Oral Answers to Questions
Rachel Reeves Excerpts(2 days, 3 hours ago)
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Michael Wheeler (Worsley and Eccles) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
The Government are committed to improving living standards for people across the UK. Thanks to decisions I made in the Budget, the energy price cap reduced by £117 a year, on average, in April. We have extended the cut in fuel duty twice, and introduced an anti-profiteering framework to protect working people from unfair price rises during the Iran conflict.
Michael Wheeler
I strongly welcome the steps that the Government have taken to bring down my constituents’ energy bills from the start of this month. However, the effects of the war in Iran are now beginning to feed through into higher food prices. Pressures on oil and fertiliser costs are likely to intensify, and I am concerned about increases in the price of my constituents’ weekly shop at a time when their budgets are already strained. Will the Chancellor outline what steps the Government have taken to protect my constituents in Worsley and Eccles from rising food prices?
Rachel Reeves
My hon. Friend speaks powerfully on behalf of his constituents. The response of this Government during this conflict is, first, to try to de-escalate it. This is not a war that we started, and it is not a war that we joined. Unlike the Conservatives and Reform, we are working to de-escalate, not ramp up, the conflict, and that is the best way to keep prices down. As long as the conflict persists, we will do everything in our power to be both responsive and responsible in the national interest, which is why we are keeping energy bills down and why we have provided £53 million of support for people who need heating oil.
Jacob Collier (Burton and Uttoxeter) (Lab)
Jess Brown-Fuller (Chichester) (LD)
The Chancellor of the Exchequer (Rachel Reeves)
We are monitoring the situation and preparing for every eventuality. The International Monetary Fund expects the UK to be the fastest growing European G7 economy cumulatively over this year and next. A rapid de-escalation of the conflict remains the best way to protect consumers from rising bills. We continue to act on the cost of living, with £117 on average off energy bills from 1 April, £53 million to help with the cost of heating oil, and freezing both rail fares and prescription charges.
Zöe Franklin
I thank the Chancellor for her answer. The tensions in the middle east are pushing up energy and food prices, adding further pressure to households who are already struggling due to the cost of living. The Chief Secretary to the Prime Minister warned this weekend that families face “eight-plus months” of difficulty ahead. With the school holidays approaching in both the May half-term and the summer, many low-income families in my constituency of Guildford are asking how they will get through the summer. When I visited Holy Trinity school in my constituency last week, the children raised concerns too, which shows how deep the anxiety about this conflict is. What concrete support will the Government provide to protect the most vulnerable households from further cost pressures in the months ahead, especially if this conflict continues into the summer holidays?
Rachel Reeves
I welcome the hon. Lady’s question. Like her, I regularly see pupils and local teachers in my constituency. As she knows, from this month we have got rid of the two-child limit in universal credit, which is lifting 450,000 children out of poverty. We are also expanding free childcare for children aged between nine months and five years, helping parents in work with the costs of balancing family life with work life. In addition, we have taken £117 off energy bills, we are freezing rail fares and prescription charges, and we are helping people—particularly those in rural areas—with the cost of heating oil.
Sadik Al-Hassan
I am grateful to my right hon. Friend the Chancellor for her efforts in what are far from ideal circumstances. Attacks on energy infrastructure and the effective closure of the strait of Hormuz are having real consequences here at home. Baker Hughes employs more than 300 people in Nailsea in my constituency of North Somerset and is an essential energy technology provider. It is at the sharp end of this crisis. Can the Chancellor confirm what support the Government are providing to exposed companies like Baker Hughes, to secure energy supplies and rebuild damaged supply chains today, and invest in the infrastructure we will need to protect British consumers tomorrow?
Rachel Reeves
I thank my hon. Friend for his question. Baker Hughes, an important employer in his constituency, is a good example of how this conflict is affecting businesses and families here at home. As he knows, we have stepped in to defend our Gulf allies who have been attacked, unprovoked, by Iran. We are working with our allies in the Gulf, whom I speak to on a very regular basis, to ensure that we are not only defending them now but helping them to rebuild their infrastructure. Here in Britain, both the supercharger and the British industrial competitiveness scheme are helping businesses with the cost of their energy.
Jess Brown-Fuller
In my constituency, the owner of a haulage business—a vital industry that keeps our economy moving—has reported a 40% increase in the cost of diesel. It is at risk of going bust, while companies like BP are reporting record profits. Given that the impact of the conflict will be felt up to eight months after its conclusion, will the Chancellor please commit to cutting fuel duty, to keep my businesses and my residents on the road?
Rachel Reeves
Fuel duty was never lower at any point under the previous Conservative Government or, indeed, the Conservative-Liberal Democrat Government. We are keeping under review what happens from September, but it is important to note that in the first three months of this year, revenues from fuel duty were no higher than they were just a year ago.
With regard to the profits of energy companies, that is exactly why we extended the energy profits levy: to ensure that windfall profits could be taxed appropriately. BP and other oil and gas companies play a really important part in our energy mix, and our important British companies are representing our country in the US this week, but it is important that windfall profits are properly taxed, whether that is through the electricity generator levy or the energy profits levy.
Laura Kyrke-Smith (Aylesbury) (Lab)
I am grateful to the Chancellor for the work she is doing to protect us from the economic impacts of this war. One of my local farmers has been in touch about the impact on red diesel prices, which are up by around 70%, and fertiliser prices, and shared his nervousness about the affordability of going ahead and planting next year’s crops. Can the Chancellor outline what more she can do to protect our farmers, our food security and our food prices in light of these global challenges?
Rachel Reeves
When we froze fuel duty and extended that freeze, that also impacted red diesel. As we keep under review what happens to fuel duty, we will do the same for red diesel. I think there are two crucial issues. The first is protecting supply, which is why de-escalating this conflict—not ramping it up, as the Tories and Reform would do—is so important, so that we can reopen the strait of Hormuz. The second is prices and costs. That is why we have introduced the British industrial competitiveness scheme to help businesses with energy costs and the supercharger. BICS comes in from this year, and the supercharger is extended from this year, to help businesses impacted by this conflict.
Sir Jeremy Hunt (Godalming and Ash) (Con)
Given that national debt is around 95% of GDP and debt interest costs are nearly 4% of GDP, does the Chancellor agree that it would be irresponsible to fund any cost of living support by increasing borrowing? That would further drive up borrowing costs, choke off growth and saddle future generations with totally unfair debt.
Rachel Reeves
I congratulate the right hon. Gentleman on running his fourth London marathon this week for a cancer charity. I know that cause is dear to his heart. He makes an important point. I understand why people are calling for immediate support, but the previous Government’s untargeted support—I understand why the former Chancellor did what he did—cost more than £100 billion in total, I think, and it meant that interest rates, inflation and taxes have ended up being higher than they needed to be. We managed to reduce Government borrowing by £20 billion last year. The budget deficit is below 5% for the first time since 2019. Sticking to fiscal responsibility is not just good for the public purse; it is also good for ordinary families and businesses. I am determined that we do not go back to the high inflation, high interest rates and high taxes that would be the inevitable result if we had an untargeted response to this conflict.
Mr Paul Foster (South Ribble) (Lab)
Cost of living, cost of living, cost of living—those are the three words that my constituents in South Ribble and the small area of Chorley that I represent contact me about every single week. They do not contact me about the Westminster bubble and process. Will the Chancellor please assure me that she will stay laser-focused on delivering on the cost of living for the constituents of South Ribble and will not allow the noise and disruption from the Opposition to put her off?
Rachel Reeves
I thank my hon. Friend for standing up for the people of South Ribble and the issues that matter to them. Since the general election, there have been six cuts in interest rates, which is the best way to help people with the cost of living, especially if they have a mortgage. Before this conflict began, unemployment was falling, the economy was growing, the deficit was coming down and interest rates had gone down six times. I will continue to focus on the cost of living, because that is the thing that matters most to all our constituents.
Daisy Cooper (St Albans) (LD)
Australia, Italy, India and more have all slashed fuel duty in response to Trump’s idiotic war in Iran. We Liberal Democrats are calling for fuel duty to be cut by 12p per litre here. Last week, the Chancellor claimed that anyone calling for a cut in fuel duty was “economically illiterate”, because it would push up inflation. According to the Office for Budget Responsibility, the current 5p fuel duty cut has led to a 0.2% reduction in the rate of inflation. Does the Chancellor think that the OBR and all these other countries that are helping their citizens are economically illiterate, or does she accept that her Government might be in the wrong and that it is time to act?
Rachel Reeves
Last time she stood up in the Chamber, the hon. Lady said that she wanted a 10p cut in fuel duty; now it is a 12p cut. What she has failed to explain is how on earth she is going to pay for any of those policies. As a former Chancellor, the right hon. Member for Godalming and Ash (Sir Jeremy Hunt), has just explained, untargeted support will result in higher inflation, higher interest rates and higher taxes, which would hurt people in St Albans and around the country rather than helping them with the cost of living.
I support what the Liberal Democrats say about opposing the war in Iran—that is our policy—but they appear to be the only people on the planet who think that a war in the middle east is somehow good for the Treasury coffers. I would not be surprised if in their next manifesto they said they would commit themselves to closing the strait of Hormuz for good. It is not good economic policy, and I am afraid that that says a lot about the Liberal Democrats’ policies.
Dave Doogan (Angus and Perthshire Glens) (SNP)
Leigh Ingham (Stafford) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
We are reforming Government procurement rules so that we can buy more that is made in this country, and we have already changed the rules on steel, shipbuilding, energy infrastructure and artificial intelligence. But I do not just want big companies to be able to get contracts; I want to help smaller businesses and charities to access Government procurement. The Government are the biggest buyer of goods and services in the economy, and I want more of that money to be spent here in Britain.
Leigh Ingham
I thank the Chancellor for her answer. In Stafford, world-class manufacturers such as GE Vernova are producing the technology that powers our national grid, yet for far too long these British employers have not had money given to them through British Government contracts. I therefore warmly welcome the Government’s commitment to reform public sector procurement to grow British industry, British skills and British jobs. Can the Chancellor tell us how this new approach will ensure that Government spending reaches manufacturers and businesses in constituencies like Stafford and towns across our country, so that when the taxpayer spends, Britain builds?
Rachel Reeves
I am slightly disappointed that my hon. Friend did not mention that today is Staffordshire Day; Staffordshire oatcakes are available for Members from both sides of the House in the Tea Room. On the wider issue, we do need to buy, make and sell more in Britain, with more contracts going to firms in Staffordshire—not just for their brilliant oatcakes, but for their ceramics.
Rachel Reeves
Conservative Members cheer, but they did not use any of those freedoms. It is this Government who are doing everything we can to buy, make and sell more in Britain. One of the best ways in which we can grow our economy is to work more closely with our friends, trading partners and neighbours in the European Union—whether through rejoining Erasmus, through playing our full part in Horizon or through a deal for our food and farming sector so that we can export the great stuff that we make here in Britain into the EU as well as to so many other areas. That is why we are determined to rebuild that relationship with the European Union.
Peter Fortune (Bromley and Biggin Hill) (Con)
Iqbal Mohamed (Dewsbury and Batley) (Ind)
The Chancellor of the Exchequer (Rachel Reeves)
The Government are taking action to tackle child poverty, by removing the two-child limit and by expanding free school meals and breakfast clubs, including the seven breakfast clubs already rolled out in the Dewsbury and Batley constituency. As a result, 550,000 children will be lifted out of poverty in this Parliament: the biggest reduction in child poverty in any Parliament ever.
Iqbal Mohamed
In my constituency, 44.4% of children are living in poverty, according to the latest Government figures. Yet Oxfam reports that just 56 billionaires in the UK now hold more wealth than 27 million people combined in our country, and their wealth rose on average by more than £230 million each last year. Does the Chancellor accept that child poverty is not inevitable but the result of political choices about who this Government want to protect? Can she explain how the child poverty taskforce can succeed without the Treasury being willing to pursue far more fair and equitable wealth distribution, through closing tax loopholes, taxing wealth and not just income, and preventing—
Rachel Reeves
Child poverty is absolutely not inevitable, which why we are lifting 550,000 children out of poverty. It is always Labour Governments who lift children out of poverty and Tory Governments who put children back into poverty. The numbers the hon. Gentleman refers to are appalling: 44% of children should not be growing up in poverty in Dewsbury and Batley. We have made the changes we have made to lift those children out of poverty and to give all of them a decent start in life.
Andrew Pakes (Peterborough) (Lab/Co-op)
One of the worst legacies of the previous Government is that 43% of children growing up in Peterborough are living in poverty. Nearly 10,000 children will be affected by the lifting of the child cap in Peterborough alone. Will the Chancellor assure me that, while we have made huge progress, we will keep a razor-like focus on child poverty as we deal with the cost of living crisis and the fallout from the war in Iran?
Rachel Reeves
The fact that some 10,000 children in one constituency have been lifted out of poverty, by just one of the policy changes we have made to reduce child poverty, shows the difference that this Labour Government are making. Combined with the breakfast clubs, the free school meals, the extension of childcare, the Renters’ Rights Act 2025 and the building of new homes, the Government are set to deliver the biggest ever reduction in child poverty in one Parliament.
Warinder Juss (Wolverhampton West) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
First of all, I offer my deepest condolences following the tragic death of two young children in my hon. Friend’s constituency. This will be an incredibly distressing time for the whole community and the thoughts of the whole House are with them.
We recognise that everyday living costs remain too high, which is why we are supporting households with their energy bills, and why we have frozen prescription charges for a second year in a row and rail fares for the first time in 30 years. It is also why we have lifted the national living wage and the national minimum wage, so people on low pay can see their money go further.
Warinder Juss
I thank the Chancellor for her condolences. I was at the site of the tragedy on Sunday laying flowers. It is very upsetting for everyone in my constituency.
One of my favourite places for lunch is the Pomegranate Café, together with the Central Community Shop, in my constituency. It is a community-based social enterprise partnership founded by the Good Shepherd charity, the Wolves Foundation and the Labour-controlled city of Wolverhampton council. It provides affordable food, and all the profits from the café are donated to the Good Shepherd’s free-to-access services—supporting its work to end homelessness, assist recovery, provide access to services around training and employability, and provide meaningful pathways out of poverty in Wolverhampton. Will the Chancellor please join me in congratulating everyone involved with the Pomegranate Café—
Rachel Reeves
I thank my hon. Friend for raising the excellent work city of Wolverhampton council is doing to help people with the cost of living, in particular the most vulnerable people in our society. The measures we are taking to reduce child poverty, and to increase the basic state pension and the new state pension, combined with what we are doing with Pride in Place, including in Whitmore Reans and Dunstall Hill in his constituency, will improve outcomes for people in Wolverhampton West and around the country.
Catherine Fookes (Monmouthshire) (Lab)
Cat Smith (Lancaster and Wyre) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
We are on the right path with the right economic plan. Unemployment is down, the economy is growing, interest rates have been cut six times, and last year Government borrowing was lower than it was the year before and is set to fall by more than in any other G7 economy.
At the same time, the Government are acting responsibly on the world stage. This is a war that we did not start, we did not enter, and we are working with our international allies to de-escalate. Our focus is on protecting family finances, supporting businesses and taking care with the public purse to improve Britain’s economic resilience. That is the right plan for our country.
Cat Smith
I thank the Chancellor for her work to lift the two-child benefit cap, which was cruelly brought in by the Conservative Government. Does she agree that that is not only morally the right thing to do, but economically good news for the 1,690 families in Lancaster and Wyre who will have more money in their pockets to spend in our local economy in Lancashire—unlike the super-rich, who would have just taken it to offshore tax havens?
Rachel Reeves
Just a couple of weeks ago, I hosted an event in Downing Street where I met people who are benefiting from the change in the two-child limit and people who had campaigned for that change. Mums told me that they were going to use the money to pay for their kids to go to after-school clubs with their friends, swimming lessons that they could not afford before, or a new school coat rather than a second-hand one. That is the difference that this money is making to families up and down the country. I am proud to be the Chancellor who has scrapped the two-child limit.
Sir Mel Stride (Central Devon) (Con)
In response to the question from my right hon. Friend the Member for Godalming and Ash (Sir Jeremy Hunt) on borrowing, the right hon. Lady suggested that she was following a strict deficit reduction plan. I think she made reference to a reduction in the deficit of £20 billion year on year—but, of course, it is easy to reduce something if you pump it up recklessly in the first place. Could she tell the House how much more borrowing this Government will undertake across this Parliament compared with the plans that she inherited from the last Government?
Rachel Reeves
To start with, let us remember that the plans we inherited from the last Government would have seen fuel duty go up straightaway; the plans that we inherited from the last Government would not have seen £29 billion of investment a year in our NHS; and the plans that we inherited from the last Government would have seen business rates for our high street businesses—our retail, hospitality and leisure businesses—go up straightaway. We did make the decision to change that inheritance because we thought it was the right thing to do, and we still do. The International Monetary Fund confirmed that we have the fastest rate of fiscal consolidation of any country in the G7, and our borrowing as a share of GDP fell to 4.3% in the last financial year and is due to fall in every single year of this Parliament. This is the first time that our deficit has been lower than 5% since 2019.
Sir Mel Stride
The right hon. Lady does not seem to know how much additional borrowing this Government are undertaking compared with the plans of the last Government, so I will tell her: it is one quarter of a trillion pounds of additional borrowing across this Parliament. The truth is that this Chancellor is addicted to borrowing, which means, compared with what otherwise would be the case—she said exactly this, in terms, in the answer to my right hon. Friend the Member for Godalming and Ash—higher borrowing costs, higher inflation, higher interest rates and more sluggish growth, doesn’t it?
Rachel Reeves
What the right hon. Gentleman is basically admitting is that he would have gone ahead with the increases in fuel duty and business rates, and that he would take that money out of our national health service. We made those changes on the mandate that we got at the election, and at the same time we are reducing the budget deficit so that, for the first time in six years, it is now below 5% of GDP. As a result, the Bank of England has cut interest rates six times, helping all our constituents with their mortgages. This is very different from the hikes in mortgages that we saw under the previous Tory Government.
Yuan Yang (Earley and Woodley) (Lab)
Rachel Reeves
As my hon. Friend knows from sitting on the Treasury Committee, this Government have already taken action to reduce the cost of living and to bear down on inflation with the changes around energy prices, fuel duty, prescription charges and rail fares. I will do everything in my power and use every lever we have to bear down on the cost of living, including for people in the private rented sector. That is why we have already introduced the Renters’ Rights Act 2025. People who have mortgages have seen cuts in their mortgage rates since we came into office, and we will also do everything we can to help people in the private rented sector too, because we must ensure that this conflict in the middle east does not result in our constituents being poorer.
Antonia Bance (Tipton and Wednesbury) (Lab)
Rachel Reeves
I thank my hon. Friend for that question. While other parties—specifically Reform and the Conservatives—wanted us to enter this war, we stayed out of it, and are working to de-escalate the conflict and reopen the strait of Hormuz. The economy was growing, interest rates were coming down and inflation was falling. As a result, every month since I have become Chancellor, wages have risen by more than inflation, easing the cost of living pressures that the previous Government oversaw.
Olly Glover (Didcot and Wantage) (LD)
Chris Bloore (Redditch) (Lab)
Rachel Reeves
My hon. Friend is absolutely right that although Reform-led Worcestershire council said that it would cut taxes, it has instead put them up. That is why I urge people in Redditch and across the country to vote Labour on 7 May.
Sarah Olney (Richmond Park) (LD)
Tom Rutland (East Worthing and Shoreham) (Lab)
Rachel Reeves
The oil and gas sector will play an important part in our energy mix for many years to come, and we need to support it, as we are doing through tiebacks, for example. But it is important that the energy profits levy remains in place for now, because during this conflict we will be able to capture the profits made in the UK through the windfall tax. The Conservatives and Reform oppose this tax, which would just mean even higher profits for oil and gas companies. As my hon. Friend knows, we are also delinking gas and electricity prices by increasing the electricity generator levy, so that no energy company can make excess profits because of the conflict.
Chris Coghlan (Dorking and Horley) (LD)
Rachel Reeves
I thank my hon. Friend for all his campaigning in this area. I also pay tribute to the trade union USDAW, its former general secretary Paddy Lillis, and its current general secretary Joanne Thomas, for all their work in this area. Strengthening statutory sick pay is part of our commitment to implement our plan to make work pay, ensuring that the safety net of sick pay is available to those who need it from day one.
Shockat Adam (Leicester South) (Ind)
Leicester South has a home ownership rate of just over 40%—nearly 23 points below the national average—in a city where the average house costs 8.5 times average local earnings. My young constituents work very hard and save responsibly to get on to the housing ladder, yet the tax system offers them absolutely nothing, while incorporated landlords deduct full mortgage interest through a company structure. Canada and Nordic countries are offering targeted tax relief for first-time buyers. Has the Chancellor considered introducing a similar relief here to ensure that young people are supported by the tax system, not left behind?
Middle East: Economic Update
Rachel Reeves Excerpts(1 week, 2 days ago)
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The Chancellor of the Exchequer (Rachel Reeves)
With permission, I will update the House on the spring meetings of the International Monetary Fund and the continued action that the Government are taking to strengthen our economic and energy security in response to the conflict in the middle east.
We did not start this war and we did not join this war, but since the war in the middle east broke out, I have been clear-eyed about my duty: to be responsive to a changing world and responsible in the national interest. The best economic policy today is our diplomatic policy—negotiation, de-escalation and the permanent reopening of the strait of Hormuz.
Last week in Washington, I held talks with world Finance Ministers, including the US Treasury Secretary, Scott Bessent. I struck a joint agreement with 10 other major economies, calling for a swift and lasting negotiated resolution to the conflict and agreeing to avoid unnecessary trade restrictions to support energy and food security. We agreed to maintain maximum economic pressure to ensure that Russia cannot profit from this war. I was proud to announce the UK’s third tranche of the Extraordinary Revenue Acceleration funding for Ukraine’s defences, as well as continuing to work with the US Administration to increase economic pressure on Iran.
The Prime Minister has also led global action, convening a summit of nations with the President of France to work together to support freedom of navigation through the strait of Hormuz. The UK will continue to play its part, including engagement with the insurance industry to support shipping when conditions allow.
We are continuing to plan for every eventuality, but we must deal with the economic costs that are already being felt. I reject the demands for a knee-jerk response to this crisis that would put household finances at risk through higher inflation and higher interest rates. Every choice that I make will be about keeping costs down for families and businesses. That is why I have extended the 5p cut for fuel duty twice since the election, saving the average motorist £90 a year compared with the plans that I inherited. It is why I have frozen prescription charges for two years in a row and frozen rail fares for the first time in 30 years; it is why I am taking £150 off energy bills with additional help for those struggling with the cost of heating oil; and it is why I have expanded the British industrial competitiveness scheme to over 10,000 manufacturers, addressing long-term competitiveness and cutting electricity costs from this year.
During the last energy shock, the previous Government’s package of unfunded and untargeted support saw more than a third of direct energy bill support go to the wealthiest households. That meant higher inflation, higher interest rates and higher taxes. I will not repeat those mistakes. Last week, the IMF said that my plan is “the appropriate response” to the conflict. I led a joint statement, with 10 other major economies, agreeing to co-ordinate our domestic responses, to ensure that they are responsive and responsible. This Government have the right plan for our economy. At the spring forecast, we saw how the action that we have taken since the election has prepared Britain to better weather this conflict. Inflation was at 3% and set to fall to target—a lower base than at the outset of the Russia-Ukraine conflict, when inflation was high and rising. Borrowing was set to fall more over this Parliament than in any other G7 economy. We are set to reduce the deficit by £20 billion, from 5.2% to 4.3% of GDP this year. I increased our financial buffers, with headroom against the stability rule of £23.7 billion, so that we can weather shocks and keep borrowing costs down.
