Autumn Budget 2025

Lord Livermore Excerpts

Thursday 4th December 2025 Lords Chamber

Moved by

[Lord Livermore]

That this House takes note of the Autumn Budget 2025.

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

My Lords, it is a privilege to open this Budget debate in your Lordships’ House, and to speak alongside so many distinguished and expert noble Lords. I look forward to listening to, and learning from, all the contributions today. We should perhaps spare a thought for the noble Lord, Lord Bridges of Headley, who, as speaker number 72, has to try to find something new to say. I do not doubt that he will succeed.

I take this opportunity to welcome the right reverend Prelate the Bishop of Portsmouth to your Lordships’ House. I very much look forward to his maiden speech.

Undeniably, this Budget has been dominated, even more than usual, by questions of process before, during and after it was delivered. There were months of speculation in advance. On the day of the Budget itself, the OBR made the serious error of releasing significant details before it was delivered and, shortly after the Budget, the OBR made the decision to publish the timeline of its forecasts. The OBR was clear in its evidence to the Treasury Select Committee this week that the Chancellor did not mislead, but I am sure that many noble Lords may, perfectly fairly, choose to focus on these questions today. In opening this debate, though, I will focus on the measures contained in this Budget and set them in the context of our wider strategy to build a stronger and more secure economy.

As noble Lords will know, we inherited an economy with serious flaws—with a crisis in our public services, a crisis in our public finances and a crisis in the cost of living. At the heart of this deep malaise had been a chronic lack of investment, both public and private, weighing down on growth and productivity. Private sector investment was the lowest in the G7, constrained by years of economic instability, a planning system that thwarted projects before they even began, a regulatory system tying businesses in red tape and a Brexit deal that cut Britain off from our largest market.

Public sector investment was no better and was even set to fall again, from 2.5% to 1.7% of GDP. That meant vital infrastructure projects constantly deferred, delayed or cancelled—roads, railways and energy projects that did not get built. Little wonder the IMF repeatedly warned that a lack of investment posed a major barrier to growth.

That is why, since day one in government, we have put increased investment at the heart of our growth strategy and made growth our number one priority. In our first Budget, last year, we changed the fiscal rules to enable and protect £120 billion of additional capital investment—the highest level in four decades—in housing, energy and transport: the infrastructure that Britain needs to grow. We have systematically begun to remove the barriers to investment faced by the private sector, with the biggest planning reforms in a generation; cutting the cost of regulation; investing in skills and apprenticeships, while reforming our visa system to attract the best global talent to Britain; pensions reform to release more capital for investment; and resetting our relationship with the EU.

All this and more is why, since the election, we have seen an additional £250 billion of private investment committed to the UK. It is why, in this Budget, the OBR upgraded Britain’s growth forecast for this year, from 1% to 1.5%. It is why we were the fastest-growing economy in the G7 for the first half of this year and are on course to be the second fastest for the year as a whole, and it is why, just this week, the OECD upgraded its prediction for Britain’s growth next year. But there is, clearly, much more to do.

Ahead of this Budget, the OBR looked back at the productivity performance of the previous decade and concluded that the chronically low levels of investment, together with the effects of Brexit and the pandemic, have weakened the economy by far more even than previously thought. This reappraisal of the productivity performance of the past has directly impacted its view of GDP going forward, driving lower growth forecasts for the remainder of the forecast period. The OBR has been clear that its review reflects not what this Government have done over the past 14 months but the legacy of the past 14 years. Nevertheless, it now falls to us to deal with the consequences.

This Budget continues that work, by taking three deliberate pro-growth choices. First, by choosing to maintain economic stability, getting inflation and interest rates down, we are giving businesses the confidence to invest and our economy the room to grow. Secondly, by choosing to reject austerity, we are protecting £120 billion of additional investment in growth-driving infrastructure. Thirdly, by choosing to back the fast-growing companies of the future, we are supporting the investment, innovation and economic dynamism that will increase growth in the next decade and beyond. Let me take each in turn.

The first pro-growth choice made by this Budget was to maintain economic stability. In the months leading up to the Budget, in countless conversations with business and investors, I heard repeatedly that the most important action the Government could take would be to reduce inflation, helping interest rates—already cut five times since the election—to continue to fall. A growing economy needs strong foundations of economic stability, with borrowing down, inflation down and investment up. So, because of this Budget, borrowing will fall as a share of GDP in every year of the forecast: from 4.5% in 2025-26 to 1.9% in 2030-31. Borrowing will fall more than in any other G7 economy. Net financial debt will be lower at the end of the forecast than it is today and the headroom against our stability rule will more than double to £21.7 billion.

The Budget also took more direct action to cut inflation. We have taken £150 off energy bills, frozen rail fares for the first time in 30 years and extended the freeze on fuel duty. All these things together take 0.4% off inflation next year. To put that in context, it is the biggest near-term reduction in inflation due to government policy ever forecast by the OBR at a single fiscal event.

The second pro-growth choice the Budget made was to protect the £120 billion of additional capital investment that we have committed over the next five years, ruling out a return to the austerity of the past. The OBR has estimated the eventual long-term growth impact of this increase in capital investment as adding 1.4% to GDP. Cutting this and returning to austerity would be the worst thing we could do for growth—the very definition of short-termism. Yet that is precisely what previous Chancellors, with previous fiscal rules, have done.

In the years following the financial crisis, austerity took demand out of the economy when it was needed most, undermining investment in critical infrastructure, weakening productivity and choking off growth. Unlike today’s Conservative Party, we will not repeat the mistakes of the past: the exact mistakes that led to the productivity downgrade that we must now fix. Instead, our increased investment will deliver new roads, improved transport, new homes and new energy infrastructure. We are investing in the construction of Sizewell C. We are investing in the UK’s first small modular reactors at Wylfa and in the Lower Thames Crossing, the trans-Pennine route upgrade and Northern Powerhouse Rail.

The third pro-growth choice this Budget makes is to back the fastest-growing British companies of the future. The ScaleUp Institute described it as

“a budget for scaleups and those ambitious to scale”,

and it is right. The UK is a great place to start a business, but I have heard for too many years that our companies cannot scale at the same rate as their US peers. As a result, brilliant British businesses are either acquired, choose to go abroad to raise investment, or fail. We will change that. We will make the UK the best place to start, scale and stay, because we know that today’s fast-growing firms are tomorrow’s engine of jobs and growth.

By doubling the eligibility of our enterprise tax incentives, investing billions of pounds in research and development, and delivering reforms to boost the attractiveness of UK markets, we will ensure that these companies can access the capital and talent they need to succeed. For all businesses, large and small, we are maintaining the lowest headline corporation tax in the G7 and the most generous full plant and machinery capital allowances in the OECD. To incentivise private investment and encourage growth, we are also introducing a new 40% permanent first-year allowance for main-rate plant and machinery from July 2026.

In this Budget, we faced a choice: we could have made the reckless choice to abandon our fiscal rules and let borrowing and debt increase. Instead, we made the pro-growth choice to get borrowing, debt and inflation down, more than doubling our headroom. We could have made the irresponsible choice and returned to austerity, cutting public services and undermining capital investment. Instead, we made the pro-growth choice to protect the investment in Britain’s infrastructure to build a stronger, more secure economy, but these choices need to be paid for.

The previous Government froze personal tax thresholds from 2021 until 2028. This Budget maintains all income tax and equivalent national insurance thresholds at their current level for a further three years from 2028. I accept that maintaining these thresholds is a decision that will affect working people—the Chancellor said that last year; I said that last year, and I will not pretend otherwise now—but we have sought to keep their contribution as low as possible by making other fair and necessary reforms to the tax system.

A Blackpool terrace pays more council tax than a £10 million Westminster mansion, so we are introducing a high-value council tax surcharge on homes worth £2 million or more, while protecting those on low incomes. We are raising taxes on property, dividend and savings income, which currently face no equivalent of national insurance, by 2% at the basic and higher rates and by 2% at the additional rate for property and savings income. The cost of pension salary sacrifice was set to almost treble from £3 billion in 2017 to nearly £9 billion by the end of the decade, so we are capping the amount that can be salary-sacrificed into a pension without paying any employee or employer national insurance at £2,000, protecting low and middle earners while retaining in full pension tax relief worth over £70 billion a year.

Alongside this, we are making reforms so that our tax system keeps pace with a fast-changing economy by ensuring that motoring taxes cover electric vehicles via a new per mile levy; increasing taxes on online gaming and betting while protecting bingo halls and horseracing; and preventing some ride-sharing apps abusing a tax relief intended for coach tour operators to undercut black cabs. We are also supporting our high streets with permanently lower business rates for over 750,000 retail, hospitality and leisure properties, funded with higher rates for the most expensive properties, including warehouses used by online giants. These are fair choices, with increases in tax coming most from those households in the highest income decile. They are choices that underpin and enable our growth agenda of cutting borrowing and debt while refusing to cut investment.

On Monday, the Prime Minister set out the next phase of that growth strategy. First, we will reform the regulation of our nuclear industry to make it easier to invest and then extend that approach across our entire industrial strategy. Secondly, we will keep moving towards a closer trading relationship with the European Union. Thirdly, we will reform a failing welfare system. In the last five years of the previous Government, spending on welfare increased by £88 billion, yet we inherited a system where children could not afford to eat but taxpayers were asked to subsidise tax breaks on the lease of luxury cars. That is a broken system, and we are reforming it. Britain, one of the richest countries on earth, still has children growing up in poverty. A Labour Government will always fight the social injustice where children, through no fault of their own, go to bed hungry and cold, their life chances shrinking every day.

Poverty scars our society, but it scars our economy too. It drives down growth and productivity; it heaps pressure on already stretched public services. Children who grew up in poverty earn 25% less aged 30 than their peers. All this costs our economy an estimated £40 billion a year. I am proud to have worked for the previous Labour Government who cut child poverty by a million over a decade. I was angry when we had to watch the Conservative Government who succeeded us reverse all our progress and increase child poverty by 900,000, at terrible social and economic cost. Now, I am proud to be a member of a Government who, by scrapping the two-child limit, are lifting 450,000 children out of poverty in a single step. Combined with other steps we have already taken, including extending free school meals to more families, this Government will now be responsible for the largest reduction in child poverty ever achieved in a single Parliament.

I am proud too of what this Budget and this Chancellor have achieved: not just cutting child poverty but cutting energy bills by £150; cutting NHS waiting lists; cutting borrowing more than any other G7 country; cutting inflation; supporting further cuts to interest rates and rejecting austerity. These are the right choices for a stronger NHS, the right choices for investment, the right choices for business and for workers, and the right choices for Britain to continue building a stronger, more secure economy. I beg to move.

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[Lord Livermore (Lab)]

My Lords, it is a pleasure to close this debate on the Budget this evening. I have enjoyed listening to all 73 contributions from noble Lords today. I congratulate the right reverend Prelate the Bishop of Portsmouth on his excellent maiden speech. I very much look forward to his further contributions to this House. I was struck particularly by one thing he said,

“to find what is good and to strengthen it”.

That must be right. Having sat through the debate this evening, though, I am aware that opinions may differ on how well we are achieving that in this Budget.

It is a privilege to speak in a debate with the noble Lord, Lord True—I do not often have that pleasure. My noble friends Lord Barber of Ainsdale and Lady Curran set out the record of the noble Lord’s Government that we inherited. The combined effect of austerity, Brexit and the Liz Truss mini-Budget was devastating to the economy. Had the economy grown by the average of other OECD countries over those 14 years, it would be more than £150 billion larger today. The previous Parliament was the worst ever for living standards. Inflation hit 11% and was above target for 33 months in a row. The UK had the lowest private investment levels in the whole of the G7. Productivity growth had entirely stalled, with output per worker growing more slowly than in nearly every other G7 country.

The need to deal with that inheritance is why we have made growth our number one priority. This Budget made pro-growth choices to get borrowing down, with increased headroom to cut the cost of living and get inflation down to support Britain’s fast-growing companies and, most of all, to protect the investment needed to support growth by avoiding a return to austerity. This is real substance, and these are real policies to get real growth and enable the British people to lead better lives in the years ahead.

As I said in opening the debate, this was a Budget dominated, even more so than usual, by process—before, during and after it was delivered. This was a point raised by the noble Lords, Lord True, Lord Rosenfield, Lord Kempsell, Lord Leigh of Hurley, and the noble Baronesses, Lady Neville-Rolfe, Lady Noakes and Lady Penn.

Let me address those directly. Let me be clear that the Chancellor was completely honest and consistent with the public in everything she said. Professor David Miles, the acting head of the OBR, in his evidence to the Treasury Select Committee on Tuesday, confirmed that what the Chancellor said before the Budget had not been misleading. The Chancellor said before the Budget that her priorities were cutting the cost of living, NHS waiting lists, debt and borrowing. The Budget delivered on all those priorities.

The Chancellor was clear that a productivity review would mean lower tax receipts. The OBR confirmed they were £16 million lower. The Chancellor said she intended to build more headroom; she built more headroom to £21.7 billion. The Chancellor was clear in the summer that policy choices would need to be paid for. The Budget shows that those cost £6.9 billion. The Chancellor was clear that challenging decisions would be needed on tax and spending, and she froze thresholds for a further three years.

Let me be clear too that the Government are committed to the independence of the Office for Budget Responsibility and its role at the heart of economic and fiscal policy-making. The strength of that institution is a vital pillar in the Government’s commitment to economic stability. As noble Lords know, and as the noble Lord, Lord Rosenfield, for example, commented, the economic and fiscal outlook was accessed prematurely ahead of the Budget. That was a very serious leak of highly sensitive information. The OBR took full responsibility for this and conducted a review into what happened.

That report was published on Monday. Following that publication, as the noble Lord, Lord Dobbs, said, Richard Hughes, the chair of the OBR, resigned. The Chancellor has written to Mr Hughes to thank him for his many years of public service. I have previously put my own thanks on record in your Lordships’ House. That decision was a matter for Mr Hughes. The suggestion otherwise from the noble Baroness, Lady Neville-Rolfe, is categorically untrue. The noble Lord, Lord Tyrie, spoke rightly about future appointments being subject to approval by the Treasury Select Committee.

The noble Lord, Lord Lamont, criticised the impact of pre-Budget speculation, as did the noble Lords, Lord Hamilton of Epsom, Lord Macpherson of Earl’s Court and Lord True, and the noble Baronesses, Lady Neville-Rolfe and Lady Penn. Let me say clearly that we take the Budget process very seriously, and we put the utmost weight on Budget secrecy. As referred to by the noble Lord, Lord Kempsell, a leak inquiry is now under way into the FT reporting on the 13 November, with the full support of the Chancellor and the whole Treasury team.

The noble Baroness, Lady Penn, spoke about learning lessons. The Permanent Secretary to the Treasury will now conduct a review of the Treasury security processes to inform future fiscal events. We will also work closely with the OBR to ensure that robust security arrangements are in place before the spring forecast and for all future forecasts. The noble Lord, Lord Willetts, asked about the arrangements for the Spring Statement. As the Chancellor said in the Budget, to support just one fiscal event a year the OBR will not assess the margin against the fiscal rules in the spring and the Government will not make a fiscal response.

The noble Lord, Lord Macpherson, asked whether the Treasury still accepts his recommendations from 2013. The answer is yes, and I can tell him that the current Permanent Secretary to the Treasury referred to that review in an email he sent to all Treasury staff.

The noble Lord, Lord Skidelsky, spoke about the productivity puzzle. Much of the context of this Budget was the OBR supply-side review, as mentioned by the noble Lords, Lord Willetts and Lord Bridges of Headley, and my noble friend Lord Hollick. The OBR looked back at the productivity performance of the previous decade and concluded that the chronically low levels of investment, together with the effects of Brexit and the pandemic, have weakened the economy by far more even than previously thought. This reappraisal of the productivity performance of the past has directly impacted its view of GDP going forward, driving lower growth forecasts for the remainder of the forecast period. The noble Lord, Lord True, together with the noble Baronesses, Lady Neville-Rolfe and Lady Moyo, noted its impact on future growth forecasts. But they all ignored the fact that it was the verdict on the previous 14 years, not the previous 14 months.

