Spending Review 2025

Baroness Penn Excerpts

Thursday 12th June 2025 Lords Chamber

[Lord Livermore (Lab)]

My noble friend is absolutely right, and I pay tribute to the expertise that he brings to this question. In the summer of 2024, at the time of the election, prisons were operating at over 99% capacity. Clearly, the previous Government, as I was saying before, did not believe in investment spending, because they kept cutting it. Our social fabric was in a terrible state when we took over. We are having to do a lot of investment spending now to make up for the damage done over 14 years. The Government in this spending review are providing £7 billion to deliver 14,000 new prison places by 2031.

[Baroness Penn (Con)]

My Lords, today’s growth figures make tax rises in the autumn all the more likely, but one rise that we do not have to wait for is the 5% increase to council tax each year planned for in this spending review. The Minister will know that council tax is a regressive tax. He will also know that this is the biggest increase since the 2001 to 2005 Parliament. Can the Minister confirm to the House how much a 5% growth in council tax each year will cost the average working family?

[Lord Livermore (Lab)]

The noble Baroness says that we do not have to wait for it. She is absolutely correct: we do not have to wait for it because her Government introduced it. A 5% cap in council tax is something introduced by the previous Government—we have not changed that. It is a cap. Councils do not have to increase council tax by 5%, but, under the rules, they cannot increase council tax by more than 5% without a local referendum. We have not changed that. That is to invest in things such as social care, but also, as is normal, to put money into policing.

Winter Fuel Payment

Baroness Penn Excerpts

Tuesday 10th June 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to my noble friend for what he says. Over 12 million pensioners are now benefiting across the UK from the triple lock. Their state pension is set to increase by up to £1,900 over the course of this Parliament. Almost 60,000 extra households are now receiving the pension credit that they are entitled to, which I think we can all agree is a very good thing. He said that he donated his winter fuel payments to charity; he is welcome to continue to do that if his income is below £35,000. If it is under that and he wants to opt out of receiving it, he is very welcome to do so. We will bring forward proposals before the Summer Recess enabling him to do that.

[Baroness Penn (Con)]

My Lords, when your Lordships’ House debated the original changes to the winter fuel payment, it was suggested that we should not means-test the winter fuel payment but tax it instead. The noble Baroness the Minister rejected that option, saying that it failed on two fronts: it did not meet the savings test or the fairness test. If the Government had listened to your Lordships’ House then, millions of pensioners who did not receive their winter fuel payment this winter would have done so. What has changed in terms of the practical ability to implement this policy now compared with when it was first suggested by your Lordships’ House?

[Lord Livermore (Lab)]

I thank the noble Baroness for her question, but to be clear: we are not taxing it. We are recovering it through the tax system, which is a different policy from the one that she is describing.

Tax: Changes

Baroness Penn Excerpts

Tuesday 29th April 2025 Lords Chamber

[Lord Livermore (Lab)]

As my noble friend will know, the UK’s approach to wealth through taxes on capital gains and inheritance generates substantial revenue for the Government and is on a par with other G7 countries. The OECD has said that capital gains and well-designed inheritance taxes can act as a more efficient and less administratively costly way of addressing wealth inequality than wealth taxes. Of course we want to ensure that we increase the incomes of the poorest people in society, which we have done, for example, through increases in the minimum wage.

[Baroness Penn (Con)]

My Lords, can the Minister confirm whether his Government agree with another of the OBR’s assessments, which anticipates that the Employment Rights Bill will have a net negative economic impact?

[Lord Livermore (Lab)]

The noble Baroness will know that the OBR has not included an assessment of that Bill in its latest forecast, because it has not yet progressed through Parliament.

