Autumn Budget 2026

Lord O'Neill of Gatley Excerpts

Thursday 12th November 2026 Lords Chamber

[Lord O’Neill of Gatley (CB)]

My Lords, I also welcome our new colleagues, and I look forward to the new Peers’ maiden speeches.

In my judgment, the external circumstances warranted a Budget framework of not doing any harm. The running down of the fiscal buffer was, of course, not entirely risk-free but, in my judgment, in the circumstances it was probably wise, especially due to the then imminent, now past, US congressional elections. Not entirely surprisingly, the near 20% drop in crude oil prices since and the associated rally in global bond markets certainly suggest that the Chancellor was right to at least not raise more taxes to keep the buffer as high as it was previously.

Already, it seems that the Budget arithmetic might be looking a bit better. This is especially true as, once again, the OBR’s short-term GDP forecasts looked rather odd at the time, perhaps because it made its forecasts so early, and certainly before the August GDP release. As we have heard already, based on the news today of a 1.9% year-on-year GDP performance in Q3, the economy is running at a rate considerably above the OBR forecast. Having recently seen the November Purchasing Managers’ Index, I think it very unlikely that we will now get the mathematical decline in Q4 GDP that would give any chance of the current official forecast happening. Unless oil prices start rising again, it also looks to me as though the OBR’s forecast for next year is rather cautious.

Importantly, below all this improvement are tentative but continued signs, at last, of the beginning of a recovery in the UK’s productivity performance. This should be especially welcomed by everybody. It perhaps adds—although many do not seem to recognise it—to some of the momentum that had already started to pick up. In my view, it is not impossible that, if the somewhat chastened president of the free world returns to his oft-stated early goal of bringing about the end of various wars, a further significant drop in oil prices could happen. In such circumstances, if they come about, the economic performance next year looks—cyclically, at least—like it could be considerably stronger than the OBR’s latest, rather timid forecast.

Despite this, and as we have heard, the Budget has, in essence, raised the importance of the soon-to-be-published Timms and Milburn reviews and, of course, the 10-year plan—all leading up to next year’s spending review. In my judgment, all these should be directly linked. More importantly, I believe that what I have often called the five sacred cows are all in the spirit of trying to encourage bold action to reward the golden opportunities. These five are: the triple lock, which has partially been announced already; proper welfare reform, including a path to significantly reduced expenditure; genuine housing tax reform; an honest and credible path to stopping the inexorable rise in NHS spending; and, of course, some kind of closer ties to the EU. If all five are central features of the 10-year plan and are then followed through, a real path to delivering growth in every postcode, through a major reduction in long-term interest rates, is deliverable.

There are two other bold reforms that I would like to talk about briefly. First, while I have been, and remain, a fan of borrowing more to invest, it cannot be done by saying, “Trust me; I know best”. The right way, which I have talked about before in this place, is to transform the outlook for infrastructure in this country by taking NISTA out of the Treasury and turning it into an OBR for infrastructure with the powers, voice and transparency that is afforded the OBR. This could show which projects have major multiplier benefits, and, to judge by my many discussions with investor, it would be very popular.

Secondly, also for investment in British, especially risky and less liquid assets, we need to change the risk/return profile in order that our vast pension insurance companies get the tax-free lump sum benefit for their customers only if the investments are in British companies. This would have a very large positive impact, both for our quoted stock market and for our venture and infrastructure markets.

Let me finish by of course applauding—given my own background in the past decade or more—the steps announced on devolution. I presume that these are the beginnings of a genuine path to a true devolution revolution.

Autumn Budget 2024

Lord O'Neill of Gatley Excerpts

Monday 11th November 2024 Lords Chamber

[Lord O'Neill of Gatley (CB)]

My Lords, no pressure there then.

Let me first say, in contrast to the noble Lord, Lord Lamont, how pleased I am to see the Government shifting their rules to deliberately allow for greater public investment spending as a share of GDP. As a vocal advocate of such a move, I think it is highly welcome. Keeping it at 2.6% is a vast improvement over what otherwise would have been a further decline to 1.7%. In my view, there should now be an ambition to get towards 3.5%—closer to that of our developed country peers, most of which, unsurprisingly, have considerably higher productivity.

Whether the specific choice of PSNFL—“persnuffle” as it became known—or, more easily on the tongue, “net financial debt”, is the right new specific debt target is of secondary importance. In principle, it should allow for more ambitious public spending in terms of rewarding investments than the previous, quite stupid, rule.

Secondly—and here I have a bit more sympathy with aspects of what the noble Lord, Lord Lamont, said—what is more important, and in my view key, is not only the ambition but the mentality behind such investments and, in my judgment, the proper, credible guardrails to ensure that projects that come forward have independent, credible and transparent validation. In principle, I welcome the enhanced role for the new NISTA and the National Audit Office and also, presumably, more specifics so that the OBR can give more detailed macroanalysis of any such benefits. These institutions’ real skill sets used in this way will be much more fruitfully put to use.

Thirdly—and perhaps where the markets had somewhat of a brief wobble—it is important that the Government use these guardrails about what investments they choose to make.

Fourthly, I hope that the 10-year infrastructure plan that the Chancellor announced is to be presented in the spring will have gone through this new set of guardrails. I hope it will include projects that are much more likely to encourage the OBR to raise its forecast of the trend rate of growth of the economy. I can think of reasonably obvious ones—again in contrast to the noble Lord, Lord Lamont—such as early years education and preventive healthcare, including obesity, as well as more traditional things, my favourite being Northern Powerhouse Rail. However, it is not for me but for NISTA and the NAO to give their transparent and objective assessments of these benefits and then for the OBR to demonstrate the consequences for long-term growth, welfare and, of course, debt.

On a separate topic, fifthly and finally, and in contrast to widespread belief, of course the increase in employers’ national insurance will have its consequences for the labour markets along with the increase in the minimum wage. In my view, if this plays a role in encouraging companies to invest more in capital and to focus on higher-skilled labour, it might end up having more useful benefits for productivity and real wages than I hear across the widespread commentary.

We live in a very interesting time in the world and financial markets, yet again, especially with the US bond market watching what the returning President Trump is really going to do. This background will mean that our markets will reward credible, transparent, growth-boosting investments but will be less kind otherwise.