This review has had both a fiscal and a growth impact. In terms of fiscal policy, because of this Budget, borrowing will fall as a share of GDP in every year of the forecast, from 4.5% in 2025-26 to 1.9% in 2030-31. Borrowing will fall more quickly than in any other G7 economy. Despite what the noble Lord, Lord Bridges of Headley, said, net financial debt will be lower at the end of this forecast than it is today. The headroom against our stability rule will more than double to £21.7 billion—this was supported, I think, by the noble Lords, Lord Lamont, Lord Willetts and Lord Macpherson of Earl’s Court, and my noble friends Lord Wood of Anfield and Lord Hollick.

The Budget also took more direct action to cut inflation. We have taken £150 off energy bills, frozen rail fares for the first time in 30 years and extended the freeze on fuel duty. All these things together take 0.4% off inflation. In answer to the noble Lord, Lord Bridges of Headley, to put that in context, it is the biggest near-term reduction in inflation due to government policy ever forecast by the OBR at a single fiscal event.

Some noble Lords said consolidation was back-loaded, including the noble Baroness, Lady Morrissey, and the noble Lords, Lord Macpherson of Earl’s Court and Lord True. I do not accept that. In the Budget, we doubled the headroom to the stability rule to £21.7 billion. We have also set out a credible and front-loaded consolidation plan that is working. Borrowing this year is set to be the lowest for six years and falls in every year of the forecast, from 4.5% of GDP this year to 3% of GDP in 2027-28, and to 1.9% in 2030-31. In answer to the noble Baroness, Lady Shawcross-Wolfson, we will deliver a further £2.8 billion in efficiencies and savings in 2028-29, rising to £5 billion in 2030, on top of almost £14 billion announced at the spending review.

My noble friend Lord Sikka spoke about the distributional impact of this Budget. The Government’s distributional analysis shows tax, welfare and public service spending decisions taken from the autumn Budget 2024 onwards are progressive and benefit households in the lowest income deciles the most. The increases in tax are concentrated on the highest-income households. On average, all but the richest 10% of households will benefit from policy decisions in 2028-29.

The right reverend Prelate spoke passionately about children with special educational needs, joined by the noble Baronesses, Lady Barran, Lady Noakes and Lady Kramer, and the noble Lords, Lord Mohammed of Tinsley and Lord True. We know and have long said that the system is in need of reform to, first and foremost, support children and families effectively. The OBR has based its estimate on unreformed pressures. It has not accounted for planned reforms to deliver a sustainable SEND system that works better for children and families. The detail of this will be set out in our reform plan early in the new year. The OBR has only used mainstream schools as an indicative example, whereas the Government have confirmed that residual SEND pressures will be absorbed within the overall Government DEL budget from 2028-29 onwards. The Government will not make final decisions until reform plans are confirmed and Budgets from 2028-29 onwards remain subject to the spending review in 2027.

Several noble Lords, including the noble Lords, Lord True and Lord Hodgson of Astley Abbotts, the noble and gallant Lord, Lord Craig of Radley, and the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, spoke about defence spending. The UK will spend 2.6% of GDP on defence spending by April 2027. The Government have set an ambition to spend 3% of GDP on defence in the next Parliament, when economic and fiscal conditions allow. Changes to the defence spending envelope will be considered at the next spending review in 2027.

The noble Lord, Lord Freyberg, spoke about the creative industries, and I agree with him on their importance to the economy. We have made creative industries central to our industrial strategy and he is right that the new discretionary power to introduce a visitor levy would allow local leaders to drive growth in their regions.

Turning now to growth, I disagree with the noble Baroness, Lady Penn, about the importance that we place on growth. It is without question our number one priority. My noble friends Lord Barber of Ainsdale and Lord Pitkeathley of Camden Town said that, in this Budget, the OBR upgraded Britain’s growth forecast for this year from 1% to 1.5%. We were the fastest-growing economy in the G7 for the first half of this year and we are on course to be the second-fastest for the year as a whole. Just this week, the OECD upgraded its prediction for Britain’s growth next year. Just last week, following the Budget, JPMorgan announced a $10 billion investment in Britain to build its new landmark tower in Canary Wharf. CEO and chair Jamie Dimon said:

“The UK government’s priority of economic growth has been a critical factor in helping us make this decision”.


Despite what the noble Lord, Lord Horam, called for, my noble friend Lord Hollick spoke about the importance of protecting the additional capital spending that we have allocated to the economy. The noble Lord, Lord Lamont, said that the previous Government had to deal with the aftermath of the financial crisis. Of course he is right, but I would contend that they did so in exactly the wrong way, by taking demand out of the economy at exactly the worst moment. The very worst thing that we could do now for growth would be to follow the Conservative Party recommendation and return to austerity, cutting investment just as previous Chancellors with previous fiscal rules have done. We will not repeat those mistakes of the past: the exact mistakes that led to the productivity downgrade that we must now fix.

This Government are committed to delivering growth in every nation and region of the UK. My noble friend Lady Griffin of Princethorpe specifically spoke about growth between northern city regions, and I absolutely agree with her. It is precisely why we have committed to the northern growth corridor, including Northern Powerhouse Rail, to boost connectivity and access to markets across the north. More widely, this Budget transfers significant new fiscal powers into the hands of local leaders.

The noble Lord, Lord Razzall, and the noble Baroness, Lady Kramer, spoke about the importance to growth of moving closer to the European Union. As they know, I agree. The noble Lord, Lord Tyrie, also supported this point, as did my noble friend Lord Brooke. The Prime Minister said the same in his speech on Monday this week.

The noble Baroness, Lady Moyo, and the noble Lord, Lord Harrington of Watford, are right to say that there is much more to do elsewhere, and they rightly identified the importance of reducing energy costs for businesses, which must of course be a priority.

My noble friend Lady Warwick of Undercliffe spoke about housing and asked specifically about social rent convergence. The Government remain committed to implementing social rent convergence, but we must take the time to get the details right and take into account the benefits to the supply and quality of social affordable housing, the impact on rent payers and affordability. We will respond to the consultation on this issue in full and announce a decision about how social rent convergence will be implemented in January. My noble friend also asked about supported housing; as she mentioned, the Government will shortly publish a new cross-government homelessness strategy. I cannot speculate on the contents of that right now, but we will be working closely with mayors and local councils to get us back on track to ending homelessness.

My noble friend Lady Thornton raised co-operatives. The Government are progressing a number of measures to support the growth of the mutual sector, including modernising the Building Societies Act. We have endorsed the industry-led Mutual and Co-operative Sector Business Council, and the Department for Business and Trade has announced a call for evidence, which will explore business support for co-operatives.

Several noble Lords, including the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, and the noble Lords, Lord de Clifford and Lord Razzall, spoke about the importance of small businesses. I agree with all of them on the importance of small businesses to the economy. As my noble friend Lady Carberry of Muswell Hill said, for small and medium-sized businesses the Budget supports high streets, with permanently lower tax rates for 750,000 retail and hospitality properties. It backs entrepreneurs by doubling eligibility for tax breaks that make it easier for fast-growing start-ups to scale and stay in the UK, makes the training for under-25 apprenticeships completely free for SMEs, and maintains the lowest rate of corporation tax in the G7.

The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, and the noble Lords, Lord Bilimoria and Lord Razzall, spoke specifically about pubs. Most pubs are protected by a £4.3 billion business rate support package, capping bills and saving a typical independent pub £4,800 next year, compared to what it would pay without intervention. The Government have also cut the business rates tax rate paid by small retail, hospitality and leisure properties to the lowest level since 1990-91.

My noble friends Lord Hollick and Lady Curran mentioned the importance of apprenticeships, particularly given the infrastructure commitments that we have made—a point also mentioned by the noble Lord, Lord Harrington, and I pay tribute to his work at Make UK. The Government are making more than £1.5 billion available over the spending review period for investment in employment and skills support. This includes £725 million for the growth and skills levy, to help support apprenticeships for young people and fully fund SME apprenticeships for under-25s. We will also introduce new reforms to simplify the apprenticeship system and make it more efficient when short courses are introduced from April 2026.

My noble friend Lady Curran spoke about the importance of growth in Scotland, and I will of course look carefully at the report she mentions. The Budget invests in Scotland’s economic potential, supporting Scotland’s energy industry, driving up economic growth across Scotland and investing in the important projects that she mentioned.

My noble friend Lord Jones of Penybont, who is far more expert in this matter than I am, spoke about the importance of growth in Wales. As he said, we are supporting the Wales energy industry by announcing that Wylfa will pioneer the UK’s first small modular reactor, supporting up to 3,000 jobs. We are also investing to deliver growth in Wales by establishing AI growth zones in north and south Wales, each backed with £5 million investment in local AI adoption and skills.

I turn to tax, which of course so many noble Lords mentioned in the debate. We faced a choice at the Budget. We could have made the reckless choice to abandon our fiscal rules and let borrowing and debt increase, but instead we made the pro-growth choice to get borrowing, debt and inflation down, more than doubling our headroom. We could have made the irresponsible choice and returned to austerity, cutting public services and undermining capital investment. Instead, we made the pro-growth choice to protect the investment in Britain’s infrastructure to build a stronger and more secure economy. But, as I said at the outset, these choices do need to be paid for.

The noble Baroness, Lady Neville-Rolfe, raised the impact of that on working people, as did several other noble Lords during the course of this debate. The Chancellor made very clear in her Budget how much maintaining the tax thresholds at their current level would impact working people. We have sought to minimise this by establishing certain other necessary tax reforms.

Several noble Lords touched on the subject of tax reform, including initially the noble Lord, Lord Burns, who was supported by my noble friends Lord Wood of Anfield, Lord Eatwell and Lord Hollick. I recognise that perhaps this Budget has not gone as far as they would have liked, but we have made a start on reforming some important tax reliefs within the system.

My noble friend Lord Davies of Brixton asked about the impact of tax thresholds on pensioners paying tax on their state pension. We gave a clear commitment to this in the Budget. We are now exploring the best way to achieve it and will set out more detail early next year.

My noble friend Lady Thornton raised the impact of the Budget on women. Increases in the national minimum wage, for example, will benefit women more. To answer her specific point, alongside the Finance Bill, impact assessments will be published in relation to each individual measure and their impacts on women.

My noble friend Lord Campbell-Savours spoke about the high value council tax surcharge, a point which was also raised by the noble Baroness, Lady Kramer. The Valuation Office will identify homes which will need to pay the surcharge through a targeted revaluation. The new charge will ensure that those with the most valuable properties pay their fair share.

Several noble Lords mentioned the impact of salary sacrifice measures, including my noble friend Lord Hollick and the noble Lord, Lord de Clifford, who expressed some concern about it. I agree with my noble friend Lord Davies of Brixton that the measures are proportionate. The Government rightly provide generous tax relief for people paying into a pension, relieving income tax on all contributions. This Budget makes no changes to those reliefs or to the tax-free lump sum. Salary sacrifice for pensions, which was intended to be a small part of our pensions system, is now forecast to nearly treble in cost from under £3 billion to £8 billion in 2030, with the most benefit going to higher earners.

The noble Lord, Lord Elliott of Mickle Fell, spoke about non-dom reforms. I have justified this policy in the past, so I will not do so again now.

I was pleased to see the issue about low-value imports that the noble Lord, Lord Leigh of Hurley, has campaigned on for so long make progress. I know he expressed concern about how long this is taking. We will do what we can to speed up the implementation of the reforms, for which the noble Lord has called.

The noble Lord, Lord Young of Cookham, spoke expertly about electric VED. I believe I was correct in saying that we are not introducing road pricing, since electric VED does not mean that motorists will be charged based on when or where they drive, nor will there be any new national charges to drive on specific roads. Electric VED only requires a vehicle’s mileage to be estimated.

I am grateful to several noble Lords, including the noble Lords, Lord Leigh of Hurley and Lord Massey of Hampstead, and the noble Baroness, Lady Penn, for their support for the further scale-up measures that we introduced as well as for expanding the enterprise management incentives, the enterprise investment scheme and the venture capital trust investment limits. I will happily take away the suggestions from the noble Lord, Lord Leigh, as to how we might go further in that regard.

I am also grateful to my noble friend Lord Stansgate for what he said in support of the measures to help ensure that the fastest-growing businesses in our country start, scale and stay, particularly by backing breakthrough technologies and regional clusters with £7 billion of UKRI funding and a new £130 million growth catalyst fund to help frontier firms scale.

I agree with a lot of what the noble Baroness, Lady Bowles of Berkhamsted, spoke so passionately about on the need for procurement reforms.

The noble Lords, Lord Lamont of Lerwick and Lord Bridges of Headley, and the noble Baroness, Lady Penn, spoke about the impact on living standards. As they will know, real household disposable income fell by 1.8% in the last Parliament, making it the only Parliament since records began in which living standards fell. This fall has already been reversed. RHDI per capita was £800 higher in the first year of this Parliament compared with the final year of the previous Parliament. The OBR forecasts growth to continue, with RHDI per capita projected to grow by 2.9% over this Parliament. It also forecasts that, as a result of the action taken by this Government, RHDI per capita will grow by a further 0.2 percentage points in 2026-27.

Many noble Lords spoke about the importance of tackling welfare reform, including the noble Lords, Lord Burns, Lord Willetts, Lord de Clifford, Lord Saatchi and Lord Hamilton of Epsom, and the noble Baronesses, Lady Coffey, Lady Stedman-Scott and Lady Shawcross-Wolfson. Last year, we delivered the largest fraud and error package in recent history, saving £4.3 billion in 2029-30. This Budget goes further to ensure that our welfare system is sustainable for the long term. It increases face-to-face assessments for health benefits and offers 18 to 21 year-olds who have been on universal credit and looking for work for 18 months paying work, instead of benefits. It ensures that people living abroad can no longer buy a state pension on the cheap and reforms the Motability scheme’s tax reliefs, saving the taxpayer over £1 billion across five years.

Our new youth guarantee will also offer 18 to 20 year-olds paid work rather than benefits and we will examine extending it, as my noble friend Lord Rook asked. We recognise the need to do more, which is why the Government will continue to look at other reforms, including through the Timms review, the Milburn review and the Pensions Commission.

As my noble friend Lord Rook said, we have raised taxes on gambling companies and launched a crackdown on tax evasion to pay for the scrapping of the two-child limit. I am still amazed that the party opposite opposed these measures, when three-quarters of households impacted by this change have at least one parent or carer in work. Reducing child poverty is not only a moral imperative but an investment in the country’s future. Under the Conservatives, child poverty rose by 900,000, yet they still oppose the action we are taking to tackle child poverty.

The cost to the economy of child poverty is some £40 billion a year. It damages the life chances of the children affected and it hits growth, because children who grow up in poverty earn 25% less aged 30 than those who do not. The right reverend Prelate the Bishop of Portsmouth described how 50% of children in one of his wards live in poverty. Removing the two-child limit will lift 450,000 children out of poverty in the final year of this Parliament, yet the noble Baroness, Lady Neville-Rolfe, on behalf of the Official Opposition, opposed it. When combined with other measures announced this year, it will lift around 550,000 children out of poverty. The noble Baroness, Lady Coffey, asked about this measurement: it is relative child poverty after housing costs.

The noble Lord, Lord Bird, spoke rightly about the intergenerational nature of poverty and said that we should prevent poverty in the first place. Child poverty makes it harder for children to get on in life and it hurts our economy in the long term. Reducing child poverty will help to increase educational outcomes and attainment, and therefore improve economic outcomes.

Finally, my noble friend Lady Pitkeathley also spoke passionately about carers. As my noble friend said, 26,000 carers will now have their overpayment debt written off or reimbursed.

We will continue to rebuild the economy after 14 years of failure from the party opposite. Where they delivered the slowest projected growth in the G7, our growth in the first half of this year was the fastest in the G7. Where they presided over the worst Parliament ever for living standards, living standards have already increased by 2.1% since the election. Where they oversaw the worst pay growth in a century, real wages grew more in the first 10 months of this Government than in the first 10 years of the previous Government, and where they continually cut capital spending and deterred investment, we are investing for the long term, with £120 billion extra over the next five years.

Now, in this Budget, we are going further: not just cutting child poverty but cutting energy bills by £150; cutting NHS waiting lists; cutting borrowing faster than any other G7 country; cutting inflation and supporting further cuts in interest rates. This is a Budget that rejects austerity, a Budget for a stronger, more secure economy, and a Budget for a Britain built for all.

Motion agreed.

