Autumn Budget 2025

Lord Macpherson of Earl's Court Excerpts

Thursday 4th December 2025 Lords Chamber

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

My Lords, it is axiomatic that, if you want to land a difficult message, it is best to start with some positives: so here goes. First, all credit to the Government for sticking to their fiscal rules, and increasing their safety margin. I admit that I had my doubts this time last year. Secondly, the overall Budget judgment looks about right: supporting the economy this year and next, but tightening policy thereafter. Thirdly, the measures to reduce inflationary pressures in the coming year should help the Bank of England ease monetary policy further. I am therefore not surprised by the positive response of the gilt market. Given the size of the national debt, it will be the interest rate demanded by the market that will determine the Government’s future room for manoeuvre.

So why has the reception of the Budget been so negative? Pre-briefing is partly to blame. There is a reason, over and above market sensitivity, why Chancellors as different as Nigel Lawson and Gordon Brown have favoured Budget secrecy. It allows them to control the narrative and tell the economic story on their terms. I have considerable sympathy for the Chancellor on the OBR leak, but the endless briefing and leaking before that point was surely the Treasury’s responsibility. In 2013, following a similar leak, I carried out a review in which I recommended that the Treasury introduce a ban on the pre-release of the Budget: that is, the economic and fiscal projections, the fiscal judgment and individual tax rates, reliefs and allowances. The then Government, and I think the Official Opposition, accepted my recommendations. Can the Financial Secretary confirm that the Government still accept this recommendation?

I also worry about the Budget measures themselves. I, for one, celebrated when we were led to understand that income tax rates would be raised. I know it would have broken the manifesto commitment, but at least it could have addressed the issue of the growing number of people facing high, sometimes penal, marginal rates as child benefit, childcare support and the personal allowance are withdrawn.

I continue to worry about intergenerational fairness. I feel that better-off pensioners—I speak as one—could have contributed more. Not only is my triple-lock pension safe, but my dividends are not going to be taxed more and I still do not pay any national insurance on my earnings. I am broadly in favour of abolishing the two-child benefit cap. I do not accept the argument that it will worsen work incentives; that is the beauty of the universal credit system introduced by the previous Government. But surely this should have been announced at the same time as sickness benefit reform, the better to get the Government’s Back-Benchers to accept it.

I also worry about the timing of the proposed tax increases. I criticised the previous Government’s Augustinian approach to fiscal policy. The Government appear to be adopting the same approach, albeit with different sides of the ledger: more spending today financed by tax increases several years down the line. Given demographic pressures, the tax take has to rise, but I fear that the Government will find it all but impossible to deliver. There is a reason the tax take has been so stable over the last 75 years, never going below 28.3% or above 35.2%. Getting revenue in is a difficult business, and the tax base is less buoyant than it was.

The optimist in me hopes that the economy will grow, that some of the tax increase may prove unnecessary and that the Government can cut taxes in the run-up to the election as Mr Healey did back in 1978. But I have to say, I am less than confident.