under previous schemes and now repackaged. This needs careful examination. Perhaps the Minister could help us here with an honest assessment.

The Government quote the Green Book, which they are revising to give more opportunity for projects outside the south-east—so a change in the way value for money is approached. Given that this has already been briefed to the media, what are the key features here and have the projects announced yesterday been assessed on the old or the new basis? How will the rules be honed to avoid Whitehall-inspired or ministerially-inspired white elephants?

I had the honour of chairing the Built Environment Committee, with many from across the House, and leading its work in 2022 on Public Transport in Towns and Cities. We found that nearly two-thirds of journeys on public transport were by bus. What do the Government’s plans do for bus funding? I am less interested today in the rapid bus routes planned for Liverpool than in basic bus services that so many people take to work, especially when they live outside our cities and commute. The Government have increased the maximum £2 fare that we introduced and have not guaranteed its long-term future.

The committee also found that light rail schemes—basically, trams—are very expensive but that very light rail systems such as that in Coventry, and bus rapid transit schemes, had more potential and needed to be assessed and compared. What have the Government concluded about the balance here, and how is that reflected in yesterday’s package?

We support infrastructure investment when it is targeted, timely and impactful. But what we heard from the Chancellor and Chief Secretary yesterday was less of a plan and more of a press release. The funding, spread over nearly a decade, will not begin in earnest until 2027. That is two years from now before the money leaves the Treasury. For communities in the Midlands and the north, this will sound like delay dressed up as action.

Can the Minister confirm when we will see the effect of this policy reflected in regional and national growth and productivity rates? Can he assure the House that businesses in the areas identified will see a tangible improvement in their day-to-day operations as a result of these spending decisions? After all, it is business, not government, that is more productive and the main driver of growth.

The noble Lord and I agree on the importance of productivity growth. However, to achieve the £86 billion productivity improvement in cities cited in the Statement requires much more than this largely welcome transport investment. We need a revolution in skills, innovation, digitalisation and public sector efficiency, and to solve the problem of uncompetitive electricity prices crippling our industries, especially in the very regions we are talking about today.

Finally, I must raise a note of caution on the fiscal front. At a time of considerable pressure on the public finances, we must be clear-eyed about priorities. A commitment of this scale, without clear delivery mechanisms or clarity on the projected economic returns, risks becoming a drain rather than a driver. Transport investment must support productivity, growth, and value for money. It must not become an uncosted political gesture, reliant on anti-growth decisions such as tax hikes. It is incumbent on the Government to be responsible in the steps that they take, so I look forward to the noble Lord’s answers today and to next week’s spending review, when we will return to some of these issues.

[Baroness Pidgeon (LD)]

The Liberal Democrat Benches fully support measures to grow our economy across every nation and every region. We therefore welcome this Statement detailing planned investment in public transport and infrastructure. It is good to see not just plans but the money set aside for some city regions, giving long-term transport financial settlements. Frankly, that is the only sensible way to ensure investment in transport infrastructure, rather than the constant stop-start begging-bowl approach we saw with the previous Government, which benefits no one and delivers nothing. For too long, communities have heard promises only, to be left with phantom transport networks, so investment in transport infrastructure is vital if we are to grow our economy and create access to jobs across the country.

In particular, we are very pleased to see the Metrolink to Stockport in this announcement, which is testimony to the hard work of the local Liberal Democrats, who have been campaigning and working on this issue for many years—indeed, long before the mayor and the combined authority were created. However, we have a number of questions. It seems that areas without mayors are being left behind or ignored. Where is the plan and money for rural areas? There are parts of the south-west, for example, which would benefit hugely from transport infrastructure investment, yet this area has been ignored in this Statement. It feels as though Bristol is as far west as the Government can see.

Whether it is Cumbria, Shropshire, Norfolk, Devon or Cornwall, there is nothing in this Statement for them, so what plans do the Government have for a rural growth strategy? What funding is planned for our railways as they come under public ownership? There is a desperate need for major investment across the network to enable more frequent trains to serve our communities. Will there be a railway investment plan? Will the Mayor of London and Transport for London be allocated further funding to maintain and grow the capital’s transport system, creating jobs across the country?

The cost of fares is a real barrier to many people. What plans are there to reduce fares—in particular, to reinstate the £2 bus fare cap—and to reform rail fares to make them affordable for passengers? Alongside the investment in infrastructure, there is the challenge of the skills and workforce issues. What plans do the Government have to ensure that we have the skilled and trained workforce to build this transport infrastructure, including fixing the apprenticeship levy? This is a welcome first step, but key questions need to be answered to ensure that every area can grow and prosper.

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

I am very grateful to both noble Baronesses, Lady Neville-Rolfe and Lady Pidgeon, for their questions, and I welcome the noble Baroness, Lady Pidgeon, to her place and look forward to speaking with her in many more of these debates.