OBR Forecasts

Lord Livermore Excerpts

Monday 1st December 2025 Lords Chamber

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

My Lords, with the leave of the House, I shall repeat a Statement on the OBR forecasting process made in the other place earlier today by my right honourable friend the Chief Secretary to the Treasury. The Statement is as follows:

“Mr Speaker, I would like to make a Statement to the House on two separate but related matters. The first is regarding communication with the public in the lead-up to the Budget. I understand that this is a topic that has held much interest and speculation over the weekend and I would like to take this opportunity to give a formal Statement to the House on the Government’s position. However, the Government have also today received the results of the OBR’s investigation into the early release of the Economic and Fiscal Outlook at the Budget last week. I know that the House will be concerned to understand those findings, so the majority of my Statement will be concerned with this latter point.

On the former point, the Chancellor has been entirely consistent and honest with the public about her considerations in the lead-up to the Budget last week. First, she was clear on her priorities for the Budget on 4 November: cutting NHS waiting lists, cutting the cost of living, and cutting our debt and borrowing. The Budget she delivered last week delivered on all three of those priorities. Secondly, she was clear on 4 November that a lower productivity forecast would mean lower tax receipts. The OBR confirmed at the Budget that tax receipts are £16 billion lower as a result of its reduced productivity forecast.

Thirdly, the Chancellor was clear on 4 November that she intended to build more headroom. She has done that, with headroom against the stability rule of £21.7 billion. Fourthly, she was clear in the summer that the policy decisions we took on welfare would need to be paid for at the Budget, and the Budget document shows those decisions costing £6.9 billion in 2029-30. Finally, the OBR has now confirmed that the Chancellor knew on 4 November that she had only £4.2 billion of headroom against her fiscal rules, meaning that once the cost of those policy decisions was accounted for, there would be a deficit of £2.7 billion against the stability rule.

The combined effect of this information is this: on 4 November, the Chancellor knew that the Government would be in deficit against the stability rule before any of this Government’s priorities for the Budget had been delivered or any additional headroom had been built. In the light of this information, and in the knowledge of the OBR’s productivity downgrade, the Chancellor knew on 4 November that challenging decisions would be required on tax and spend. The subsequent decision to freeze personal tax thresholds for a further three years shows that this was completely correct.

The Chancellor took the unique step of delivering that scene-setter speech before the Budget, precisely so that she could be honest about the circumstances that she was facing and the decisions she would need to take. The Chancellor has been completely honest and consistent with the public in everything that she has said.

I turn now to my second topic. Last Wednesday, before the Chancellor had begun to give her Budget speech, the Office for Budget Responsibility published its entire Economic and Fiscal Outlook November 2025 online. Let me be clear: this is a very serious breach of highly sensitive information. It is a fundamental breach of the OBR’s responsibility, it is a discourtesy to this House, and it should never have happened. The OBR rightly took full responsibility and issued an apology to the Chancellor later that day. It has now conducted an investigation into how the report was published prematurely, and it sent its report, including its findings, to the Treasury and the Treasury Select Committee today at 12.30 pm.

The report states:

‘We are in no doubt that this failure to protect information prior to publication has inflicted heavy damage on the OBR’s reputation. It is the worst failure in the 15-year history of the OBR’.


It adds:

‘The ultimate responsibility for the circumstances in which this vulnerability occurred and was then exposed rests, over the years, with the leadership of the OBR’.


The report notes that this has

‘inflicted heavy damage on the OBR’s reputation’,

and caused significant disruption on Budget Day ‘to the Chancellor’s disadvantage’. I can confirm to the House that the report goes on to make it clear that this is a significant and long-standing issue that has allowed external users to gain early access to the OBR’s publication, which contains full details of its forecasts and the Chancellor’s Budget.

In the days since the Budget, there has been speculation about the kind of error that led to the Economic and Fiscal Outlook November 2025 being published early. The report today confirms that the cause was not

‘simply a matter of pressing the publication button on a locally managed website too early’.

The report concludes that the cause of the OBR’s error was ‘systemic issues’, and that the investigation has made it clear that

‘the problem exposed last week was not a new one’.

Indeed, I can confirm to the House that the report reveals that the OBR’s EFO in March was accessed before the Chancellor delivered the Spring Statement to the House. That underlines just how serious a situation this is. Let me underline just how seriously we as a Government take it to ensure the OBR never allows this to happen again.

The report notes that common and fairly basic protections to prevent early access, including passwords and random character URLs, were not used. It further notes that two configuration errors, which were not understood by the OBR’s online publishing function, prevented the safeguards in its online publishing software being effective.

However, I am very concerned to share that the report also notes that

‘it is very likely that the weaknesses that caused the premature accessing of the November 2025 EFO were pre-existing. Indeed, it appears that the March 2025 EFO was accessed prematurely’.

These findings are very serious indeed. That market-sensitive information was prematurely accessible to a small group of market participants is extremely concerning; that it might have been the case on more than one occasion is even more severe. We do not at this stage know the extent to which market behaviour may have been affected on this or other occasions as a result of information being available early.

I want to share one further piece of information from the report with the House today. On the morning of the Budget, the first IP address to successfully access the economic and fiscal outlook had made 32 prior attempts on the day, starting around 5 am. Such a volume of requests implies that the person attempting to access the document had every confidence that persistence would lead to success at some point. This unfortunately leads us to consider whether the reason they tried so persistently to access the economic and fiscal outlook is because they had been successful at a previous fiscal event. At this time, we do not have answers to all these questions, but I can confirm that the Treasury will make contact with previous Chancellors to make them aware of developments that relate to previous fiscal events. The OBR has rightly conducted its initial investigation as quickly as possible, and it is right that both the Government and the Treasury Select Committee now take time to consider the report and its findings. The Treasury Committee will have the opportunity to carefully question the OBR tomorrow at its post-Budget hearing.

Furthermore, in response to the recommendation in paragraph 3.4 that the problem exposed last week was not a new one, I can confirm to the House that the Government will work in conjunction with the National Cyber Security Centre to take forward the recommendation that a forensic examination of other fiscal events is carried out, although let me specifically note to the House that the report finds no evidence of hostile cyber activity. In addition, the report says that the OBR

‘could not, in the time available, carry out deeper forensic examination of other recent EFO events and we recommend that such an exercise is, with expert support, now urgently carried out’.

We will make sure that work is carried out urgently. We will look at wider questions of the systemic risk that this incident has uncovered, including the report’s conclusion that the OBR’s information security arrangements

‘should have been regularly re-examined and assured by the management of the OBR’.

This Government are committed to the independence of the Office for Budget Responsibility and its role at the heart of economic and fiscal policy-making. The strength of that institution is a vital pillar in the Government’s economic and fiscal policy-making, and we will respond to this matter with the seriousness it demands”.

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, this really has been a bit of an omnishambles with announcements, scene-setting musings, U-turns, misstatements and leaks—speculation that, for a time at least, spooked the markets, raising interest rates on government debt and causing such uncertainty that businesses and individuals delayed or abandoned decisions. We in this House have felt for the Minister, who has tried to hold the line by refusing to speculate despite being inveigled by pretty much all of us to try to make him do so. Frankly, all around him, others were simply flying kites.

On the issue of the OBR, Richard Hughes has taken the honourable step of resigning. Like others, I agree that he is very much the embodiment of a dedicated civil servant and has contributed much to the economic welfare of this country. Can the Government tell us, now that they recognise the seriousness of the breach, whether it is possible that attempts to access this information actually rise to the level of criminality? Are we looking at a possible issue around that? Also, is the security review being extended to other entities at arm’s length from the Government that might also have significant information but not the security that is necessary?

On the Chancellor, we need to understand much better why statements about tax receipts were omitted from the discussion on 4 November. This sits within the context of the omnishambles that I described. I am very concerned, for the future, that this form of extreme kite-flying—not just on this Budget; we have certainly seen it on earlier Budgets—has become so normalised that it has, in effect, killed off purdah. I am not sure that that is good for either the economy or how the markets behave.

In that case, will the Government recognise that they need to overhaul the whole Budget process? In the Swedish example, the Parliament gets to debate the Government’s Budget before it is set in stone, to propose alternatives and to make amendments; that is then followed by a period of scrutiny and accountability. Will the Government now bring forward a new approach to this process—one that enhances accuracy and transparency and properly restores both public trust and the role of Parliament?

[Lord Livermore (Lab)]

I am very grateful to both noble Baronesses for their contributions and questions.

The noble Baroness, Lady Neville-Rolfe, began by paying tribute to Richard Hughes, his actions today and his record of public service. I was very fortunate to work with him while I was a special adviser in the Treasury; he was my private secretary while I was a special adviser. I absolutely know what the noble Baroness said about his commitment to public service, so I join her in those words. The Chancellor said earlier today:

“I want to thank Richard Hughes for his public service and for leading the Office for Budget Responsibility over the past five years and for his many years of public service”.


This Government are committed to protecting the independence of the OBR and the integrity of our fiscal frameworks and institutions.

The noble Baroness, Lady Neville-Rolfe, spoke about misleading. I fundamentally reject that. The Chancellor has been completely honest and consistent with the public in everything she has said. On 4 November, the Chancellor said that her priorities were cutting the cost of living, NHS waiting lists, debt and borrowing. The Budget delivered precisely on those priorities. The Chancellor was clear that, if there were a productivity downgrade, that would mean lower tax receipts. The OBR confirmed that tax receipts are £16 billion lower than they otherwise would have been. The Chancellor said that she intended to build more headroom, and she did—to £21.7 billion. The Chancellor was clear that policy choices would need to be paid for; the Budget shows that those cost £6.9 billion. The Chancellor was clear that challenging decisions would need to be taken on taxation and spending, and she froze thresholds for a further three years. So, as I say, the Chancellor was completely honest and consistent with the public in everything she said.

I note that the noble Baroness, Lady Neville-Rolfe, spoke of a “supposed” productivity collapse, as if she were trying to make light of the fact that the OBR looked back at the past 14 years and revised its view of what the previous Government had done to the economy downwards. It looked at the chronic lack of investment, Brexit, the mini-Budget and all of the other things the previous Government had done, and it was forced to downgrade productivity—the performance of the economy—as a result. It put that forward and said that that did lasting damage to the economy. The noble Baroness described that as “supposed”, so I would like her to acknowledge that that was real and has real, lasting consequences.

The noble Baroness also said that public finances had “improved”. I do not understand how going from a headroom of £9.9 billion at the Spring Statement to a headroom of £4.2 billion before any measures were taken into account is an improvement in the public finances. It is important to point that out.

The noble Baroness said that there is no “fiscal logic” to this Budget. Is she saying, therefore, that she thinks that the headroom of £4.2 billion is sufficient? Is she saying that, if the Chancellor had come before Parliament and announced £4.2 billion of headroom, that would have been an acceptable level of headroom, given the global uncertainty that we face? So, no—there was very clear fiscal logic to this Budget.

The noble Baroness asked me three specific questions. Did the Chancellor know that there was a £4.2 billion surplus on 4 November? Yes, she did. On 4 November, the Chancellor had £4.2 billion of headroom before those policy choices were accounted for, meaning that, once those policy choices were accounted for, there would be a deficit of £2.7 billion before any additional headroom was built. The Chancellor was extremely clear that she intended to build more headroom. The noble Baroness also asked: if the Chancellor wanted more headroom, why did she not say so? I suggest that the noble Baroness goes back and reads her speech from 4 November, because she specifically said that she wanted to build more headroom to create a greater margin against events. The noble Baroness also asked me about the FCA but, frankly, that is a matter for the FCA to decide.

I am grateful to the noble Baroness, Lady Kramer, for her comments. She said that this Budget process had perhaps been dominated by more process questions than normal. I totally agree with her; it has been dominated by process before, during and after the Budget speech. I have some sympathy with her pleas for a return to purdah; it would certainly make my life more easy, and would have made life easier for me in the run-up to the Budget. She also praised Richard Hughes for his record of public service; I entirely agree with her.

The noble Baroness asked whether the contents of this review rise to the level of criminality. As the Statement that my right honourable friend the Chief Secretary gave in the other place says, we have only just received this report; we and the Treasury Committee should take time to consider it.

The noble Baroness gave some suggestions about how other countries run Budget processes. I am not sure that we will be reforming the process to quite that extent, but I have full sympathy with what she says. It is important that we take the Budget process and Budget secrecy extremely seriously—and we do.

[Lord Leigh of Hurley (Con)]

My Lords, this is the second fantasy black hole of this Government. The first did not actually matter because absolutely nobody believed it. No credible economist believed it; I challenge noble Lords to name one who did. However, the second fantasy black hole does matter, because we were all sucked into it to the point where people like me—and, indeed, including me—took financial actions and decisions based on that speech of 4 November. These were irreversible financial decisions based on the words of the British Chancellor. Frankly, like Chris Mason of the BBC, no less, we feel misled. The Chancellor knew that tax receipts were higher than the rest of us knew. This means that people can no longer trust this Chancellor. We cannot believe any of her future statements. If that is the case, does the Minister, who has our confidence and credibility, not agree with me that she surely cannot remain as Chancellor?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his kind words about me, and I am grateful that I have his full confidence. Do I agree with what he says about the Chancellor? It will not surprise him to hear that, no, I do not. The Chancellor has been completely honest and consistent with the public in everything she has said.

The noble Lord says that no one believed the £22 billion black hole. It may be living rent-free in his head, because he has mentioned it probably more times than anyone other than me in this House, so, on that measure alone, it has been extremely successful.

The noble Lord said that he feels misled. I am sorry about that, but the Chancellor said absolutely nothing misleading. As I say, she has been completely honest and consistent. She set out in advance what her priorities were, and she delivered on those priorities. She set out in advance that a productivity downgrade would mean lower tax receipts, and it did mean £16 billion lower tax receipts. She said that she intended to build more headroom, and she built more headroom—to £21.7 billion. She was clear in the summer that policy choices would need to be paid for, and the Budget shows that those policy choices cost £6.9 billion. She said that challenging decisions would be needed on tax and spending, and she froze thresholds for a further three years, among other taxation decisions. So, as I say, she was entirely consistent in what she said before and what she did in the Budget.

[Lord Eatwell (Lab)]

My Lords, the Opposition suggested that markets were misled. Does the Minister agree that, if markets had been misled by the Chancellor’s speech on 4 November, there would have been a sharp market reaction when the truth was revealed in the Budget? But quite contrary to the erroneous statement by the noble Baroness, Lady Neville-Rolfe, there was no sharp reaction. Indeed, the markets after the Budget displayed a similar rate of return on 10-year bonds as they did immediately after the speech on 4 November. There was no significant change because they were not misled. The fiscal balance in both cases was roughly the same. Do these erroneous statements not suggest that the Chancellor’s critics have a lamentable lack of understanding of how the financial markets actually work?

[Lord Livermore (Lab)]

I am grateful to my noble friend for what he said. Obviously, I cannot comment on any specific market movements or lack thereof, but he is absolutely correct that no one at any point was misled. The Chancellor was honest and consistent with the public in everything that she said. My noble friend is absolutely right about the positive market reception to this Budget because we have put fiscal responsibility at the heart of it. We have reduced borrowing every single year of the forecast. We are reducing borrowing further than any other G7 country and net financial liabilities are lower at the end of this forecast period than the beginning. As I said, this is completely consistent with what the Chancellor set out at the start of this process—that she wanted to see debt and borrowing fall as a result of the Budget.

[Baroness Wheatcroft (CB)]

My Lords, would the Minister agree that the real flaw in all this debate is putting such importance on such tiny movements in forecasts? The OBR itself admits that its forecasts tend to overestimate GDP growth and productivity. The reliance on these figures on such short-term movements is utterly crazy when something such as the student loan book stands at nearly £300 billion. Could the Minister tell us what sort of a shortfall he expects to come out of that in the end?

[Lord Livermore (Lab)]

I have some sympathy for the premise behind the noble Baroness’s question. That is why it is important that in this Budget we rebuilt headroom. The Chancellor said at the start of this process, in her speech on 4 November, that she wanted to build greater resilience against global shocks and the kinds of events we are seeing around the world. That is why she built more headroom in the Budget, to £21.7 billion. That provides a greater cushion, for the exact reasons the noble Baroness is saying. The noble Baroness said that the OBR tends to overestimate GDP growth. Obviously, this year it underestimated it, because we beat the forecast for this year. It estimated that growth would be 1% but it turned out to be 1.5%. We were the fastest growing economy in the G7 for the first half of this year and we are on course to be the second fastest for the year as a whole. That is an achievement. She spoke about overestimating productivity, and she is absolutely correct on that. Productivity was downgraded because of the abysmal record of the party opposite over 14 years.

