Autumn Budget 2025

Lord Wood of Anfield Excerpts

Thursday 4th December 2025 Lords Chamber

[Lord Wood of Anfield (Lab)]

My Lords, it is a pleasure to follow the noble Lord, Lord Lamont, as always, and I welcome the right reverend Prelate the Bishop of Portsmouth. I welcome the main proposals of this Budget: some as important measures to combat inequality and support households; others as necessary responses to what remains a very difficult time for the British economy.

As a social democrat, I applaud the Budget’s wide-ranging package of cost of living measures, including the reduction in energy bills, the minimum wage increase, and the freezing of prescription charges and rail fares, alongside the pre-announced expansion of free childcare for working families. This was the most important issue for millions who supported Labour at last year’s election, and the Government are delivering on those concerns.

I welcome the ending of the two-child benefit cap—the single biggest policy driver of child poverty in Britain. I have been disheartened to hear Conservative and Reform voices in the past week caricature this move, which primarily benefits children in working families, as paying for welfare. Children who grow up in poverty are significantly more likely to rely on benefits in their adult life. If you support work and oppose dependency, you should support the end of the two-child cap, not denigrate it.

I also strongly welcome the increase in the minimum wage. The Government already have a proud record on wage inequality. Wages are up more in the first year of the new Government than in the first decade under the last Conservative Government. In 2015, 20% of all employees were low paid—that is, earning less than two-thirds of the median wage. That figure today is 2.5%.

The Chancellor’s commitment to an expanded headroom on her fiscal rules is also welcome. I hope it will give the Government more space to consider big decisions based on their merits rather than operating on the cliff edge of fiscal rules and living in fear of events that cause small changes in fiscal parameters or bond market reactions.

Much has been said about the OBR-Treasury relationship, and I will make just one observation. The process of dynamic scoring, estimating the long-term growth and productivity effects of major policy measures, is an important part of forecasting, but everyone can see that there are clearly issues and tensions in the way this process currently works, on both sides—in particular, which measures are considered sufficiently significant to score and using announcements to fish for dynamic scoring from the OBR. I hope this is an area where clearer rules of the game can be worked out in time for the next Budget.

I also support the Chancellor’s fiscal stance: spending and borrowing more in the early years of the Parliament, increasing taxes and tightening spending growth in the latter years, all while maintaining a significantly more expansive approach to capital spending. Yes, it is a strategy with risks, but taking a more aggressive fiscal stance now to improve growth and protect long-term investment spend is, in my view, the right approach after a decade of stagnation.

I also welcome the proposed council tax surcharge on high-value homes. There will, of course, be issues to sort out through consultation—for example, developing a system that is fair to those who are asset-rich and cash-poor, and the challenge of adding a tax system based on current prices of high-value homes on top of a council tax system that is still based on 1991 valuations.

This brings me to one last point on which the Budget had less to say: long-term tax reform. Tax policy is deeply political; nothing is more political. But, as the joint proposal from nine think tanks across the political spectrum argued last month, there are many sensible structural tax reforms that all parties could endorse and that would increase fairness and revenue, such as addressing punitive marginal tax rates, reforming the VAT tax base, updating council tax valuations, and equalising tax rates on income from different sources. In opposition, Labour spoke positively of such reforms. I hope that we will set up work to address some of these in the remainder of this Parliament.