Last week, the IMF welcomed the UK’s “notable improvement” in our public finances. I am clear that the best way we can build a stronger, more resilient economy is through economic growth. I welcome recent figures showing that the economy grew by 0.5% in the three months to February and upgraded growth for the three months to January to 0.3%. I also welcome this morning’s labour market figures for February, which show unemployment coming down and real wages continuing to rise, as they have in every month since I became Chancellor—adding to the evidence that the Government have the right economic plan to steer our economy through the uncertainty ahead.
However, as I have said, the war in Iran will come at a cost. Last week, the IMF published its updated forecasts for the global economy in response to the war. It reduced its expectations for GDP growth in the United Kingdom and increased its expectations for inflation. That builds on the IMF’s judgment that the UK is more exposed to energy price shocks than our counterparts—a problem that the previous Government failed to address in 14 years—and on its observation that, since the last energy crisis, the UK has had higher inflation than other countries. The aftermath of Liz Truss’s disastrous mini-Budget, and the previous Government’s untargeted and unfunded support package, contributed to a more persistent rise in inflation and interest rates than in other countries around the world.
The IMF’s forecasts are a stark reminder of why we must stick to our economic plan and go further and faster on delivering economic security. Since the election, we have invested in clean, home-grown energy, in renewables and in nuclear power. In 2025, we imported 17% less gas than in 2021, and gas generation now sets the wholesale price of electricity around a third less frequently than it did in the early 2020s, meaning that our energy system is now more secure and less exposed to volatile global energy prices.
Today we are going further, with a package of changes to reduce our reliance on imported oil and gas, boost the use of renewables, and smooth the impact of energy price shocks. First, oil and gas production from the North sea is an important and valuable resource, and its workforce is a vital asset for our country. That is why we are harnessing our domestic supply by managing existing fields for their entire lifetimes, including by allowing tiebacks for those fields to ensure that they remain viable. Today, in advance of legislation, we are publishing further details on tiebacks, which I first announced in the Budget. External analysis has predicted that they could result in tens of millions more barrels of oil and gas being available for UK supply. Today’s announcement gives industry greater clarity to support investment in those projects and maximise supply from our existing sites to support our energy security.
Secondly, we are sweeping away the barriers to new renewables investment by accelerating vital grid infrastructure, reforming land access rules and extending permitted development rights, as well as making more public land available for renewable infrastructure, which could unlock up to 10 GW of capacity, and helping households and businesses to switch to clean, cheaper renewable electricity through plug-in solar panels and better electric vehicle charging.
Thirdly, we are reforming our energy system. Currently, households and businesses pay more for their electricity when the gas price is high. The electricity generator levy already recoups some of the excess returns made by generators due to high gas prices. Today, I am announcing that I will extend the electricity generator levy beyond its scheduled conclusion in 2028, and, ahead of that, I will increase the rate of the levy from 45% to 55%. That will ensure that a larger proportion of any exceptional revenues from high gas prices are passed back to Government, providing a vital revenue stream so that money is available for Government to support businesses and families with the impacts of the conflict in the middle east. Crucially, it will encourage older low-carbon electricity generators, which supply about a third of our power, to move from market pricing to fixed-price contracts for difference.
New proposals, set out by the Secretary of State for Energy Security and Net Zero today, will further weaken the link between high gas prices and the price paid for our electricity, and limit the spikes in energy prices from driving up inflation and costs for households and businesses.
The Government have the right economic plan—a plan that was right before this conflict in the middle east started and is now essential to weather the impact of that conflict. The plan, backed by the IMF, will keep costs down for everyone and provide support for those who need it most. In a world that is more uncertain, it is a plan to build a Britain that is stronger and more secure. I commend this statement to the House.
Rachel Reeves
That response exposes a shadow Chancellor who is out of credible ideas. I was sad to read in the weekend’s newspapers that once again, he is being lined up for the sack by the Leader of the Opposition, but to be honest, after his performance today, I can understand her choice.
The shadow Chancellor talks about the IMF. Yes, the IMF did downgrade the forecast. Why? It is because of a war, which his party unquestioningly backed, and because of our high exposure to global energy markets, which his party allowed. We are taking the right choices. We did not back this war, nor did we follow the calls of the Leader of the Opposition and the leader of Reform to join in. We are investing in and reforming our energy market, so that we can take back control of our energy security.
The shadow Chancellor talks about the economy. Well, let’s talk about the economy. Before this war broke out, our economy grew by 0.5% in the three months to February and 0.3% in the three months to January. Inflation was expected by the Bank of England and the Office for Budget Responsibility to return to target, and interest rates had been cut by their fastest rate in 17 years, compared with hitting 5.25% under the Conservatives, which saw mortgage costs going through the roof. [Interruption.] The hon. Member for Wyre Forest (Mark Garnier) says it is the Bank of England’s job to address inflation, but we had the same Bank of England when the Conservatives were in government. It has cut interest rates while we have been in government because we got control of the public finances, and the Conservatives lost control of the public finances.
The shadow Chancellor says that the response to a fossil fuel crisis is to rely more on fossil fuels and to reduce investment in clean, home-grown energy. He is ignoring the fundamental lesson of both Russia’s invasion of Ukraine and the conflict in the middle east. The shadow Chancellor opposed new solar energy, opposed onshore wind power and did not invest in either Sizewell C or small modular reactors, as this Labour Government are doing. Just today, the CEO of RenewableUK has said that
“reducing the link between the volatile global gas prices and the cost of electricity is the best way to protect households, businesses and industries against the unpredictable and volatile costs of fossil fuels in the long term, to strengthen the UK’s energy security.”
The shadow Chancellor says that tiebacks make no difference, yet Offshore Energies UK says that
“developing fields as tiebacks reduces costs, lowers emissions, and extends the life of existing critical infrastructure”,
which is exactly why we are doing it.
The shadow Chancellor says that delinking would lead to higher prices. It is the exact opposite. The whole aim here is to move to fixed prices. By increasing the electricity generator levy—we do not know whether the Conservative party supports or opposes it—we incentivise those energy companies to come off the levy and come on to contracts for difference. We are beginning the negotiations with industry, so that we can reduce that volatility in prices. As the CEO of E.ON has said today,
“For too long, the value in our energy system has flowed to those at the top of the chain. Today’s move starts to turn that around”,
because we can take out of the system the volatility and the spikes, which are so damaging for both family finances and business finances. But the shadow Chancellor had nothing to say on that.
Fuel duty was never lower in 14 years under the Conservatives than it is today. Of course, we are keeping all scenarios under review, but it is quite clear that the best way to bring down fuel prices is to de-escalate this conflict, not ramp it up like the Conservatives want to do.
The shadow Chancellor has nothing to say on international co-operation, nothing to say on global negotiations to keep the strait of Hormuz open, nothing to say on reform of our energy market and nothing to say on investment in our infrastructure. Why? It is because he has no plan. Why? Because he does not have any ideas. Why? Because his party has no economic credibility. Labour has the right plan for our country. The Conservatives would take us right back to the bad days of high inflation, high interest rates and the mess they made of our economy.
Bill Esterson (Sefton Central) (Lab)
The conflict in Iran is also a matter of energy security and the cost of energy. It is a reminder for the second time in four years of the dangers of being dependent on international fossil fuel markets and of the need to reduce our dependence. The Energy Security and Net Zero Committee has heard a lot of evidence about the importance of decoupling the price of electricity from the price of gas, so may I encourage the Chancellor to bring forward measures that will reduce the amount of time that gas can continue to set the price of electricity? It is a pity that the Conservative party did not take that approach following the invasion of Ukraine in 2022 when it had the chance.
Rachel Reeves
I thank the Chair of the Energy Security and Net Zero Committee for that question, and for his important work on this issue. There are two ways to reduce the number of days in which the gas price sets the electricity price. First is to invest more in home-grown renewables and in nuclear, so that more of the mix is made up of electricity. The second way is to delink gas and electricity prices, first by increasing the electricity generators levy to bring in money but also—this is crucial—by incentivising those companies that are currently getting the market price to go instead on to a contract for difference, which gives greater certainty for families, pensioners and businesses with their bills. That is exactly what we are doing.
Madam Deputy Speaker (Ms Nusrat Ghani)
I call the Liberal Democrat spokesperson.
Daisy Cooper (St Albans) (LD)
I thank the Chancellor for advance sight of her statement.
The Chancellor should have come here today to explain how she was going to use the £20 million extra that the Treasury is pulling in every single day through higher VAT, a higher energy profits levy and other taxes, to tackle the immediate cost of fuel crisis that is facing families and businesses today. The Chancellor is fundamentally wrong when she says that a knee-jerk response would have put household finances at risk through higher inflation and higher interest rates. We need just to look at what other countries are doing. The Government could have used that £20 million to drive down prices—the price of petrol at the pump, the price of train and bus fares, and the price of home-charging electric vehicles. Slashing those prices could have helped the Chancellor to control inflation and higher interest rates. That is what other countries are doing, and what we Liberal Democrats are calling for.
The Liberal Democrats were the only political party to have in our manifesto a commitment to break the link between gas and electricity prices, so we are glad that 18 months on, the Government have finally listened.
In addition to the measures outlined today, may I ask the Chancellor about two specific things? First, has she spoken to any banks about rolling out low-interest loans for householders who want to do the right thing and adopt energy-saving measures, but are struggling with the up-front costs? Secondly, I met the Competition and Markets Authority on Monday. The CMA and Ofgem both agree that there is a case to answer about the broken energy market and why hospitality and small businesses are being blocked. Will the Chancellor join me in writing to Ofgem and asking it finally to investigate, without any further delay, a broken energy market that is blocking hospitality and small businesses from accessing the best deals?
Rachel Reeves
I welcome the fact that the hon. Lady and her party opposed the war and did not want the UK to become involved, unlike the Conservatives and Reform. However, I find what she has just set out fundamentally economically illiterate. The idea that a great fiscal policy is to close the strait of Hormuz! Why did we not think of that when we came to office? If we close the strait of Hormuz, all our problems will be over because we can get in all this money—that is what the hon. Lady is suggesting; that we will get some great windfall from a tax. The truth is that the IMF and every other forecaster are clear that tax revenues will be lower, not higher, because of the conflict in the middle east. The money that the hon. Lady wants us to spend simply does not exist. I am afraid she is falling into the failed economic policies of the Conservatives, who delivered untargeted, unfunded support that resulted in higher interest rates, higher inflation and higher taxes. She is suggesting an untargeted approach, but that is what got us into the mess we are in today.
I welcome the fact that the hon. Lady supports us on decoupling, which is the right thing to do with our gas and electricity prices. I regret that she and her party did not support the Planning and Infrastructure Act 2025, which enables us to build the homes and energy infrastructure that we need. On working with banks, the Department for Energy Security and Net Zero is working with every high street lender and energy company to help people who are struggling with their bills.
David Burton-Sampson (Southend West and Leigh) (Lab)
As my right hon. Friend mentioned, in 2022 Liz Truss launched a household energy support package that provided blanket support to every household, including the most well off. It was estimated to cost between £57 billion and £60 billion, just over the first six months; that was predominantly funded by borrowing. Does my right hon. Friend agree that the right and fiscally responsible thing to do during this crisis is to provide targeted support to those who need it most?
Rachel Reeves
More than one third of that support for energy bills went to the top third of households. That makes no sense at all, especially when those households then end up being burdened with higher interest rates on their mortgages, higher inflation in the shops, and higher taxes for years to come. The right approach is a targeted one, to keep costs and interest rates down for everybody. Of course, the best economic policy would be a de-escalation of this conflict, not ramping it up, as the Conservatives and Reform want to do.
Dr Ben Spencer (Runnymede and Weybridge) (Con)
The Chancellor will be aware of how important aviation is to the UK economy, particularly Heathrow, which is responsible for a huge amount of air freight and economic activity in my constituency. Given the reports regarding the supply chain for kerosene used in aviation, what measures is the Chancellor taking to ensure kerosene supply? What consideration has she given to tax relief to ensure that our aviation sector is sustainable and continues to contribute to the UK economy?
Rachel Reeves
As the hon. Gentleman knows, the Government are a big supporter of our airports and the aviation sector. That is why we are backing a third runway at Heathrow, a second runway at Gatwick, as well as expansion at Stansted and Luton airports. We are in regular contact with the aviation sector. It is currently not reporting any challenges with security of supply, but as the hon. Gentleman and the House would expect, we are planning for all different scenarios. The best way to ensure security of supply is to reopen the strait of Hormuz by working to de-escalate this conflict.
Jim Dickson (Dartford) (Lab)
I welcome the fact that in this time of economic shocks, the Government are playing their proper role in protecting UK households from the worst harms, and I thank the Chancellor for the work that she is doing with other Finance Ministers and Governments to bring about a de-escalation of the war—unlike others, who advocate for escalation. Does she agree that, in addition to taking the measures that she has talked about today, and that the Secretary of State for Energy Security and Net Zero has announced, she must continue, alongside the rest of the Government, to press other Governments for de-escalation of the war? That is the best way to protect UK households.
Rachel Reeves
That is why the whole House welcomed the Prime Minister and the French President convening a meeting of 50 countries on Friday, to work on how we could reopen of the strait of Hormuz and, crucially, on the protection of vessels travelling through it, when it is safe for them to do so; and it is why I have been working with the insurance industry to ensure that the right cover will be available to vessels, when it is possible to travel through the strait again. When I was in Washington last week, I met our allies from the Gulf countries, who made clear the importance of reopening the strait of Hormuz and preserving toll-free travel through it.
Greg Smith (Mid Buckinghamshire) (Con)
Prices are going up, and if the Chancellor’s 5p increase in fuel duty between September and next March goes ahead, we will be the European country with the eighth highest fuel duty. Surely this is not the time for that increase. If she wants certainty, the best thing she could do, at that Dispatch Box, is cancel the fuel duty hike.
Rachel Reeves
I understand the concerns that people have about filling up their car with petrol and diesel right now. We have introduced the cheaper fuel finder tool, so that people can compare prices and get the best deal when they fill up their car, and we have had all the petrol retailers into No. 11 Downing Street to ensure that we do not have any price gouging. There are still four and a half months until September. We are preparing for every eventuality. I have extended the fuel duty freeze and the 5p cut twice already, which means that the average motorist is saving £90 more than they would have done under the plans that I inherited from the Conservative party.
Ms Julie Minns (Carlisle) (Lab)
The conflict in the middle east has again highlighted just how vulnerable our off-grid rural households are to fossil fuel-driven energy shocks. Does the Chancellor agree with me that the warm homes plan is a major opportunity to upgrade rural housing and cut bills? Will she confirm what further steps the Government are taking to encourage the take-up of low carbon technology?
Rachel Reeves
I thank my hon. Friend for raising the challenges felt in many rural communities. Those challenges are why I put in place additional money to help people with the cost of heating oil. We recognised that the £150 off energy bills introduced in April does not apply to heating oil, and we wanted to ensure that people had support with that. We are also extending and increasing the generosity of the warm homes plan, in particular by including boiler upgrades. That will help people in all communities, including rural communities, where the cost of heating homes is often higher.
Stephen Flynn (Aberdeen South) (SNP)
We are very fortunate in Scotland to already produce more renewable electricity than we consume, and of course we produce more oil and gas than we consume as well. Unfortunately, we do not experience any benefit in our bills. The Chancellor had the cheek to say that she regards the oil and gas workforce as a vital asset to the country, but they certainly do not feel like that, because a thousand of them are losing their job every single month. If she believes in jobs, investment, energy security and reducing climate emissions, will she outline why she has not yet moved to the oil and gas price mechanism? Why is the Chancellor allowing the Energy Secretary to overrule her and prioritise imports of liquefied natural gas, rather than supporting domestic energy sources?
Rachel Reeves
People in Scotland, and right across the UK, benefited from the money off their energy bills. We are one of the few countries in the world where energy bills for households went down in April, rather than up. That was because of the changes that I made in the Budget. Of course, that benefits households in Scotland as well. Today, the Energy Secretary and I have announced changes around tiebacks. The previous Government could have made such changes, but they did not. Offshore Energies UK has said:
“developing fields as tiebacks reduces costs, lowers emissions, and extends the life of existing critical infrastructure.”
This policy will help to create and support more jobs in Scotland in this vital sector. If the Scottish National party is so concerned about jobs, why does it not back nuclear in Scotland, just as this Labour Government back nuclear in England and Wales?
Luke Murphy (Basingstoke) (Lab)
I welcome the Chancellor’s statement and the announcements made by her and the Energy Secretary. We have seen two fossil fuel shocks in just the past five years, which have done untold damage to our economy. Half the recessions since the 1970s have been caused by similar fossil fuel shocks. It is clear that the move to clean, home-grown energy is good for the economy, good for security and good for household bills. What conversations have she and the Energy Secretary had with organisations that might be taking up voluntary agreements? When might those agreements be made, and when will we see the benefit of breaking the link between gas and electricity prices?
Rachel Reeves
Investment in nuclear and renewables can ensure security of supply, and security of price. Investment in fossil fuels cannot secure security of price, because that price is determined by international markets. A third of power is electricity that is not covered by a contract for difference. We are trying to get that on to contracts for difference, so that we can stabilise prices and avoid the spikes that we see because of the volatility in fossil fuel prices that my hon. Friend mentioned. The Energy Secretary and I have already met representatives from the energy sector to discuss this policy and the negotiation of contracts for difference. After the negotiations, and given the incentive to avoid the higher electricity generators levy, we are confident that many businesses will be happy and willing to move, through a negotiated price, on to contracts for difference.
Mr Andrew Snowden (Fylde) (Con)
The strangely cheerful outing by Treasury Front-Bench Members today makes them the equivalent of the band playing on the deck of the Titanic, as the Government sink around them after hitting the iceberg that is Peter Mandelson. If the Chancellor thinks that anybody out there genuinely feels that she has made the economy more resilient to economic shocks, then I am sorry to say that she is living in cloud cuckoo land. I have met the families who have less money in their pay packets because of her tax raids. I have met the businesses that are making people redundant, cutting investments or facing closure because of her tax rises. If she wants to help people in the economy, she should cut taxes.
Rachel Reeves
Today we have announced an increase in the electricity generators levy to help the hon. Gentleman’s constituents, and all our constituents, to get lower prices for electricity. Instead of talking the country down, he might want to mention the fact that the economy grew by 0.5% in February, unemployment went down today, we have the fastest deficit reduction pace of any country in the G7, and in every single month that I have been Chancellor, wages have risen by more than prices. That is very different from what happened when his party was in charge.
Nick Smith (Blaenau Gwent and Rhymney) (Lab)
I thank the Chancellor for her statement. I agree that the best economic policy today is diplomatic policy. Given the situation in Iran, will she tell us more about her plans for putting economic pressure on the leadership there to de-escalate this dreadful situation?
Rachel Reeves
My hon. Friend is absolutely right that the best economic policy is diplomatic policy; it is reopening the strait of Hormuz, and de-escalating this conflict. That is why the Prime Minister hosted, with France, the coalition meeting last Friday, and why, when I met the US Treasury Secretary last week, we committed to doing more to increase the sanctions and the economic pressure on Iran. My team of Treasury officials met US Treasury officials last week to work out what more can be done, following the excellent work that our two Treasuries have already done together to increase economic pressure on Iran.
Tim Farron (Westmorland and Lonsdale) (LD)
As a result of this war, agricultural inflation is running at 7.6%—more than twice general inflation levels. Red diesel has doubled in price and fertiliser supply is under serious threat. Predictably, food prices are likely to rise, causing hardship for millions of people, partly because of Britain’s lack of food security. Is it not time for the Government to U-turn on the Conservative policy that they inherited, which means that England is now the only country in Europe that does not use its farm payments to actively support its farmers to produce food?
Rachel Reeves
I thank the hon. Gentleman for his representation of the agricultural sector. As he knows, on the two occasions when we have extended the 5p cut in fuel duty, a commensurate benefit has been applied to red diesel, but I recognise the challenges faced, in the current conflict, by the agricultural sector and other sectors that are big users of diesel. That is why we are working hard with industry to ensure that the sectors get the support that they need. Crucially, we are also trying to de-escalate the conflict and reopen the strait of Hormuz to improve the availability of diesel and fertiliser.
Melanie Onn (Great Grimsby and Cleethorpes) (Lab)
I congratulate the Chancellor on her statement. The setting of electricity prices to international gas prices has long been blamed for the erratic nature of our electricity bills—indeed, that was previously accepted by the Conservative party. While the Conservatives complained about it and did nothing, this Government are seeking to take action to disconnect those two issues. Will the Chancellor advise when she thinks that families will start to see a benefit from the decoupling of electricity prices from international gas prices?
Rachel Reeves
My hon. Friend knows what she is talking about, not least because she is the MP for Great Grimsby and Cleethorpes, but also as a result of her previous career before taking her seat at the last election. There are two ways in which people will benefit. The first is in the short term, through the higher electricity generator levy. We have increased the rate from 45% to 55%, which will bring in money this year that can help us as a Government to relieve some of the pressure on families and businesses. We will also use the higher levy to negotiate the contracts for difference at a good price for bill payers and taxpayers so that we get rid of that volatility. I am confident that in the months ahead, while we have the higher electricity generator levy in place, we will be able to negotiate the new contracts and reduce the volatility. Crucially, the reduction in volatility will benefit both households and businesses.
Sir Julian Lewis (New Forest East) (Con)
May I welcome the couple of positive references that the Chancellor made a little while ago to civil nuclear power? Given that we have in this country Rolls-Royce, a world-leading specialist in the design and construction of small modular mobile nuclear reactors, what plans do the Government have to support this particular sector so that we are less dependent on the whims of Iranian dictators in future?
Rachel Reeves
I was really pleased last week to sign with Rolls-Royce the contract for the first fleet of small modular reactors in the UK. They will be located on Anglesey, but they will create jobs for people from Derby to Warrington and from Manchester to Sheffield, and of course in north Wales and on Anglesey itself. We are also working with Rolls-Royce as it looks to secure contracts overseas, as it already has with Czechia, creating more good jobs here in Britain for this exciting new technology, which will also have the benefit of secure, home-grown energy.
Ben Goldsborough (South Norfolk) (Lab)
Because of the action of this Government, rural communities in Norfolk received the highest payment of support for heating oil, with more than £3 million in the whole of England. However, a huge concern is that more than 60% of the applications that have been made have not been completed by the local Conservative-run council. What will the Chancellor’s action be to ensure that Norfolk county council gets these payments into the pockets of my constituents?
Rachel Reeves
I am sorry to hear that the Conservative-run council in South Norfolk has not completed 60% of the applications for help with heating oil. The Government made more than £50 million available and targeted it at such places and at my hon. Friend’s constituents, who need it most. I am very happy to follow up with the council to ensure that people get the support they need.
Carla Denyer (Bristol Central) (Green)
I am relieved that the Government are now committed to breaking—[Interruption.]