[Lord Razzall (LD)]

My Lords, I take very much on board what the Minister has said about the Chancellor’s announcement that she wanted to increase and improve the headroom. I have been thinking about why the one thing she did not disclose at the time was the extra tax receipts. I suspect the Minister will say he is not prepared to answer this, but I will ask him. Would he accept that it is quite difficult for any Chancellor of the Exchequer to increase headroom when the pressures come? If you are a Tory Chancellor, they come from everybody sitting over there who wants to reduce taxes; if you are a Labour Chancellor, they come from everybody over there who wants to improve public services. Would he accept the possibility that the reason the Chancellor kept this to herself was in order to be able to increase the headroom without those pressures?

[Lord Livermore (Lab)]

I definitely agree with the middle part of the noble Lord’s question on the importance of fiscal responsibility to securing the objectives that we want to see. The best way to provide more money for public services is to reduce the amount we are paying on debt interest; fiscal responsibility is vital to that. As I have said, we are cutting borrowing in every year of this forecast. We are cutting borrowing faster than any other G7 country and we have doubled the amount of headroom. That all helps to support the amount that we pay on debt interest coming down. That gives us more money to spend on the priorities that we all want to see: improving living standards, cutting NHS waiting lists and having more money to fund the public services. Fiscal responsibility is completely consistent with the objectives of this party in funding public services and improving living standards.

[The Earl of Effingham (Con)]

My Lords, please allow me to quote the former chair of the OBR on the black hole that the Minister has now referenced over 50 times at the Dispatch Box:

“Nothing in our review was a legitimisation of that £22 billion”.


Last week, the OBR said that:

“At no point in our pre-measures forecast process were either of the Government’s fiscal targets missed by more than £2.5bn”.


Why are the Government saying something completely different from the OBR?

[Lord Livermore (Lab)]

I am grateful to the noble Earl for pointing out my message discipline at this Dispatch Box. I am proud to have mentioned that £22 billion black hole over 50 times. The two noble Lords sitting next to each other are the other two Members of this House who have mentioned it almost as many times as I have. I think every time the noble Earl has made reference to the £22 billion black hole, I have pointed out to him that the OBR review ran up to six months before the end of the previous Government’s time in office. It identified a black hole and then the party opposite had another six months to continue adding to that hole and to continue to conceal it from the OBR. The OBR says in terms that it was concealed from it. That is a very serious charge.

Regarding what the OBR says about headroom, as I said, on 4 November, the Chancellor had £4.2 billion of headroom before any policy choices we had already announced were accounted for. Once those policy choices were accounted for, she would have a deficit of £2.7 billion. I do not think that anyone on the opposite side of the House thinks that going to the country with a £2.7 billion deficit rather than any headroom would be a fiscally responsible thing to do, given how uncertain the world around us is. It is absolutely right that we increased headroom to £21.7 billion.

[Lord Wood of Anfield (Lab)]

My Lords, I add my praise for Richard Hughes and his outstanding public service, mentioned by the noble Baroness, Lady Neville-Rolfe, the Minister and others. I have two questions for the Minister about the Treasury-OBR relationship going forward, learning the lessons from what has happened.

First, the Treasury was clearly very annoyed by the OBR’s letter to the Treasury Select Committee, detailing the timeline of discussions. Is it the Minister’s understanding that there is a strong Treasury preference that the OBR does not do that in future? I think I know the answer, but how important is that to the Treasury-OBR relationship? Secondly, the Minister has rightly talked about defending the independence and continued existence of the OBR, but is there now discussion about changing its remit and role in the process, in the light of what has happened in the past few weeks?

[Lord Livermore (Lab)]

I am grateful to my noble friend for the points and questions he raises. I had the great privilege of working with him in the Treasury at a time when Richard Hughes was working for us, so we both know the commitment that Richard Hughes has to public service.

My noble friend asked about the relationship with the OBR. I start by saying how strongly we support the Office for Budget Responsibility and its ongoing independence. The first piece of legislation passed by this Government after winning the election was to strengthen the role of the Office for Budget Responsibility, because we had seen, during the Liz Truss mini-Budget, what happens when it is cut out of the process. We saw how damaging that is to the living standards of working people and we are determined that that never happens again. We have absolute commitment to the ongoing independence of the Office for Budget Responsibility.

My noble friend asked about the letter from the OBR to the Treasury Select Committee. We put the utmost weight on Budget security. The OBR chose to publish some further information, which is set out fully in Richard Hughes’s letter to the Treasury Committee. The Treasury agreed in advance to its publication. However, it is important to maintain a private space between the Treasury and the OBR for the exchange of forecast information and Budget policy development, so we welcome the OBR’s statement that this is not intended to become usual practice.

[Lord Sentamu (CB)]

My Lords, I am very grateful to get a copy of the Chief Secretary to the Treasury’s Statement. He paints a chronology of events and how they happened, regardless of any speculation about this. For me, what is important is that he says that the Chancellor

“was clear on 4 November that a lower productivity forecast would mean lower tax receipts. The OBR confirmed at the Budget that tax receipts are £16 billion lower as a result of the reduced productivity forecast”,

and that the Chancellor said at the last Budget that the decisions the Government took on welfare would have to be paid for in this Budget, which she has done, although that will not happen until 2029-30. What will the Government do not to be bounced into the decisions they took on welfare, which then created difficulties for the Chancellor?

Secondly, the OBR’s report has revealed that it is quite possible that other Chancellors faced the same kind of leakage. The OBR has been in place for 15 years, during which all those Chancellors faced the same, especially Kwasi Kwarteng.

[Lord Livermore (Lab)]

I am grateful for that question. The noble and right reverend Lord quite rightly says that the Chancellor was very clear that the productivity review would mean lower tax receipts, and the OBR confirmed that they are £16 billion lower. The OBR’s productivity review lays bare the economic consequences of the past 14 years. The OBR looked back at the productivity performance of the previous decade and concluded that austerity, Brexit and the pandemic have weakened the economy by far more than previously thought. That has an impact on the public finances and growth for the remainder of the forecast period.

[Baroness Penn (Con)]

My Lords, can the Minister tell the House why the increase to forecast tax receipts as a result of higher forecast inflation and greater taxes on employment was the only information not made public in advance of the Budget?

[Lord Livermore (Lab)]

The Chancellor was not going to set out the entire Budget in advance. She set out the Budget on Budget Day. As I have said before, what she did before the Budget and at the time of the Budget were entirely consistent. She set out her priorities and then delivered on them. She said that if the productivity review were to lead to a downgrade in productivity, it would mean lower tax receipts, and it did. The Chancellor said that she intended to build more headroom, and she did. She said in the summer that policy choices would need to be paid for, and she paid for them. The Chancellor was also clear that challenging decisions would need to be taken on tax, and she took several challenging decisions on tax, including freezing thresholds for a further three years.

[Viscount Stansgate (Lab)]

My Lords, I am grateful to my noble friend for coming to the House and repeating this Statement, which is in two parts. On the first part, some of the comments and exchanges so far have had an element of artificial outrage about them—but we can leave that to the debate on the Budget on Thursday. My question is about the second part of this Statement, which relates to the leak and the information that we have been given about how it seems to have occurred. This is not 1947—for those who understand the reference—but nevertheless it is a very serious matter indeed. If it is not too technical a question, I was wondering whether the IP address that started at 5 am to access this information 32 times has yet been identified, and whether we will be told about what happened, because that is the type of serious breach that we need to avoid in future.

[Lord Livermore (Lab)]

I am grateful to my noble friend, and I agree with him that this was a very serious breach of highly sensitive information—a fundamental breach of the OBR’s responsibility—and it should never have happened. On the IP address, I do not believe that it has yet been discovered, but ongoing investigations may well yield that information. My noble friend is right: we are absolutely determined to ensure that this never happens again and we have set out next steps to make sure that that is the case.

[Baroness Lawlor (Con)]

On 31 October, the OBR told the Chancellor of the £4.2 billion. When the Ministers met that same day, neither the Prime Minister nor the Chancellor saw fit to share with Ministers the news from the OBR. One Cabinet Minister is quoted as saying:

“Had we been told, we might have been in a position to advise against setting hares running on income tax and giving the public the impression we are casual about our manifesto commitments”.


Was the Minister told of the £4.2 billion, or when did he know of it?

[Lord Livermore (Lab)]

The noble Baroness seems to know very well what went on behind closed doors and what the Prime Minister and Chancellor said to Ministers in various private meetings. I am afraid that I do not think that she does know what went on behind closed doors. As I have said already, on 4 November the Chancellor had £4.2 billion of headroom before those policy choices were accounted for, meaning that she would have a deficit of £2.7 billion before any additional headroom was built.

[Baroness Curran (Lab)]

My Lords, we have had much discussion of the process in these questions so far, but can my noble friend the Minister remind the House that it is the substance of the Budget that matters much more for families and businesses throughout this country? The doubling of the headroom in the OBR has allowed the Government to provide for financial resilience in the country, which has been welcomed by the markets, because they understand that that is a vital ingredient for a stable and strong economy.

[Lord Livermore (Lab)]

I am very grateful to my noble friend for reminding us that, at the end of the day, it is the substance of the Budget that matters. It is worth reminding ourselves what the Budget and the Chancellor achieved. She cut energy bills by £150, cut NHS waiting lists, cut child poverty, cut inflation and cut borrowing every year, faster than any other G7 economy. She more than doubled the headroom and protected record investment, and she supported faster cuts in interest rates.

Budget: Small and Medium-sized Businesses

Lord Livermore Excerpts

Thursday 27th November 2025 Lords Chamber

[Lord Leigh of Hurley]

To ask His Majesty’s Government what assessment they have made of the effect of the Budget on small and medium-sized businesses.

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

My Lords, yesterday’s Budget rejects austerity, instead building a strong and secure economy—

[Noble Lords]

Hear, hear!

[Lord Livermore (Lab)]

It does this by cutting the cost of living and reducing inflation, cutting NHS waiting lists and cutting government borrowing every year so interest rates keep falling. For small and medium-sized businesses, the Budget supports high streets with permanently lower tax rates for 750,000 retail and hospitality properties, backs entrepreneurs by doubling eligibility for tax breaks that make it easier for fast-growing start-ups to scale and stay in the UK, makes the training for under-25 apprenticeships completely free for SMEs and maintains the lowest rate of corporation tax in the G7.

[Lord Leigh of Hurley (Con)]

My Lords, yesterday was the benefits Budget. The Chancellor has broken her promise not to increase income taxes. As she said in her Budget, because no national insurance is charged on dividend income, she will increase the income tax on dividends. Does the Minister think that she understands that national insurance is on employed income, for which an employee is paid a risk-free salary, but SME dividends are the reward paid to people who take a risk and invest in their own business to help the business grow? For some reason—perhaps he can explain—she failed to put national insurance on the huge incomes of lawyers and others in LLPs. Does he share my concern, and that of many others in the UK, that she has no understanding whatever of basic economic principles such that she does not understand the difference between salary and dividends that SMEs get for return on capital?

[Lord Livermore (Lab)]

Unsurprisingly, no, I do not agree with the noble Lord. He will remember that, in the last five years of the previous Government, spending on welfare increased by £88 billion. The Government are taking action to ensure income from assets is taxed fairly, narrowing the gap between taxes paid on work and tax paid on income from assets. Those with dividend income pay considerably less tax than those whose income comes from employment or self-employment, as they do not pay national insurance contributions. It is not fair that the tax system treats different types of income so differently, so tax on dividend income will increase by two percentage points. Over 90% of UK taxpayers do not pay dividend tax.

[Lord Pitkeathley of Camden Town (Lab)]

My Lords, we know the vital role that the start-up community, and innovation within it, plays in our economy and its future growth. Would my noble friend talk a little bit more about what the Chancellor did yesterday to help that sector with its scale and stay agenda? Also, declaring an interest as a member of the London Partnership Board, and perhaps playing the Millwall card, may I ask my noble friend to acknowledge the role that London is playing in bearing a share of the burden again that is perhaps disproportionate?

[Lord Livermore (Lab)]

I am very grateful to my noble friend for what he says about the action we took to help scale-up businesses in the UK. As many noble Lords will know, the UK is already a great place to start a business, but our companies are not scaling at the same rate as their US peers and raising less at later-stage investment. As a result, UK companies are either acquired, fail, or choose to go abroad to raise that investment. We will change that and make the UK the best place to start, scale and stay, because today’s fast-growing firms are tomorrow’s engine of jobs and growth. We are doubling the eligibility of our enterprise tax incentives, investing billions of pounds in public capital and delivering reforms to boost the attractiveness of the UK markets, making sure that those companies can access the capital and the talent that they need to succeed in the long term.

[Lord Fox (LD)]

My Lords, I am sure the Minister and I will agree that the best way of helping businesses of all sizes is for there to be growth—meaningful growth—over the period. Given the words of the OBR boss, Richard Hughes, this morning on the “Today” programme that none of the measures in this Budget will lead to growth, it is very clear that the OBR does not rate the trade deals, investments in Heathrow or any of the measures as delivering growth over the period covered by the Budget. Where will the growth come from?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. The OBR has upgraded Britain’s growth forecast for this year from 1% to 1.5%, reaching the same conclusion as the IMF, the OECD and the Bank of England, which have already upgraded their growth forecasts. We were the fastest-growing economy in the G7 for the first half of this year, and we are on course to be the second fastest for the year as a whole. He is right that the OBR has looked back at the previous decade and concluded that policies such as austerity and Brexit have weakened the economy more than previously thought, and that assessment then directly impacts its view of GDP for the remainder of the forecast period, but the past does not have to determine the future, and we will go further and faster with our growth mission. We are cutting inflation and cutting borrowing every year of the forecast so that interest rates can keep falling, giving businesses the confidence to invest; we are maintaining public investment to build critical infrastructure; and we are backing our fastest-growing companies. We beat the growth forecasts this year, and we will beat them again.

[Lord Tyrie (Non-Afl)]

Well, it is goodbye Budgets for growth and hello tax and spend, is it not? When Ministers are forced back just to reading scripts—completely unedited, as far as I can tell—we get a gist of the sense of lack of authority behind some of the remarks that have just been made. Budgets used to have detailed studies of incentive effects attached to them. Could the Minister tell us, and publish, any such studies of the incentive effects on small business growth for the tax measures in this Budget?

[Lord Livermore (Lab)]

The noble Lord was characteristically rude, but I will resist being rude back to him. There were very many measures—

[Lord Tyrie (Non-Afl)]

Could the Minister possibly say where I have been rude?

[Lord Livermore (Lab)]

There were several measures to help businesses scale up. The enterprise management incentive scheme will be significantly expanded and made available to more companies. Enterprise investment scheme investment limits and gross asset thresholds will be doubled, and venture capital trust investment limits and gross assets thresholds will also be doubled. The Government will obviously publish impact assessments for all those measures.

[Baroness Elliott of Whitburn Bay (Lab)]

My Lords—

--- Later in debate ---

[Baroness Elliott of Whitburn Bay (Lab)]

My Lords, I welcome the news of free apprenticeships for under 25s in small and medium-sized enterprises. This is good news for young people and businesses. What impact does the Minister think it will have on the number of people coming into apprenticeships in those arenas?

[Lord Livermore (Lab)]

I am grateful to my noble friend for her support for what we announced yesterday in terms of apprenticeships. We are investing £1.5 billion over the spending review period for investment in employment and skills support, including £725 million for the growth and skills levy to help support apprenticeships for young people and to fully fund SME apprenticeships for under-25s. We will also introduce new reforms to simplify the apprenticeship system and make it more efficient when short courses are introduced from April 2026.

[Baroness Neville-Rolfe (Con)]

My Lords, as someone who champions SMEs and regularly has my amendments rejected by the Government, I welcome some of what the Minister has set out. It will, however, be offset by the increase in dividend tax, which has been mentioned, and the negative effect of wider tax increases. Our main disappointment with the Budget, as has already been said, is the disappearance of growth as the principal objective, with no significant positive impact by 2030 according to the OBR. Does he agree that this neglect is particularly bad for SMEs, and can he answer the two questions on the overall impact of the Budget on SMEs now?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. No, I do not accept that the Budget is bad overall for growth and for SMEs. As I have said, the OBR has upgraded Britain’s growth forecast for this year from 1% to 1.5%. The noble Baroness’s policy of going back to austerity and cutting spending by £47 billion would be exactly the wrong thing to do at this point for growth. We need to maintain investment in our economy. In this Budget, we are cutting inflation, cutting borrowing every year of the forecast and keeping interest rates down. We are maintaining higher levels of public investment for decades, building houses, roads, railways and energy infrastructure, and backing our fastest-growing companies. She mentioned growth. She may have seen this morning that JP Morgan, the global investment bank, announced a $10 billion investment in the UK with its intention to build its new landmark tower in London. Jamie Dimon, the CEO, said:

“The UK Government's priority of economic growth has been a critical factor in helping us make this decision”.

