Middle East: Economic Update

Viscount Colville of Culross Excerpts

Thursday 26th March 2026 Lords Chamber

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

I am grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their comments and their questions. As it is the last day before Recess, I wish both noble Baronesses a very happy Easter in advance.

The noble Baroness, Lady Neville-Rolfe, began her comments by welcoming what we are doing on nuclear, and I am grateful for her support on that and for her support as we implement the Fingleton review. As she knows, we have already begun to rewrite the story on nuclear for this country: we have begun construction at Sizewell C, we have agreed an extension to Sizewell B and we are due to sign the contracts on the UK’s first small modular reactor in Anglesey in partnership with Rolls-Royce. The Chancellor has also confirmed that we will legislate to implement the Fingleton review on nuclear and wider infrastructure in the next Session and has also written to industry and to regulators to get them to set out their plans to fast-track its implementation.

I was disappointed to see the noble Baroness indulge in some anti-EU rhetoric, which I know she does not actually believe. I think it makes absolute sense at this time of global instability that we deepen our economic relationship with our closest partners. It is clear that that is where maximum growth will come from for this country.

The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, spoke about the Competition and Markets Authority. It has stepped up its statutory monitoring of fuel prices and will publicly update on fuel pricing later this month. It is also working with Government to monitor the cost of household essentials, including groceries, for price rises and disruption. It has launched a market study into heating oil on top of its existing work to identify and tackle breaches of consumer law in the heating oil market. The Chancellor also announced this week that we are going further to make sure it has the bite it needs to detect and crack down on price gouging, bringing in a new anti-profiteering framework and considering time-limited targeted powers for the CMA and other regulators as needed. Yesterday, the Chancellor and the Business Secretary both met and convened the regulators’ council to discuss its work to protect consumers and small businesses, as the noble Baroness, Lady Kramer, mentioned.

On oil and gas, I agree with what the noble Baroness, Lady Neville-Rolfe, said. We will ensure the North Sea oil and gas plays an important role in our economy for years to come. Last week, the Chancellor met with the North Sea industry leaders to discuss their role in jobs, investment, growth and energy supply. The noble Baroness also mentioned energy security. She did not mention the fact that the last Government’s failure to invest in energy was a failure to protect our country. But, through determined long-term action, this Government are taking control of our own energy supply. We are investing in renewables, lifting the ban on onshore wind, streamlining grid connections, bringing the next renewables auction forward to this July and driving forward negotiations on the UK’s participation in the EU internal electricity market. We also ran the biggest ever floating offshore wind auction last year.

As I mentioned already, the noble Baroness, Lady Neville-Rolfe, welcomed nuclear, and we must guarantee that our domestic oil and gas industry can play a crucial role as well for years to come. So we are investing in tie-backs to make the most of existing production facilities. The Chancellor has also announced that she has instructed officials to develop plans to back critical energy projects with indemnities if their planning consent is challenged in the courts, so that we can build the infrastructure that we need.

The noble Baroness, Lady Neville-Rolfe, mentioned the OECD projections out this morning. As she knows, the war in the Middle East is not one that we started, nor is it a war that we have joined, but it is a war that will have an impact on our country. The OECD’s projections are highly sensitive to the duration of the shock and reflect the impact of higher energy prices, which the UK, as she knows, is more susceptible to. But, in an uncertain world, we have the right economic plan. The decisions we have taken have put us in a better position to protect the country’s finances and family finances from global economic instability.

Both noble Baronesses touched on the economic situation that we find ourselves in. The full economic impact of the conflict remains uncertain, but the spring forecast showed that the Government have the right economic plan, that we enter this period of global uncertainty with the fundamentals of our economy strong and that we are more prepared for a more volatile world. We have cut inflation, which now stands at 3%—a lower base than at the outset of Russia’s illegal invasion of Ukraine. We have prioritised growth to drive up living standards. The OBR forecast before this conflict showed that GDP per head was set to grow more than was expected at the Budget, with growth of 5.6% over the course of this Parliament. We have stabilised the public finances, having already reduced the deficit by £20 billion this year from 5.2% to 4.3% of GDP—its lowest level for six years and the fastest reduction in the G7. Of course, these forecasts predate the current conflict in the Middle East, but Britain today is in a stronger position to withstand whatever uncertainty comes our way.

The noble Baroness, Lady Noble-Rolfe, spoke about defence. We are delivering the biggest sustained increase in defence spending since the Cold War. The Chancellor has approved access to the Ministry of Defence to use the special reserve to deploy additional capabilities to the Middle East, meaning that the net additional cost of these operations will be funded by the Treasury. The defence investment plan will be published in due course. We are investing £270 billion over this Parliament, after years of our Armed Forces being neglected under the previous Government. We will increase defence spending to 2.6% of GDP from 2027, and we are increasing spending on defence by £5 billion in this year alone.

Finally, both noble Baronesses spoke about energy bills. The noble Baroness, Lady Neville-Rolfe, asked me what “responsible” means. It means that, as we respond to this crisis, we should learn from the mistakes of the past. The previous Government pushed up borrowing, interest rates, inflation and mortgage costs with an unfunded, untargeted package of support under Liz Truss that gave the most support to the wealthiest households. Between 2022 and 2024, under the last Government, households in the top income decile received an average of £1,350 of direct energy bill support. That left us with high levels of national debt—a cheque written then for a bill that is still being paid today. Contingency planning is taking place for every eventuality so that we can keep costs down for everyone and provide support for those who need it most, acting within our iron-clad fiscal rules to keep inflation and interest rates as low as possible.

[The Deputy Speaker (Viscount Colville of Culross) (CB)]

My Lords, the noble Lord, Lord Campbell-Savours, is taking part remotely. I invite the noble Lord to speak.