Middle East: Economic Update

Baroness Primarolo Excerpts

Thursday 26th March 2026 Lords Chamber

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question. He knows that the previous Government increased welfare spending by £88 billion in their last five years, which is quite a legacy for us to have inherited. He also knows that we are delivering the biggest sustained increase in defence spending since the Cold War. As I have said already, the Chancellor has approved access for the Ministry of Defence to use the special reserve to deploy additional capabilities in the Middle East.

He asked me how we will increase defence spending. 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. Our ambition is to reach 3% in the next Parliament, when fiscal and economic conditions allow. We are not going to put an arbitrary date on that percentage until we know exactly where the money is coming from.

I should also say that, this week, the Chancellor announced a new defence procurement mechanism. A core group of NATO allies—Finland, the Netherlands, the UK and other partners—have announced that they are exploring setting up a new mechanism for financing by 2027. The aim is to aggregate demand to drive joint procurement, accelerate defence investment and increase the availability of critical capabilities.

[Baroness Primarolo (Lab)]

My Lords, I am grateful for my noble friend the Minister’s Statement, for the steps the Government are taking, and that they will keep under review the impact on families and businesses, particularly small businesses. I return to the question of energy security. Is my noble friend in a position to give us more details on the work being done on the grid infrastructure to ensure its efficient use, speedily bringing down energy prices as we shift to more renewable sources? Will the Government consider returning to their considerations on zonal pricing as a way of bringing energy bills down?

[Lord Livermore (Lab)]

I am grateful to my noble friend for her question on energy security. As she rightly says, energy security for this country is about making the best use of all the resources at our disposal. It is why we are investing more in nuclear, as the noble Baroness, Lady Neville-Rolfe, said at the outset: we are investing in the construction at Sizewell C and 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 SMR. It is why we must, as several noble Lords have said already, make the most of our oil and gas reserves—we will ensure that North Sea oil and gas plays an important role in our economy for years to come—and why we are meeting with industry leaders to discuss their role in jobs, investment, growth and energy supply. It is, of course, why—again, as several noble Lords have said—we must make the most of our transition towards renewables and why we should invest heavily in those, as we are doing. We are taking action, as my noble friend says, to streamline grid connections, and that work goes on. We are undertaking a series of very important initiatives in that respect. On zonal pricing, as I understand it, the Department for Energy Security and Net Zero has said that that is not the direction that it intends to go in.