[Baroness Bowles of Berkhamsted (LD)]

If the Government are supporting scale-ups and start-ups, what do they think about the fact that every single start-up and scale-up, even those very successful at fundraising, has been eliminated from the Department for Transport’s recent procurement framework and that they were asked to provide indemnities if they were to participate? How does that measure up with HMT asking regulators and the private sector to take more risk and not doing so itself? How do they get value out of the investment that they are putting in if it is not followed up with routes to revenue?

[Lord Livermore (Lab)]

The noble Baroness is absolutely right about the importance of procurement to scale-up firms; I completely agree with her on that point. As part of the announcements that we made yesterday, we said that the Government will act as a better early customer to help UK firms prove commercial potential, including through a new innovation marketplace to fast-track strategically important firms into public procurement.

Inheritance Tax: Pensions

Lord Livermore Excerpts

Monday 17th November 2025 Lords Chamber

[Baroness Altmann]

To ask His Majesty’s Government what assessment they have made of the impact on bereaved families, confidence in pensions and future levels of pensioner poverty of proposals to impose inheritance tax retrospectively on unused pensions and death benefits.

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

My Lords, the Government continue to incentivise pension savings for their intended purpose of funding retirement. Most unused pension funds and death benefits payable from a pension will form part of a person’s estate for inheritance tax purposes from 6 April 2027. This removes distortions resulting from changes made over the last decade, which have led to pensions being openly used and marketed as a tax planning vehicle to transfer wealth, rather than to fund retirement.

[Baroness Altmann (Non-Afl)]

I thank the Minister for his Answer, but my Question was whether the Government have actually properly considered the real-world impact of these unworkable proposals. With its aim to hit the minority of wealthy pension owners, this policy could actually damage millions of less well-off families who will see a 40% cut in death benefits, especially if they are in a defined contribution scheme, much less so in defined benefit. A single parent with a house and children will lose out significantly. Does the noble Lord recognise that this retrospective confiscation without transitional protection undermines confidence in long-term planning, reduces long-term investment and will lead to more people rushing to take money out of their pensions quickly, just in case they may face the inheritance tax? This is especially the case if they can take out thousands of pounds a year at just 20%, which will mean more pensioners in future in poverty, despite the Government’s aim to get more people saving for a good pension.

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question; I think the short answer is no. Let us be very clear: this is not a retrospective policy change. It takes effect for deaths on or after 6 April 2027, so that is in no way retrospective. As for the examples that the noble Baroness gives, it is important to be very clear that estates will continue to benefit from all the normal nil-rate bands, reliefs and exemptions available. An estate can pass on up to £1 million with no inheritance tax, and spouses are fully exempt from inheritance tax. More than 90% of UK estates will continue to have no inheritance tax liability following these changes.

[Lord Davies of Brixton (Lab)]

May I welcome my noble friend’s clear statement that the purpose of a pension fund is to provide pensions and not to assist the better-off in estate planning? Does he agree with me, given the frequent press comment that inheritance tax is, in many senses, a voluntary tax, that anyone will be able to avoid paying the higher rate of tax with a modicum of planning?

--- Later in debate ---

[Lord Livermore (Lab)]

I very much agree with the first part of my noble friend’s question. It is very important to state that the intended purpose of pension savings is to fund retirement. The Government continue to incentivise pension savings, with tax relief on both contributions to pensions and the growth of funds held within a pension scheme. These tax incentives are very significant, costing taxpayers £78 billion a year. It is therefore right, as my noble friend said, that it is important to ensure that these tax reliefs are being used for encouraging savings for retirement, rather than ordinary taxpayers subsidising the wealthy to pass on their wealth free of inheritance tax.

[Lord Macpherson of Earl’s Court (CB)]

My Lords, does the Minister agree that it is an important principle of the tax system that tax reliefs, and therefore tax expenditures, should be tightly drawn? Does he also agree that the point of pension relief is to provide a pension in retirement, and therefore that pension savers should draw down their pension, rather than using it as a device to avoid inheritance tax and to improve the lot of their descendants, rather than themselves?

[Lord Livermore (Lab)]

I do agree with everything the noble Lord said. I enjoyed discussing these matters with him when he was a Treasury official and I was a special adviser. I probably learned a lot of this from him then, so I completely agree with what he said. To repeat, the purpose of pension savings is to fund retirement. If taxpayers are spending £78 billion a year on that, it is very important that it is used for its intended purposes rather than for estate planning, as the noble Lord says.

[Baroness Kramer (LD)]

My Lords, does the Minister agree that in real life, many people restricted their lifestyles, spending and gifting in order to build a sufficient defined contribution pension that could pay, if needed, for years in a care home—not knowing how long they would live or their health condition—and because they did not want to burden the state or their children? They now see that they were being gullible in believing the assurances that anything unused could go to their loved ones free of inheritance tax, and that the Government simply regard their sense of responsibility as rather stupid. What would the Minister say to those people?

[Lord Livermore (Lab)]

More importantly, what would I say to the noble Baroness? I would say that she is saying things that are completely misleading. As I have said already, estates will continue to benefit from all the normal nil-rate bands, reliefs and exemptions available, so an estate can pass on up to £1 million with no inheritance tax, and spouses are fully exempt from inheritance tax. It is also important to say that we have equal treatment here. There is equal treatment for inheritance tax purposes between pension and non-pension assets, and I think that is perfectly fair within the system.

[Baroness Neville-Rolfe (Con)]

My Lords, I speak as someone whose relatives have struggled for years, rather than months, in coping with the probate system, partly because of the problems caused by the inefficiencies of the probate office. Executors will not be able to deal with the extra complexity of adding pensions to IHT, particularly those with lots of small pension pots. My noble friend Lady Altmann, in her submission to our Finance Bill Sub-Committee, has suggested a simpler mechanism for dealing with this and raising the necessary revenue. Will the Government examine this sympathetically?

[Lord Livermore (Lab)]

I presume the noble Baroness is referring to the proposal of the noble Baroness, Lady Altmann, for a flat tax, and it is very interesting that she raises that. Currently, fewer than 10% of estates will have an inheritance tax liability. If you put a flat tax on all pensions, you are asking 90% of estates to pay more so that 10% of estates can pay less. I do not consider that to be fair.

[Lord Massey of Hampstead (Con)]

My Lords, interest charges for late payments of tax are charged at 8% per annum and apply to estates after six months. Does the Minister agree that, given potential complications in finalising and executing wills, six months is rather short and that a longer grace period of at least one year should apply before interest charges are levied?

[Lord Livermore (Lab)]

I understand the point that the noble Lord raises. As I understand it, six months is standard within the tax system.

[Lord Evans of Rainow (Con)]

My Lords, the Minister may recall that this time last year I asked a Question about pensioners who are coming up to the time when their pensions are ready to be drawn down, and they are looking forward to the 25% tax-free lump sum. Despite the noble Lord’s reassurances, thousands of pensioners took their pension early. Can the Minister reassure pensioners waiting to draw down their pension that there will be no changes to the 25% tax-free lump sum?

[Lord Livermore (Lab)]

I remember the noble Lord’s Question last year. As he knows, I will not speculate on the next Budget now or comment on individual tax measures ahead of time.

[Lord Forsyth of Drumlean (Con)]

My Lords, does the noble Lord accept the principle that it is wrong to raise any tax of any kind on people who do not have the cash to pay it?

[Lord Livermore (Lab)]

As I say, given that all the normal nil-rate bands will continue to apply, an estate can pass on up to £1 million with no inheritance tax. If you are leaving £1 million, you probably have the cash to pay the tax.

[Baroness Altmann (Non-Afl)]

My Lords, I fully agree with the noble Lord that pension funds should be used to fund retirement. The point is that this is a retrospective tax, because people have already put the money in and made long-term plans, of which now a significant proportion, and sometimes the majority, is being confiscated by HMRC if they are unlucky enough to die before they draw down. The worry is about people who are younger, not those who are deliberately avoiding taking their pensions. People die unexpectedly young, and their families will lose out and their death benefits will be cut. These are people who have made long-term plans. I am concerned about the impact on future pension savers, who will think, “The Government might just come and take this money away from me. I’m not going to invest it for the long run—pensions is just not something I want to bother with”, even if they would not eventually pay IHT. That is the problem and why I was suggesting a flat-rate levy, which can recover some of the tax relief given on unused pensions but still not impact the future confidence in pensions.

[Lord Livermore (Lab)]

All the points that the noble Baroness raises have been covered in previous conversations. It is clearly not a retrospective tax because it takes effect for deaths on or after 6 April 2027. I have also dealt with the fact that a flat-rate tax would mean that 90% pay more so that 10% can pay less, and that an estate can pass on up to £1 million with no inheritance tax due.

Economic and Taxation Policies: Jobs, Growth and Prosperity

Lord Livermore Excerpts

Thursday 13th November 2025 Lords Chamber

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

My Lords, I congratulate the noble Lord, Lord Elliott of Mickle Fell, on securing this debate and on his thoughtful, interesting and wide-ranging opening speech. I very much look forward to reading his book, once I receive the free copy that I was promised. I also join the noble Lord in his heartfelt tribute to the late noble Lord, Lord Desai.

It has been most enjoyable today to listen to the contributions from so many distinguished noble Lords, and it is a pleasure to respond to this debate. It has been a particular pleasure to hear from noble Lords from the party opposite about how to grow the economy; it is perhaps a pity they did not take their own advice over the past 14 years.

We have heard in this debate from members of the previous Government about how to grow the economy and increase prosperity, despite growth in living standards being one of their greatest failures; we have heard from some of the most prominent supporters of Brexit about how to grow the economy, despite their own disastrous Brexit deal permanently reducing GDP by four percentage points, as mentioned by my noble friend Lord Eatwell; and we have heard from some of the most enthusiastic acolytes of Liz Truss about how to grow the economy—

[Lord Lamont of Lerwick (Con)]

If the Minister will allow me, he spoke about GDP being reduced by four percentage points. I assume he is referring to the OBR’s original projection, which was over the next 15 years. So far, we have not had the 15 years, and he is thoroughly misrepresenting the situation if he is implying that this has already happened.

[Lord Livermore (Lab)]

I do not think I have misrepresented the situation in any way, shape or form. The OBR forecast that around two-fifths of the 4% impact had already occurred by the time the EU-UK Trade and Cooperation Agreement came into force and that GDP will be 2.7% lower by 2025, with the remaining reduction occurring by 2030, meaning the economy will be over £100 billion smaller than it otherwise would have been.

As I was saying, we have also heard from some of the most enthusiastic acolytes of Liz Truss about how to grow the economy, despite the Liz Truss mini-Budget crashing the economy and sending mortgage rates spiralling. I think we have long since abandoned any hope of an apology to the British people from the party opposite for its record on the economy over 14 years, but what is still shocking is its inability to show even the slightest hint of self-awareness for the damage it did to the British economy over the past 14 years or any awareness that that damage continues to scar our economy today, as my noble friend Lord Davies of Brixton clearly set out.

The reality of that record over 14 years is stark, as my noble friend Lord Liddle said. First, there was austerity, mentioned by my noble friend Lady O’Grady of Upper Holloway, which took demand out of the economy at exactly the wrong moment and cut investment, undermining the economy’s ability to grow, and left us ill-prepared for the future. Then a disastrous and tragically misjudged Brexit deal—interestingly, not mentioned by the noble Lord, Lord Elliott, in his opening speech—imposed new trade barriers equivalent to a 13% increase in tariffs for manufacturing and a 20% increase in tariffs for services, reducing total trade intensity by 15%. As a result, as I have said, the economy will be over £100 billion smaller by 2030.

The combined effect of these costly mistakes was devastating. Had the UK economy grown by the average of other OECD countries over those 14 years, it would be more than £150 billion larger today. The previous Parliament was the worst ever for living standards. Inflation hit 11.1% and was above target for 33 months in a row. The noble Baroness, Lady Noakes, mentioned business investment. She may recall that, under her Government, the UK had the lowest private investment levels in the whole of the G7, productivity growth entirely stalled and output per worker grew more slowly than in nearly every other G7 country.

These policy errors, chronic instability and low levels of investment have left deep scars on the British economy, as my noble friend Lord Eatwell set out. As mentioned by the noble Lord, Lord Harper, alongside the forthcoming Budget, the Office for Budget Responsibility will set out the conclusions of its review into the supply side of the UK economy. I will not pre-empt those conclusions today, but the OBR may downgrade the historic assessment of the UK’s productivity and may conclude that the productivity performance we inherited from the previous Government was even weaker than previously thought.

[Lord Bridges of Headley (Con)]

Can the Minister clarify that his argument is that the Government have made no policy errors regarding their economic management over the last year?

[Lord Livermore (Lab)]

I am only five minutes into my speech; let us hear my whole speech before we conclude on that.

The OBR’s productivity assessment will be a look in the rear-view mirror, but the past mistakes of the previous Government do not need to determine our country’s future. While the record of the past 14 years may be even worse than previously realised, it underlines the importance of delivering higher and more sustainable economic growth, which has been the defining mission of this Government since we entered office. The noble Lords, Lord Elliott, Lord Harper and Lord Bridges, and the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, mentioned today’s growth figures. While they are, of course, lower than any of us would want to see, they confirm that the UK was the fastest growing economy in the G7 in the first half of this year and show just how much more there is to do.

We will move further and faster with our growth strategy, set out clearly many times and built on the three pillars of ensuring economic and fiscal stability, reforming the economy and increasing investment. It is welcome that the IMF has said that this strategy focuses on the right areas to increase productivity. This strategy recognises that growth comes not from government but from businesses and investors and that there is a role for a strategic state, not to step back and let businesses fend for themselves, but to act in partnership with business by systematically removing the barriers to growth that it faces.

The first pillar, stability, is the foundation all else is built on. That began with the Government’s first Budget last October. The noble Lords, Lord Harper, Lord Swire and Lord Leigh of Hurley, could not help but mention the £22 billion black hole in the public finances we inherited, which the previous Government sought to conceal from the OBR, but once again—

[Lord Harper (Con)]

Will the Minister confirm that at no point would the OBR, either in interviews or in its documents, confirm the existence of a £22 billion black hole because it absolutely did not?

[Lord Livermore (Lab)]

The report that it produced stopped before the conclusion of the previous Government. It stopped at that Government’s last Budget and of course they had several months left to run. The OBR reported on the period it was asked to report on, yet the previous Government still had several more months to run. The OBR has absolutely concluded that that information was concealed from it, and I think that is a very serious thing for us to know. Once again, noble Lords who mentioned it in their speeches today sought to deny and downplay that black hole—exactly the behaviour that got the country into the mess the previous Government left behind.

Faced with that inheritance, any responsible Government would need to act. One of the decisions we took was to increase the level of employers’ national insurance contributions to help repair the public finances, rebuild public services and restore economic stability, as mentioned by so many noble Lords in today’s debate. Contrary to what the noble Lord, Lord Bridges, said, I acknowledge, as we have always acknowledged, that there are consequences to responsibility and that the increase in employers’ national insurance would have costs to businesses and beyond, but the consequences of irresponsibility for the economy and working people would have been far greater, as we saw in the Liz Truss mini-Budget. Many noble Lords opposite mentioned the importance of small businesses, and I completely agree with them. The Government protected the smallest businesses from these changes by increasing the employment allowance from £5,000 to £10,500. This means that 865,000 employers will pay no national insurance contributions at all, and more than half of all employers will either gain or see no change.

Another area highlighted in this debate by the noble Lords, Lord Elliott and Lord Bilimoria, the noble Viscount, Lord Trenchard, and the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, was the non-dom regime. It is right that everyone who makes their home in the UK pays their taxes here. The Government have therefore removed the outdated concept of domicile status from the tax system and introduced a new residence-based regime. The OBR has certified that the non-dom reforms the Government have implemented will raise £33.8 billion in total revenue, and that figure accounts for some non-doms who are ineligible for the new regime choosing to leave the UK in response to these reforms. The Government will of course continue to work with stakeholders to ensure that the new regime is internationally competitive and focused on attracting the best talent and investment into the UK.