Spring Statement

Baroness Penn Excerpts

Thursday 27th March 2025 Lords Chamber

[Lord Livermore (Lab)]

I thank the noble Lord for his question. I was lucky enough to work with him in the Treasury when he was an official there, so I know that he knows what he is talking about. Clearly, there are risks, as I set out to the noble Lord, Lord Forsyth. The job of the Government is to mitigate those risks and pursue a growth policy to ensure that we have sufficient growth and are resilient to the challenges that we are going to face. We have to get our public finances in order so that we have that resilience. We have to pursue stability, investment and reform. We are doing all those things to ensure that we have resilience. On tariffs, we are engaged in a conversation with the United States Administration, so we are doing what is necessary. We have rebuilt the headroom in full and we have, I think, provided the resilience needed to cope with an ever-changing and uncertain world.

[Baroness Penn (Con)]

The Minister has repeatedly cited figures on living standards. What impact will yesterday’s Statement have on the living standards of the poorest half of our population?

[Lord Livermore (Lab)]

The impact assessment that has been done so far does not include the £1 billion re-investment, so I am not sure that we can look at those figures right now. On real household disposable income, living standards will now grow this year at double the rate expected at the time of the Budget. The noble Baroness was a Treasury Minister when we saw the worst ever Parliament for living standards in history. Living standards will rise twice as fast in this Parliament compared with the last.

Strategic Priorities Statement: Defence

Baroness Penn Excerpts

Tuesday 25th March 2025 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. The issues she raises will be addressed exactly by the defence industrial strategy. One of its key objectives, for example, is procurement—increasing its pace and opening it up to small and medium-sized enterprises, as she said. I hope that there will be more for her to hear in tomorrow’s Spring Statement.

[Baroness Penn (Con)]

My Lords, can the Minister confirm that any defence spending channelled through the National Wealth Fund will not be constrained by the Government’s fiscal rules, specifically the investment rule, as those investments will be scored as net financial assets under the new measure of debt introduced by the Chancellor?

[Lord Livermore (Lab)]

I can absolutely confirm that all National Wealth Fund spending will be within the fiscal rules.

Finance Bill

Baroness Penn Excerpts

2nd reading & Committee negatived & 3rd reading
Wednesday 19th March 2025 Lords Chamber

[Baroness Penn (Con)]

My Lord, I too welcome the noble Baroness, Lady Caine of Kentish Town, who clearly brings a wealth of experience to the House. It is always somewhat strange debating a Finance Bill at this end. We cannot amend it; we do not have much time to make our contributions, and it is five months after the measures were first announced in the Budget and a week ahead of the spring forecast, which will provide us with our next update on the state of the public finances. In October, the Chancellor assured people that the spring forecast would not be a fiscal event, and I think everyone would appreciate it if the Minister could repeat that commitment today.

Perhaps in that context it is little wonder that these debates can range more widely than the contents of the Bill, but I shall try to reward the Minister’s hard work in preparing for the debate by focusing on four measures that are related to the Bill—one for each of my remaining minutes.

The first is the changes to stamp duty, which were touched on by several noble Lords, where the additional relief for first-time buyers has been removed and an additional surcharge for second homes increased. Stamp duty is a terrible tax economically speaking but I understand the temptation to increase it. It was our Government who first introduced an additional rate for second home owners. However, the IFS has said that the measures in the Budget will result in even more unaffordable rents, which is the opposite of what our housing market needs. Does the Government’s assessment of the impact of the stamp duty changes agree with that of the IFS that it will lead to higher rents?

The second measure I want to touch on are the changes to the energy profits levy. What assessment have the Government made of the impact of these changes on investment and jobs in the industry and have they made any assessment of the impact on consumers from lower production? More broadly, what is the cost in forgone revenue of the decision to grant no further North Sea licences? Have the Government made an assessment of the emissions impact of importing more gas to meet our domestic needs as we transition towards low-carbon power?

The third measure is the welcome extension of agricultural property relief to land management schemes, thereby supporting the success of those schemes, as noted by my noble friend Lady Coffey. Of course, that is against the background of the wider concerns about the impact of restricting APR and BPR, announced in the Budget but legislated for elsewhere.

To really understand the impact of these measures, it is important that we understand how much revenue the change to each relief is expected to generate. I asked the Minister this in January, but I think he misheard the question, so I will ask again in the hope of getting a response. Can the Government provide separate estimates for the revenue generated by the changes to APR and the changes to BPR?