Carla Denyer
I am relieved that the Government are now committed to breaking the price link between expensive gas and cheap renewables, but given that the proposed solution is voluntary for electricity generators, how will the Chancellor ensure that the proposals that she and the Secretary of State for Energy Security and Net Zero are putting forward will actually deliver substantially lower bills? If I send them to her office, will she consider the proposals from the think-tank Commonwealth for a mandated, not-optional, fixed-price model to ensure that billpayers are not left at the mercy of the volatile international fossil fuel market?
Rachel Reeves
As I set out in my statement and as the hon. Lady said, we are delinking gas and electricity prices. That is the right policy, and we will achieve it through the increase in the electricity generator levy. By increasing it from 45% to 55%, we are providing a very strong incentive for companies that still get market prices to move on to contracts for difference to avoid the electricity generator levy. If they do not go on to a contract for difference, they will continue to pay the electricity generator levy, which I have extended today, and we can use that money to help people with their prices.
The hon. Lady’s commitment to lower prices and more secure supply would be a bit more credible if the Green party did not oppose new nuclear and the Planning and Infrastructure Act 2025, which will make it easier to build the infrastructure investment in renewables and clean energy that we desperately need to lower bills and get ourselves off fossil fuels.
Andy McDonald (Middlesbrough and Thornaby East) (Lab)
I thank the Chancellor for her statement and for the work that she and the Energy Secretary have done in this regard. The focus on renewables and the decoupling of gas and electricity is most welcome, but may I point something out? One of the problems that we inherited from the Conservatives, who have the gall to complain about the high cost to businesses and households, is that we are heading towards curtailment fees in 2030 of around £6 billion per annum. Would the Chancellor be kind enough to meet me and my hon. Friend the Member for Camborne and Redruth (Perran Moon) to discuss some of the technological options available to us to mitigate those soaring costs?
Rachel Reeves
I thank my hon. Friend for the interest that he has in this really important area. We are doing a number of things on this front. The Planning and Infrastructure Act, which passed through Parliament at the end of last year despite the opposition of the Conservatives and the Greens and the indifference of the Liberal Democrats, will enable us to build the infrastructure to get energy from offshore wind to people’s homes and businesses, as well as investment in battery technology so that we can store energy. My hon. Friend will also have heard the announcement last week that we will enable differential pricing at different times—for example, to be able to get free electricity in some cases at weekends, when the demand for energy is lower. Those are some of the things we are doing to better balance demand and supply on the grid, and I would be very happy to meet him to discuss the matter further.
Richard Tice (Boston and Skegness) (Reform)
Is the Chancellor aware that the price of gas in the US is 10% lower than at the start of the war, while here in the UK it is 30% higher? That proves that if we produce what we consume, there is actually a domestic price of gas. Will she have a word in the shell-like ear of the Secretary of State for Energy Security and Net Zero and tell him to get on and approve the licences at Jackdaw and beyond, including onshore? That would mean more gas, more production and lower prices.
Rachel Reeves
I think that the hon. Gentleman has just said that he is in favour of fracking. If so, I look forward to campaigning against him on that.
Amanda Martin (Portsmouth North) (Lab)
I thank the Chancellor for her statement and for the work she is doing at this globally difficult time. As a proud coastal, naval and defence city, Portsmouth understands that economic, national and climate security are inseparable, from household bills to flood resilience and defence jobs. Will she reassure families and businesses in my constituency that today’s actions, such as decoupling, will protect them from rising costs, support the jobs that are so vital to our city and ensure that we have a city for future generations?
Rachel Reeves
I thank my hon. Friend for standing up for her constituents in Portsmouth. The purpose of decoupling gas and electricity prices is to reduce the volatility. We all know from our constituencies how much lower-income families and pensioners, in particular, struggle with volatility in gas and electricity prices, because electricity is an essential and people need it for everyday use. Decoupling will smooth out some of the volatility in the price of energy, giving greater certainty to families, pensioners and businesses, which all have to contend with the volatility of the fossil fuel market. That is why we want to move to more contracts for difference, and that is what today’s policy will achieve.
Mr Lee Dillon (Newbury) (LD)
In her statement, the Chancellor outlined a plan for tomorrow, but no help for today. The residents of Newbury—the small businesses and farmers—want to know how high the Chancellor will allow the prices of petrol, red diesel and fertiliser to go before she decides to take positive action and reduce the impact of the cost of living crisis on those people. How high do those prices have to go, Chancellor?
Rachel Reeves
In Newbury, and indeed in all of our constituencies, people got £150 off their energy bills in April this year. There are very few countries in the world where energy bills fell in April; in most countries they are going up. That was possible only because of the measures I took in last year’s Budget. I have extended the 5p cut in fuel duty two times already since becoming Chancellor. Obviously, we are following very carefully what is happening in the middle east and looking at the impact on the UK economy, families and businesses, and we will be ready to respond. However, the best way to get bills and prices at the pump down is to de-escalate this conflict and reopen the strait of Hormuz. That is the policy of the hon. Gentleman’s party, and it is the policy of this Government, because that is the best way to help people with the costs of energy.
Tahir Ali (Birmingham Hall Green and Moseley) (Lab)
The Prime Minister was right not to take part in the war led by Donald Trump and Netanyahu, and the Chancellor is right not to engage in a knee-jerk reaction to this economic difficulty. However, will she keep under active consideration those who are most vulnerable—those who are on benefits and the hard-working families who will struggle to put food on the table, choosing between that and paying energy bills—and if need be, will action be taken immediately?
Rachel Reeves
When the previous Government intervened in the case of an energy price shock, more than a third of the benefit went to the top third of income earners. That makes no sense at all when Government resources are stretched and when it resulted only in higher interest rates, higher inflation and higher taxes for the exact same people. That is why we are looking at what targeted action could be taken. It is also why, at the beginning of this month, the new state pension increased by up to £575 and we got rid of the two-child limit on universal credit, which will lift almost half a million children out of poverty over the course of this Parliament.
Carla Lockhart (Upper Bann) (DUP)
No farmers means no food, no hauliers means empty shelves, and no construction means a country that is not moving forward. In Northern Ireland, those three industries are now taking to the streets to protest, which is clear evidence that this Government’s inaction is pushing them to the brink. Will the Chancellor today do the right thing and commit to cutting fuel duty, scrapping punitive carbon taxes, and properly supporting the industries and sectors that are fundamental to this country’s security and stability?
Rachel Reeves
In Northern Ireland and across the country, people got £150 off their energy bills in April, and of course Northern Ireland was the biggest beneficiary of the support for heating oil—that support went disproportionately to Northern Ireland, given its greater reliance on heating oil compared with the rest of the country. The British industrial competitiveness scheme will reduce business energy costs for 10,000 manufacturing firms from this year, taking up to 25% off their electricity costs, and decoupling will reduce electricity prices for both businesses and households. When those contracts for difference come in, that will have a direct impact, but in the meantime the higher electricity generator levy that is coming in this year will provide revenues so that the Government can help cushion this shock for businesses and families.
Several hon. Members rose—
Andrew Pakes (Peterborough) (Lab/Co-op)
The Chancellor is right: this was not our war, but its impacts are being felt by businesses and families in my constituency. What is almost as shocking as the recent price hike is how exposed our country is because of a decade of under-investment by the Conservative party in nuclear, onshore wind and updating our power networks. Can the Chancellor reassure me that while we keep a razor-sharp focus on the cost of living for families, we will also do our utmost to speed up the development and renewal of our energy networks, so that we can power this country from our own sources and not just rely on imports?
Rachel Reeves
My hon. Friend is absolutely right. This is not our war—we chose not to join it, unlike the Conservative and Reform parties, which were egging us on to do so. However, we do need to become less exposed to global fossil fuel markets. That is why we passed the Planning and Infrastructure Act 2025, which will enable us to build the energy infrastructure we need. It is why we signed off Sizewell C and a fleet of small modular reactors; it is why we are giving planning permission to solar farms; and it is why we have ended the effective moratorium on onshore wind—the cheapest form of electricity—to keep prices down for families, businesses and pensioners.
Munira Wilson (Twickenham) (LD)
The Chancellor said in her statement:
“Every choice I make will be about keeping costs down for families and businesses”.
However, when I speak to small business owners on high streets across my constituency of Twickenham, Teddington and the Hamptons—especially café and restaurant owners—they tell me that the soaring energy and food prices that are a result of war are only compounding the pain they were feeling as a result of the Chancellor’s choices to hike national insurance for employers and, in some cases, double their business rates. What action will she take this month and this quarter, not in a year’s time, to help those businesses stay afloat? We need them to stay open for the sake of our communities.
Rachel Reeves
The best thing we can do as a Government is to keep inflation and interest rates down. Since I became Chancellor, wages have risen faster than prices in every single month, giving people more money to spend, and interest rates have been cut six times—which will benefit all of our constituents, but those in London perhaps most of all, given that house prices are more expensive in places such as Twickenham—putting more money in people’s pockets. Today’s announcement about the British industrial competitiveness scheme will take up to 25% off energy bills for 10,000 businesses from this month, and decoupling will help all businesses with their energy costs. The electricity generator levy will bring in money this year, and then the new contracts for difference will reduce volatility and price spikes for all businesses.
Alex Baker (Aldershot) (Lab)
In my constituency, I hear from many small businesses that are worried about rising energy bills and what that means for their ability to grow and create jobs. As such, I welcome the measures that the Chancellor has outlined today, particularly decoupling gas and electricity, which will help to safeguard my constituents from these international spikes. However, everyone in this situation has to play their part. The Government are doing their bit, but could the Chancellor set out what conversations she is having with the energy companies themselves on how they can further support businesses with their energy costs at a time of global instability?
Rachel Reeves
I thank my hon. Friend for that question, and I understand the concerns that families and businesses have about the cost of energy and the risk of second-round effects if those costs are passed on to other goods and services in the economy. That is why my focus is on keeping interest rates and inflation down for everybody, and it is also why we are working to de-escalate this conflict. We are also working with energy companies to ensure that people who are struggling with energy debt, for example, are supported, and that people are not taken off contracts.
Dave Doogan (Angus and Perthshire Glens) (SNP)
On 3 March, during the Chancellor’s vacuous spring statement, I raised with her that the war which had just started in the middle east would have an inevitable and immediate consequence for energy prices. I asked her what she was going to do about it, and she said that she had no plans to do anything about it. Today, the Chancellor comes to the Chamber like the coo’s tail, talking about fiddling about with contracts for difference next year while my constituents are currently paying nearly £2 a litre for diesel. In Ireland, the Government spent €750 million to support farmers, hauliers, agriculture, fisheries and household energy bills. If the Chancellor were to do the same, the figure would be £8 billion. Where is the £8 billion for our communities, Chancellor?
Rachel Reeves
In the past two weeks, we have announced up to 25% off energy bills for 10,000 manufacturers, starting this month. Today, we have announced tiebacks to exploit more of our energy resource in the North sea, which has been welcomed by OEUK, and we have announced an increase in the electricity generator levy to bring in money to help with the costs of energy. We are one of the few countries in the world where energy bills went down in April, because of the decisions that I made in my Budget. Since I became Chancellor, wages have risen by more than prices in every single month and interest rates have been cut six times. That is the difference we are making. It would be nice if the SNP used the record funding we have given it to cut NHS waiting lists, rather than seeing them rise and rise.
Torcuil Crichton (Na h-Eileanan an Iar) (Lab)
I thank the Chancellor for her statement and her nimble response to the energy shock, including support for heating oil consumers, who make up half the households in Na h-Eileanan an Iar. The future of energy security is not an either/or. We must pursue renewables with a community share in the wealth of wind, and we must use the tiebacks that she detailed to exploit existing licences in the North sea fully. Will the Chancellor encourage other Ministers to match her commitment by hastening the review of Jackdaw and Rosebank? That would not just ensure energy security, but send a message to workers that we are with them in the North sea and the wild Atlantic for years to come.
Rachel Reeves
My hon. Friend is absolutely right that we need a balanced energy policy. While some parties oppose renewables, some parties oppose nuclear and some parties—oh, they have gone—oppose any oil and gas, this Government have a balanced energy policy. We are investing in new nuclear—small modular reactors and Sizewell C; we are investing in renewables—solar and onshore and offshore wind; and we are ensuring a bright future for North sea oil and gas. That is why today we set out our policy and more detail on tiebacks. It is also why, in the not-too-distant future, the Energy Secretary, in a quasi-judicial way, will make a decision on Jackdaw and Rosebank after the courts quashed the previous Government’s decision.
Pippa Heylings (South Cambridgeshire) (LD)
We welcome the Government’s announcement on cutting the link between wholesale gas and electricity prices, which will help to shield families across the UK from volatile fossil fuel prices. They are using the very measure that the Liberal Democrats proposed more than a year ago. It is now time to go further and faster to fix a broken energy market that results in households and businesses that are powered by solar and wind not having cheaper energy bills, and even having to pay on their energy bills to turn off wind farms in British waters. I have written to the Chancellor and the Secretary of State for Energy Security and Net Zero. Will the Chancellor meet me to discuss our proposals to accelerate reforms, bring down energy bills and secure our energy supply?
Rachel Reeves
I agree with the hon. Lady about decoupling. We are using an increase in the electricity generator levy to bring in money immediately and to incentivise companies to move on to contracts for difference. In terms of having to pay when solar and wind cannot be used, what the hon. Lady says would be a little more plausible if the Liberal Democrats had not sat on their hands during consideration of the Planning and Infrastructure Bill. That legislation will enable the energy infrastructure to be built that will bring electricity to people’s homes, lower people’s bills and give us the energy security that we want to see.
Perran Moon (Camborne and Redruth) (Lab)
The Chancellor will know that AutoTrader announced last week that, for the first time, the average cost of a new electric vehicle has fallen below the average cost of a new petrol vehicle. There has never been a better time to switch to EVs. Can the Chancellor elaborate on how these targeted announcements, and some of the changes she is making today, will support the switch to electric vehicles?
Rachel Reeves
My hon. Friend makes a good point. There are a couple of things we are doing today to make it more cost-effective to get an electric vehicle. First, the decoupling of gas and electricity prices will mean that electricity prices will not be set by high gas prices. That reduces the costs of filling up an electric vehicle with electricity. We are also making it easier for people to install electric vehicle charge points, including on their streets and in their homes. We are making solar panels more available, including in high street shops, to enable people to benefit from that cheap electricity, which they can use to power their homes and their cars.
Robert Jenrick (Newark) (Reform)
Kevin Brewer is a domiciliary care worker from Northern Ireland. He says that he loves his job, but he drives 70 miles every day. He told the BBC this week that for the first time he considered phoning in and saying that he could not do his job. In the end, he decided to put the cost of the fuel on his credit card. Chancellor, people are suffering across the country. I invite her to meet people such as Kevin at the national fuel tax protest on Whitehall on Monday, where motorists, white van men and women, care workers and many others from across the United Kingdom will come together to ask her to take action now to cut VAT on fuel and to say that she will not increase fuel duty in September.
Rachel Reeves
Fuel duty was never lower in the 14 years when the right hon. Gentleman was a Conservative Member of Parliament than it is now. As I have said on numerous occasions, we are keeping fuel duty under review. The best way to reduce costs for people who are reliant on their cars is to de-escalate this conflict, which is the exact opposite of Reform UK’s policy. It wanted to join in this conflict and said when the conflict started that we should stand with America. I do not agree that we should be standing with America; we should be standing up for our own country and families and businesses in our country.
Harpreet Uppal (Huddersfield) (Lab)
It is important that we look at long-term measures such as decoupling gas and electricity prices, because we know that previous temporary measures have not stopped our exposure to these shocks, leading to further insecurity for residents and businesses. Can the Chancellor say how quickly households and businesses such as textile manufacturers in Huddersfield will benefit from this new pricing model? Can she say a little more about accelerating vital grid infrastructure?
Rachel Reeves
I thank my hon. Friend for raising the concerns of people in Huddersfield. From this month, we are helping 10,000 manufacturing businesses in the industrial strategy sectors with the cost of electricity, reducing it by up to 25%. Today, we have announced that we are increasing the electricity generator levy, which will bring in more money to the Exchequer. We can use that money to help people with the costs of this war which we did not start, but of which people in Huddersfield, Leeds and around the country are feeling the consequences.
Steff Aquarone (North Norfolk) (LD)
On heating oil, members of the Chancellor’s Treasury team have been keen to point out that the small amount of funding—the equivalent of about £35 a household—was just the first step. Can she outline when the next step will come to support houses that are dependent on heating oil?
Rachel Reeves
We were pleased to be able to announce tens of millions of pounds to help people with the cost of heating oil, in the same way that we brought down gas and electricity bills for families and pensioners across the UK because of my Budget decisions last year. It is important that local authorities now make sure that that money is available to people. We heard from my hon. Friend the Member for South Norfolk (Ben Goldsborough), for example, that 60% of applications in Norfolk have not been processed. We need to make sure that that money gets to the people who need it. As I have said, we will keep additional support under review. The best way to bring down bills for families, businesses and pensioners—the hon. Gentleman’s party agrees with this—is to de-escalate this conflict and reopen the strait of Hormuz. That is why our diplomatic policy is so important.
John Whitby (Derbyshire Dales) (Lab)
According to modelling from the National Energy System Operator, gas will still set the price of electricity 30% of the time by 2030, despite most of the energy being produced from renewables. Solar and wind are far cheaper than other forms of energy, and it is right that households across the UK, and in Derbyshire Dales in particular, can benefit from the lower prices. Will the Chancellor therefore outline what steps she is taking to decouple the price of renewables from the price of gas and to drive down energy prices for homes in Derbyshire Dales?
Rachel Reeves
This is the second energy price shock caused by a lack of availability of oil and gas in just four years. It shows that we need to invest more in home-grown energy to ensure security of supply and price to help people in Derbyshire Dales and right across the country. That is why we are increasing the electricity generator levy. We are using that money to help people now, but crucially as an incentive to get electricity providers on to contracts for difference, so that we do not have to pay more for electricity just because the price of gas is high.
Ayoub Khan (Birmingham Perry Barr) (Ind)
The Chancellor said that we did not start this war and have not joined this war, and the reason for that is that this war is illegal. Iran never posed an imminent threat. Pakistan has taken valiant steps to negotiate a deal, which led to Iran opening the strait of Hormuz, but unfortunately and absurdly, Donald Trump is blocking the strait, causing a major economic crisis for everyone. I welcome the 5p cut in fuel duty and the £150 reduction in energy bills, but the reality is that they are having an insignificant impact on families, especially vulnerable families. What imminent steps will the Chancellor take to help and shield them?
Rachel Reeves
I join the hon. Gentleman in paying tribute to Pakistan for the work that it is doing to de-escalate this conflict by hosting peace talks. I would expect all Members of the House to urge all parties to return to those negotiations as quickly as possible, so that we can end the bloodshed but also ensure that bills come back down for families and prices fall at the pumps. We are already taking action to reduce household energy bills through the help with heating oil. Today’s announcements on decoupling and tiebacks, and last week’s announcement on reducing business energy costs through the BIC scheme, are all things that we are doing to help families and businesses with the cost of electricity.
Catherine Atkinson (Derby North) (Lab)
Does the Chancellor agree that economic security, energy security and national security all go hand in hand, which is why home-grown lower-carbon power that we control is so important? Can she tell us more about how small modular reactors, which are being delivered by Rolls-Royce and are backed by this Labour Government, will play their part in delivering power, security and good British jobs?
Rachel Reeves
It was great to meet Rolls-Royce apprentices with my hon. Friend in Downing Street last week to see what difference this Government’s investment in small modular reactors through the National Wealth Fund will make. The investment in nuclear is creating good jobs that pay decent wages, providing export opportunities through this new technology and, crucially, giving us energy security on both supply and price.
Sorcha Eastwood (Lagan Valley) (Alliance)
Just so the Chancellor is aware, my constituents in Lagan Valley did not get £150 off their electricity bills. I am sure the Chancellor knows that that is because Northern Ireland is not in the same electricity market as the rest of the UK. Even if we add together the sums that we received through the Barnett consequentials, they do not total £150. We hope that her lack of knowledge does not reflect the importance of Northern Ireland when this Government come to tackling the cost of living crisis. When will the Chancellor meet my colleagues in the Northern Ireland Executive to discuss how to help us through this crisis?
Rachel Reeves
Northern Ireland benefited from the Barnett consequentials, with the money going to the Northern Ireland Executive. As the hon. Lady says, Northern Ireland is in a different electricity market. At the same time, we listened carefully to what MPs and Members of the Northern Ireland Executive said about Northern Ireland’s exposure to heating oil. When we made the support available, we did so through local authorities and locally, rather than as a national scheme, recognising the higher exposure to heating oil in Northern Ireland than anywhere else in the country.
Middle East: Economic Update
Rachel Reeves Excerpts(1 month ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Rachel Reeves)
Thank you, Mr Speaker, for granting me permission to make this statement to the House about the Government’s continued response to the war in the middle east.
Let me start by paying tribute to our armed forces; my thoughts and the thoughts of the whole House remain with them and with those whose lives have been disrupted by this conflict.
Since I last addressed the House, the costs of oil and gas have remained high, and last week the Bank of England estimated that inflation could be between 3% and 3.5% in the next few quarters. The full economic impact of the war remains uncertain, but it makes our economic plan even more important: to build prosperity that is secure and resilient and to bear down on the cost of living and protect the public finances, with delivery through our iron-clad fiscal rules. Today, I will set out further action that I am taking.
First, on global collaboration, last week the Prime Minister authorised the US to use UK military bases to defend the strait of Hormuz. It remains the case that the best way to protect families and businesses is rapid de-escalation of this conflict. To strengthen our collective security, I have announced that we will explore a new defence financing and procurement mechanism with the Netherlands, Finland and other EU and NATO partners. I welcome the International Energy Agency’s decision to authorise a co-ordinated release of our collective oil reserves to alleviate the immediate pressure on supply, and the UK has now begun the release of our share of 13.5 million barrels of oil.
Secondly, on our energy security, the last Government’s failure to invest in energy was a failure to protect our country, but through determined action, this Government are taking control of our own energy supply: we are investing in renewables, lifting the ban on onshore wind and streamlining grid connections; we ran the biggest offshore wind auction in European history last year, and we are bringing the next renewables auction forward to this July; and we are driving forward negotiations on the UK’s participation in the EU internal electricity market. We must guarantee that our domestic oil and gas industry can also play a role in our energy system for decades to come, so I can confirm that we are encouraging investment in tiebacks to make the most of our existing production facilities.
We are rewriting the story on nuclear, too. We have construction on Sizewell C, have agreed an extension to Sizewell B, and are due to sign the contracts on the UK’s first small modular reactors in Anglesey, in partnership with Rolls-Royce. I will not tolerate red tape and vested interests holding back our energy security, so our new planning rules will unblock the pipeline of critical infrastructure projects. I can announce today that we will legislate to implement the Fingleton review in the next Session, and I recently wrote to industry and regulators to get them to set out their plans to fast-track that implementation in full.
To the Opposition parties, which like to talk big about energy security but then vote against the very infrastructure to build it, let me say this: it is time to put our country first. I can confirm today that we are developing options to back critical energy projects with indemnities if their planning consent is challenged, so that we do not waste a single moment in protecting our energy security, because energy security is national security.