The noble Baroness, Lady Foster, and the noble Lord, Lord Bilimoria, among others, mentioned changes to agricultural property relief and business property relief. The Government made these changes better to target APR and BPR and to make them fairer. The reforms mean that, despite the tough fiscal context, we are maintaining very significant levels of relief from inheritance tax beyond what is available to others. These reforms mean that almost three-quarters of estates claiming APR, including those that also claim BPR, will not pay more inheritance tax.

The economic stability provided in our first Budget is underpinned by our fiscal rules, mentioned by my noble friend Lord Eatwell and the noble Lord, Lord Young of Cookham. Those rules allow us to invest more in capital, alongside a credible plan to grow our economy and bring debt down within this Parliament. We met these fiscal rules in the Budget last year and at the Spring Statement in March, and we will meet them again at the forthcoming Budget.

The second pillar of our growth strategy is to deliver whatever reforms are necessary to remove the barriers to growth faced by businesses and investors. These include planning reforms, which the OBR estimates will add 0.4% to GDP—the biggest policy-driven booster growth with no fiscal cost that it has ever scored. Our pension reforms will unlock £50 billion of investment for businesses and major infrastructure. Our skills reforms will equip firms with the skilled workforce they need to grow. We have begun a reset with the European Union, which I hope the noble Baroness, Lady Kramer, will support, despite not going as far as she argued for in her speech today. We have also reached a trade agreement with the US and signed a new trade deal with India. We have set out a new modern industrial strategy to target high-growth sectors. As mentioned by the noble Lord, Lord Risby, we are cutting the administrative costs of regulation on business by 25%, and we are delivering the Leeds reforms, the widest-ranging reforms to financial services regulation in over a decade.

The final pillar of our growth strategy is investment, which stability and reform are designed to increase. The Government have an important role to play here. The IMF has long warned that a lack of public investment was a significant barrier to growth. That is why we have committed an additional £120 billion of public investment over the next five years, made possible by reform of the fiscal rules. Our fiscal rules ensure that we do not need to cut capital spending, unlike the previous Government which planned to cut it even further, as my noble friend Lord Eatwell observed, which got us into this productivity hole in the first place. We are directing our additional capital investment into growth-driving projects, including new homes, improved transport connectivity and new nuclear projects such as Wylfa, as mentioned by my noble friend Lady O’Grady of Upper Holloway and the noble Lord, Lord Bilimoria, and we are catalysing private investment through the new National Wealth Fund and British Business Bank.

As so many noble Lords opposite have said today, the real prize is increased private sector investment in our economy. Whereas under the previous Government the UK had the lowest level of private investment in the G7, since the election private sector companies have committed over £325 billion-worth of investment into the UK, including during the US state visit in September and, as mentioned by my noble friend Lord Chandos, at the regional investment summit last month—the first, we hope, of many.

Real progress takes time and, as my noble friend Lord Chandos said, we cannot reverse 14 years of underinvestment overnight. But real wages grew more in the first 10 months of this Government than in the first 10 years of the previous Government. Under the previous Government, we saw the worst pay growth in a century, with barely 0.3% growth between 2010 and 2024. The noble Lord, Lord Elliott, spoke about living standards in his opening speech. Living standards are up 2.1% since the election, compared to the 1.8% fall over the last Parliament. That was the only Parliament on record where living standards were worse at the end of the Parliament than at the beginning, as referred to by the noble Lord, Lord Skidelsky.

Whereas the UK was ranked seventh out of seven for projected 2025 growth in the G7 under the previous Government, our growth was the fastest in the G7 in the first half of this year. But we do not expect anyone to be satisfied with growth of 1%. Today’s growth figures reinforce the fact we need to go further and faster, not repeating the previous Government’s mistakes of cutting investment but continuing to create the right conditions for growth.

The first part of our planning reforms will add an additional £6.8 billion to the size of our economy in the next five years, but the next part, our planning Bill, must complete its passage through Parliament before it can make a difference. Interest rates, which rose consistently in the last Parliament, have now been cut five times since the election, but at 4% they are still a constraint on business borrowing and a burden on family finances. Inflation is clearly much lower than the double digits seen under the previous Government, but the choices we make must be focused on getting inflation falling and creating the conditions for interest-rate cuts to support economic growth and improve the cost of living.

As mentioned by the noble Lord, Lord Elliott, in his opening speech, while we have taken action in the industrial strategy to reduce business energy costs by up to £420 million a year, they are still too high and we must go further.

Noble Lords, including the noble Lords, Lord Elliott, Lord Harper and Lord Bilimoria, mentioned the importance of employment. The latest figures show that 138,000 jobs have been created since the election. The OBR forecasts that over this Parliament employment will rise and unemployment will fall, but the figures published this week show exactly why we must go further to get Britain working and get our economy growing. I am grateful for the support for the youth guarantee from the noble Lord, Lord Skidelsky; and the noble Lord, Lord Howard, mentioned the importance of jobcentre reform.

Noble Lords, including the noble Lords, Lord Elliott, Lord Leigh of Hurley and Lord Massey of Hampstead, the noble Viscount, Lord Trenchard, my noble friend Lord Liddle and the noble Baroness, Lady Neville-Rolfe, mentioned the Employment Rights Bill. As noble Lords know, the Bill is still going through its final parliamentary stages. The Government are also supporting businesses to create jobs, innovate and grow, including by reforming our regulatory framework to reduce barriers to growth and investing in our economy.

Many noble Lords, including the noble Lords, Lord Young of Cookham, Lord Petitgas, Lord Horam and Lord Bridges of Headley, and the noble Baroness, Lady Stedman-Scott, mentioned welfare. The Government are committed to reforming our welfare state. We are shifting the focus from welfare to work, skills and opportunities. We have backed that up with £1 billion a year for employment support by the end of the decade. As my noble friend Lord Liddle said, the Government have also announced an independent report into young people and work, to be led by Alan Milburn, which will examine why increasing numbers of young people are falling out of work or education. He will publish his final report by next summer.

Many noble Lords, including the noble Lords, Lord Elliott, Lord Harper, Lord Petitgas, Lord Swire, Lord Wharton of Yarm, Lord Massey of Hampstead and Lord Kempsell, the noble Baronesses, Lady Stedman-Scott, Lady Fall and Lady Kramer, and my noble friend Lord Liddle, spoke about the forthcoming Budget in just under two weeks’ time. There has been much speculation about the forthcoming Budget, as mentioned by the noble Lord, Lord St John of Bletso, but, as my noble friend Lord Chandos rightly suggested, I am not going to comment on individual tax measures today. The Chancellor has asked the OBR to produce a new forecast. She will take decisions based on that forecast, and we will set out our fiscal plans at the Budget in the usual way. The Chancellor will, though, make those decisions mindful of the importance of growth and investment to businesses and to the economy, and it is vital that the tax system supports our growth mission.

The noble Lord, Lord Elliott, spoke of the importance of innovation and enterprise, mentioned also by the noble Lord, Lord Marks of Hale, while the noble Baroness, Lady Fall, rightly spoke about the importance of supporting scale-up businesses. The current rate of corporation tax is the lowest in the G7, and that is supplemented by generous business investment reliefs that directly support investment, including full expensing, R&D tax reliefs and the patent box regime.

The noble Lord, Lord Bridges, mentioned headroom. As the Chancellor said earlier this week, we will continue to

“build more resilient public finances—with the headroom to withstand global turbulence … giving business the confidence to invest and leaving government freer to act when the situation calls for it”.

We have been clear about the principles that will guide the forthcoming Budget. It will protect the NHS and public services from a return to austerity, because it was austerity that choked off investment that would have put our country on a path to recovery after the financial crisis. Instead, we will protect investment in our economy and build on the progress already made to repair the public services. The Budget will support growth, enabling businesses to create jobs and innovate. It will improve the cost of living by doing what is necessary to protect families from high inflation and high interest rates, and it will keep debt under control because the less we spend on debt interest, the more we can spend on the priorities for working people, as the noble Baroness, Lady Kramer, rightly said,

I am grateful to all noble Lords who have spoken in today’s debate, but we will take no lectures from the party opposite, which presided over 14 years of instability, low productivity and economic decline. Where it delivered the slowest projected growth in the G7, growth in the first half of this year was the fastest in the G7. Where it presided over the worst Parliament ever for living standards, living standards have increased by 2.1% since the election. Where it oversaw the worst pay growth in a century, real wages grew more in the first 10 months of this Government than in the first 10 years of the previous one. Where it continually cut capital spending and deterred investment, we are investing for the long term, with £120 billion over the next five years, alongside £325 billion committed by the private sector since the election.

The OBR may conclude shortly that the productivity record of the previous Government was even worse than previously thought, but we will not let those past mistakes determine our country’s future. This Government will invest in the NHS, support growth and improve the cost of living. We will continue to build strong foundations for our economy because that is the only route to securing Britain’s long-term future.

[Lord Elliott of Mickle Fell (Con)]

My Lords, I will be brief. I thank the Library for its excellent briefing note, and all noble Lords for their thoughtful contributions. It has been a superb and stimulating debate; we should consider making it an annual fixture in the Lords calendar.

There are lots of points I would love to pick up on, not least on welfare, the notion of an exit tax, even capital controls, but I get the sense from the House that the thing noble Lords would like to hear from me most on is perhaps Brexit. It was mentioned by the Minister, the noble Lord, Lord Eatwell, and the noble Baroness, Lady Kramer.

There was a lot of talk about the OBR report. I have read that report and it is based on projections brought together before the referendum, before we knew what sort of deal it would be from the EU. It is actually a very old report. Since 2016, it is worth noting that UK economic growth, although less than expected, has been higher than most western European countries. UK trade—

[Lord Livermore (Lab)]

It is just worth noting that the OBR updated those forecasts in 2024 and 2025 and maintained its view that it will reduce GDP by four percentage points.

[Lord Elliott of Mickle Fell (Con)]

It is also worth noting that UK trade with the EU is now higher than it was in 2019, as is UK trade with the rest of the world. The referendum was over nine and a half years ago and we left the EU five and a half years ago. I think it is time to take responsibility for what is going on now with economic growth. The Government should be commended for some measures which have increased economic growth, such as the post-Brexit trade deals—not possible without Brexit—with the US, the Gulf states and India.

I liked the intellectual honesty of saying that we should rejoin the customs union and think the Government should be more intellectually honest if they talk about Brexit. It is worth noting, though, that were we to rejoin the EU, what would the annual membership fee now be? Perhaps £22 billion a year—that would be another £22 billion to think about. I hope the Government consider some of the proposals put forward in the Budget and I beg to move.

Cryptocurrencies: US Regulation

Lord Livermore Excerpts

Wednesday 12th November 2025 Lords Chamber

[Lord Davidson of Glen Clova]

To ask His Majesty’s Government what assessment they have made of the risks to the finance system in the United Kingdom arising from the loosening of regulation of cryptocurrencies in the United States of America.

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

My Lords, the UK is engaged with the US on crypto asset risks through international fora, and we have created a joint UK-US Transatlantic Taskforce for Markets of the Future, for enhanced collaboration on digital assets. The Government are legislating this year for a crypto assets financial services regulatory regime, with the Financial Conduct Authority as the lead regulator, so consumers are protected and firms have the certainty needed to invest and grow in the UK.

[Lord Davidson of Glen Clova (Lab)]

I thank my noble friend the Minister for his Answer. The risks normally associated with cryptocurrencies are volatility, fraud, money laundering and access to criminality. Have these risks been assessed by the Government, and if so, with what result?

--- Later in debate ---

[Lord Livermore (Lab)]

I am grateful to my noble and learned friend for his question. The Government’s approach to crypto assets seeks to strike the right balance between giving firms regulatory certainty and ensuring the sector has the space and flexibility to innovate. The Government recognise that our financial stability, as well as the other considerations that my noble friend mentioned, are associated with crypto assets, but they need to be balanced against supporting innovation and ensuring the UK positions itself as a competitive global destination for digital assets. Internationally, the UK financial authorities have been working, through the Financial Stability Board, to assess and develop supervisory and regulatory approaches to address the global financial stability risks posed by crypto assets and global stablecoins. We are also currently working to put in place a comprehensive domestic regulatory regime for crypto assets as financial services, to ensure the UK has the necessary protections for crypto asset usage.

[Lord Vaizey of Didcot (Con)]

My Lords, I declare my interest as the chair of the All-Party Group on Crypto and Digital Assets. The Minister’s remarks are very welcome. Does he agree with me that the risks around crypto are the risks of not regulating it? With one in four people in Britain now trading cryptocurrency —half of them under the age of 35—regulation has never been more needed. In essence, the key issue is time: we need to get on with it.

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question and pay tribute to his considerable expertise in this matter. I agree with what he said. Crypto assets have the potential to play a significant role in the financial services sector, and the economy more broadly, including through greater transparency, efficiency and security. We are already seeing the benefits that stablecoin can provide in cross-border payments by reducing costs and improving efficiency. Unlocking the full potential for digital assets and blockchain technologies requires payments that interact with them directly, and stablecoins can play an important role in achieving that. It is therefore important for the UK to harness those opportunities and—I agree with him on this—to bring forward legislation, and we will do so.

[Baroness Kramer (LD)]

My Lords, my concern is about the geopolitics. Much of the UK’s trade today is conducted in offshore dollars, which sit beyond the reach of the US Government. As dollar stablecoin replaces traditional dollars, the US Government will get their hands on levers to pressure us and others by threatening to curtail access. Are the Government looking at the key issues of monetary sovereignty? The regulators clearly are not.

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. She is not correct to say that the regulators are not looking at that; of course they are taking it into account. She is absolutely right that the US is taking forward US-denominated stablecoin. It is very important that the UK does the same. The Government see stablecoin playing an important role in the diverse and competitive UK payments landscape. We hope that firms will see the advantages of being regulated as stablecoin issuers in the UK and will seek permissions under the new regime for that.

[The Earl of Devon (CB)]

My Lords, at the same time that the US is loosening regulation, as the Minister mentioned, the FCA is midway through its multi-year review of a comprehensive crypto asset regulatory regime. Can the Minister confirm that that review is proceeding in accordance with the published crypto road map? Is there any concern that the crypto sector and the UK’s innovation will be hampered by increased regulation at a time when other jurisdictions are loosening their regulations?

[Lord Livermore (Lab)]

I am not sure I share the noble Earl’s characterisation of the distinction between the two regimes. The US will legislate for their interests, and we will legislate for ours. The US passed legislation for the regulation of stablecoin in the summer. US regulators will publish their regulatory rules in mid-2026, with a backstop date of January 2027 for the US regime to go live. In the UK, the Government published draft legislation in April, with the final legislation due before the end of the year. Alongside that, the FCA is at an advanced stage in its consultations on the details of its regime, with a view to finalise its detailed rules and requirements in 2026. As I said at the outset, we have also created a joint UK-US Transatlantic Taskforce for Markets of the Future, to enable enhanced collaboration on digital assets.

[Lord Ranger of Northwood (Con)]

My Lords, I welcome the comments from the Minister on this topic and note my interest as co-chair of Digital Markets and Digital Money APPG. Two weeks ago, I was in Washington and met members of the US Securities and Exchange Commission—its chair, Paul Atkins, and its commissioner, Hester Peirce—to discuss “Project Crypto”, the road map it announced in August to modernise regulations for the digital asset economy. Its goal is to enable American financial markets to move on-chain and to position the US as a global leader in blockchain and crypto by creating a clearer, more innovative-friendly regulatory framework. While recognising the need to manage risks in financial stability, does the Minister agree that the greater danger to the UK is falling behind jurisdictions such as the US, if they move faster to enable innovation in crypto and digital assets?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question and pay tribute, too, to his expertise in this matter. There is a lot of truth in what he said, which is partly why HM Treasury has jointly established the transatlantic task force with the US Treasury. The purpose of the task force is threefold: first, to identify and explore options for short to medium-term collaboration on digital assets, while legislation and regulatory regimes are still developing; secondly, to identify options to improve links between our capital markets, to enhance the growth and competitiveness of both UK and US markets; and, thirdly, to report, ideally, within 180 days. It is chaired by officials of HM Treasury and the US Treasury, including representatives from the UK and US regulators responsible for capital markets, so that we can share lessons between the two authorities.