Fourthly and finally, the Finance Bill sets unchanged income tax rates and thresholds in England and Northern Ireland for the 2025-26 financial year. At the time of the Budget, the Chancellor said this:

“Having considered the issue closely, I have come to the conclusion that extending the threshold freeze would hurt working people ... I am keeping every single promise on tax that I made in our manifesto, so there will be no extension of the freeze … beyond the decisions made by the previous Government”.—[Official Report, Commons, 30/10/24; col. 821.]


Will the Minister repeat the Chancellor’s pledge today? At PMQs, the Prime Minister failed to do so, so perhaps the Minister can do the Prime Minister’s job for him in this debate.

Growing the UK Economy

Baroness Penn Excerpts

Monday 3rd February 2025 Lords Chamber

[Lord Livermore (Lab)]

I agree with the noble Baroness’s analysis, and we are absolutely dedicated to resetting our relationship with the EU, which is clearly our biggest trading partner. Following their meeting in Brussels in October, the Prime Minister and the President of the Commission agreed to strengthen the relationship between the UK and the EU, and last month at a Eurogroup meeting of EU Finance Ministers, the first to be attended by a UK Chancellor since Brexit, the Chancellor set out the need for a closer UK-EU economic relationship based on trust, mutual respect and pragmatism. The Chancellor has also said that she is absolutely willing to consider the customs partnership that the noble Baroness refers to. The noble Baroness is also right about speed: we recognise that delivering new agreements will take time, but we are ambitious, we have clear priorities and we want to move forward at pace.

[Baroness Penn (Con)]

My Lords, I am glad the Minister found something else to agree with my noble friend Lady Neville-Rolfe on: the importance of affordable energy for growth. Can the Minister therefore clarify whether the Government endorse the more than doubling of the carbon price in the next five years, which is needed to achieve and deliver another of the Government’s missions—that of clean power by 2030—as set out in the National Energy System Operator report?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for that question. I will leave it to my right honourable friend the Secretary of State for DESNZ to bring forward the Government’s response in that area.

Agricultural and Business Property Reliefs: OBR Costing

Baroness Penn Excerpts

Monday 27th January 2025 Lords Chamber

[Lord Livermore (Lab)]

I absolutely agree with everything that the noble Lord said. Last week’s publication from the OBR does not contain any new information about its view on the fiscal impact of this policy; it remains the same as it set out in its Economic and Fiscal Outlook for the 2024 Budget. The noble Lord’s question relates to that of the noble Baroness, Lady McIntosh of Pickering. The OBR described this as “highly uncertain” because such a wide range of tax planning options are available to respond to this policy change, including being able to pass on up to £3 million tax-free. The noble Lord was also correct to say that the current system, particularly the extent to which it drives up land prices, has locked out young farmers from being able to own property—and them being able to do so is undoubtedly a good thing.

[Baroness Penn (Con)]

My Lords, the costings we have seen for this policy tend to put APR and BPR together. Can the Minister provide figures for the effects of each separately?

[Lord Livermore (Lab)]

They have been costed jointly at £0.5 billion, as the noble Baroness, Lady McIntosh of Pickering, said.

Financial Services: Mansion House Speech

Baroness Penn Excerpts

Thursday 21st November 2024 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to my noble friend for his points. In the letter that the Chancellor sent to the chief executive of the Financial Conduct Authority, she made it very clear that the importance of competition, growth and risk-taking is to be seen in the context of its regulatory duties. She said that:

“The financial services regulators are key to driving forward”


growth;

“we must have proportionate, effective regulation that allows firms of all sizes to compete, innovate and grow, creates a stable, attractive environment which encourages businesses to establish and expand in the UK, and adequately protects consumers”.


She recognises that there are trade-offs to be made, but she would like to see a greater emphasis on achieving that secondary growth objective.

On supporting small businesses and their access to finance, my noble friend is absolutely right that, to date, the UK has been a very good place to start a business but a less good place to scale one, and access to capital is a vital part of improving that. He mentions the British Business Bank, which is incredibly important; it has been very successful in providing some of that finance, and we need to go further. Colleagues in the Department for Business and Trade will also be coming forward with proposals to help small businesses scale and grow.