Thirdly, on households and businesses, I know that when prices rise and incomes are squeezed, people look to the Government and ask, “What are you doing to help?” That is why, since the election, we have delivered and funded 30 hours of free childcare to working parents, with wages rising faster than prices for every month that I have been the Chancellor and free breakfast clubs being rolled out at primary schools. From next week, this is what will see: the two-child limit—gone; day one sick pay—in; another rise in the national living wage; prescription charges—frozen; train fares—frozen; fuel duty—frozen; and the state pension increasing by £575. For businesses, there is £4.3 billion in business rates support; the regulation action plan, which will cut admin costs; and the supercharger discount, which will be followed next year by the British industrial competitiveness scheme to take money off business energy bills. But I know that there is more to do.
On trade, I can confirm to the House that we are aiming to conclude negotiations with the EU this year on the sanitary and phytosanitary agreement, which will directly impact food prices in our shops. I have also asked officials to look at where targeted reductions to agrifood tariffs can help bring down food prices, balancing this against the implications for domestic producers and food security. Later this week, I will be holding meetings with supermarkets and banks to discuss how they can further support their customers.
We have a world-class competition and consumer protection regime. Since my last statement, the Competition and Markets Authority has stepped up its statutory monitoring of fuel prices, and I will update on fuel pricing within the next month. The CMA is working with Government to monitor the cost of household essentials for both price rises and disruption, and has launched a market study into heating oil. Today, I can announce that we are going further to make sure that the Competition and Markets Authority has the powers it needs—powers that were denied to it by the previous Government—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. This week, the Business Secretary and I will convene the regulators’ council to discuss its work to protect consumers, because—let me say it again—this Government will not tolerate any company exploiting this crisis at consumers’ expense.
Finally, I want to update the House on how I am preparing for this conflict as it goes on. I know that families and businesses are worried about the impact of rising prices. I have said that we will be responsive to a changing world and responsible in the national interest, and today I want to set out in more detail what that means.
First, we will be responsive. We do not yet know what the full impact of this conflict will be, so we must be agile in responding appropriately at each moment. We extended the 5p fuel duty cut and have pushed out the cheaper fuel finder, empowering people to avoid rip-off prices, and chasing down the last few filling stations to reach 100% compliance. When wholesale kerosene prices more than doubled overnight, we stepped in within a matter of days with £53 million of support for those who needed it most. From next week, households will benefit from £150 off their energy bills thanks to the action that I took in my Budget, with the price cap giving households certainty on their bills until July, ahead of the winter months, when people use 78% of their gas.
Secondly, we will be responsible. The spring forecast showed that the Government have the right economic plan, restoring stability to our country’s finances and family finances. I will not put that stability at risk. As we respond to this crisis, we must 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. I can confirm to the House that 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.
This is not a war that we started, nor is it a war that we joined—notwithstanding the advice of the Opposition parties—but it is a war that will have an impact on our country. The challenges may be significant, but I promise to do what is right and fair, being responsive in a changing world and responsible in the national interest. I commend this statement to the House.
Sir Mel Stride (Central Devon) (Con)
I thank the Chancellor for advance sight of her statement.
The right hon. Lady comes to the House with an economy in tatters. She would have us believe that she has delivered the stability and resilience that can weather the storm ahead, but she has done nothing of the kind. When she came to office, she ramped up borrowing and spending and hiked taxes to record levels. She was warned at the time, by the Office for Budget Responsibility and others, that her policies would mean higher inflation, higher borrowing costs and higher interest rates, and that she would destroy jobs. All of that has come to pass. Her mismanagement and foolish choices have given us the highest inflation in the G7, the highest borrowing costs in any major advanced economy—with gilt yields higher than those of Greece and Morocco—fragile fiscal headroom, the highest unemployment since the pandemic and rising, and GDP per capita falling. Under this Government we are getting poorer, and our economy is increasingly fragile and far from secure and resilient.
Despite what the right hon. Lady has said about tiebacks, nothing exemplifies this Government’s economic folly more than their approach to oil and gas. The utterly misguided net zero obsessions of the Energy Secretary have led to the absurdity of reduced extraction, while we see jobs destroyed, tax revenues forgone, and energy security smashed. The greatest tragedy of all is that in Jackdaw and Rosebank we have fields ready to go. In just months, they could be pumping vital relief to millions. Jackdaw alone has enough gas to supply more than 1.5 million homes, yet the right hon. Lady has nothing to say on that matter. Less oil and gas extraction means greater dependency and less security: this road leads to ruin. On energy, on the cost of living, on jobs, on growth, on public finances, on every measure that matters, the Chancellor has left us weak, weak, weak, and in the face of this energy shock, millions are about to suffer as a result.
With respect to her statement, may I ask the right hon. Lady the following questions? How many fuel retailers have yet to engage with the new fuel finder service, and can she comment on the widespread reports of technical glitches and out-of-date price information? She mentioned the small modular reactor planned for Wylfa, but given the need, can she explain why she has chosen not to go ahead with the large-scale nuclear site that was signed off by the last Conservative Government? On the specific subject of energy cost support, may I ask what fiscal capacity she believes she has to support those in need, and what plan she has to ensure that any targeted approach truly reaches all of them?
In her statement, the Chancellor criticised the last Conservative Government’s support package for not being targeted, but what she failed to mention was the fact that the present Prime Minister was then urging for support to be universal. Indeed, he said at that time that Labour’s approach would ensure
“that no household would pay a penny more on their bills.”—[Official Report, 8 September 2022; Vol. 719, c. 404.]
We have had no consistency from the right hon. Lady. How is she going to ensure that support for people depending on heating oil reaches those who need it most? Of course, that support, under this Government, will be funded through the taxes of hard-working people. Indeed, the reduction to energy bills this April is simply being taken from bills and dumped on to the shoulders of hard-pressed taxpayers.
It does not need to be this way. Is not the critical question this: where is the control of public spending? Where is the renewed resolve to grasp the welfare bill to get people off benefits and into work? I will tell you, Mr Speaker: it is nowhere, because the right hon. Lady is a captive of her own Back Benchers and has brought our economy one step from its knees. She knows it, the country knows it, and now we must all brace ourselves for what is to come—not from a position of strength, as the right hon. Lady is so desperate to have us believe, but from a position of weakness of her own making.
Rachel Reeves
That statement revealed only that the shadow Chancellor is utterly out of his depth. In the past 20 months, we have had six cuts in interest rates. We have more than doubled the fiscal headroom compared with the headroom that I inherited from the Conservative party. For the first time in six years, our deficit is less than 5% of GDP, and wages have increased by more than inflation in every single month that I have been Chancellor of the Exchequer. Compare that with the record of the previous Conservative Government, who oversaw the only Parliament on record in which people were poorer at the end of it than they were at the beginning. I prefer my record to their record any day of the week.
The shadow Chancellor says that we should act. Well, we have acted, but what he fails to mention is that his party supported our being involved in this conflict. Whereas we have called for de-escalation, the Leader of the Opposition said that we should be a participant in this conflict. The damage that that would have done to our economy would have been immense, yet the Conservatives make no apology for that.
The Leader of the Opposition said yesterday about the Prime Minister:
“If he’s creating a support package, that’s going to be done with taxpayers’ money.”
She thinks that we should be doing things that are not going to cost taxpayers money. The shadow Chancellor says that we should do more and put in more money, but the Leader of the Opposition says that we should not do anything. Where does the Conservative party now sit on the £53 million of support that we gave on heating oil? That was using taxpayers’ money to support those who needed it most. It was the right thing to do, but now the Leader of the Opposition seems to suggest that it was the wrong thing to do.
The shadow Chancellor asked a few specific questions. On the cheaper fuel finder that we have introduced, more than 90% of retailers have signed up to it, and of that 90%, all of them are updating their prices regularly. Along with the Competition and Markets Authority, we are chasing down the final few that have not submitted their prices.
On small modular reactors, the Conservatives say they supported it. They had 14 years, and they put not a single penny into it. The same is true of Sizewell C. They cannot say that we should spend less money and at the same time say that we should support Sizewell C and small modular reactors, because everything has to be paid for.
On fiscal capacity, we have more than doubled the headroom compared with what I inherited from the Conservatives. It was less than £10 billion when I became Chancellor of the Exchequer; it is now nearly £24 billion because of the actions that I have taken. The shadow Chancellor says that we have not built contingency, but the exact opposite is the case.
The shadow Chancellor asks about Rosebank and Jackdaw. It was because of the failure to do the work properly that they were challenged in the courts. One month after the previous Government left office—because they were kicked out—the courts came back and said that we had to reconsider scope 3 emissions. The energy companies Shell and Equinor resubmitted their plans at the end of last year. [Interruption.] The regulators—
Mr Speaker
Order. Members can go and have a discussion outside if they cannot be quiet here.
Rachel Reeves
Thank you, Mr Speaker.
The energy companies came back at the end of last year with their revised plans, and the regulators are now considering those. Ahead of the autumn, my right hon. Friend the Energy Secretary will to decide whether it is legal to go ahead with them, but we made a commitment in our manifesto to honour existing licences. It is only because of the failure of the previous Government to consult that we are in this position in the first place.
The shadow Chancellor says that if we cut the welfare bill we will be able to help people. Well, I am afraid the Conservatives had 14 years in office and he was the Welfare Secretary when the bill ballooned. Frankly, we will take no lessons from the Conservative party. It is only the Labour Government who can be responsive to the immediate challenges, because we have been responsible with the public finances. We are committed to our long-term energy security, and committed to making the right decisions in the national interest.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
As the Prime Minister said yesterday, we have no idea how long this conflict will be and he is not assuming that it will be over quickly. We live in troubled times, and it is quite right that the Chancellor of the Exchequer is making serious contingency plans as we move through spring and summer and into autumn and winter. As she well knows, one of the challenges of targeting support is the availability of data. What is she doing to make sure that the data is available—not just across Whitehall, but in local government and in the energy companies themselves—to target support at those who need it most?
Rachel Reeves
That is a really important point. The previous Government had not done the contingency planning, so when the energy price shock came along, they said, “We are not going to provide any support.” In the end, they had a choice between doing nothing or providing blanket support. It was that blanket support that cost £78 billion. We have been working with the Department for Work and Pensions, local Government and others to ensure that we will be able to target support at those who need it most, but that is in addition to taking £150 off everyone’s energy bills already. We are doing the work. The prices come down in April for the following three months, and we are a long way off the winter, when 78% of gas is used by households.
Daisy Cooper (St Albans) (LD)
I thank the Chancellor for advance sight of her statement. Our thoughts are with our brave armed forces at this time.
I agree that the last Government’s failure to invest in energy was a failure to protect our country. Today we face the stark reality that we cannot guarantee our national security, our energy security or our food security. When the Liberal Democrats were in government, we launched the auction for onshore wind and established the Green Investment Bank, helping to drive down costs and quadruple renewable energy. The Conservatives’ decision to scrap the Green Investment Bank has left our energy system more exposed, and should be worn as a badge of shame.
To shore up our energy security and to tackle the energy crisis, we Liberal Democrats have consistently argued for a three-pronged approach: first, to reduce energy demand by incentivising households and businesses to invest in energy efficiency, without the tax penalties built into the business rates system or prohibitive up-front costs; secondly, to fix the broken energy market that is unfairly inflating prices, especially for small businesses on our high streets; and thirdly, to provide targeted support for the most vulnerable and for those with the highest energy needs. I urge the Chancellor to consider our proposals to create an energy security bank that can offer low-interest loans for energy-saving improvements for households and small businesses, to reverse the cuts to home insulation programmes, and to exempt business investment in energy efficiency from business rates calculations.
Although the action from the Competition and Markets Authority is welcome, it is not enough. Small businesses have been blocked from the best energy deals for years—well before Donald Trump started bombing Iran—yet there has still been no CMA investigation into suppliers blocking access to those fair deals. I ask the Chancellor again: will she please instruct the CMA to do that investigation without delay?
On targeted support, families are fearful. Will the Chancellor consider zero-rating VAT on heating oil and liquefied petroleum gas and introducing a price cap mechanism for off-grid fuels? Will she commit to halving energy bills over the next decade by reforming pricing structures? If bills rise to more than £400 a year, as some are warning, will the Chancellor commit to coming back to this House and outlining a broader support package so that many struggling households do not face a crippling hit of that scale?
Rachel Reeves
I thank the hon. Lady for her questions. Nick Clegg once said that it would take 10 years to get nuclear power up and running so there was no point in doing it, as it would come on stream only in the 2020s. Imagine if that Deputy Prime Minister had not blocked investment in nuclear energy then—we would have the benefits of it today. The Liberal Democrats had a chance when they were in government, and they did absolutely nothing. The Conservatives opposed onshore wind, which is also helping to bring down bills.
In terms of supporting investment in renewables and energy security, we have created the National Wealth Fund, which is prioritising investment in defence and energy security, including in critical minerals in Cornwall, carbon capture and storage and the roll-out of chargers for electric vehicles. We have also put £14 billion into the warm homes plan to subsidise and support people to make energy improvements in their homes in order to reduce their energy consumption and therefore their bills, alongside doubling the number of people eligible for the warm home discount. We are looking at improvement relief through the business rates consultation to ensure that if people do make improvements, including on energy efficiency, they will not then be whacked with higher business rates.
The hon. Lady said that we should cut VAT on heating oil. When the Liberal Democrats were in government, they increased VAT on everything, so it is a bit rich to say that they want to cut it now. We have asked the Competition and Markets Authority to do a review into heating oil, which I set out today, in addition to the £53 million of support we have put in.
There seems to be a slight contradiction in what the hon. Lady is saying—does she want targeted support or blanket support? I argue that the progressive, universal approach that we are taking is the right one. It means £150 off everyone’s energy bills, but also targeted support for those who need it most. We cannot repeat what happened when Liz Truss was Prime Minister—we are still paying the price for the cheque that was written then with higher interest rates, inflation and taxes than we would otherwise have had.
Jon Trickett (Normanton and Hemsworth) (Lab)
I welcome the Chancellor coming to the House as soon as possible to make a statement. On profiteering in the fuel sector, the last time there was a problem with oil prices was after the war began in the east, when the then Government, following their laissez-faire market policies, allowed prices to rip to an extraordinary extent. The consequence, as we saw, was outrageous profiteering in the energy sector. Will the Chancellor indicate that we will not follow the Conservatives’ failed laissez-faire ideology, and that we will instead intervene directly in the market to prevent outrageous profiteering from occurring on this occasion?
Rachel Reeves
I thank my hon. Friend for that question. That is why we have the energy profits levy and the electricity generator levy—so that we can claw back any excess profits. It is also why we believe in an active and strategic state, including through empowering our regulators, like the Competition and Markets Authority, to ensure that the price gouging we have seen in the past cannot happen after the conflict in the middle east.
Sir Edward Leigh (Gainsborough) (Con)
In an attempt to get some consensus here, I commend one part of the Chancellor’s statement, where she said:
“We must guarantee that our domestic oil and gas industry can…play a role in our energy system for decades to come”.
Is there not a sensible, middle-of-the-way approach here? We should by all means proceed with green energy—such as offshore wind, in which we lead the world, in the North sea off the Lincolnshire coast—but we should also keep an open mind about new extraction from the North sea. I was listening carefully to what she said to the shadow Chancellor. Will the Chancellor confirm today that the Energy Secretary will keep an open mind when he considers these licences, so that we can guarantee our resilience in the future?
Rachel Reeves
I thank the right hon. Gentleman for his approach and for his question. The oil and gas industry plays an important role in our energy system and will do so for decades to come. We very much welcome the jobs that it creates, the tax revenue that it provides and, most importantly, the energy security that it offers. In my Budget, I set out the new North sea oil and gas strategy, which includes allowing the use of tiebacks or infills on existing sites. For the reasons I have explained, the Secretary of State for Energy Security and Net Zero now has to take a quasi-judicial decision on Rosebank and Jackdaw. He will, of course, approach that decision with an open mind because this Government recognise the importance of our oil and gas sector.
John Grady (Glasgow East) (Lab)
Does my right hon. Friend agree that the essential truth is that the Government have introduced a package of measures to make the poorest families in Glasgow and across the United Kingdom better off, whereas the Conservatives propose plunging those families back into extreme poverty? They left us with ridiculous levels of debt and the weakest defence since the 1930s—their record is absolutely shameful.
Rachel Reeves
My hon. Friend is right, but I would say it is worse than that in Scotland, where there is the legacy of two awful Governments: the Conservatives made people poorer, while the SNP Government fail to back our nuclear sector, which could deliver cheaper bills for people in Scotland.
Sir Jeremy Hunt (Godalming and Ash) (Con)
Could I gently ask the Chancellor to be less partisan at a time of crisis? If she brings before the House difficult measures that are right for the country, she will have the support of the whole House, but if she is partisan, she will not. I actually rise to support her basic instinct, which is for targeted rather than universal support. Four years ago, energy bills were heading to £4,000. We are at nothing like that now, and we do not know what the oil price will be next week, let alone this winter. Although we gave support to households and families last time by increasing borrowing, with her support, we cannot react to every single economic shock by further increasing our national debt. Will she confirm that when she comes to the House to announce targeted support, it will be fully funded in her Budget and not funded by increasing our national debt yet again?
Rachel Reeves
I thank the right hon. Gentleman for that question. When he became Chancellor, it was on the back of lots of promises that there would be no support for energy bills. He and others recognised that that position was not sustainable, but work had not been done on how to introduce a targeted system, so the choice was a binary one between blanket support or no support. The right hon. Gentleman took the right approach then by ensuring that people’s energy bills did not go through the roof; however, a targeted approach would be more appropriate, because under the previous approach, the top third of families got more than a third of the benefit. That is not right or sensible—all it does is drive up inflation, interest rates and taxes in the future. It is not the fault of the former Chancellor that that approach was taken, but we are using this period, when energy prices are actually falling because of the approach I took in the Budget, to ensure that we are in a position to take a targeted approach in the autumn.
Luke Murphy (Basingstoke) (Lab)
I am grateful to the Chancellor for her statement, and in particular for setting out the long list of interventions this Government have made on the cost of living, which stands in stark contrast to the record of the Conservatives, who left behind the worst legacy on living standards in a generation. Can the Chancellor confirm that in the weeks and months to come, as she takes decisions on encouraging regulators to take action and in contingency planning, she will keep in mind the need to protect our constituents’ living standards while ensuring economic stability?
Rachel Reeves
That is why what we did in the Budget last year was so important. In other countries, domestic energy bills are now going up, but because of the measures that I took in my Budget last November, energy bills will fall from 1 April, despite everything that is happening in the middle east. However, what would have the biggest impact on bills is an escalation in this conflict, which is what the Conservative party initially wanted to happen.
Mr Alistair Carmichael (Orkney and Shetland) (LD)
Shetland is home to one of the largest onshore wind farms in the country, the operators of which are paid millions not to generate electricity because of grid constraints. As a result, the announcement this morning of a trial of discounted energy rates for communities such as ours will be met—possibly—with some excitement. When will we hear the details of how that will work and what it will mean in terms of reductions to the bills of my constituents?
Rachel Reeves
On the point about national grid infrastructure and why we end up paying for energy that cannot be used, we have to speed up those connections. That is why I spoke about consulting on indemnities for building out infrastructure, even in the case of judicial review. We must act in the national interest and get this infrastructure built. At the same time, the Secretary of State for Energy Security and Net Zero will set out in more detail the specific ways in which we can bring down prices for communities, including those of the right hon. Member.
Melanie Ward (Cowdenbeath and Kirkcaldy) (Lab)
My constituents are appalled by supermarkets and other petrol retailers that are price gouging and profiteering from global instability and a middle east war that was backed by both the Tories and Reform. Let us make no mistake: if they were in government, our country would be right in the middle of it. Will the Chancellor set out the action that she is taking to clamp down on price gouging? I thank her for the £9 million announced yesterday to help my constituents in Cowdenbeath and elsewhere affected by the changes at Mossmorran.
Rachel Reeves
I thank my hon. Friend for those questions and for her campaigning work on Mossmorran to ensure that we can properly support her community, which we are also doing with our growth mission fund. We have introduced the cheaper fuel finder to ensure that price gouging does not happen, as it provides greater transparency on the prices offered by different fuel retailers. This is something that the previous Government could have done in their 14 years in power. France already has a cheaper fuel finder available on a number of apps, which can be used when people are travelling. We are introducing that system here because we want to ensure that our constituents pay the lowest price possible when they fill up their tanks.
Dame Harriett Baldwin (West Worcestershire) (Con)
Given the current crisis, does the Chancellor regret in her first Budget increasing unfunded borrowing by £150 billion over this Parliament, which the Office for Budget Responsibility said at the time was
“one of the largest fiscal loosenings of any fiscal event in recent decades”?
Rachel Reeves
The Conservative party once believed in fiscal discipline, but that has gradually eroded over time. It is because of the fiscal rules that I introduced that we have been able to invest in Sizewell C and in small modular reactors. That was not possible under the fiscal rules of the previous Government. I would also say that borrowing fell in the last year. That did not happen in the last few years of the previous Conservative Government.
Rachael Maskell (York Central) (Lab/Co-op)
I thank the Chancellor for her statement. I am sure she will agree that our biggest concern is the intersection between poverty and food and energy price hikes for our constituents. As she looks ahead, will she consider a warm homes prescription to protect people’s health by keeping their homes warm, which would also save money, and will she ensure sufficiency in the crisis and resilience fund, so that local authorities can invest in those in the greatest need?
Rachel Reeves
I thank my hon. Friend for that question. From next month, families with children will benefit from the abolition of the two-child cap in the universal credit system. We have also doubled the number of recipients of the warm home discount and put £14 billion into upgrading people’s homes through the warm homes plan. Of course, as we look at targeted support, we will consider vulnerabilities within that.
Wendy Chamberlain (North East Fife) (LD)
The Chancellor has mentioned several times that households will benefit from £150 off their energy bills, but I had a constituent on the phone this morning who has been told that his energy bills are still rising and will not see the savings that the Chancellor is talking about. What conversations is she having with energy companies to make sure that people do actually benefit from the fall in bills that she is so keen to talk about?
Rachel Reeves
I would be very happy to see the particular details of that constituent, because energy companies—through both fixed and variable tariffs—are passing on that £150 reduction that I introduced in the Budget by getting rid of the energy company obligation levy entirely and by moving other levies from bills on to general taxation. I am happy to look at the particular circumstances of that individual, but people should be getting, on average, a £117 cut in their energy bills from 1 April.
Jim Dickson (Dartford) (Lab)
I thank the Chancellor for her statement. As she says, we have made good progress on stabilising our fiscal and economic situation since the 2024 election. Most notably, we have increased the headroom available on our public finances, but as a result of the previous Government failing to invest in sustainable energy and nuclear, we are much more exposed to price shocks than we could be. Does she agree that it is vital that we do all we can to protect the most vulnerable in our community, including those among my constituents in Dartford, from the energy price hikes will result from this middle east war?
Rachel Reeves
For my hon. Friend’s constituents in Dartford and for people around the country, there have been six interest rate cuts since the general election. The more than doubling of the headroom means that we have a bit more room for manoeuvre in the face of shocks. However, gas has set the price for energy at a third less than it was just four years ago, because of this Government’s investment in renewables.
John Glen (Salisbury) (Con)
I welcome the targeted nature of these measures, but three weeks ago it looked like inflation was going to return to the level that the right hon. Lady inherited when she took office in July 2024. That is no longer going to happen, but we are now seeing it the cost of borrowing. Given that we are spending well over £100 billion a year on debt interest, what assessment has the Chancellor made of the implications for the public finances of higher inflation and higher borrowing costs?
