Spring Forecast Statement

Lord Northbrook Excerpts

Tuesday 17th March 2026 Lords Chamber

[Lord Northbrook (Non-Afl)]

My Lords, the Spring Statement has been overshadowed by the escalating conflict in the Middle East. There is

“significant chance that the new forecast is already out of date before the ink has dried”,

warned Andrew Wishart of Berenberg Bank. However, even before this, the UK economic forecasts were looking grim. Growth was looking stagnant and downgraded to 1.1% for this year. While 2027 and 2028 forecasts were raised, Paul Dales at Capital Economics has warned that this could be overoptimistic. Helen Miller, director of the Institute for Fiscal Studies, said:

“The economic outlook, and therefore the outlook for borrowing, could shift more materially between now and the Budget in the autumn. The conflict in the Middle East is already pushing up”


commodity

“prices and expectations for interest rates. It could yet cause more far-reaching economic disruption”.

On the inflation front, Mr Dales also predicted that, if remaining for a medium-term period,

“the leap in energy prices will mean UK inflation”

will be

“higher than the OBR is forecasting”.

According to senior OBR official David Miles and the NIESR think tank, the rise in global energy prices, if sustained, will lead to a 1 percentage point increase in inflation. As a result, the Bank of England will have much less scope for lowering interest rates, as this rise will take inflation well beyond its target of 2%.

Moving on to the Statement’s comments on taxation, the OBR said that taxes would hit 38% of national income in 2030-31—a depressing post-war record. After the Chancellor’s decision to increase the employers’ rate of national insurance and freeze income thresholds, revenues as a result of these measures will increase by 25% in the next five years.

Welfare spending is out of control. The Government’s welfare bill, including spending on pensioners, is poised to soar by 23% over the next five years. The number of people claiming disability benefit will rise by 2.3 million over the same period. The numbers claiming incapacity benefit will also increase: this category will be up by 18% over the next five years. However, the OBR said that this could be an underestimate, as it is assuming that new incapacity benefit claimants will rise at a slower rate than in previous years. Overall, welfare expenditure is predicted to cost the country 11.2% of total GDP by 2030, which is a very worrying figure, and even the Government believe something serious must be done to control its increase.

On unemployment, the OBR predicts that almost 2 million people will be jobless by the end of the year, surpassing the highs of unemployment last seen during the Covid epidemic. It forecasts that the unemployment rate will be up to 5.3%, from 4.75% last year. According to the Times, Labour has presided over an almost 30% rise in unemployment since it came to power. The OBR warns that higher unemployment could become structural and persistent, with new technologies such as AI permanently displacing workers.

Looking at the UK economic situation, the Government clearly could not have anticipated the Middle East turmoil. However, they have done things domestically that have been foolish. The lack of business and financial experience on the House of Commons Front Bench has led to poorly thought-through decision-making. The increase in employers’ national insurance, seen as an easy way to raise tax, is a classic example. The consequences were not considered sufficiently. In a difficult economic climate anyway, it has led to businesses laying off staff rather than having to pay the extra tax.

Then there is the minimum wage. Both major parties have made the same mistake here. It is in theory good to give pay increases above inflation, but in practice, especially when the wage for younger people is raised to such an extent, it affects the profitability in particular of businesses dependent on employing this category of worker. Combined with the employers’ national insurance increase, these two measures have had a devastating effect on businesses.

When we look at a third problem, we can see what a hammer blow has hit smaller businesses in particular. It is business rates. The Government failed to realise the effect of the revaluation of properties, particularly on leisure businesses and small shops, which has led to unfair rate increases on many of them.

I made no apology for referring to three areas of tax change which, if implemented, could give a major boost to the economy. First, there is the non-domicile tax changes. Relying on mistaken forecasts of extra tax on these individuals, Governments of both parties have decided to frighten them away from the UK. These non-doms paid much more via PAYE and VAT than the potential extra tax it was claimed would be raised by their status change. This is because they employ people, use hotels and restaurants, and spend money in shops, to name but a few areas. The non-dom legislation should be scrapped.

The next area is duty-free shopping. Again, Governments of both parties have foolishly made and kept the abolition of this. Again, this is very short-sighted and based on erroneous overall calculations of tax loss. What was not factored in was the extra money that could be spent by these shoppers, who go to other European airports instead.

Finally, I turn to inheritance tax. This should be fundamentally changed or abolished. I would like, for a start, to see the UK adopt the American threshold of nearly $14 million before the tax is due, or the Government should consider the example of socialist Sweden, where the tax was abolished. It is a pernicious double tax. As a wise friend from Bexhill with extensive business experience has pointed out, fear of the tax prevents small businesses expanding and being passed on to the next generation. It also cuts back potential spending by descendants in family businesses. It encourages non-domiciled individuals to leave the country—guess who returned when Sweden abolished the tax? It is so disappointing that Conservative and Labour Governments have done nothing about it, except in the case of Labour, which made it worse. A new political approach is needed.