[Lord Brennan of Canton (Lab)]

My Lords, do the Government have in mind any lessons from history when considering the potential consequences on the finances of ordinary people of a regulatory race to the bottom with regard to any kind of financial instrument?

[Lord Livermore (Lab)]

Possibly, but I do not at all share the characterisation made by my noble friend of a regulatory race to the bottom. As I have said, we will regulate in the UK’s national interest. The Government will bring forward the final legislation to create a financial services regulator regime for crypto assets this year. Clearly, we must strike the right balance between giving firms regulatory certainty, protecting consumers and ensuring that the sector has the space and flexibility to innovate.

[Baroness Neville-Rolfe (Con)]

My Lords, these markets are global. Can the Minister tell us what contingency plans the Bank of England and the Treasury have in place should a major crypto company in the US collapse, with consequences for UK savers and markets, now as well as once the legislation has gone through? When we last discussed this subject, the Minister helpfully agreed that the Government might present a discussion paper, which would help us all. When might we expect that, given the pace of change in this important area?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. As she knows, the Bank of England is the independent regulator for systemic stablecoin and will design its regime as necessary to manage the associated risks. On 10 November, just earlier this week, the Bank of England launched a consultation to seek industry feedback on its systemic stablecoin regime, building on the initial proposals set out in its 2023 discussion paper. This includes up to 60% of backing assets to be held in short-term sterling-denominated UK Government debt securities, consistent with emerging regulatory regimes internationally, and the proposed cap of between £10,000 to £20,000 for individuals and £10 million for businesses applying for systemic stablecoins and only after consultation. The Treasury and the Bank of England are maintaining a close and ongoing dialogue on the legal and regulatory treatment of stablecoins in support of the Government’s objective to make the UK a global destination for digital assets. In terms of any wider discussion paper, I am very happy to continue discussing that point.

[Lord Fox (LD)]

My Lords, my question concerns the Bank of England’s control over money supply. At what point, when the public are adopting cryptocurrencies, does the Bank lose control of the money supply? What calculation has the Treasury done, or has the Treasury done in conjunction with the Bank of England, to maintain national control over our money supply?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. The Bank of England’s Financial Policy Committee and the multilateral Financial Stability Board currently agree that crypto asset markets do not currently pose material risk to financial stability in the way the noble Lord describes but that stability risk may grow as connections between the traditional financial services sector and crypto markets increase. International and UK financial authorities have been working through the Financial Stability Board to assess and develop supervisory and regulatory approaches to address global financial stability risks posed by crypto assets and global stablecoins.

National Insurance: Partnerships

Lord Livermore Excerpts

Monday 10th November 2025 Lords Chamber

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

My Lords, the Government do not comment on tax speculation outside of fiscal events. The Chancellor will set out the Government’s fiscal plans at the forthcoming Budget.

[Baroness Neville-Rolfe (Con)]

My Lords, given that professional services contribute some 12% to GDP, and that almost all the UK’s leading accountancy and law firms operate as LLPs, has the Minister examined the potential for unintended consequences such as increased incorporation or outsourcing, which could reduce, rather than increase, the overall tax take? I originally tabled this Question to probe the bad but rumoured idea of taxing GP partnerships in this way. Can the Minister at least rule that out?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. However, she knows that I am not going to speculate or give a running commentary on the next Budget now. There has been much speculation, as is usual ahead of a Budget. A lot of that speculation is irresponsible. I am not going to comment on individual tax measures now. We will do things in the usual way. The Chancellor has asked the OBR to produce a new forecast. She will make decisions based on that forecast. We will set out our fiscal plans at the forthcoming Budget. The Chancellor will do so mindful of the importance of growth and investment to businesses and the economy.

[Lord Carlile of Berriew (CB)]

My Lords, does the Minister, as an expert in taxation matters, agree that in reality, the great majority of those who are partners in limited liability partnerships do not have any of the autonomy of self-employed persons but are treated as having such autonomy, and that it would be logical for all those who are in reality employed persons to be treated in the same way by the tax system?

[Lord Livermore (Lab)]

I am sorry to disappoint the noble Lord, but I am afraid I am not going to comment now on individual tax measures.

[Baroness Bowles of Berkhamsted (LD)]

My Lords, does the Minister recognise that the self-employed sector creates growth and increases economic participation and that self-employed people are risk absorbers without access to various state benefits? Is the suggestion floated concerning LLPs potentially the thin end of the wedge to attach more tax to all self-employment? Possibly, there is an issue, in that LLP status transfers risk from partners to societies at no cost to the partners. If there is a moral case for payment for that risk transfer, surely, it must be separately investigated, not wangled through national insurance.

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question, the first part of which I agree with. On the rest of it, as she knows, I am not going to comment on individual tax measures right now.

[Lord Bridges of Headley (Con)]

My Lords, may I ask the Minister a very simple question? In terms of his definition of a working person, is a partner in a law firm a working person?

[Lord Livermore (Lab)]

I applaud the noble Lord’s attempt at his question. I am not going to comment on individual tax measures right now.

[Lord Sikka (Lab)]

My Lords, whether someone trades through a company or a partnership is a personal choice. That choice should not be incentivised by the national insurance system. It is wrong to hand incentives to rich accountants and lawyers to dodge employers’ national insurance just because they trade as partnerships. That differential treatment encourages abuse and avoidance strategies. Does the Minister agree, and if not, can he give reasons?

[Lord Livermore (Lab)]

My reason is very simple: I am not going to speculate on the next Budget now. I am, of course, grateful for my noble friend’s expertise in these matters.

[Lord Pannick (CB)]

My Lords, will the Minister accept that it not speculation but fact that the legal services sector brought in exports worth £9.5 billion last year? Will he also accept that it is fact, not speculation, that to increase the tax burden would inevitably damage the ability of law firms to attract cases such as international arbitration and dispute resolution from abroad when we are in competition with Singapore, Dubai and other litigation centres?

[Lord Livermore (Lab)]

I certainly agree with the first fact that the noble Lord set out, and I am happy to do so. On his second fact, that is inviting me to speculate, which I think I have made clear I am not going to do.

[Lord McLoughlin (Con)]

My Lords, without asking the Minister to speculate on what might be in the Budget, will he tell us what was meant when the Chancellor and the Prime Minister said they would not increase income tax?

[Lord Livermore (Lab)]

Again, I think that that may be inviting me to speculate on the next Budget. I am not going to give a running commentary on the speculation there has been so far. The Chancellor will set out the Government’s tax policy at the forthcoming Budget.

[Baroness Wheatcroft (CB)]

My Lords, will the Minister accept that although he continues to tell us that he is conducting his responses in the normal way ahead of a Budget, it is not the normal way, ahead of a Budget, for the Chancellor to give a speech to a press conference which is simply about the Budget?

[Lord Livermore (Lab)]

The Chancellor is entirely at liberty to set out what she wants to set out at any given point. As I said, there has much speculation ahead of the Budget. I am not going to comment on the Budget. We will do things in the usual way. She has asked the OBR to produce a new forecast for the Budget. She will take decisions based on that forecast and set them out at the forthcoming Budget.

[Baroness Kramer (LD)]

My Lords, will the Minister advise his colleagues that any new partnership NICs applied to LLPs will exclude small entities that genuinely are a variant on self-employed organisations, with similar risks, precarious income, limited benefits and lack of employment opportunity, and are, indeed, a very important path for a lot of people returning to employment or getting into employment for the first time?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. I am not quite sure how many more ways I can say this: she is inviting me to comment on tax speculation, and I think I have made it clear that I am not going to do that.

[Lord Leigh of Hurley (Con)]

My Lords, going back to the last election after Labour were previously in power, Labour had to leave a note saying that there was no money left. The next time, it will have to leave a note saying that there is no money left and no entrepreneurs left. Has the Minister read the Walker report, which shows that the HMRC assessment of non-doms leaving the country was underestimated by 50% because it looked at people only on a remittance basis and had not taken into account wealthy investors who are not under PAYE, and who are leaving the country in droves?

[Lord Livermore (Lab)]

If the noble Lord wants to talk about the amount of money that is left, I am very happy to point him to the £22 billion black hole in the public finances that we inherited and that his Government sought to hide from the Office for Budget Responsibility. The same OBR has certified that the non-dom reforms the Government have implemented will raise £33.8 billion in total revenue over the five-year forecast period. This figure accounts for some non-doms who are ineligible for the new regime, choosing to leave the UK in response to these reforms. The Government will continue to work with stakeholders to ensure that the new regime is internationally competitive and focus on attracting the best talent and investment into the UK.

[Lord Garnier (Con)]

My Lords, in his earlier answer, the Minister said that much of the speculation was irresponsible, which suggests that some of it was not. Could he please list it?

[Lord Livermore (Lab)]

No. As I think I have made clear, I am not going to comment on individual tax measures.

[Lord Watts (Lab)]

Does the Minister agree with me that, if there are going to be tax increases of any sort, they should be fair and should not be borne by people who are paying PAYE, who have no choice about paying their tax—but that everyone over there seems to think that everyone else should have an opportunity to avoid it?

--- Later in debate ---

[Lord Livermore (Lab)]

I am grateful to my noble friend for his question. I am not going to comment, as he knows, on individual tax measures, but I think we can be clear that the priorities for the forthcoming Budget will be protecting our NHS and public services from a return to austerity. It should be a Budget for growth that supports businesses to create jobs and innovation; we should improve the cost of living, doing what is necessary to protect families from high inflation and high interest rates; and we should keep debt under control.

[Lord Johnson of Lainston (Con)]

My Lords, I think there may be a misunderstanding about what LLP structures are. Will the Minister agree with me on the importance of these structures, which enable people to pool their own labour? This is not a loophole; it is an opportunity for people to come together, and they are effectively charging tax on employing themselves. Will the Minister agree with me that, in principle, LLPs are a good idea, and that getting rid of them would be throwing the baby out with the bathwater? We have just had a baby in the Chamber, so I am very reminded of that. If he could answer my question, I would be very grateful.

[Lord Livermore (Lab)]

I do not know if the noble Lord was paying attention for the last 10 minutes, but I have made it extremely clear that I am not going to comment on individual tax measures.

Public and Private Sector Productivity Trends

Lord Livermore Excerpts

Thursday 30th October 2025 Lords Chamber

[Lord Londesborough]

To ask His Majesty’s Government what assessment they have made of the United Kingdom’s productivity trends across both public and private sectors.

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

My Lords, in the decade from 2010, the UK economy saw the lowest productivity growth since the Napoleonic Wars, which led to the lowest growth in living standards ever recorded. This Government also inherited a situation where public sector productivity was 7.2% below pre-pandemic levels. Reversing that poor productivity performance is the number one mission of this Government. As part of our growth strategy, we have set out measures to increase productivity, including reforms to planning and skills, record levels of investment in R&D, new investment in transport connectivity, a modern industrial strategy and a 10-year infrastructure strategy.

[Lord Londesborough (CB)]

My Lords, I thank the Minister for his reply. Low productivity has indeed been a running sore for almost 20 years now. Frankly, there are no real signs of progress, which is why the OBR is poised to downgrade its trend forecast and leave the Chancellor with an even deeper black hole. We need a major reset, so is it not time to set up an office for productivity alongside the Office for Budget Responsibility if we want to achieve per capita growth and fiscal discipline? This would be an office with experts with first-hand industry experience delivering on productivity, including how to lead, manage, train, set targets, and reward and incentivise our workers in public and private sectors.

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question and suggestion. On the progress that has been made, he will know that the drivers of productivity are fundamental and deep-seated challenges that exist in our economy, that they are long-standing, and that obviously we cannot come in, click our fingers and improve that productivity performance—it will take time. For example, investment is one of the most important drivers of productivity. That requires changes to our planning system and the planning Bill is still going through this House, so of course it is going to take time. As I say, the productivity performance that we inherited from the previous Government has been too weak. Austerity, Brexit and the Liz Truss mini-Budget have left deep scars on the British economy that are still being felt today, but those past mistakes do not need to determine our future. That is why, as part of our growth strategy, we have set out measures to increase productivity in the British economy.

[Lord Leigh of Hurley (Con)]

My Lords, on the point from the noble Lord, Lord Londesborough, would the Minister consider looking at how the figures are compiled? Personally, I think that the contribution from the services sector is underplayed and undervalued in the calculation of productivity. Would the Minister also recognise the contribution from the 13 leading business representative bodies—indeed, pretty much every business in the UK—that the Employment Rights Bill will reduce productivity and growth?

[Lord Livermore (Lab)]

On the noble Lord’s first point, I am very aware of some issues around the data, and I believe the ONS has been reviewing it along the lines he suggests. On the Employment Rights Bill, he will know that labour supply is also a fundamental component of driving productivity, and that a more motivated and more secure workforce is a more productive workforce. I hope he will take that into account.

[Baroness Kramer (LD)]

My Lords, we hear this week that only 11% of UK SMEs say they use technology to a great extent to automate or streamline operations. Do the Government understand that the slow pace of adoption of new technology by SMEs—many of which have not even adopted first-generation technology—lies at the heart of our productivity problem, which is why it remains incomprehensible that the Government keep adding burdens on SMEs? I know the Minister cannot tell us what is in the Budget, but can he at least tell the House that he recognises the problem?

[Lord Livermore (Lab)]

Yes, I absolutely recognise the problem and I agree with 90% of what the noble Baroness said. The only part I disagreed with was when she criticised the Government. I agree: digital adoption and AI adoption will be central to solving the productivity problem. SMEs are vital to that. It is why digital adoption was a key part of our small business strategy. I hope we can work together on this important issue.

[Lord Howell of Guildford (Con)]

My Lords, the period from 1970 to 1990 was a time of rapidly increasing productivity, of rapidly increasing Japanese investment in particular, and of great reduction in trade union restrictive practices, which the Japanese would not put up with. What lessons does he draw from that for today?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his insight from that period. He is absolutely right. It was a time of high productivity; it is a shame that the second Conservative Government after that did not maintain it. We now have to deal with the inheritance from that Government. He is right to say that private sector investment is a key driver of productivity, so the lesson I draw from that period is that we have to encourage greater levels of private sector investment. Under the previous Government, private sector investment fell to the lowest in the whole G7. We have so far welcomed £120 billion in private investment and a further £150 billion during the US state visit last month alone.

[Lord Brooke of Alverthorpe (Lab)]

My Lords, does my noble friend the Minister agree that we are very good at telling other people what to do? Is it not time that we started having a look at our practices and productivity to see whether we can run Parliament and the Commons much more effectively than we are at the moment?

[Lord Livermore (Lab)]

I am very happy to say that that may be a question for someone other than me.

[Baroness Bull (CB)]

My Lords, the Minister will know that, with 52% of the adult population having numeracy levels at or below those of a primary school leaver, low numeracy acts on a drag on the UK economy, leading to a critical skills gap and, ultimately, limiting productivity. Does he agree that unless we address low numeracy, as we have addressed core reading skills, we will struggle to achieve the economic growth that is at the core of his Government’s ambitions?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. I agree. Fundamental skills are vital to improving our productivity. Labour quality is a key driver of productivity. The skills agenda is vital to that. That is why we recently set out measures to tackle that in the skills White Paper. I hope the measures she speaks about will also be looked at carefully.

[Baroness Neville-Rolfe (Con)]

My Lords, I very much agree on skills, but a large part of the productivity problem in the UK has been in the public sector. This is hardly surprising, since the Government awarded huge public sector pay rises last year without a direct productivity link. Civil service numbers have also increased. Low productivity and growing headcount are not a happy state of affairs. How does the Minister plan to improve that rather dispiriting situation?

[Lord Livermore (Lab)]

The noble Baroness is correct to say that public sector productivity is a major issue. I know that it is something she cares about deeply. Obviously, she will be aware that the Government inherited a situation where public sector productivity was 7.2% below pre-pandemic levels; that is obviously and clearly unacceptable. She said that pay rises were awarded without any link to productivity. That is factually incorrect. At the spending review, the Government established a programme of public sector service reform to drive greater productivity. Every department has committed to at least 5% savings and efficiencies over the spending review period, with the Office for Value for Money working closely with departments to agree bespoke targets. This will result in savings and efficiencies equivalent to nearly £14 billion a year by 2028-29, and public sector productivity has already risen by 1.5% since the election.

[Lord Fox (LD)]

My Lords, in 1964 the then Labour Government sought to separate the Treasury into two pieces: one to look after the short-term fiscal tax-raising element and one to look at economic development. The same tension exists today. Can the Minister tell your Lordships how the Treasury is balancing them? At the moment, it looks as if short-term fiscal concerns are outweighing long-term economic needs.