Rachel Reeves
It is because of those concerns and not wanting to put any upward pressure on borrowing costs or inflation that we are looking at what targeted support can be offered, rather than the blanket support we saw the previous time energy bills went up. The Bank of England offered its assessment on the potential impacts on inflation, but as the Governor of the Bank of England has also said, the upward pressure on inflation because of the conflict in the middle east is tempered somewhat by the action that I took in my Budget last year, which reduces inflation by between 0.4 and 0.5 percentage points, taking off some of that upward pressure on inflation.
Dan Carden (Liverpool Walton) (Lab)
I thank the Chancellor for her statement. May I ask her to do something for a specific group of people? Constituents who have to rent their home in the private rented market, especially those in more deprived communities like mine, will see their energy bills go up, but their biggest outgoing each month will still be their rent, which all too often is exploitative in areas like mine. We had rent controls in this country from the first world war up until the dying days of Margaret Thatcher’s Government. What can she do, thinking outside the box, to tackle this issue?
Rachel Reeves
I recognise that in my hon. Friend’s constituency, like in mine and many others, more people are in private rented accommodation than own their own home. One reason for introducing the Renters Rights Act 2025, which was opposed by the Conservative party, is to give people greater certainty, to enable them to challenge increases in their rents, and to give them greater rights over eviction, which was done to help his and all of our constituents.
Dave Doogan (Angus and Perthshire Glens) (SNP)
Just three weeks ago at the spring statement, I cautioned the Chancellor that significant fiscal intervention would be required to protect businesses and households in the face of the war in the middle east. She said at that time that, thanks to her actions, the finances of the UK were in robust condition. Now she prevaricates in order to protect those self-same public finances. Those two things cannot be true at the same time. Some 13% of my constituents are reliant on oil; in Scotland the figure is 5%, in England 2%, and in Leeds West and Pudsey it is 0%. Perhaps that is why she provided just £53 million to support oil users, which will not even touch the sides.
Rachel Reeves
It took 200 days for the previous Government to act on heating oil, and it took us under two weeks. We have put in £53 million, and that money is allocated based on heating oil usage in different parts of the country. None of the £53 million will go to help my constituents in Leeds West and Pudsey because we do not use heating oil, but there will be support for Scottish and Northern Irish constituencies and many others, because it is the right thing to do.
Brian Leishman (Alloa and Grangemouth) (Lab)
It is expected that food inflation will hit 4%. That means that a typical family’s annual grocery bill will increase by approximately £240. In Scotland, approximately 1 million people experienced food insecurity in the last year, and food insecurity is closely linked to access to and consumption of fruit and vegetables. The Chancellor said that she will meet with supermarkets, but what will the asks and demands be so that people can access nutritious and affordable food?
Rachel Reeves
The two-child limit for universal credit will be lifted from next week, and food banks have said that that will reduce reliance on them from families with children. That is a very good thing, but there is more that the Government could do to try to bring down food inflation, including getting a sanitary and phytosanitary deal with the EU, which would bring down prices in the shops. We are committed to achieving that this year. It is opposed by the Conservatives and Reform because of their ideological dislike of the European Union, but it is the right thing to do to reduce food inflation for all our constituents.
Esther McVey (Tatton) (Con)
The sad truth is that the Chancellor weakened the UK economy with her tax-busting Budgets and jobs tax, and that has been exposed by this middle east crisis. The Energy Secretary’s actions are making things worse: he has just refused to maximise drilling in the North sea and issue new licences, which would provide much-needed energy security and affordability. Will she now see sense and overrule the Energy Secretary’s decisions?
Rachel Reeves
Since I became Chancellor, we have had six cuts in interest rates, and for every month that I have been Chancellor, wages have risen faster than prices. Compare that with the previous Parliament, where people were worse off at the end than they were at the beginning. If the right hon. Lady believed in energy security so much, why was she part of the Government who refused to fund small modular reactors or Sizewell C and opposed onshore wind, which is the cheapest form of energy? If she believes in energy security, she should back it.
Andrew Cooper (Mid Cheshire) (Lab)
My constituents are being exploited by unscrupulous petrol retailers who are not letting a crisis go to waste. At BP in Winsford unleaded is 10p more per litre than the cheapest price in the area, and at Shell in Middlewich it is 15p more per litre. Does the Competition and Markets Authority have the powers that it needs to clamp down on this unscrupulous behaviour?
Rachel Reeves
We have introduced the cheaper fuel finder to ensure that my hon. Friend and, most crucially, his constituents have that information. People in France can already see the different prices of petrol at different filling stations on a map via an app or their sat-nav. That is where we will be in just a few weeks’ time once we have the technology working with those companies. The previous Government had 14 years to introduce something like that, and other countries have already done so while we went without. Having the fuel finder tool means that all our constituents can fill up at the cheapest cost.
Gavin Robinson (Belfast East) (DUP)
I thank the Chancellor for recognising the disproportionate reliance on home heating oil in Northern Ireland, but the £17 million made available for half a million homes reliant on oil equates to £34 per household, and there is no data to target that support. There is £81 million available from the renewables obligation for electricity. We were told by the Prime Minister and the Northern Ireland Secretary that that could be targeted, yet Treasury officials are blocking that, so I ask her to look at that again.
The Chancellor has made a commitment not to restore the 5p duty on fuel, but could she also look at the rebate for red diesel to help support construction, transport, haulage and energy regeneration in our country to stimulate the parts of our economy that have a disproportionate reliance on it and have lost the support that they gravely need?
Rachel Reeves
I thank the right hon. Gentleman for what he said about heating oil. Obviously, a disproportionate amount of support has gone to Northern Ireland, given its greater reliance on heating oil, and we encourage local authorities to target the money at those who need it most. At the same time, to ensure that everybody is supported, the Competition and Markets Authority is doing an urgent review to make sure that price gouging is not going on. We acted in a matter of days on heating oil, because that was the right thing to do.
When we froze fuel duty, we also took action on red diesel, but I am happy to ensure that the relevant Minister meets with the right hon. Gentleman to talk further about what needs to be done.
Several hon. Members rose—
Rachel Reeves
My hon. Friend is right about the importance of manufacturing in Huddersfield and more widely across Yorkshire. We are introducing the supercharger from the beginning of April, which will take £420 million off the energy bills of the most energy-intensive industries. The British industrial competitiveness scheme will also help over 5,000 businesses when it comes in next year.
Dr Ellie Chowns (North Herefordshire) (Green)
The fuel price shock caused by Trump’s reckless war highlights just how risky it is for the UK to be locked into the global fossil fuel markets. The Climate Change Committee recently pointed out that the cost of achieving net zero by 2050 is less than the cost of a single fossil fuel price spike, reinforcing the point that we need to invest in clean, green technologies and get ourselves off being hooked on fossil fuels.
The key problem in the UK is that gas is coupled to electricity prices, so decoupling is crucial. Will the Chancellor look at the report last week from Common Wealth, which points out that decoupling could be achieved right now and would save households at least £200 each year?
Rachel Reeves
I agree that de-escalation is the best way to reduce bills for families and businesses. I gently say to the hon. Lady that we want investment in renewables, and we introduced the Planning and Infrastructure Act 2025 to make it easier to build them, but her party voted against that—a vote which would have kept people’s bills higher than they need to be. We have had a one-third reduction in gas imports, and gas is setting the price of our energy at something like a third less than it was just four years ago. The electricity generator levy and the energy profits levy are ensuring that excess profits are taxed, and we can use that money to support the public finances and public services.
Justin Madders (Ellesmere Port and Bromborough) (Lab)
The consumer-focused, pragmatic approach being taken by this Government is in such contrast with the rhetoric of some on the Opposition Benches, who would only see military action escalate—and be in no doubt that our constituents would be paying the price for that.
I welcome the CMA’s report this morning about action to tackle rip-off vet fees, but that report took several years. The Chancellor spoke of new powers for the CMA to tackle price gouging, but can she confirm that it will be able to act swiftly, nimbly and in real time to tackle companies seeking to exploit this particular crisis?
Rachel Reeves
My hon. Friend is absolutely right: the Conservative party’s gung-ho approach would have made the crisis worse, not better. Our approach diplomatically has been to de-escalate the crisis at every stage, in part because we do not want that cost of living impact on families. As he knows, we met the Competition and Markets Authority a couple of weeks ago to talk through what more can be done, including on rolling out fuel finder for cheaper fuel and investigating the impact on heating oil. The CMA will be coming back to us in the next few weeks following that investigation, and looking more widely at how to keep prices down for all our constituents.
Simon Hoare (North Dorset) (Con)
The £474,000 awarded to Dorset council last week as part of the Chancellor’s announcement is welcome, but I must tell her that it really will not touch the sides; more will need to be done to support rural communities. Unwillingly and unwittingly, the Government will be profiteering through a massive hike in VAT and duty take. May I urge the Chancellor to ringfence, either in whole or in great part, the excess receipts that she will be receiving—this would not add to Government borrowing—to support rural communities across the country as they face this cost of living crisis?
Rachel Reeves
I thank the hon. Gentleman for what he said about heating oil. As well as the direct support for his local authority and many others, the CMA’s work is crucial to stop businesses exploiting the crisis to increase their profits. As I said in response to my hon. Friend the Member for Ellesmere Port and Bromborough (Justin Madders), the CMA will report on that shortly. On ringfencing certain tax revenues, it is clear that a prolonged conflict will reduce other tax revenues and push up borrowing costs, so it is not possible to ringfence a particular tax for a particular use, because other tax revenues will be coming down. But the whole reason for the energy profits levy and the electricity generator levy is to have some stabilisation in the system to bring in money to support the Government and our constituents when that is most needed. Of course, we will be using it to do that.
Andrew Pakes (Peterborough) (Lab/Co-op)
I thank my right hon. Friend for the serious approach she has taken to the conflict, unlike the hokey-cokey approach we have seen from the Conservative party. Peterborough is willing to play its part in developing our energy infrastructure, and we have already had £1 billion-worth of private investment to upgrade the gas networks based out of Peterborough, but my constituents know that the price hike is not just about what is happening now in the middle east; it is about that decade when we did not build the energy infrastructure the country needs. Will she reassure me that her plan will speed up new nuclear, speed up investment in renewables and get the country building the energy infrastructure we need if we are to tackle this challenge for the long term?
Rachel Reeves
I thank my hon. Friend for that question. It is great to see that investment in the gas networks coming into Peterborough, supported by him. That is in stark contrast to the Conservatives, who got rid of our gas storage facilities, stalled on nuclear and stalled on renewables. As a result, they left us more vulnerable to an energy price shock.
Ben Lake (Ceredigion Preseli) (PC)
What contingency planning is taking place to support non-domestic energy bills, especially in rural areas such as mine where a great number of small businesses and community organisations rely on heating oil and LPG?
Rachel Reeves
I am sure that the hon. Member will agree that the best thing we can do to support households and businesses is to de-escalate the crisis and bring it to an end as quickly as possible. But, as I set out in my statement, I will not tolerate businesses price gouging and earning excessive profits because of the conflict in the middle east. The CMA therefore has new powers to ensure that does not happen, and we are targeting support at those who most need it.
Mais Speech
Rachel Reeves Excerpts(1 month, 1 week ago)
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The Chancellor of the Exchequer (Rachel Reeves)
I am updating the House on the Government’s economic plan to increase living standards, build resilience and bolster the security of the UK economy.
Today, I am reaffirming and building upon what I set out in my 2024 Mais lecture: that in this age of insecurity, the right solution for Britain’s economy is “securonomics”. This is a strategy for building secure and resilient growth by increasing public and private investment through an active and strategic state which works in partnership with business, steps up its role in expanding the supply side of the economy, and makes conscious and deliberate choices about the sectors in which we pursue leadership and the capabilities we must protect or grow.
In Iran and the middle east, we are witnessing further symptoms of that age of insecurity. This week, the Government have intervened to protect the most vulnerable households reliant on heating oil, who are not shielded by the energy price cap, and we have been clear that any exploitation of the crisis for excess profit will not be tolerated.
The effects we have already seen are likely to put upwards pressure on inflation in the months to come. However, the actions that this Government have taken to secure our economy and our national resilience have put us in a better position to respond. We have substantially uplifted defence spending, with £270 billion investment planned over the spending review. Our energy security plan is taking effect, with the UK importing 17% less gas in 2025 than we did in 2021, and from next month, the energy price cap will be £117 lower.
The age of insecurity affects every country. But since the global financial crisis, the UK has experienced the sharpest slowdown in productivity growth of any G7 economy compared with the pre-crisis trends. To address this, we must capitalise on our strengths as set out in the modern industrial strategy and fix our structural weaknesses, and the mistakes of the past caused by a passive state that believed markets should be left to their own devices and that growth could be built on a narrow geographical base of too few places.
The Government’s plan for righting these wrongs is securonomics. Securonomics provides a response to a more unstable world, prone to shocks, by focusing on economic security for working people, by increasing domestic productive capacity in areas of strength or strategic importance, and by working closely with international allies to build more resilient supply chains. Since 2024, the Government have been pursuing this strategy, and driving growth through stability, investment and reform.
Rather than turning back now, the Government must continue to take active, bold decisions. That is why we are going further on our three big choices: empowering regional growth, embracing AI and innovation, and establishing a closer relationship with the EU.
I want every part of Britain to do well. The Government have already committed to this agenda: we published the regional growth strategy in 2024, and our National Wealth Fund is already supporting local places to build on their existing strengths: investing in wind power in Orkney and critical minerals in Cornwall, while building on the north of England’s strengths to create a global clean energy supercluster. Meanwhile, our growth mission fund is driving local growth across Britain through projects such as Kirkcaldy high street, the Peterborough sports quarter and the reopening of Southport pier.
I am now going further to drive regional growth across the UK. I am backing Britain’s cities and ensuring towns do not lose out by connecting them into those city regions through better transport, housing and skills. This includes accelerating action in the Oxford to Cambridge growth corridor, doubling the Government’s initial commitment by making over £800 million available for up-front land acquisition and infrastructure to help unlock land for new homes. I am providing £2.3 billion of new grant, loan and patient capital funding over five years for city investment funds, with up to £1.7 billion going to mayors in the north. This funding will go directly into hands of mayors in major city regions to deliver city densification, supporting priority projects in local growth plans and development in the areas around Northern Powerhouse Rail stations. I am also backing growth-driving sectors by investing over £150 million through the industrial strategy-8 cluster programme in areas across the north.
Looking ahead to autumn Budget, I can also confirm that I have asked my officials to work with mayors, businesses and other experts to develop a road map for future fiscal devolution. This will set out plans to give regional leaders control of how they allocate a share of some national taxes that for too long have been allocated by central Government, looking at income tax alongside other taxes. To ensure that Government are achieving our objectives of providing our mayors with the long-term certainty that they need to invest in the foundations of growth in a way that is practical and responsible, the development of this road map will be guided by four key principles: empowerment, accountability, sustainability and fairness. This is not about new taxes or higher tax rates. I will not ask taxpayers to pay more. Reforms will be fiscally neutral, focused on sharing and retaining a portion of existing revenues, with the proceeds of growth benefiting the places that generated them.
I am also committed to going further on innovation and AI. This will ensure the UK is a world leader in AI and will enable us to benefit from the clear opportunities AI presents, while managing the risks. We are taking concrete steps to make the UK the best place for innovative firms to start, scale and stay, with a £500 million sovereign AI unit, regulatory reforms to support safe and trustworthy adoption of innovative products and services across the economy, including responsible AI applications, an AI adoption summit and a commitment worth up to £2 billion to fund quantum technologies over the next decade—including up to £1 billion to procure commercial-scale quantum computing capabilities. We want to ensure that AI serves in the interests of working people, creating good jobs that pay well, and security and hope for the future. That is why we are setting up a new AI economics institute to work with the future of work unit to understand the impact of AI on our productivity and labour markets. In January, we announced our ambition to upskill as many as 10 million workers through our AI skills hub, alongside providing £27 million to kick-start the Government’s techlocal scheme and AI scholarships at top UK universities to link training and industry.
I am also reaffirming the Government’s commitment to strengthening our partnerships with the EU to increase our resilience and our trade opportunities. We have seen instability on Europe’s border, in the middle east and in our economy—not aided by the costs of a damaging Brexit. We need to deliver security amid this volatility, strengthening resilience in the economy and stabilising trading conditions for businesses. There is now a strategic imperative for deeper integration between the UK and EU, and so today I set out more detail on the Government ambition to strengthen our relationship with Europe to benefit both partners. There are red lines in the national interest, but we choose growth and security over instability and decline, and so will be prepared to align with EU rules: if it boosts long-term growth, consumer benefits and jobs, if it fits with stable and compatible policy goals, and if it protects or strengthens the UK’s security and resilience. This is all while keeping the option of regulatory autonomy where needed in strategically important sectors.
Further supporting our commitment to defence and security, and strengthening our wider international relationships, I can also announce today that a core group of NATO allies—Finland, the Netherlands, and the UK, together with other partners—are exploring setting up a new mechanism for financing by 2027. This has the aim to aggregate demand, drive joint procurement, accelerate defence investment, and increase the availability of critical capabilities such as munitions as we step up shared defence and security commitments.
All announcements are funded from within existing departmental budgets within the current spending review period, except for the city investment funds and additional Ox-Cam financial transactions, which will be accounted for at Budget 2026.
This is the right economic plan in this age of uncertainty. I look forward to continuing to update Parliament as we pursue this strategy to deliver for the UK economy.
[HCWS1413]
Oral Answers to Questions
Rachel Reeves Excerpts(1 month, 2 weeks ago)
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Jim McMahon (Oldham West, Chadderton and Royton) (Lab/Co-op)
The Chancellor of the Exchequer (Rachel Reeves)
I am grateful to my hon. Friend for raising this important issue. While the approved mileage allowance payment rates have not changed since 2011, I recognise that motoring costs have evolved significantly, and it is an important issue for many people who claim motoring expenses. We are, therefore, looking at the issue and will consider the matter further in the usual way, as part of a future fiscal event. Through steps such as freezing fuel duty, we are taking wider action in the meantime to ensure that people pay the lowest price possible at the pump, whether or not they use the approved mileage allowance payment.
Jim McMahon
I thank the Chancellor for that response; I welcome it, and so will millions of working people. This has been a long-standing campaign for Unison, and I am grateful to it and the RAC Foundation for taking on this case and to the Mirror for the coverage it has given to the campaign. The 45p a mile rate, set 15 years ago, is nowhere near the true cost of running a vehicle today, which was recently assessed at 67p a mile—and that was before fuel costs rocketed in the last week. Gemma, a social worker for over two decades, travels around 400 miles a month for work, which means she is paying over £1,000 a year just to do her job and care for other people. Gemma and the millions of working people like her will welcome the Chancellor’s statement today, but can this work be expedited, given the cost of living crisis?
Rachel Reeves
I genuinely thank my hon. Friend for all he has done to draw attention to this important issue. I am also grateful for representations from the trade union Unison, given that this particularly affects low-paid workers, including care workers like Gemma. We have a standard Treasury policy of keeping all taxes under review ahead of fiscal events, but as I say, this is one area that I will be keeping a very close interest in.
Dame Harriett Baldwin (West Worcestershire) (Con)
The Chancellor will review mileage rates, but with her fuel duty freeze coming to an end in September and the next fiscal event not happening until later in the year, will she commit to review that decision at the end of this parliamentary Session if petrol prices are significantly higher than they are today, for the sake of people’s cost of living?
Rachel Reeves
The price of petrol today is 8p per litre lower than if I had followed the plans that were left to me by the previous Conservative Government. From April, it will be 11p per litre lower. Of course, we keep these things under review, but oil prices today are 24% lower than they were yesterday, so things are very volatile at the moment. That is why, as I said yesterday, the most important thing we can do to address the cost of living challenges people face is to de-escalate the conflict in the middle east, which is exactly what this Government are attempting to do.
Sir Ashley Fox (Bridgwater) (Con)
Michael Wheeler (Worsley and Eccles) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
Stability is the most important thing that we can do to get interest rates and inflation down, and tackling the cost of living—especially given the global headwinds—is my top priority. At the Budget, we took money off energy bills and froze prescription charges and train fares. The Government’s cheaper fuel finder scheme is now online, and it shows petrol prices at forecourts across the country. Yesterday, some petrol retailers charged almost 180p per litre, while others were charging less than 130p per litre. This Government will not tolerate price gouging, and I will be meeting with petrol retailers this week to raise concerns and to get prices down at the pumps for all our constituents.
Bell Ribeiro-Addy
The Trussell Trust’s recent “Hunger in the UK” report highlights the startling reality of food insecurity. It has found that rates are higher for private renters in receipt of housing benefit, either through local housing allowance or through the housing element of universal credit. Private renters on the lowest incomes cannot keep up with the rising cost of living, and maintaining the freeze on local housing allowance risks driving even more people into hunger and homelessness, because private renters receiving LHA will likely see an average shortfall of £243 a month. The Government have taken meaningful steps towards tackling food insecurity, but will the Chancellor build on this by lifting the freeze on local housing allowance?
Rachel Reeves
The Renters’ Rights Act 2025, which will come into force in the next month or so, will make a big difference to my hon. Friend’s constituents and to all our constituents who are contending with living in the private rented sector—particularly with issues such as evictions, but also with mid-term rent increases. At the same time, we have put £39 billion into our social and affordable homes programme so that more people can get a council house or a social home rather than living in the private rented sector. We are also getting rid of the two-child limit, which the Trussell Trust says will reduce demand for food banks.
Michael Wheeler
While cost of living pressures are affecting people across my constituency of Worsley and Eccles, young families face a perfect storm. Whether it is housing costs, expensive childcare or student loans, many young families are struggling, and research shows that the cost of living crisis is holding people back from even starting a family. Will the Chancellor outline what measures the Government are taking to alleviate the financial burdens on young families, in addition to their welcome moves to expand free childcare?
Rachel Reeves
We absolutely recognise the pressures facing families. Bringing stability back to the economy is the No. 1 thing that we can do for working families. There have been six cuts in interest rates since the general election, which has seen the average cost of servicing a mortgage come down by about £1,300 a year. The Renters’ Rights Act will come into force shortly to give greater rights to people in the private rented sector. The free childcare offer, which is now fully funded, ensures that parents with children aged between nine months and five years get free childcare if they are in work. From next month, the end of the two-child benefit limit will lift 450,000 children out of poverty.
Graham Stuart (Beverley and Holderness) (Con)
Richard from Beverley tells me that he paid £304 for his last tank of heating oil, yet if he orders it again now—and he needs to do so within four weeks—it will cost him £862. Families across rural areas such as Beverley and Holderness rely on heating oil to keep warm, yet because they are off-grid, they get no protection from the energy price cap. Some 1.5 million people across the country are affected, so what steps can the Chancellor take to alleviate the situation for rural families such as Richard’s, who are facing a huge spike in the cost of living through no fault of their own?
Rachel Reeves
First, everybody gets support with their electricity bill, regardless of how they heat their home. However, I do recognise the unique issues around heating oil; we had representations from the Labour group of rural MPs over the weekend, and my colleague the Financial Secretary to the Treasury is going to meet all MPs with an interest in this area tomorrow. I very much urge the right hon. Gentleman to come to that meeting, but the most important thing this Government are doing is trying to de-escalate the crisis in the middle east, because that is the way to get prices down for all our constituents, whether for heating oil or at the pumps.
