Spring Forecast Statement

Lord Davies of Brixton Excerpts

Tuesday 17th March 2026 Lords Chamber

[Lord Davies of Brixton (Lab)]

I start by paying tribute to the noble Lord, Lord St John of Bletso. I do not know whether he will mind me mentioning that we recently discovered that we share one thing in common—there may be others—which is that we are both stammerers. He is wonderful testimony to the fact that it is not a life-changing condition. In some ways it can be life-enhancing, because it forces you to do things you might not otherwise do.

The first issue I want to raise is in relation to the Spring Statement. A number of speakers have mentioned that, obviously, the war in the Middle East is affecting the figures. Another thing that will affect the figures is the sweeping immigration reforms announced by my right honourable friend the Home Secretary earlier this month to extend the default settlement period from five to 10 years, introduce an asylum visa break and reduce refugee protection grants to 30 months. If they achieve the effects that we are told they will, it is clear that they will have significant implications for the OBR’s projections.

The fiscal consequences of lower migration are, on balance, unfavourable to public finances. Oxford Economics, for example, has pointed out that falling migration

“threatens growth, strains public finances, and leaves productivity carrying the burden”.

More specifically, it estimates that, if net inward migration dips below 100,000—that is its expectation for the current year—the cumulative effect would leave the UK population 1.5 million lower than the ONS projection by 2030. So my question is: if the OBR is going to adjust its assumptions in respect of the proposed changes, what will be the effect on potential output for 2029-30? Oxford Economics estimates a reduction of 1 percentage point, implying that government borrowing will be £19 billion higher and hence wipe out most of the Chancellor’s so-called “headroom”.

The aggregate picture is, of course, much more complicated than that, but I still ask my noble friend the Minister whether the Treasury is engaged in this debate and whether the proposals from the Home Office are set in stone. Is there a chance of the Treasury explaining the potential impact that the proposals will have on the economy?

The second issue I wish to raise is that of inheritance tax on unused pension pots. A number of speakers have explained in detail some of the administrative and personal difficulties that will arise. I hope that my noble friend will be able to reply to those points, but let us not lose sight of the central fact, which is that personal estates not used for pension purposes should be subject to inheritance tax. They are part of the deceased individual’s estate and so should be subject to the inheritance tax that is due.

We are in this situation because of what, in my view, was the ill-judged adoption of the so-called policy of “freedom of choice”, which effectively shifts the focus of provision from pensions to savings. If you are going to provide a tax-advantage method of providing pensions, that is what it should do. It should not be used for the separate purpose of sheltering payments that you want to make to other people.

I was a bit puzzled by the comments of the noble Lord, Lord—

[Noble Lords]

Leigh of Hurley.

[Lord Davies of Brixton (Lab)]

Yes, the noble Lord, Lord Leigh of Hurley. That was a blind spot: I am sorry. I always listen with great interest to what the noble Lord says. We take part in many of the same debates. I did not really understand his suggestion that widows would be the main people to suffer from this policy. I would be happy to give up 15 seconds of my seven minutes if the noble Lord could clarify that. Is he saying that they are going to have to do the PR work? Is he saying that their pensions are going to be taxed?

[Lord Leigh of Hurley (Con)]

As the noble Lord has invited me to intervene, I will. The point is that women live longer than men and it is much more likely that, if a person passes away, it will be the man leaving the woman to be the PR and to pay the tax.

[Lord Davies of Brixton (Lab)]

Sure, but that is true only if the widow does not get a pension. My whole point is that that arrangement should be providing pensions and not providing capital sums to the widow. If the deceased does not want to place that burden on their widow—or widower: it works both ways—they have to ensure that the money is not unused but is used to provide the dependant, the spouse, with a pension. It is only lump sums that will be taxed in this way. To me, that seems right and proper because it is part of the deceased’s estate, and there are of course the normal tax-free allowances. We are here because pensions are the purpose of these arrangements. They are not for the purpose of estate planning, and yet, since the introduction of freedom of choice, that is what they have become.

I want to pick up a point made by the noble Lord, Lord Elliott of Mickle Fell. He mentioned the total welfare bill. Of course, the main part of the welfare bill is pensions. I was not entirely sure whether he was suggesting that we take the pensions away from pensioners and advise them to get a job. Was that his suggestion?