[Lord Livermore (Lab)]

I disagree with the noble Lord. I do not think that there is any tension between economic stability and economic growth. As I say, under the Liz Truss mini-Budget we saw the damage that grotesque economic instability did to business confidence and business investment in this country. Maintaining stability—that starts with stability in the public finances—is why our fiscal rules are so important to our growth mission. Stability is the precondition for economic growth in this country, so the two go very much hand in hand.

[Lord Bird (CB)]

My Lords, would the Government agree that, because we have a low-wage economy, we also have a low-investment economy? That is shown in the fact that 80% of all the transactions carried out by our banks, which were formerly owned by us, are in buying and selling private property, not in investing in new businesses and the kind of investment that the Government are now calling for.

[Lord Livermore (Lab)]

I am not quite sure what the question was. I do not think that I agree with noble Lord’s diagnosis.

Rules on Duty-Free Goods

Lord Livermore Excerpts

Wednesday 22nd October 2025 Lords Chamber

[Baroness Hoey]

To ask His Majesty’s Government what plans they have to ensure that the same rules on duty-free goods apply for those flying from Belfast to the European Union as those flying from the rest of the United Kingdom.

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

My Lords, duty-free shopping between Northern Ireland and the EU would require the application of personal allowances and associated border checks to prevent the uncontrolled flow of tax-free goods into either Northern Ireland or the EU. The enforcement controls required for this would run counter to the Windsor Framework and to the principle of the frictionless movement of people and goods between Northern Ireland and Ireland.

[Baroness Hoey (Non-Afl)]

My Lords, I thank the Minister for that rather predictable Answer. Could I press him? Does he understand the frustration and anger that families in Northern Ireland have when they travel on their well-earned holidays to sunny parts of the EU and cannot get duty-free, while other citizens of the rest of the United Kingdom can? Does he understand that not having duty-free is costing Northern Ireland’s small airports about £5 million a year? Does he have any sympathy or empathy with the people of Northern Ireland? Will he make a commitment that when His Majesty’s Government are involved in the much-heralded reset, this will be one of the issues—it may seem a minor issue to some people, but it is quite an important one—to be negotiated with the European Union to change?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question. She says that my Answer was predictable, but one thing that was entirely predictable was the impact of Brexit, which she campaigned for. Back in 2016, Sir John Major and Sir Tony Blair said clearly that Brexit would present specific challenges for Northern Ireland, given its land border with an EU member state and the importance of safeguarding the Good Friday agreement, yet the noble Baroness dismissed those concerns. Now that the reality of Brexit does not match up to the fantasy version which the noble Baroness had, she seeks to blame others for the consequences of her own actions.

Let me be very clear: the Windsor Framework is the best workable solution to Northern Ireland’s unique circumstance. The noble Baroness asked whether I have empathy—absolutely I do. Placing Northern Ireland in a uniquely beneficial position within the United Kingdom, by being part of the UK internal market and the EU single market for goods, provides significant opportunities for growth and ensures that there is no hard border on the island of Ireland. She mentioned the reset. As part of the EU reset, the EU and the UK have agreed to negotiate an SPS agreement. I urge the noble Baroness to support that reset.

[Baroness Ritchie of Downpatrick (Lab)]

My Lords, does my noble friend the Minister agree that it would be much better for Members of your Lordships’ House to argue for and underpin the value of dual market access whereby businesses and communities in Northern Ireland can avail themselves of access to the UK internal market and the EU single market? I agree with my noble friend when he said that Brexit was the cause of all these difficulties. It would be better if noble Lords sought to work to eradicate the difficulties and challenges presented by the Windsor Framework to underpin our local economy.

[Lord Livermore (Lab)]

I am very grateful to my noble friend for her question and I agree with every word she said. The Windsor Framework is the best workable solution to Northern Ireland’s unique circumstances. As she said, it places Northern Ireland in a uniquely beneficial position within the United Kingdom—which I hope we can make a lot of—by being part of the UK internal market and the EU single market for goods. That provides significant opportunities for growth and ensures that there is no hard border on the island of Ireland.

[Lord Weir of Ballyholme (DUP)]

My Lords, the Minister highlighted the principal rationale for there not being duty-free at Northern Ireland airports when flying to the EU as the need to maintain frictionless trade with the Irish Republic, presumably on flights to the Irish Republic. Is the Minister aware that not a single flight goes from Northern Ireland to the Republic of Ireland? Does he agree that we are left in the absurd position of creating an additional problem to solve a problem that, in practice, does not actually exist?

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. I will clarify this for him. The original Question asked about flights from Belfast to the European Union, so that is what this Question is about. I will be very clear. If we have duty-free, we have to have allowances. If we have allowances, we have to have checks and enforcement. If we have checks, we have to have border infrastructure, and border infra- structure is contrary to the Windsor Framework and the Good Friday agreement.

[Lord Bellingham (Con)]

My Lords, one of the key outcomes of the Windsor Framework was the plan for green lanes for goods leaving the UK but staying in Northern Ireland rather than being transported to the Republic. Can the Minister tell the House what progress has been made on the introduction of those green lanes?

[Lord Livermore (Lab)]

This may have been another of the fantasies that people had about certain Brexit outcomes rather than reflecting reality. What we have ended up with—I pay tribute to the previous Government for negotiating this—is the Windsor Framework, which, as I said, is the best workable solution to Northern Ireland’s unique circumstances. We absolutely support the implementation of the Windsor Framework.

[Baroness O'Loan (CB)]

My Lords, the Minister described a very glowing situation in Northern Ireland, which is not necessarily the experience of the people in Northern Ireland, subsequent to the Windsor Framework. While accepting that the Windsor Framework is what we have to live with at the moment, does the Minister accept that there are many problems, that people cannot get access to many goods and services, and that goods are increasingly not being supplied to Northern Ireland because of the bureaucratic difficulties and economic costs? Would the Minister commit to considering all these matters and to bringing forward a reset that actually benefits Northern Ireland?

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question and insight. I will say up front, as I have said before, that we are committed to implementing the Windsor Framework in good faith and to protecting the UK internal market. We will work constructively with all stakeholders—the EU, the Northern Ireland Executive, businesses, and political parties and civic society in Northern Ireland—to achieve that aim, taking into account the implementation deadlines. As the noble Baroness said, the Windsor Framework agreement secured substantial legally binding changes and flexibilities that do improve things. I hope that the EU reset will further improve things, and I therefore urge all noble Lords to support it.

[Baroness Kramer (LD)]

My Lords—

--- Later in debate ---

[Baroness Kramer (LD)]

My Lords, will the Government please start to renegotiate our entry into the customs union? It would eliminate the issues raised by the noble Baroness, Lady Hoey, and many others and increase prosperity for us. There is a very simple and direct set of answers.

[Lord Livermore (Lab)]

I am grateful to the noble Baroness for her question and I pay tribute to her consistency on this matter. We share many similarities in our observations and analysis of the impact of Brexit. She will know that we are engaged in the EU reset, which will achieve substantial benefits for growth in the UK and for British citizens travelling around the European Union. I urge her to support the reset.

[Lord Grocott (Lab)]

My noble friend, on this Question and a number of others that I have heard him reply on, demonstrates the passion that he feels for the European Union. It is a passion not shared by everyone. Some of us remember that the 40 years when we were in the European Union were not exactly flowing with milk and honey as far as the British economy was concerned.

--- Later in debate ---

[Lord Grocott (Lab)]

My noble friend will notice the support he gets from the Liberal Democrat Benches.

Can I have my noble friend’s assurance that we stand very strongly by the Labour Government’s manifesto promise that there will be no question of us rejoining either the customs union or the single market?

[Lord Livermore (Lab)]

I am sure my noble friend and I agree on many things, but Brexit is not one of them. I hope that when he talks about our experience in the European Union he will acknowledge the OBR’s calculations that, had we remained in the European Union, by the end of this Parliament the economy would be £100 billion larger than it will be otherwise. That is a significant disbenefit of Brexit. As my noble friend knows, the manifesto stands.

[Baroness Neville-Rolfe (Con)]

My Lords, returning to the Question, we on these Benches fully recognise the importance of the agreements reached between the previous Administration and the European Union. However, there is a legitimate question about whether practical solutions could now be explored to address the specific anomaly. Will the Minister consider supporting a joint UK-EU technical group to examine practical options for restoring duty-free parity for Northern Ireland travellers, which could overcome the difficulties the Minister outlined? That process could be undertaken without undermining the Windsor Framework.

[Lord Livermore (Lab)]

Let me be absolutely clear, again. If you have duty-free, you have to have allowances. If you have allowances, you have to have checks and enforcement. If you have checks, you have to have border infrastructure, and if you have border infrastructure, that will be contrary to the Windsor Framework and the Good Friday agreement.

GDP Per Capita

Lord Livermore Excerpts

Monday 20th October 2025 Lords Chamber

[Lord Leigh of Hurley]

To ask His Majesty’s Government what assessment they have made of the latest estimates of the current GDP per capita, and of the factors contributing to it.

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

My Lords, the latest data from the ONS shows that GDP per capita has risen by 0.9% over the past year, in line with the OBR’s forecast, and this is the second fastest in the G7. This compares with a fall of 0.1% during the previous Parliament. The increase in GDP per capita in the past year is due mainly to the strong rebound in both private consumption and investment. Of course, we want to go further, which is why economic growth is the Government’s number one priority.

[Lord Leigh of Hurley (Con)]

Indeed so, but the Minister will be aware that the ONS’s latest figures show that in the most recent quarter, economic growth per capita grew by only 0.2%—less than half than in the previous quarter. Will he accept that this is entirely due to the Government’s policies on the national insurance increase, the lack of business confidence because of the Employment Rights Bill, and the wholly unnecessary delay in the Budget? Would he like to clarify his previous remarks about the effect of Brexit being 4% on growth and productivity, when he knows very well that the OBR said that that would be over 15 years? This means that on a per annum basis, the effect is teeny and within the margin of error.

[Lord Livermore (Lab)]

The answer to all the noble Lord’s questions is no. He points out that GDP per capita grew by 0.2% in the second quarter of this year; that compares with 0.1% over the entirety of the previous Parliament. If he wants to make comparisons, I am more than happy to do that. I do not accept the points he makes about the Government’s other policies. We are currently the fastest-growing economy in the G7. On his points about Brexit, the OBR has been very clear that Brexit has permanently reduced the size of our economy by 4%. Its calculations are absolutely clear on that point.

[Lord Watts (Lab)]

My Lords, does the Minister agree with me that GDP would have been higher had we not had a Government previously who wrecked the economy, wrecked public services, gave us Brexit and left us with massive debt?

[Lord Livermore (Lab)]

My noble friend is absolutely correct. The previous Government gave us austerity, taking demand out of the economy at exactly the wrong moment; a Brexit deal, which reduced GDP by 4%; and the Liz Truss mini-Budget, which crashed the economy. We will take no lessons from the party opposite when it comes to growing the economy.

[Baroness Kramer (LD)]

My Lords, the UK is the sixth-largest economy, measured by GDP. But, on the measure of GDP per capita, it is only the 18th largest. Our demographic profile, with a heavily aging population, is a key reason for this. This year, we expect to reach the scary benchmark of having more deaths than births. Of course, we need to upskill our population in advancing technology. Do the Government accept that we rely on net immigration to sustain the economy in the public sector and that there is no way out of that?

[Lord Livermore (Lab)]

I hear what the noble Baroness says. The OBR is currently considering the economic and fiscal impacts of the immigration White Paper published in May and will report back in its forecast in the autumn. Of course, she is right that we are in a global race for talent, with many countries seeking to improve the attractiveness of their immigration systems for highly talented individuals. The immigration White Paper announced that the Government will review the visa offer for highly talented individuals by expanding the high potential individual visa and reforming the global talent and innovator founder visas. We have also agreed that we will work towards an ambitious youth mobility scheme with the EU, creating maximum economic and cultural opportunities between the UK and the EU. Any scheme would give young Brits the opportunity to travel, to experience other cultures and to work and study abroad.

[Lord Londesborough (CB)]

My Lords, can the Minister confirm that the Government’s pledge still holds—specifically, that the UK will deliver the G7’s fastest growth in GDP per capita for two straight years by the end of this Parliament—and explain why investors, both debt and equity, should buy into this view?

[Lord Livermore (Lab)]

Yes, I can absolutely confirm that that remains our mission. Our growth mission is to have the fastest-growing economy in the G7. We are currently the fastest-growing economy in the G7, and the IMF recently revised up the growth forecast for this year, the second time it has done so. I think both the IMF and the OECD currently forecast that the UK will be the second fastest-growing G7 economy this year. Our growth mission also includes living standards; since the election, living standards are up 2.1% compared with the 1.8% fall over the last Parliament—the only Parliament on record in which living standards were worse at the end of it than at the start. We also have a commitment on GDP per capita, as the noble Lord rightly says; the OBR currently forecasts GDP per capita to rise by 5.6% over this Parliament.

[Lord Massey of Hampstead (Con)]

My Lords, the ONS reported recently that 53% of the population are net recipients of state benefits and therefore make a very modest, to say the least, contribution to GDP. Meanwhile, 1% of the population are producing 13% of GDP and paying 28% of our tax. Whether we like it or not, the UK is becoming ever more financially dependent on its top earners but at the same time making it less attractive for them to stay and contribute to the UK. The evidence is mounting—we saw it from France yesterday—that people are considering moving their assets abroad and potentially leaving the country. So does the Minister agree with me that, whatever your ideological view of wealth distribution might be, the UK needs to focus on retaining its high earners, and does he recognise that if only 10% of the top 1% leave—that is 35,000 people—our fiscal black hole would increase very substantially?

[Lord Livermore (Lab)]

That is a very long question but I can give the noble Lord a very short answer. Yes, of course, I agree with him. It is very important that we retain our high earners and retain as much talent in this economy as we possibly can.

[Lord Sikka (Lab)]

My Lords, the equitable distribution of income to enable people to buy goods and services is essential for sustained economic growth, but all is not well. At Melrose, the CEO to average worker pay ratio is 1,112; at Tesco 375; at Marks & Spencer 261; at Associated British Foods 218; and 195 at Sainsbury’s. In view of this scale of inequity, what is the Government’s plan to secure equitable distribution of income for workers and, in doing so, also secure economic growth?

[Lord Livermore (Lab)]

Clearly, we need to make sure that we retain top talent in this country, as the previous questioner asked me about, but we also need to make sure that we increase the living standards right across the income distribution, and particularly for working people. My noble friend will know that wages continue to grow and that in the first 10 months of this Government, real wages rose more than in the first 10 years of the previous Government.

[Lord Fox (LD)]

My Lords, one of the problems facing the Treasury and the Bank of England is the quality, or lack of it, of workforce data. Can the Minister tell us what progress is being made with the ONS to improve the quality of the data that the Government have to make their decisions?

[Lord Livermore (Lab)]

The noble Lord is absolutely correct. That is currently a significant issue. As I understand it, the ONS is reviewing that data, and that review is ongoing.

[Baroness Neville-Rolfe (Con)]

My Lords, per capita GDP is, of course, a proxy for productivity in the longer run, and I am very concerned that productivity has become an increasing problem for the UK economy. What do the Government plan to do about it, in both the public sector and the private sector?

[Lord Livermore (Lab)]

The noble Baroness is absolutely correct to say that productivity is a long-standing problem in the economy. As I understand it, productivity fell to the lowest in the G7 under the previous Government, so clearly it is important that we have prioritised that. One of the most important things we are doing for productivity is increasing investment in our economy. We have revised the fiscal rules to enable us to increase investment in the economy, and I regret very much that the party opposite opposed those changes to the fiscal rules.

[Baroness Curran (Lab)]

My Lords, can my noble friend the Minister explain to the House the role of record levels of public investment and how they contribute to economic growth? In his answer, lest we forget, can he remind the House of the financial legacy that we inherited from the last Government—particularly the amount of the financial black hole?

[Lord Livermore (Lab)]

My noble friend is very generous in inviting me to mention the £22 billion black hole. She is correct that capital spending is a significant driver of growth in our economy. The OBR estimates that the increases in capital spending that we have seen have increased growth by 0.14% over five years, 0.43% over 10 years and 1.4% in the long term. It is very regrettable that the party opposite opposes those capital spending plans.