Kirsty Blackman (Aberdeen North) (SNP)
Inflation might be lower than projected, but prices are still rising. Fuel prices at the pumps might be lower than the Tories promised, but they are still higher than they were, and energy costs are still not down to what the Government promised in their manifesto. Will the Chancellor recognise that families are really struggling at the moment and put in an emergency package of measures to support them through the cost of living crisis?
Rachel Reeves
In April, people will get £150 off their energy bills and prescription charges in England will be frozen as will rail fares. At the same time, we are getting rid of the two-child benefit cap, which will lift 450,000 children out of poverty, but the most important thing we can do for the price of petrol, diesel and heating oil is de-escalate the conflict in the middle east and get vessels moving again through the strait of Hormuz. That is why this Government are putting such efforts into de-escalating this crisis.
Steve Witherden (Montgomeryshire and Glyndŵr) (Lab)
The level of poverty that 14 million people in the UK face is not inevitable; it is the result of political choices, and it damages our economy, costing around £75 billion each year. Will my right hon. Friend consider equalising capital gains tax with income tax and introducing a 2% wealth tax on assets over £10 million to lift people out of poverty and strengthen public finances?
Rachel Reeves
In my first Budget, I changed a number of taxes to ensure that the wealthiest are paying their fair share. We increased capital gains tax, reduced the number of tax loopholes, introduced VAT and business rates on private schools, extended the energy profits levy and got rid of the exemptions for private equity. In the Budget last year, I did more than any Chancellor has ever done to take children out of poverty. In the course of this Parliament alone, more than half a million children will be lifted out of poverty. I am proud to be the Chancellor who has delivered that.
Pippa Heylings (South Cambridgeshire) (LD)
With tensions in the middle east pushing up global oil and gas prices again, households are understandably worried that yet another international crisis will mean higher energy bills and a higher cost of living at home. In my South Cambridgeshire constituency, like in others we have heard about today, many rural and semi-rural households have to use oil for heating, and they have seen prices double over the past week. I have heard that the Chancellor is considering measures to support them. Will she support the Liberal Democrats’ call to zero rate VAT on heating oil for three months for all those residential homes, and will she consider other measures to protect them from massive spikes in their bills?
Rachel Reeves
There are two things going on with heating oil. First, we have the conflict in the middle east, which we are trying to de-escalate, and secondly, we have price gouging. The way to deal with that is to ensure that customers are treated fairly and companies are not ripping off their customers. That is why we have asked the Competition and Markets Authority to look at the issues around heating oil, but we have to get to the root of the problem, which is that vessels are not flowing through the strait of Hormuz, and some businesses are using this crisis as an opportunity to rip off consumers. Rather than throwing public money at something when that is not the solution, let us deal with price gouging and getting the oil flowing.
James Wild (North West Norfolk) (Con)
The Chancellor promised in her first Budget that she would not extend the freeze on income tax thresholds, because it
“would hurt working people. It would take more money out of their payslips.”—[Official Report, 30 October 2024; Vol. 755, c. 821.]
In her second Budget, the Chancellor broke her promise with a £23 billion tax rise, bringing a million more people into paying higher rate tax. When people are set to struggle with the cost of living over this Parliament, why are the Government choosing to make their lives harder?
Rachel Reeves
Some people have short memories, haven’t they, Mr Speaker? I remember the Conservatives freezing those thresholds on a number of occasions. We said in our manifesto that we would not increase the headline rates of national insurance, VAT and income tax that working people pay, but I did say clearly at the Budget last year that we would have to ask everyone to make a greater contribution, because of the downgrade in productivity, which is a result of the mismanagement of the economy by the last Government over 14 failed years.
Daniel Francis (Bexleyheath and Crayford) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
The conflict in the middle east affects all of us, and I understand the anxiety felt by families and businesses. Rapid de-escalation in the middle east is the best way to protect businesses and working people from rising costs, which is why I continue to work closely with G7 colleagues to call for immediate de-escalation and to guarantee the security of vessels moving through the strait of Hormuz. I am clear-eyed about the situation we face. I will be both responsive to a changing world and responsible in the national interest to protect public finances and to help families and businesses with the cost of living.
Daniel Francis
I thank my right hon. Friend for her comments and support and echo what she has said about the situation in the middle east. The charity Shelter has long campaigned for people with no fixed address to be able to access bank accounts, including without ID. Which groups of people might benefit the most from the leadership shown by the Labour Government and from banks on this issue?
Rachel Reeves
I thank my hon. Friend for his question and pay tribute to my hon. and learned Friend the Economic Secretary to the Treasury for all the excellent work that she has done to take this agenda forward. The lack of a bank account does make it harder for people to secure stable employment and stable housing. That is why our financial inclusion strategy secured a commitment from the major banks to work with Shelter directly to make it easier for people without standard ID to access a bank account. This partnership with Shelter will particularly help to break the cycle of homelessness and support people to rebuild their lives, which we all want to see.
Sir Mel Stride (Central Devon) (Con)
For every single year of the last Conservative Government, we froze fuel duty, and we did so to stand up for hard-working families. Given that petrol prices are surging at the pumps, why has the right hon. Lady chosen now to put up fuel duty?
Rachel Reeves
As the right hon. Gentleman knows, the plans that we inherited from the previous Government would have seen fuel duty go up just a few months after the general election. We did not think that was the right approach, so we reversed the Conservative plans that we inherited to freeze fuel duty and to keep the 5p discount introduced during the pandemic. In April this year, under the plans that I inherited, fuel duty would have gone up again, but we do not think that is the right thing to do. Therefore, in a staggered approach from the autumn this year, the 5p cut introduced during the pandemic will begin to be unwound. At the same time, we have just introduced the cheaper fuel finder, which yesterday showed the divergence in prices paid by customers on petrol forecourts. Some paid 130p a litre and others 180p per litre, so it is really important that people use that cheaper fuel finder to shop around. I shall be meeting petrol retailers later this week to make it clear that we will not accept price gouging.
Sir Mel Stride
Given the rapidly rising cost of oil and gas, why does the right hon. Lady believe that it is better to import it than to extract it from the North sea?
Rachel Reeves
The price of oil and gas is particularly volatile at the moment, given the conflict in the middle east. My understanding, as we came into the Chamber today, was that prices of oil were down by something like 25% on the day. The most important thing that all of us can do to deal with what is happening to prices at the moment is to support de-escalation. That is the Labour party’s policy, but I am not sure what the policy of the Conservative party is. None the less, that is the best way to get down both the price of petrol at the pumps and of heating oil. The North sea will play an important part of our energy mix for many years to come, which is why I met North sea oil and gas companies just last week to talk about what more they can do and how we can help.
Torcuil Crichton (Na h-Eileanan an Iar) (Lab)
Damien Egan (Bristol North East) (Lab)
Rachel Reeves
I am proud to be the Labour Chancellor who has overseen the biggest uplift in defence spending since the end of the cold war. Just last week we announced a £1 billion helicopter deal with Leonardo, based in Yeovil, just down the road from my hon. Friend. Yesterday I confirmed to the House that the Ministry of Defence has access to the special reserve. That means that the added costs of deploying additional capabilities in the middle east will be funded entirely by the Treasury special reserve.
David Mundell (Dumfriesshire, Clydesdale and Tweeddale) (Con)
Rachel Reeves
I thank the right hon. Gentleman for raising the important issues with heating oil that his constituents are facing. I very much hope that he will be able to attend the meeting tomorrow. There are two key issues: making sure that vessels can again flow through the strait of Hormuz, which requires a de-escalation of the crisis; and stopping the price gouging that some businesses are engaged in at the moment. That is why I have asked the CMA to look at that too.
Paul Davies (Colne Valley) (Lab)
John Milne (Horsham) (LD)
Rachel Reeves
While only 4% of people in Great Britain use heating oil, I recognise that this is a particular issue for many constituents, and in Northern Ireland the figure is more than 60%. I am keen for the hon. Gentleman to take these issues to the meeting with the Financial Secretary to the Treasury tomorrow. We are working closely with the Competition and Markets Authority to stop price gouging. There is no reason why a company should be charging twice as much as it was for heating oil; we need to put a stop to those practices.
Jessica Toale (Bournemouth West) (Lab)
The junction of Surrey Road and Prince of Wales Road; Wimborne Road, between Kinson library and Bear Cross; and Hankinson Road, around Winton rec—these are some of the more than 35 roads in Bournemouth West where residents have told me potholes are out of control. Lib Dem-led Bournemouth, Christchurch and Poole council has been given £7.5 million to maintain our roads and fix potholes. I will be writing to BCP council later today, but in the meantime, will the Minister join me in urging it to get its act together and finally fix our roads?
Sir Desmond Swayne (New Forest West) (Con)
Rachel Reeves
Alongside the Budget last year, we published the new North sea oil and gas strategy, which, for example, allows tie-backs, so that more use can be made of existing fields. The previous Government brought in the energy profits levy when energy companies’ profits went through the roof after Russia’s invasion of Ukraine. That is still in place, so that when prices are high, we can bring money in to help people with their bills.
Lloyd Hatton (South Dorset) (Lab)
I welcome the Chancellor of the Exchequer’s work to get the Leonardo helicopters contract over the line, as that will help protect defence jobs right across Dorset, Somerset and the wider south-west. Will the Treasury and Ministers continue to work with the Ministry of Defence to secure investment in the defence sector in Dorset and across the west country?
Rachel Reeves
I thank my hon. Friend for what he said about the Leonardo contract at Yeovil, which supports many thousands of jobs in Somerset, and indeed Dorset. I am proud to be the Chancellor who has overseen the biggest uplift in defence spending since the end of the cold war; that has enabled us to support this investment and many others.
Freddie van Mierlo (Henley and Thame) (LD)
Antonia Bance (Tipton and Wednesbury) (Lab)
Given the global situation, what discussions has the Chancellor had with Cabinet colleagues on helping to keep industrial energy costs manageable? Will she work with colleagues to bring in the British industrial competitiveness scheme, which would cut manufacturing energy costs by 25%, as soon as possible?
Rachel Reeves
My hon. Friend is a powerful advocate for the energy-intensive industries, and for manufacturing more widely. The supercharger is being extended from April this year. That will help 500 of the most energy-intensive businesses, and increase their discount from 60% to 90%—and next year, the BIC scheme comes in. Given what is happening in the middle east, we will continue to look closely at what we can do to help our energy-intensive industries.
John Lamont (Berwickshire, Roxburgh and Selkirk) (Con)
Over 50% of properties in the Scottish Borders are not on the mains gas grid and are completely dependent on heating oil. They are being hammered by the increase to the price of heating oil over the last week or so, and they need to see concrete action from this Government to stop the excessive prices and the profiteering. What are the Government going to do?
Rachel Reeves
I agree with the hon. Gentleman. We are trying to de-escalate the conflict in the middle east, because if we can get vessels moving again through the strait of Hormuz, we will deal with a lot of these problems. I am working closely with both Lloyd’s of London—I met its representatives yesterday—and my G7 colleagues to ensure that those vessels can get moving again. At the same time, I think that everybody has heard the stories in this Chamber and from our constituents about the problems of price gouging. We have to address that, and I have asked the CMA to look at it. Members across the House will have a chance tomorrow to set out their case to the Financial Secretary to the Treasury in more detail, so that we have all the information needed to make the case.
Adam Jogee (Newcastle-under-Lyme) (Lab)
My constituents in Newcastle-under-Lyme are sick and tired of poor-quality, dangerous roads. The county council has resources from this Government, and must stop being missing in action. What message does the Minister have for Staffordshire county council?
Paul Waugh (Rochdale) (Lab/Co-op)
My constituent in Rochdale, Louise Marshall, wrote to me this weekend because she is worried sick about the massive price rise she is facing for heating oil. Can the Chancellor assure me, notwithstanding the meeting we are all going to have with the Financial Secretary to the Treasury, that we can be absolutely crystal clear that under this Government, we will not tolerate price gouging or war profiteering from oil companies that try to rip off their customers?
Rachel Reeves
I absolutely agree with my hon. Friend. The price gouging that we see is totally unacceptable, which is why we have already asked the Competition and Markets Authority to look at this. Whether we are talking about petrol at the pumps or heating oil, there is no excuse for any business to use this as an opportunity to rip off customers.
Sir Jeremy Hunt (Godalming and Ash) (Con)
One of the things that makes our economy less resilient is high levels of debt. The Chancellor and I have both followed fiscal rules that allowed us to claim that debt was falling, when in fact it continued to rise, both in absolute terms and as a proportion of GDP. Does she think it is time to consider a new fiscal rule that actually reduces debt—for example, a rule that public spending will not increase faster than economic growth?
Rachel Reeves
Debt is lower in every year of the forecast that I published last week than it was in the plans that I set out in the Budget just back in November. The fiscal rules that I introduced in the October after I became Chancellor said, first of all, that we had to balance day-to-day spending with tax receipts, and that is important. They also stated that, subject to getting debt down as a share of GDP, we could invest in the things that can actually grow the economy. The right hon. Gentleman and I both know that growth is the best way to ensure that our public finances are sustainable, and that we improve living standards for working people.
Perran Moon (Camborne and Redruth) (Lab)
The Government’s new industrial strategy has signposted a path to further economic growth and prosperity. There are certain regions of the UK that can play a significant role in this growth, so would Treasury Ministers consider working with the Department for Business and Trade to make Cornwall an industrial strategy zone?
Rachel Reeves
In the Budget last year, we introduced the Kernow growth fund to support the Cornish economy because of its specific strengths around critical minerals, defence and clean energy. The National Wealth Fund and the wider Government will do everything we can to unlock the huge opportunities that we know exist in Cornwall.
Dr Ellie Chowns (North Herefordshire) (Green)
Given the recent Institute for Fiscal Studies report that says that the Treasury’s excessively narrow focus on fiscal rules leads to dysfunctional policy making, and given recent global events showing the uncertainty of fiscal forecasting, does the Chancellor recognise that it is time to move to a more flexible and strategic approach to fiscal rule-making and fiscal policymaking?
Rachel Reeves
I totally reject the premise of that question. The fiscal rules that I introduced as Chancellor have unlocked £120 billion for capital investment. We will be spending £50 billion more on day-to-day spending by the end of this Parliament, but at the same time, we are bringing debt down, bringing the deficit down, bringing inflation down, and bringing interest rates down for all our constituents. Economic stability is the way to grow our economy and make working people in all our constituencies better off, and if we forget that, it is ordinary working people who pay the price.
Middle East: Economic Update
Rachel Reeves Excerpts(1 month, 3 weeks ago)
Commons ChamberRead Full debate Read Hansard Text Watch Debate Read Debate Ministerial Extracts
The Chancellor of the Exchequer (Rachel Reeves)
With permission, Mr Speaker, I will make a statement about the Government’s preparedness and economic response to the conflict in the middle east. Let me begin by paying tribute to our armed forces, and by expressing my concern and sympathy for the British citizens whose lives have been disrupted by the conflict so far. I understand the anxiety felt by families and businesses during these incredibly uncertain times. This conflict affects us all, and we must respond to it.
As I have demonstrated time and again, I will take the necessary decisions to help families with the cost of living and protect the public finances. I am clear-eyed about my response to the current situation. My economic approach will be both responsive to a changing world and responsible in the national interest. The economic impact of the situation in the middle east will depend of course on its severity and its duration. The movements we have already seen are likely to put upward pressure on inflation in the coming months, but I also want to confirm to the House that our financial markets are functioning and that I am in regular touch with the Governor of the Bank of England.
This afternoon, I spoke with G7 Finance Ministers, setting out my priorities for the international co-operation needed. First, we are calling for immediate de-escalation and a return to the diplomatic process. Secondly, we must guarantee the security of vessels passing through the strait of Hormuz. Thirdly, I stand ready to support a co-ordinated release of collective International Energy Agency oil reserves. Fourthly, the UK will play its part as the global hub of maritime insurance. I am meeting the chair of Lloyd’s of London later today, when we will discuss how best to support the continued passage of maritime trade.
I want to assure the country that the fundamentals of Britain’s economy are strong. Every step that I have taken since the election has built our national resilience: stability in the public finances; investment in infrastructure in both defence and energy security; and reform to our economy. Last week, I updated the House about our progress in delivering that plan. We have cut inflation so that it is now at 3%, a lower base than at the outset of the Russia-Ukraine conflict. I have prioritised economic growth to drive up living standards and I have stabilised the public finances. We have already reduced the deficit by £20 billion since last year, from 5.2% to 4.3% of GDP. We are due to reduce borrowing more over the rest of this Parliament, and by more than any other G7 economy, and I have increased our financial buffers, confirmed last week by the Office for Budget Responsibility.
I know that families and businesses will be concerned about the impact of this conflict on them, so I want to set out the action we have already taken and will take to protect them. I am prioritising energy security, investing in clean, home-grown energy. Our contracts for difference are already protecting consumers, ensuring that generators of low-carbon energy pay money back into the system when the wholesale prices are high, shielding bill payers from fossil fuel price shocks. I can confirm to the House that, in the coming days, we will publish the Government’s response to the Fingleton review of nuclear regulation to build nuclear power more quickly.
Our energy system is now more secure than it was at the outset of the Russia-Ukraine conflict. In 2025, the UK imported 17% less gas than we did in 2021. While gas generation is estimated to have set the wholesale price of electricity in Britain around 90% of the time in the early 2020s, that has now fallen by around a third. As a result we are less reliant on and less exposed to volatile international energy prices than we were at the outset of the Russia-Ukraine conflict, and that is welcome.
I recognise the role that North sea oil and gas will play in our economy for years to come. Last week, I met North sea industry leaders to discuss their role in jobs, investment and growth, and in energy supply. The energy profits levy currently remains in place and the electricity generator levy will also be activated if prices remain at high levels. I have set out the details of our successor regime to the energy profits levy, the oil and gas price mechanism, balancing providing certainty to business with fairly taxing windfall profits from energy companies.
I have also taken direct action on energy bills. Our supercharger discount on business electricity is increasing next month, cutting costs for around 500 of the most energy-intensive businesses by an additional £420 million per year. We are supporting the lowest-income families by investing £15 billion in our warm homes plan to improve the energy efficiency of people’s homes and reduce their bills, and, through the warm homes discount, taking £150 off bills for 6 million of the lowest-income households—a doubling of the number of people who will receive the warm home discount compared with the plans the previous Government had. That is in addition to the £117 drop in the price cap that Ofgem has confirmed from next month, thanks to the wider action on bills I took in the Budget.
I want to be clear to families at home that despite the movements we have seen in energy prices in the last few days, the price cap for domestic bills for April will not change, giving families immediate certainty on their bills until at least the end of June. However, I recognise that households who use heating oil face unique challenges, so I have asked the Financial Secretary to the Treasury to lead discussions with officials and rural and Northern Irish MPs to explore further action we can take. Those meetings will happen on Wednesday.
The current conflict only increases the importance of the action I took at the Budget to reduce energy bills. A rapid de-escalation in the middle east remains the best way to protect us from rising energy bills, but as the situation continues to unfold my priorities will continue to be helping families with the cost of living and protecting the public finances. I am also taking action to ensure that people pay the lowest possible price at the pump. In November, I extended the 5p per litre cut in fuel duty for a further five months and ensured that fuel duty will not increase in line with inflation this year. Petrol is more than 8p per litre cheaper today than it would have been under the plans we inherited at the election. That discount increases to 11p per litre next month once that extension takes effect.
The new cheap fuel finder that I confirmed at the Budget is currently being delivered, helping consumers find the cheapest price for their fuel. Almost 90% of petrol retailers have already registered for this and last week I instructed my officials to accelerate the integration of the cheaper fuel finder with map applications. This week, I am meeting petrol forecourt operators and I will not hesitate to call out retailers who fail to provide data to the fuel finder. I am clear that the best way to keep prices at the pump low is rapid de-escalation, and I will continue to monitor prices as the situation develops. I have also asked the Competition and Markets Authority to be vigilant across prices, including essentials such as road fuel and heating oil. Let me be absolutely clear: I will not tolerate any company exploiting the current crisis to make excess profits at consumers’ expense.
I am proud to be the Chancellor who is delivering the biggest uplift in defence spending since the end of the cold war. I am committed to giving our military the resources they need. That is why I can confirm today that I approved access for the Ministry of Defence to the special reserve to deploy additional capabilities in the middle east, meaning that no net additional costs of these operations will be funded by the MOD, but instead will be funded by the Treasury.
We do not yet know how long the conflict will last or what further action will be required, but it is my duty to be responsive in an uncertain world and responsible in the national interest to protect the public finances and help families with the cost of living. That is what the Prime Minister is doing and that is what I will continue to do. I commend this statement to the House.
Sir Mel Stride (Central Devon) (Con)
I thank the Chancellor for advance sight of her statement and add the Opposition’s firm support for our armed forces.
As the Chancellor has made clear, these are very serious and concerning times, and developments in the middle east are already having profound consequences for our economy. Oil prices have surged above $100 a barrel for the first time since the 2022 energy crisis. That alone is enough to have huge knock-on effects for households and businesses: families filling up their car will already have noticed petrol prices increasing, and fixed-price energy tariffs have either been increased or pulled from the market. We are already seeing British households worse off as a result of this conflict.
I am grateful to the Chancellor for updating the House on her meetings with other G7 Finance Ministers, and I welcome her commitment to supporting action to ease pressure on global supply by using strategic oil reserves. That, however, will go only so far.
As the Chancellor has said, the longer this conflict continues, the more likely it is that we will see a sustained period of higher prices. That, in turn, will have implications for interest rates and our cost of borrowing. The longer that lasts, the more likely it is that higher inflationary expectations will become anchored. If that happens, monetary policy will need to adjust accordingly, which may mean higher mortgages for homeowners who have only just begun to see some relief.
Gilt markets have already been responding to these events, which could mean that the forecasts we were given just last week from the Office for Budget Responsibility end up looking very different. We must continue to monitor developments closely.
Where the Opposition clearly differ from the right hon. Lady is in her approach to the economy in the run-up to this crisis, as her gross mismanagement has left us far more vulnerable than would otherwise have been the case. She refers to inflation, which was bang on target when we left office; thanks to her choices, though, it rose back up to almost 4% last year—the highest in the G7—and remains elevated, which is far from ideal given the threat of a significant further spike in energy prices. Extraordinarily, the Chancellor has just now reconfirmed that the Government will press ahead with a rise in fuel duty later this year.
Borrowing is running higher than was forecast when the Government took office—we are spending well over £100 billion a year on debt interest alone. This leaves us far more vulnerable to rising borrowing costs. The Government are also continuing to impose ruinously high taxes on our oil and gas sector and choosing to rely on imports instead of maximising our own domestic energy supply. That is proving to be an incredibly short-sighted approach. However, as the right hon. Lady has just told us, there will be no change in direction. That is the wrong choice. More broadly, of course, business confidence has hit record lows, and unemployment has risen back to pandemic levels. Our economy is weaker as a direct result of this Chancellor.
Last week, at the spring statement, the right hon. Lady had an opportunity to change course; instead, we got no action at all, just breathtaking self-congratulation and denial. She had a vital opportunity to come to the House with a plan to get the economy growing, but she did not do so—not least because this weak Government have caved in to their own Back Benchers, who prefer higher welfare spending to fixing our economy.
Today, let me reiterate our offer to support the Government if—even at this late stage, and particularly given the gravity of the current global outlook—they do the right thing by showing some backbone and coming forward with a proper plan to cut welfare spending and strengthen our economy so that we can properly support hard-working families through this difficult time. That is the very least that the British people deserve.