The noble Baroness, Lady Neville-Rolfe, asked a number of questions. She started by asking about growth. I noticed that she did not mention that, in this quarter, the UK is the fastest-growing economy in the G7. I noticed that she did not mention that our growth forecasts have just been upgraded by the IMF. I noticed that she did not mention that, in many business surveys, business confidence is now at its highest level for many years. I hope that, when she talks about growth, she will always give a rounded picture of where we are on growth.

She asked whether these measures will contribute to regional growth, and yes, of course they will: that is the whole point of them. For too long, we have relied on just one part of the country to generate economic growth. We need to make sure that more parts of our country are contributing to growth and more people throughout our country are feeling the benefits of that growth. That is absolutely why we are doing what we are. It is why we started with connectivity: because we know that connecting city regions is incredibly important, enabling more people to travel to work, connecting labour markets and connecting businesses to more places so that they can sell more goods to more people. That is absolutely central to what we set out yesterday. The answer to the question, “Will this contribute to growth?” is: yes it absolutely will. We saw in the Spring Statement the OBR, for example, scoring for the first time some of our growth measures, and of course we hope that it will continue to score our growth measures going forward.

She asked: is this new money? Absolutely, yes—yesterday, we announced £15 billion of new money. It is the biggest ever investment by any British Government in our regional transport network. As a result of the fiscal rules and the difficult decisions that we have taken, we are in the spending review increasing the overall amount of spending by £300 billion: £190 billion on day-to-day spending and an increase of £113 billion on capital spending. I noticed that the noble Baroness, Lady Neville-Rolfe, welcomed—slightly half-heartedly—what we announced yesterday. It is notable that she welcomed the additional spending, but she has at no point welcomed any of the difficult measures we have taken to raise that money so that we can spend it on the things that she is now welcoming. I think that her shadow Chancellor is today making a speech where he is seeking to distance himself from the Liz Truss approach from the previous Parliament. Yet it seems to me that the party opposite is repeating exactly the same mistakes of the Liz Truss mini-Budget of spending money that it does not have. I think that is a huge risk going forward. As I say, she has welcomed this spending, but she has opposed every single measure we have taken to raise the money to fund it. She asks: will this policy require any additional taxes? No, because we have already raised the taxes in the last Budget—£40 billion—to enable us to spend this money for the rest of this Parliament. So yes, these measures will be met within the envelope that was set at the last Budget.

The noble Baroness said that these are the same measures as the previous Government announced. She kept using the phrase, “We promised”. I think that is a really important phrase because, yes, the previous Government did promise many things, but they did not put a single penny of funding behind any of the promises made. The big difference between what we are doing now, what the Chancellor announced yesterday, and what the previous Government announced, was that they made lots and lots of promises that they never funded—not with a single penny of funding. She will have heard me refer to the £22 billion black hole in the public finances. That is exactly why that black hole occurred. What we announced yesterday was real funding for real measures going forward. That is the big, fundamental difference. She asked for an honest assessment, and I think I would call for some honesty from her too that the previous Government did not fund any of those promises.

She asked about the Green Book. We have set out that the Green Book was used by previous Governments against regional authorities and local mayors as a reason not to invest outside London and the south-east. We have changed that methodology. We will set out in the spending review next week the full details of that review, and I look forward to discussing the full details of that with her.

She said that funding would not be seen for two years from now. Of course, there was no funding seen under the last Government at all, so of course we have to start somewhere and we have to get the money out of the door—she is absolutely right. But spades will be in the ground in this Parliament, and we absolutely confirm that.

She asked: will we see improvements for business? Yes, it is absolutely the purpose of this announcement to connect businesses to more areas. It is why local transport networks are so vital and why we have started where we are. She talked about the fiscal front, and I completely agree with her. Of course there are increasing pressures, but that is why I say to her that we must not make promises that we cannot afford. The previous Government did exactly that; we will not make that mistake.

I am very grateful to the noble Baroness, Lady Pidgeon, for her welcome for the long-term nature of these announcements, and it is obviously great that national government is working with local government and local government leaders to deliver on these promises. She called it a welcome first step, and I would agree exactly with that sentiment. We were very clear about what we were and were not announcing yesterday. Yesterday, we were announcing the connectivity of city regions, so of course this focused on certain city regions. Next week, we will set out in the spending review the entire regional plan for growth: for the rest of England, Scotland, Wales and Northern Ireland. That is what we will do, but yesterday we were talking purely about the connectivity of city regions, and we were putting the transport connectivity first, because we know that that is the essential underpinning for so much else in our growth strategy.

She touched on a number of other things that are important to growth. She talked about skills, for example. I completely agree with her when it comes to skills. We will be setting out in the spending review, and then in the industrial strategy in the weeks following the spending review, the measures that we are taking. She talked about having the workforce to build this transport infrastructure. Absolutely: I completely agree with her on that point. She asked about funding for railways, the rest of the country and regional plans, and about the Mayor of London, et cetera. All those questions will be addressed in the spending review next week, and I look forward to discussing that with her and other noble Lords next week.

[Baroness Neville-Rolfe (Con)]

Will that include buses?

[Lord Livermore (Lab)]

It will include buses too, of course.