[Baroness Penn (Con)]

My Lords, I welcome the inclusion in the Statement of work with tech platforms and telco networks to tackle fraud. Can the Minister confirm whether that work is just the implementation of the charter, launched about a year ago under the previous Government, on voluntary action from those companies, or whether it will move towards mandatory action if sufficient progress is not made? Can he also update the House on the implementation of the measures in the Online Safety Act to tackle fraud online?

Autumn Budget 2024

Baroness Penn Excerpts

Monday 11th November 2024 Lords Chamber

[Baroness Penn (Con)]

My Lords, we have had a long debate today, where, as usual, your Lordships’ House has brought its considerable expertise to bear, dissecting last month’s Budget. Not least, the eloquent maiden speech by my noble friend Lord Booth-Smith demonstrated the value that he will undoubtedly bring to this House. I shall try not to delay us much further, but the large number of speakers that we have had is befitting of a Budget with such large sums involved.

It has been the largest tax-raising Budget in history, with the tax burden now at a historic high. There will be an additional £142 billion of borrowing over the forecast, with debt interest payments of £100 billion every single year—all to fund an additional £70 billion of spending, on average, every year.

The Minister has tried to claim that Labour has a mandate for this Budget, but it does not. And what is the result of these decisions? Lower wages and lower living standards, lower growth and lower private investment, and higher inflation and higher interest rates. People’s bills will go up and their wages will go down.

I turn first to tax. Before the election, the Chancellor promised people that Labour’s policies would be

“fully funded and fully costed—no ifs, no ands, no buts”.

Just last month, the Prime Minister made an absolute commitment to not raise taxes on working people. When the former Prime Minister, my right honourable friend Rishi Sunak, told people that Labour would raise their taxes by £2,000 over the next Parliament, Rachel Reeves and Keir Starmer said he was lying. To be fair, he did get the figure wrong: it was not £2,000 over the course of the next Parliament but £2,000 every single year.

The Government continue to not be straight with people now, claiming that the £25 billion rise in national insurance is not a tax on working people. National insurance is literally the only major tax that exclusively hits working people. If noble Lords do not believe me, ask the Chancellor, who said the problem with national insurance was that

“it is a tax purely on people who go to work and those who employ them”.

If, understandably, noble Lords do not quite trust the Chancellor on this after October’s Budget, how about the Resolution Foundation, which has said that national insurance is a tax on jobs? Meanwhile, the IFS has described it as a straightforward breach of a manifesto commitment. I know that those in the party opposite will not take any advice from these Benches, but perhaps they will listen to Paul Johnson of the IFS, who said:

“The continued pretence that these changes will not affect working people risks further undermining trust”.


However, the problem with this Budget is not just the scale of the tax rises but the choices they have made. By reducing the threshold at which employers pay national insurance, they have increased proportionately the cost of employers employing workers at lower wages the most, making it more expensive to take on entry-level workers and to employ people part time. The noble Lord, Lord Londesborough, set out eloquently the wider impacts of this change. Can it really be the right decision at a time when one of the biggest challenges for this Government is to support people off benefits and into work?

As many noble Lords have pointed out—including the noble Baronesses, Lady Warwick, Lady Thornton, Lady Tyler and Lady Bull, the noble Lord, Lord Shipley, and my noble friend Lord Dobbs, among others—nor does it seem that the Government have thought through the impact of an increase on this scale when it comes to their other policy commitments. GPs, care homes, nurseries: the Government are asking them all to deliver more, but with the national insurance rise they are making it harder and more expensive for them to employ the people they need to do it.

Combined with Labour’s £5 billion bill for its employment rights legislation, the change further increases the incentive for self-employment, distorting people’s decisions in the labour market and taking them out of employee protections, employee benefits and the pensions system, and I am not sure that is something that people on the Benches opposite want to see.

What about other taxes? The tax on family farms makes it impossible for family farms to be passed on to the next generation and threatens the position of tenant farmers. I hope the Minister will listen carefully to the strength of feeling, and the strength of the arguments made, in this House today on that issue.