Finally, let me ask the right hon. Lady the following questions. Will she urgently reconsider her decision to implement the first increase in fuel duty in 15 years? Likewise, will she urgently reconsider her decision to continue with the crippling taxes being imposed on North sea oil and gas producers? On the Fingleton review on nuclear, can she clarify whether the Government are accepting all the recommendations, as Ministers previously committed to accepting?
Will the right hon. Lady give further details on what additional economic action is under consideration internationally if the conflict continues? What measures are the Government considering to support households in the event of a sustained period of higher prices, and what action is being considered as part of the Financial Secretary to the Treasury’s work to support those reliant on heating oil?
Are the Government tracking the Iranian regime’s illegal funding sources to ensure that UK financial systems are not facilitating funds that are being used to support repression? Will the right hon. Lady confirm that there is sufficient resource available in the special reserve so that our brave servicemen and women have the support that they deserve?
Rachel Reeves
I thank the shadow Chancellor for his questions. The Government believe that the best way that we can protect families and businesses from this conflict is through de-escalation. We heard nothing in the shadow Chancellor’s response about what the Conservatives’ view is on de-escalation. We believe that it is important that we get back to the negotiating table and do not escalate this conflict, but I am not sure that that is the view of the Conservatives.
We know that commitment to greater energy security can help guard against shocks. After inaction and delay from the Conservatives while they were in government for 14 years, this Labour Government are committed to investing in and building new nuclear. That is why we are backing Sizewell C and small modular reactors— neither of which were funded by the previous Government, but both of which were funded at the spending review, because this Government are backing Britain’s energy security. This Labour Government are backing the industries of the future, such as carbon capture and storage—not funded by the Conservatives, but funded in the spending review, because we back Britain’s energy security. Through the National Wealth Fund, we are investing in floating offshore wind and our docks—not funded by the Conservatives, but funded in the spending review, because we back Britain’s energy security.
In 14 years the Tories did nothing. They failed when we needed new nuclear. They stood by and allowed the loss of gas storage facilities at Rough. They failed to fix the broken planning system to enable us to build renewables, and they had an effective moratorium on onshore wind, which is the cheapest form of energy. We are taking a different approach in the interests of our economy and energy security.
On energy bills, I urge the shadow Chancellor not to scaremonger. The £150 cut to energy bills that I announced in the Budget will continue, as has been confirmed by Ofgem. We removed the failed energy company obligation scheme, and we removed a number of levies from bills. On heating oil, those conversations will happen this week, and we are working closely with MPs and colleagues in Northern Ireland to make sure that things are working well. The Minister for Energy at the Department for Energy Security and Net Zero met the heating oil sector on Friday and spoke this morning to the Competition and Markets Authority. There is not currently a problem with supply, but if Members have individual issues around supply, they should make sure that they get in contact with DESNZ.
The shadow Chancellor asked about fuel duty. Fuel duty would have risen by 8p if I had used the plans that I inherited from the Conservatives. We have had two Budgets in which the freeze on fuel duty was extended, and both times it was voted against by all Opposition parties. It is a little rich for the Tories now to say that they want to reduce fuel duty when they voted against Budgets that froze it.
On the energy profits levy, the shadow Chancellor must have a short memory, because he was in the Cabinet that introduced the energy profits levy. It was introduced for a reason. Windfall profits were being made by the energy companies and there was a need to help consumers with bills, which is exactly what we have done.
On the public finances, I am not sure the right hon. Gentleman listened to my statement last week or my statement today. The deficit has reduced from 5.3% to 4.2% of GDP. This is the first time in six years that the budget deficit has been less than 5% of GDP. In fact, in the 14 years that the Conservatives were in office, borrowing was higher than the G7 average; it is now lower than the G7 average, and it is coming down in every year of this Parliament. On inflation, I will not take any lessons from the party whose policy took inflation to more than 11%.
The right hon. Gentleman, as a former Work and Pensions Secretary, says that we should be spending less on welfare. Well, it would have been nice if he had done something about it when he was in charge. We are reforming the welfare system, which the Conservatives broke.
On Fingleton, we commissioned the Fingleton review because we are determined to build nuclear power, unlike the Conservative party. On oil reserves, we have reserves equivalent to 90 days of oil imports. As the G7 confirmed today, we will be making further announcements on that. On gas reserves, it was the Conservative party that closed the storage facilities at Rough. National Gas has confirmed today that our gas reserves are at a comparable level to last year and the year before that. The numbers that are being reported are utterly misleading, because gas comes from a number of sources—interconnectors, liquid natural gas and our storage facilities—so I would really rather the Conservative party did not scaremonger when people want certainty.
On money laundering, of course we have the very strictest rules. On the special reserve for defence, of course we will ensure that the Ministry of Defence has all the money it needs to provide support for our armed forces.
Madam Deputy Speaker (Caroline Nokes)
I call the Chair of the Treasury Committee.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
My right hon. Friend is right to focus on the cost of living and de-escalation in the middle east. I am pleased to hear her confirm again that there is money for the Ministry of Defence and access to the special reserve to deploy additional capabilities to the middle east. Can she give us a figure or a range for how much money the Treasury is providing to the Ministry of Defence to deploy?
Rachel Reeves
It would not be right to disclose that sort of information. As I said, we will provide all the support that is needed for our operations in the middle east.
Madam Deputy Speaker (Caroline Nokes)
I call the Liberal Democrat spokesperson.
Daisy Cooper (St Albans) (LD)
I am grateful to the Chancellor for advance sight of her statement, but it does not include a single concrete announcement, and in itself will not provide the reassurance that householders and businesses are looking for as they hear reports that energy bills are about to escalate. Last week, the Liberal Democrats asked the Chancellor whether she would consider scrapping the planned 1p increase in fuel duty, due in September. Will she confirm that that option is still on the table and has not been ruled out?
Last autumn, we Liberal Democrats called for a new energy security bank to roll out low-interest loans to households and small and medium-sized enterprises. We welcomed the Government’s warm homes plan in January, but will the Chancellor confirm that it could be extended from five to 10 years and that it will have a greater emphasis on home insulation? Could small businesses’ investment in energy-saving measures be excluded from business rates calculations?
In the long term, we need energy market reform. I urge the Chancellor and her Government to intervene to stop these unpredictable fluctuations in the gas market. We need urgently to develop a plan to delink gas and electricity prices, and move expensive old renewable subsidies from the renewables obligation to the much better and cheaper contracts for difference model.
I am glad that the Chancellor has written to the Competition and Markets Authority about keeping an eye on petrol pump prices, but last autumn I wrote to the Secretary of State for Business and Trade and asked him to instruct the CMA to investigate bad practices in the energy market that affect hospitality businesses and small businesses. The Federation of Small Businesses and UKHospitality have also asked for that investigation but, six months on, it still has not happened. Will the Chancellor please confirm that she will speak to the Secretary of State for Business and Trade?
Finally, on rural homes, we know that off-grid homes rely on oil, and they are already seeing prices go up as panic buying spreads. I am grateful that the Chancellor indicated that there will be a meeting on Wednesday. Will she confirm that an announcement will be forthcoming by the end of this week?
Rachel Reeves
The hon. Lady talks about energy security, but she has never once acknowledged her party’s failure when they were in government. In 2010, her then party leader Nick Clegg justified opposing new nuclear energy on the grounds that it would take until 2022 to become operational. Well, 2022 has been and gone, but what is here is another example of Britain paying a high price today for the choices of the Opposition parties.
I turn to the hon. Lady’s specific questions. We announced at the Budget that we will take £150 off bills—that will come in in April and continue until June—by taking the failed energy company obligation levy, over which the last Government presided, off bills. People on heating oil also use electricity in their homes and will benefit from reductions in their energy bills from April. As I said, the Financial Secretary to the Treasury will meet relevant MPs this week.
The hon. Lady walked with her colleagues through the Lobby to oppose the Budget measures, which included freezing fuel duties, so it is a bit rich of her now to say that she wants us to cut fuel duty. On ensuring that homes are properly insulated, at the spending review last year I announced £15 billion for the warm homes plan, which is focused on lower-income families.
The hon. Lady is absolutely right that contracts for difference are crucial in weaning ourselves off imported oil and gas. We are in a better place because of the CfD auctions we have been holding and the energy infrastructure we have been building, and which we can build because of the Planning and Infrastructure Act 2025, which Opposition parties opposed.
Finally, as I said in my statement, the Competition and Markets Authority has an important role in ensuring that markets are functioning properly on heating oil, on petrol forecourts and for small businesses. We will ensure that it fulfils that role so that people are not overcharged for the energy they use.
Bill Esterson (Sefton Central) (Lab)
I welcome the Chancellor’s commitment to giving us energy security by reducing our dependence on international fossil fuel markets and moving to clean energy instead. I also welcome what she said about her support for jobs and investment in the North sea, her commitment to protecting consumers through the warm home discount and the warm homes plan, and indeed the commitment she made in the Budget to take £117 off consumer bills.
My right hon. Friend rightly pointed out the dire record of Opposition parties on new nuclear—14 years in which they failed. Will she give a commitment that this Government will add to their already announced successes on Sizewell C and on small modular reactors, and give policy certainty to the industry through a fleet approach to both large-scale and small modular reactors?
Rachel Reeves
I thank my hon. Friend for that question. We have already signed off commitments to both Sizewell C—a publicly funded nuclear power station—and small modular reactors, which we will build with Rolls-Royce in north Wales. The purpose of the Fingleton review is to ensure that we can build those quickly and cheaply, as—more than ever—the current situation demands.
Sir Jeremy Hunt (Godalming and Ash) (Con)
When I was doing the Chancellor’s job, the Treasury rule of thumb was that a 20% increase in energy prices meant 1% more on inflation and 0.5% less on growth. The truth is that it is much too early to know whether the Chancellor will have to find £78 billion to help households with energy bills, as I had to do in 2022, but we do know that the world is much more dangerous and that there are big problems in our defence budget. I welcome the fact that the Government are now committed to increasing defence spending to 2.5% of GDP, but nearly two years on from when the previous Government made the same commitment, it is clear that that is not enough. Will she unblock the arguments between the Treasury and the Ministry of Defence and outline a timetable whereby defence spending increases to 3% of GDP and we are able to defend our interests in the middle east and our allies in Europe, as the whole House would wish?
Rachel Reeves
The right hon. Gentleman’s point about it being too early to tell the impact is really important. Of course we will take the necessary actions to protect consumers and businesses, but the most important thing we can do at the moment is to de-escalate the conflict and work with Lloyd’s of London and countries around the world to get those vessels flowing through the strait of Hormuz. That is absolutely key for containing the rises in energy prices.
On defence spending, the Conservative manifesto committed to getting to 2.5% by the end of the Parliament. We are going to get to 2.6% by April next year, and we have made further commitments to 3% and then 3.5%. Obviously, we have a spending review coming up next year where these decisions will be taken in the round.
Several hon. Members rose—
John Grady (Glasgow East) (Lab)
The root cause of this issue in Britain is our excessive reliance on gas. That is why consumers in Glasgow East pay much more for their energy. The Conservatives had an offshore wind auction with no bids and an onshore wind moratorium, and the SNP is against any new nuclear power stations. Does my right hon. Friend the Chancellor of the Exchequer agree that we must double down on nuclear and on onshore and offshore wind to attack the root cause of our energy costs?
Rachel Reeves
We are building new nuclear in England and we are building new nuclear in Wales. We would love to build new nuclear in Scotland, but that will be possible only with a Labour Government in Scotland. On renewables, auction round 7 was very successful, and auction round 8 will take place later this year. My hon. Friend is absolutely right: we need to wean ourselves off imported oil and gas and be more secure with our energy supplies here in the UK.
Dame Harriett Baldwin (West Worcestershire) (Con)
The Chancellor has announced today that she is not really making any changes at this point, and that she is calling for a de-escalation. What would she say to my rural constituent who uses heating oil and has a virtually empty tank after a long winter, and is facing a 100% increase in the cost of heating oil? I did not hear anything that would help that particular constituent.
Rachel Reeves
As the former Chancellor, the right hon. Member for Godalming and Ash (Sir Jeremy Hunt), said, it is too early to know the impact of this. The key is de-escalation and getting vessels flowing through the strait of Hormuz. The hon. Lady will have heard me say that heating oil is uniquely affected. People who use heating oil will get the benefits in their electricity bills, but I urge her to attend the meeting on Wednesday to put the case of her constituent to the Financial Secretary to the Treasury.
Ben Goldsborough (South Norfolk) (Lab)
I thank the Chancellor and Treasury officials for working closely with the Labour rural research group to discuss the heating oil troubles that we are facing right now, with prices going up by over 200% in some parts. Can she elaborate on what action will be taken with the Competition and Markets Authority to ensure that we are protecting our consumers from these price gouging effects?
Rachel Reeves
The point about price gouging is really important, and that is why we have today instructed the Competition and Markets Authority to ensure that heating oil and petrol retailers, for example, are not taking advantage of this situation to line their own pockets rather than thinking about the consumers they serve.
Chris Coghlan (Dorking and Horley) (LD)
This last week has underlined our perilous national security situation and the potential risks to growth. Does the Chancellor agree that now is the time to raise defence spending to 3% of GDP, perhaps funded by borrowing, along with our European and Canadian allies, to reassure the bond markets and to drive growth and protect our national security?
Rachel Reeves
I have huge respect for the hon. Gentleman, who is on the Treasury Committee, but his party has opposed every increase in taxes that we have brought in to better fund our public services, including higher defence spending. Like me, he will be looking at what is happening in the financial markets. I am not convinced that this is the time to unleash more borrowing on the markets. That is what Liz Truss tried, and look where it got us.
Luke Murphy (Basingstoke) (Lab)
I welcome the Chancellor’s statement, particularly the focus on energy security and our plan for home-grown clean energy. It has been astonishing since the election to hear that the Conservatives’ lesson from the Ukraine crisis was that we needed to be more dependent on international fossil fuels, after it cost us £78 billion, as the former Chancellor, the right hon. Member for Godalming and Ash (Sir Jeremy Hunt), just said. The Chancellor mentioned the electricity generator levy. Will she tell the House how and when that would be activated?
Rachel Reeves
The energy profits levy is still in place, and the higher prices go, the more windfall tax is paid. There is also the electricity generator levy, whereby if electricity prices go up because they are, in some cases, outside of contracts for difference and linked to gas prices, we will recoup money there. That is obviously important because if the situation goes badly, we will need to be able to better support consumers. That is why the EPL and the EGL were brought in in the first place, and why they are important parts of the architecture we have.
Sir Edward Leigh (Gainsborough) (Con)
When we are in the middle of a war, I am not sure that it achieves much to be overtly party political. The past is where we were; we are now in the present. Just to be helpful, I agree with the Chancellor on de-escalation and on defending our interests, not pursuing regime change, but the fact is that we have the highest energy costs in Europe. We are now in a crisis and potentially a war economy. I saw the Energy Secretary sitting next to her earlier. Whatever the good intentions on net zero, will she listen to the shadow Chancellor on North sea oil, because we are in this crisis now and have to meet it with every tool in the toolbox?
Rachel Reeves
The right hon. Gentleman is absolutely right. The best way to reduce prices for businesses and families in all our constituencies is to de-escalate and ensure that vessels can get through the strait of Hormuz, and that is our focus. But what this crisis, as well as Russia’s illegal invasion of Ukraine, shows us is that we have to wean ourselves off oil and gas. We are better placed now than we were when Russia invaded Ukraine because we get more of our electricity through contracts for difference than we did then, and we are less reliant on gas prices to set our overall energy prices, but this shows that we need to do more to invest in both nuclear and home-grown renewables so that we are not so reliant on imports. However, as I said in my statement, I met North sea oil and gas leaders last week to talk about how we can support them during this time to ensure that we have access to the reserves we need.
Jim Dickson (Dartford) (Lab)
I thank the Chancellor for her statement. It is vital for residents in Dartford and across the country that they know the Government have their back when it comes to fuel bills going forward. Does she agree that the economic stability she set out last week in the spring statement means that the economy and consumers are much less vulnerable to the price shocks coming from the middle east than they otherwise would have been?
Rachel Reeves
We are in a better position than we were when Russia invaded Ukraine for two reasons. The first is our macroeconomic situation. For the first time since 2019, our deficit is below 5% of GDP. It came down by 1 percentage point of GDP just this year, and the OBR has forecast that it will fall every year, which gives us a bit more of a buffer. Of course, I set out how the headroom against the fiscal rules—both the stability rule and the investment rule—had increased at the spring forecast compared with the Budget. The other way we are better prepared is that more of our electricity comes from contracts for difference, which are not linked to the volatile and rising gas prices. That means that bills will be less affected, but I come back to the point that de-escalation will have the greatest impact on my hon. Friend’s constituents in Dartford and people elsewhere in getting their bills down.
Kirsty Blackman (Aberdeen North) (SNP)
Families are already struggling with the ongoing cost of living crisis, and the Chancellor has failed to bring down energy bills in the way that was promised in the manifesto. As prices continue to soar and international events cause people real anxiety as they look on, people are struggling and feeling the squeeze from the cost of living more than ever before. Will she now recognise that this is a crisis for families and put in real support to help them through the cost of living crisis?
Rachel Reeves
With respect to the hon. Lady, on 1 April, energy prices will fall by an average of £117 thanks to the action that I took in the Budget, and will be frozen at that point until the end of June. As the former Chancellor, the right hon. Member for Godalming and Ash (Sir Jeremy Hunt), and other Members have said, the most important thing we can do now is de-escalate the crisis. If she really believes in energy security, she should back Labour’s plans to invest in nuclear energy, as well as the jobs that it would create in Scotland.
Gareth Snell (Stoke-on-Trent Central) (Lab/Co-op)
I welcome the Chancellor’s reiteration of the British industry supercharger scheme, but she will know that it helps only 10% of this country’s energy-intensive industry—electro-intensive industry in particular. The price per therm of gas is pretty much double what it was last week, so will she set out what help might be available for gas-intensive industry and for electro-industry that is not part of the supercharger scheme? Although we all hope that de-escalation comes, if it does not, will she meet the energy-intensive industries impacted by gas prices to see how they can be given immediate relief?
Rachel Reeves
I thank my hon. Friend for that important point. Five-hundred businesses will benefit from an increased discount through the supercharger, taking it from 60% to 90%, from April. Next April, the British industry competitiveness scheme comes in, and it will benefit around 7,000 businesses. Of course, we will continue to consider how we can support our energy-intensive industries if the situation in the middle east continues.
John Glen (Salisbury) (Con)
Given that it was promised at the start of June last year, when will the Chancellor sign off on the defence investment plan?
Rachel Reeves
I have huge respect for the right hon. Gentleman and the time he spent at the Treasury. As he knows, the previous Government committed to reaching 2.5% by the end of this Parliament. We are committing to bringing that forward, and by April next year we will be spending 2.6% of GDP. We will set out the defence investment plan based on our strategic defence review. Of course, the previous Government did not even bother to do a strategic defence review.
Sam Rushworth (Bishop Auckland) (Lab)
Constituents in Weardale, Teesdale and Gaunless valley are already paying double what they would have paid for their heating oil a week ago, and some of them simply cannot afford to fill up their tanks. Thanks to the fiscal headroom that the Chancellor has created, there is money in the system to support them, so will she consider fixed-term payments in the short term, and an expansion of the warm homes local grant in the long term, to help people to transition to cheaper forms of fuel?
Rachel Reeves
As I set out in my statement, we put £15 billion into the warm homes plan at the spending review last year, to better insulate people’s homes and help them to move to cheaper forms of energy. However, I recognise the immediate problems relating to heating oil, which is why I have asked the Competition and Markets Authority to consider price gouging, and why the Financial Secretary to the Treasury will meet MPs on Wednesday. I hope that my hon. Friend will be there on behalf of his Bishop Auckland constituents.
Sarah Dyke (Glastonbury and Somerton) (LD)
Since the outbreak of the conflict in the middle east, heating oil prices have increased by over 100%. That is a harsh reminder that relying on volatile fossil fuel markets leaves households financially vulnerable. Many rural households are off the gas grid, so constituents such as Julian from East Lambrook are not protected by the energy price cap. Does the Chancellor agree that that is unfair on rural communities, and will she take steps to develop a mechanism to protect those householders from damaging global fossil fuel price shocks?
Rachel Reeves
Almost every household uses electricity to turn on the lights. They will benefit from some of the changes that will come in on 1 April. Some 4% of households in Great Britain, and more than 60% in Northern Ireland, rely on heating oil. We recognise the unique situation here. The increase in the price in the past few days does not reflect market conditions, which is why we have asked the Competition and Markets Authority to look urgently at extortionate prices. We are also ensuring that supply remains stable. Enough heating oil is available, and we do not want people to be priced out of it.
Matt Rodda (Reading Central) (Lab)
I welcome the Chancellor’s statement and thank her for her work to reduce dependence on fossil fuels. Will she say a little more about her long-term work to increase grid capacity and change the planning system to help invest in new nuclear and solar?
Rachel Reeves
We made changes to the national policy planning framework a few days into this Government, and at the end of last year we passed the Planning and Infrastructure Act 2025, which makes it easier to build a range of infrastructure from housing to data centres and, crucially, energy infrastructure. That Act was opposed by the Opposition parties, who need to explain why they are against building the grid connections that will help us to benefit from cheaper energy.
Martin Vickers (Brigg and Immingham) (Con)
I agree with the Chancellor that de-escalation is desirable, but this conflict is likely to go on for many months. She talks about reducing our reliance on fossil fuels, which I agree with, but businesses are operating in the here and now, and they want reassurance. Forget the 500 businesses that will benefit from the supercharger scheme; what message can she give to medium-sized businesses that are very concerned and are having to lay off staff?
Rachel Reeves
I recognise the concerns about businesses. As well as the supercharger, the British industrial competitiveness scheme is coming in next year, and we are monitoring the situation carefully to see what else might be necessary. De-escalation is so important. There is no reason why this conflict has to go on for months and months—nobody wants that, it is in no one’s interest, and we must quickly get vessels flowing through the strait of Hormuz. That is why I am meeting Lloyd’s of London later today, to work through what insurance products can be introduced, and it is why G7 Finance Ministers talked on the call this afternoon about how we can guarantee the safety of vessels flowing through the strait.
Perran Moon (Camborne and Redruth) (Lab)
Tens of thousands of homes across Cornwall are still totally reliant on heating oil, so I am delighted that the Chancellor has confirmed that the Financial Secretary to the Treasury will be meeting rural MPs, whose constituents are disproportionately affected by the crisis. Does she agree that in order to accelerate away from a fossil fuel-led economy, the British Business Bank, National Wealth Fund, and Great British Energy need to take a more dynamic attitude to risk when supporting renewable energy projects?
Rachel Reeves
I thank my hon. Friend for that question, and the group of rural Labour MPs for contacting me over the weekend with their stories and suggestions. That is why the Financial Secretary to the Treasury will be meeting MPs on Wednesday this week. The National Wealth Fund and British Business Bank are already investing heavily in renewables, and we increased their budget for them to do so. I also recognise the important opportunities in Cornwall, not just the South Crofty tin mine in my hon. Friend’s constituency, but other energy projects, including geothermal energy, and I have asked the National Wealth Fund to look again at those opportunities.