A tax on family businesses, just at a time when Labour claims it wants to encourage investment and long-term stewardship, means it is making it harder for the very kinds of businesses that often take this the most seriously. There are higher taxes specifically for first-time buyers, who find it hardest to move on to the housing ladder, and further increases in stamp duty, which the IFS has warned will drive up rents. There are taxes on education and on savings. As the former Prime Minister said during the election campaign, “You name it, they’ll tax it”.

The noble Lord, Lord Desai, had some ideas to add to this further and, with the Labour Party’s new approach to taxation, maybe he will be welcomed back on to its Benches some time soon.

I turn next to borrowing. Before the election, the Chancellor promised she would not

“fiddle the figures or make something different to get better results. We will use the same models the government uses”—

referring to public sector net debt. But changing the measure of debt used in the new fiscal rules is a multibillion-pound fiddle.

We have heard in the debate today, from both sides, the case for more investment in our economy. I agree, but there are still choices to be made in where that investment comes from and how to make sure that it delivers growth. On the first point, the last Government took action to promote higher investment from the private sector, for example through the introduction of full expensing. Under this Government, the OBR predicts not only that private sector investment will fall over the forecast period but that it will fall by even more than the amount of extra investment caused by public investment going up.

This brings me to my second point. As my noble friend Lord Lamont and others pointed out, we need to be really clear-sighted that investment is not an end in itself. The test is: does it lead to greater economic growth? There is very little in this Budget to give us confidence that it does. Indeed, as my noble friend Lady Finn pointed out, areas such as transport are being cut, where you would expect to see higher levels of investment if you were focused on growth.

The scope for waste and inefficiency with this additional spending is significant. The Government have reassured us that this will not happen because they are establishing a new office for value for money. As my right honourable friend the leader of the Opposition has said, if you need an office for value for money, what is happening across the rest of government? Surely, value for money needs to be built in to how all public money is spent.

This brings us to another challenge that the Chancellor may face with her new measure of debt: its volatility. With such little headroom against her fiscal rules already, small changes such as increases in borrowing costs or the threat of tariffs from a major trading partner could easily blow her off course. That would lead us back to the worst of all worlds of stop-start investment, driving up costs and undermining confidence from private investment.

Record taxes and record borrowing lead us to record levels of spending. The challenge is to make sure that additional spending is not simply going to be absorbed by higher wages but drives reform in the public sector. But I am afraid that, after less than 20 weeks in office, we have already seen Labour’s tax record and it does not look good. It has cancelled plans to reduce the Civil Service to pre-pandemic levels, increased the salaries of train drivers by £10,000 and given junior doctors a 22% pay rise, all without asking for a single productivity improvement in return, and all while removing the winter fuel payment from three-quarters of a million pensioners on low incomes.

The incredible front-loading of the additional planned spending will make it incredibly difficult for the Government to spend effectively, but the Chancellor has promised that she is not coming back for more. But what about the commitment to grow defence spending to 2.5% of GDP? As we have heard in this debate, we live in a more dangerous and uncertain world than ever. What about the commitment to restore aid spending to 0.7% of GNI? This was called for by the noble Lords, Lord McConnell and Lord Oates, and also committed to in the manifesto of the party opposite. What about the commitment to fully decarbonise the grid in just six years’ time—a commitment that has been estimated as needing £40 billion of investment a year to deliver? Perhaps the Chancellor is keeping her fingers crossed that improved economic growth will ride to the rescue. I hope, for not just the Chancellor but the country, that this will be the case. But the OBR is not so sure. It forecasts growth down, investment down, inflation up, interest rates up and living standards down.

The Minister will doubtless say in his winding-up speech that these are Labour’s choices and it stands by them. But I would say to the noble Lord, and to all noble Lords opposite, that these were not Labour’s choices to make. They were choices that it should have put to people at the general election. But Labour did not trust people to make up their own minds and, in return, I doubt, after this Budget, that the public will put their trust in this Government for very much longer.