Robert Jenrick (Newark) (Reform)
The British people are being clobbered. The Chancellor could have come here today and scrapped her hike in fuel duty. She could have come here, ended the insanity, and got drilling again in the North sea. Instead, she offered nothing—absolutely nothing. This crisis deserves a proper response. When will she finally understand that for now at least she is the Chancellor, not just a bystander?
Rachel Reeves
The freeze in fuel duty—Reform opposed it. The energy profits levy—the right hon. Gentleman introduced it when he was in the Conservative Government. I will take no lectures from him and the Tory tribute act sitting up there.
Torcuil Crichton (Na h-Eileanan an Iar) (Lab)
I thank the Chancellor for her statement, for her support for the armed forces, and for acknowledging the anxiety of constituents abroad. Closer to home—at home, in fact—half of my constituents in Na h-Eileanan an Iar outside the town of Stornoway rely on heating oil to heat their homes. They face great uncertainty, with no guarantee of delivery, or of price on delivery. I hear what Money Saving Expert Martin Lewis fears regarding price gouging and price rises, so I welcome Treasury talks and hope that they will lead to further scrutiny and regulation of this unregulated industry. Otherwise, I will have to introduce the Financial Secretary to the Treasury to the old Lewis tradition of cutting peat for winter fuel.
Rachel Reeves
I recognise that my hon. Friend’s constituents will be affected more than most by worries about the delivery and price of heating oil. That is why I have instructed the Competition and Markets Authority to look at price gouging and why the Financial Secretary to the Treasury will be meeting my hon. Friend and other concerned MPs on Wednesday this week.
Tom Tugendhat (Tonbridge) (Con)
Will the decisions that the Chancellor is making about the strategic reserve being used for defence include consideration about the availability of funding for the Royal Navy to prepare warships to go to sea? There has been rumour over the past few days that one reason why one of His Majesty’s ships is not ready is that the contractor is still working 9 to 5. Will she be able to fund this properly, so that all ships are available as quickly as possible?
Rachel Reeves
I can confirm that there are no financial impediments to warships going to the middle east. Money is available through the special reserve for personnel and contracts for all our operations in the middle east.
Alex Baker (Aldershot) (Lab)
As the Member of Parliament for the home of the British Army, I thank the Chancellor for her support for our armed forces. My constituency is also home to innovative defence and aerospace businesses, many of which are ambitious to expand and to play their part in strengthening our national security, but that depends on being able to access the investment that they need to scale up. Will the Chancellor reassure those businesses in my constituency that this Government will continue to work closely with the financial sector to ensure British defence and advanced manufacturing companies can access the capital that they need to invest, grow and create good, skilled jobs here in the UK?
Rachel Reeves
As my hon. Friend knows, we have increased the funding available to both UK Export Finance and the National Wealth Fund to invest and support our defence industry. I also support the work that she and my hon. Friend the Member for York Outer (Mr Charters) are doing in ensuring that the financial services sector also lends to defence businesses, including scale-up businesses.
David Chadwick (Brecon, Radnor and Cwm Tawe) (LD)
Almost two thirds of homes across Brecon, Radnor and Cwm Tawe are dependent on heating oil, the price of which is now surging thanks to Donald Trump’s decision to bomb Iran. Will the Chancellor reassure my constituents that help will be on the way from the Government?
Rachel Reeves
The meeting with the Financial Secretary to the Treasury will be open to all MPs and is taking place on Wednesday this week, and I urge the hon. Gentleman to attend that meeting. We are aware of the unique situation with heating oil. That is why I have instructed the Competition and Markets Authority, but I am also keen to hear directly from MPs.
Mr Calvin Bailey (Leyton and Wanstead) (Lab)
The impacts of this spiralling conflict are serious and will fall on our constituents’ pockets, so I welcome the Chancellor’s statement and the measures that she has set out. Yet last week, the hon. Member for Clacton (Nigel Farage) was in the United States attempting to lobby against our national interests—with a comical lack of success. Does my right hon. Friend agree that the impact on living costs can only be compounded by continued, deeply unpatriotic interventions by Members of Reform UK?
Rachel Reeves
I thank my hon. and gallant Friend for his question and for his contribution to the debates last week. He knows how important it is to de-escalate, because it is our armed services personnel who would be at the frontline of any escalation of the crisis. De-escalation is also in the interests of all our constituents, whether because of heating oil, the price paid at petrol pumps or mortgage rates. That is why this Government are putting all our diplomatic efforts into de-escalating this crisis and reopening the strait of Hormuz.
Simon Hoare (North Dorset) (Con)
As heating oil and petrol prices go up in rural North Dorset, my constituents are hearing the Chancellor echo one of her predecessors in effectively saying, “Crisis? What crisis?” She needs to actively get a grip on this issue. Motorists in rural areas use their cars because they have to. The vast majority of my constituents are off grid and have no alternative to keep warm other than using heating oil. This is a crisis in costs taking place today that meetings with and letters to the CMA will not help or address. She has mentioned that this meeting has been organised on Wednesday and that invitations have gone out for it. [Interruption.] We do not need the hon. Member for Swansea West (Torsten Bell) gesticulating like some—
Rachel Reeves
I have huge respect for the hon. Member. As the former Chancellor of the Exchequer, the right hon. Member for Godalming and Ash (Sir Jeremy Hunt), says, it is too early to know what the impact of this crisis will be. That is why I met with G7 Finance Minister colleagues today, which I am sure the hon. Member for North Dorset (Simon Hoare) welcomes. We discussed the release of the International Energy Agency’s strategic oil reserves, for example. What is needed to contain prices for all our constituents is to ensure that we have the oil and gas on the market that we need. That is why we are prioritising diplomatic routes to de-escalate this crisis.
Jonathan Davies (Mid Derbyshire) (Lab)
I thank the Chancellor for her statement, because this is a worrying time for not just our national security, but our economy. I am pleased to hear about the work going on with the Competition and Markets Authority in respect of consumers of heating oil, but may I suggest that she has a conversation with her colleagues in the Department for Energy Security and Net Zero to expedite the £1 billion-worth of community energy investment coming through the local power fund and focus it as quickly as possible into rural areas such as mine in Derbyshire? If this is going to be a protracted conflict, that could make a difference.
Rachel Reeves
In the spending review last year, I put in £1 billion for the community investment fund in local energy schemes to ensure that communities are more self-reliant for their basic energy needs. That is the lesson from Russia’s invasion of Ukraine, and it is also the lesson from this conflict in the middle east. We need to be more resilient and secure as an economy, and that is exactly what we are doing.
Dr Ellie Chowns (North Herefordshire) (Green)
The Iran crisis highlights the urgent need to speed up the UK’s energy system transition to clean, green, cheap renewables and energy efficiency. The last time that energy prices went through the roof due to illegal international aggression, in 2022, normal people paid the price while huge energy giants raked in billions of pounds in windfall profits. Will the Chancellor guarantee that in responding to this crisis, she will do everything possible to protect ordinary households and ensure that no energy company makes profits from this war?
Rachel Reeves
The reason we have the energy profits levy and the electricity generator levy is to ensure just that. If the hon. Lady is really serious about energy security and investing in low-carbon energy, I really do not understand why her party opposes planning reforms so that we can build grid infrastructure, as well as both small modular reactors and new nuclear in Suffolk. All those things add to our energy security and reduce our reliance on fossil fuels. Why do the Greens oppose them?
Tom Hayes (Bournemouth East) (Lab)
I respect the Conservatives who are calling for de-escalation, but they need to have a word with their leader, who wanted to sign Britain up to a war of choice with changing goals and no clear timescales, thereby contributing to the chaos and the worsening cost of living crisis. The Chancellor has a plan, and we are seeing inflation, interest rates and Government borrowing falling as a result. Will she commit to keeping to that plan to keep bringing down borrowing so that the country can live more within its means and get rid of the awful inheritance left by the Conservatives?
Rachel Reeves
Last week’s spring forecast from the Office for Budget Responsibility showed inflation coming down, borrowing coming down and debt coming down. Our economy is fundamentally strong, but we all need to see a de-escalation of this conflict and the reopening of the strait of Hormuz to ensure that our constituents continue to benefit from falling energy bills and falling interest rates. That is why we are so focused on the diplomatic efforts.
Sir Oliver Dowden (Hertsmere) (Con)
As the Chancellor has repeatedly said, at the root of the current economic crisis lies the closure of the strait of Hormuz. What conversations have the Government had with the Trump Administration, both about insurance and, more importantly, about deploying UK military assets to secure the reopening of the strait? Does she agree that a more robust approach might reassure our friends and allies in the Gulf who invest so much in the United Kingdom? Our presence there has been notable by its absence.
Rachel Reeves
There are two things that are needed to effectively reopen the strait. The first is security for vessels passing through it, which will require cross-country action involving the US, of course, but also the UK and France. We all stand ready to do that, and that was one of the things we discussed on our G7 Finance Ministers’ call today. Once that is provided, we also need to ensure that appropriate insurance products are in place, and we are working on that with Lloyd’s and the US Administration. We are the global leader in maritime insurance, so we have an important role to play to ensure those vessels are properly insured once they start to move again.
Josh Newbury (Cannock Chase) (Lab)
The Chancellor has taken decisive action to bring down energy bills, but as she noted, those who rely on heating oil are often the most exposed to sudden price shocks. Even in my fairly urban constituency, there are hundreds of households in that position, and some of them have been on touch with me because the cost of heating oil has doubled in a week due to the effect of the Iran conflict. As the Chancellor works to shield the British public from the economic fallout, will she ensure that our households on heating oil are protected from the shocking increases we are currently seeing?
Rachel Reeves
It is important that the players in the heating oil sector behave responsibly and do not seek to profiteer from the current conflict. It is their customers who will lose out, which is why we have instructed the Competition and Markets Authority to guard against price gouging. I know that my hon. Friend will attend the meeting with the Financial Secretary to the Treasury on Wednesday to make those representations, but the best thing we can do is de-escalate and get those vessels moving, in order to get that oil and gas flowing.
Helen Morgan (North Shropshire) (LD)
One in three households in North Shropshire are dependent on heating oil—I declare an interest, because mine is one of them. Since last week, people have been in contact with me, concerned about the rapid escalation of heating oil costs. I welcome the Chancellor’s announcement that she recognises that problem and wants to act on it, but can she outline in more detail what kind of remedy she envisages and how soon it might be put in place?
Rachel Reeves
I said in my statement that despite what we did in last year’s Budget to take £150 off domestic energy bills, there is a unique situation with regard to heating oil. That is why I was pleased to receive representations on that topic over the weekend—the Treasury is working through those proposals—and it is why the Financial Secretary to the Treasury will meet MPs this week. The reason prices are going up, though, is the challenges in getting oil and gas out of the middle east. That is why it is so important to de-escalate, but it is wrong for anyone to profiteer off the back of this crisis.
Mr Luke Charters (York Outer) (Lab)
Many of my constituents stranded in the middle east have been left out of pocket because of their travel insurance. In my view as a former regulator, those policies have overly broad exclusion terms. Will my right hon. Friend update the House on her meetings with the insurance sector, the Financial Conduct Authority and consumer groups, and will the City Minister meet me to discuss this issue?
Rachel Reeves
I am sure that the relevant Minister—whether that is a Minister in the Department for Transport or the Economic Secretary to the Treasury—will meet my hon. Friend. It is important that everybody who wants to get home from the middle east is able to do so. We welcome the work that airlines are doing with the support of the Government to get people home, but it is also important that people are not ripped off for that.
Harriet Cross (Gordon and Buchan) (Con)
For months now, we have heard the Chancellor and other Government Front Benchers saying that we will be using oil and gas for years to come. Of course we will—no matter how much they want to wish it away, we will be using oil and gas for years to come, so we must secure our supply. In her meeting this morning with G7 Finance Ministers, did any of them say that banning new oil and gas licences in the North sea was a good idea? Are any of them banning themselves from accessing their own energy resources?
Rachel Reeves
It was, of course, the hon. Lady’s party that introduced the energy profits levy in the first place, and it did so for a good reason. Many of the questions today have been about the impact on prices, and the way that support was given to consumers during the Russia-Ukraine crisis was through money from the energy profits levy being used to subsidise people’s bills. That is why we have the energy profits levy.
Dave Robertson (Lichfield) (Lab)
I thank the Chancellor for her statement. She is absolutely right to take the action that she has on energy prices, particularly given that 20% of the world’s oil is transported via the strait of Hormuz. The strait of Hormuz also transports more than a third of the world’s urea, almost half its sulphur, and a significant amount of ammonia. What steps is the Chancellor taking to protect our farmers from spiking fertiliser prices at the same time as energy prices are rising?
Rachel Reeves
We are working closely with the Department for Business and Trade and the Department for Environment, Food and Rural Affairs, as well as business, to understand the different parts of industry that will be affected by protracted conflict. That is just another reason why it is so important to de-escalate. That is exactly what we are seeking to do, and it is also why we are working with G7 allies focused on reopening the strait of Hormuz, because that is the best thing we can do to bring down prices and ensure that supply continues to flow.
Sorcha Eastwood (Lagan Valley) (Alliance)
I welcome the Chancellor’s statement this afternoon. As she has outlined, Northern Ireland is uniquely exposed, with up to 70% of people across Northern Ireland reliant on home heating oil. Instead of meeting me, does she have plans this week to meet the Minister for the Economy and my ministerial colleagues in the Northern Ireland Executive to see how we can best support our people?
Rachel Reeves
It is important to understand the extent of the impacts on Northern Ireland. When we made the announcement in the Budget, we made money available for Northern Ireland to have its own scheme, recognising the slightly different energy market there. The Financial Secretary to the Treasury, who is leading on this work at the Treasury, will meet his opposite numbers in the Northern Ireland Executive to ensure that we understand the challenges there and what we can do to best support people.
Tony Vaughan (Folkestone and Hythe) (Lab)
I thank the Chancellor for her statement, which underlines the importance of new nuclear to boost our energy security. Many of us who back new nuclear also care deeply about nature. Dungeness in my constituency is both a nationally important habitat site and a vital location for new nuclear. Does the Chancellor agree that we urgently need a reformed framework for habitat protection—along the lines proposed by the Fingleton review—so that we can safeguard the environment and welcome new nuclear back to places such as Dungeness?
Rachel Reeves
I thank my hon. Friend for his pragmatic approach. We will be responding to Fingleton in the next few days and then legislating as quickly as possible to make it cheaper and quicker to build the energy infrastructure that we know we need.
Sir Alec Shelbrooke (Wetherby and Easingwold) (Con)
Defence industry supply chains are desperately in need of the defence investment plan. The Chancellor talks about the money being invested, but why is the Treasury not allowing the DIP to go forward? It is starting to become critical, and we need that infrastructure. The Secretary of State is desperate for that infrastructure. We need to know when it is coming forward. They are the Government’s self-imposed deadlines, nobody else’s.
Rachel Reeves
We published the strategic defence review earlier this year, and in the spending review last year, the biggest uplifts in spending were at the Ministry of Defence and the Department of Health and Social Care. The previous Government said that they would get to 2.5% at the end of the next Parliament. We will get to 2.6% by April next year, and that money is already being spent. The right hon. Gentleman does not need to worry about that.
Baggy Shanker (Derby South) (Lab/Co-op)
My constituents in Derby will be worried about the devastation that they see across the middle east, and they will agree that de-escalation must remain a priority. They are also worried, though, about the impact on their weekly shopping bills, petrol prices and energy bills. Does the Chancellor agree that stability for our businesses and local people is vital, given the volatility we are seeing internationally?
Rachel Reeves
I am pleased that since I became Chancellor, the Bank of England has cut interest rates six times, and we have been able to take £150 off energy bills and freeze prescription charges and rail fares. My hon. Friend’s constituency contains Rolls-Royce, which will benefit from small modular reactors and also from the increased defence spending that is already going in.
Ben Lake (Ceredigion Preseli) (PC)
Some 72% of households in my constituency have no connection to the mains gas grid. For those who filled their tanks over the weekend, the consequences of the Iran crisis have become very real, and those who are still to do so are anxious to learn when any potential support that may be agreed on Wednesday will be provided.
Rachel Reeves
I recognise that there are significant challenges in some areas of Wales, as indeed there are in Northern Ireland, and I urge the hon. Gentleman to attend the meeting with the Financial Secretary to the Treasury. We have already had representations over the weekend about what is needed, and I want Members in all parties to be able to contribute to that, but the best way to reduce prices is to get that oil and gas flowing again, which is why it is so important to secure not only a military solution to get the strait of Hormuz open but an insurance solution, and I am working closely on that at the moment.
Several hon. Members rose—
Spring Forecast
Rachel Reeves Excerpts(1 month, 3 weeks ago)
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The Chancellor of the Exchequer (Rachel Reeves)
This Government have the right economic plan for our country, a plan that is—[Interruption.]
Mr Speaker
Order. Look, both sides, if you are not interested, you don’t have to stay in the Chamber. I am interested, my constituents are interested, and your constituents are interested as well.
Rachel Reeves
A plan that is even more important in a world that has become yet more uncertain in the last few days. With unfolding conflict in Iran and the middle east, it is incumbent on me and on this Government to chart a course through that uncertainty, to secure our economy against shocks and to protect families from the turbulence we see beyond our borders.
I want to express my gratitude to members of our armed forces as they serve across the globe to protect our country. I want to reassure this House that I am in regular contact with the Governor of the Bank of England, with my international counterparts and with key affected industries, including our maritime sector. Tomorrow I will meet our North sea industry leaders to discuss the implications they face and work with them to manage this uncertain period.
In an increasingly dangerous world, I am proud to be the Chancellor that is delivering the biggest uplift in defence spending since the cold war, with £650 million committed in January to upgrade our Typhoon fighter jets, a new Royal Navy frigate launched from Rosyth last week and, just yesterday, our £1 billion helicopter deal with Leonardo.
I am in no doubt about Britain’s ability to navigate the challenges we face. The plan that I have been driving forward since the election is the right one: stability in our public finances, investment in our infrastructure, including our armed forces, and reform to Britain’s economy. It is a plan to reshape our economy and break with the failed ideas of the past: building growth on not just the contribution of a few people in a few places, but in every part of Britain, with a state that does not stand back but steps up; strengthening our trading relationships and our alliances; creating capacity in our economy through affordable housing, better transport and free childcare; and being an active and strategic state, building growth and economic security in an uncertain world.
Stability is the single most important precondition for economic growth. That is why we have committed to a single major fiscal event a year, limiting major policy changes to the Budget, and giving businesses and households the certainty they need. Today the new forecasts from the Office for Budget Responsibility show that our plan is the right one: inflation is down; borrowing is down; living standards are up; and the economy is growing.
This Government have restored economic stability. The previous Government allowed inflation to skyrocket to over 11%, stoked interest rates to 15-year highs and delivered the first Parliament on record where people were poorer at the end than at the start. That is the Conservatives’ record, and I recognise the impact it had on families. We promised change at the election, and I understand the responsibility on me to deliver that change. I know that the question that people will ask themselves at the next election is, “Are me and my family better off?” I am determined that the answer will be yes.
The change we promised has already started: there have been six cuts in interest rates since the general election—the fastest pace of reduction in 17 years—and inflation has fallen. For businesses, that means lower capital costs and greater certainty, and for families, it means more money in their pockets to spend in local shops and on the high street. Those interest rate cuts will save households over £1,300 a year on a typical new fixed-rate mortgage. Real wages have risen by more in the first 18 months of this Labour Government than in the first 10 years of the Tory Government.
At the Budget, I went further to deliver the change that people rightly demand. I extended the 5p cut in fuel duty for a further five months, froze prescription charges for the second year in a row and froze rail fares for the first time in 30 years, and I am taking £150 off energy bills from next month. In February, the Bank of England confirmed that inflation will fall faster because of the action I took at the Budget, and today the Office for Budget Responsibility expects inflation to come down even faster than it forecast in the autumn.
In the current global context, with the risk that rising energy prices will put upward pressure on inflation, the action that I have taken is even more crucial. Keeping inflation low and stable is the best way to support family incomes and reduce pressures on the cost of living.
But that is not all we have done: this Labour Government have funded 30 hours of free childcare for working families; we are rolling out free breakfast clubs at primary schools; and we are set to achieve the biggest reduction in child poverty over a Parliament since records began by reversing the shameful two-child limit imposed by the Conservatives. That is the moral choice, for the children who will no longer go to school hungry and for the women who will no longer suffer the grotesque indignity of the rape clause. Scrapping the two-child limit is an enduring investment in our children and in our future to realise the potential of young people that would otherwise be wasted.
The Tories have said that they would reinstate that destructive policy, and now Reform is saying exactly the same thing—two parties united in their intention to plunge nearly half a million children back into poverty at a single stroke. If you import failed Tory politicians, you get failed Tory policies too. Labour—and only Labour—has the right economic plan for our country. [Hon. Members: “More!”]
Last year, we demonstrated the resilience of Britain’s economy in the face of global headwinds with the fastest growth of any G7 country in Europe. Today the Office for Budget Responsibility has updated its growth forecasts, including reflecting lower net migration. Average growth across the forecast period is largely unchanged, while the OBR has adjusted the profile of GDP so that it grows slightly slower in 2026—[Interruption.] And then faster in both 2027 and 2028. GDP is forecast to grow by 1.1% in 2026, 1.6% in both 2027 and 2028 and 1.5% in both 2029 and 2030.
I have always said that growth is for a purpose—to make working people better off. I can confirm that GDP per person is set to grow more than was expected in the autumn, with growth of 5.6% over the course of this Parliament. That compares with a fall in GDP per capita in the last Parliament. By the next election, after accounting for inflation, people are forecast to be £1,000 a year better off. [Hon. Members: “Hear, hear.”] I did not hear the Opposition that time!
We promised change, and we are delivering that change. The economy is growing, living standards are rising and inflation has fallen, but I am not satisfied with those forecasts. I know that the economy is not yet working for everyone and that the deep economic scars left by the Conservative party and their mates in Reform are still blighting the lives of too many people.
In today’s forecasts, unemployment is set to peak later this year and then fall in every year of the forecast period, ending at 4.1%, which is lower than it was at the start of the Parliament. However, young people in particular are still suffering from the aftermath of years of Tory mismanagement. In the last five years of the previous Government, the number of young people not in education, employment or training increased by 113,000. The number of inactive young people reached record highs under the Conservative Government, and over the last decade, apprenticeship starts by young people fell by 40%.
This Government will not leave an entire generation of young people behind. We are already taking action to prioritise young people with additional investment to reform apprenticeships and through the £820 million youth guarantee, providing young people with employment support and a guaranteed job. In the coming weeks, I will set out more reforms to undo the Tory legacy of neglect, and give young people the support and the opportunity that they deserve.
In the face of global uncertainty, we beat the forecasts last year. In the year ahead, the choices that we are making give me confidence that we will beat them again. In the year ahead, more of the choices that we have already made will come into effect: discounts on business energy costs; trade deals with India, the US and the EU; reforms to back our entrepreneurs; investment in our infrastructure; skills funding for further education; and more planning reforms—progress opposed by the Conservatives, opposed by Reform, opposed by the Liberal Democrats, and opposed by the Green party too. It is Labour and only Labour that has the right plan for our country.
Our plan for growth is grounded in a profound rejection of the failed economic dogmas of the past—the trickle-down, trickle-out thinking that produced ever-diminishing returns for working people. I know that an economy cannot be working if it is delivering for only a few people in a few places; I know that it matters where things are made and who makes them; and I believe that the working people who keep our country moving deserve a fair day’s pay for an honest day’s work.
Since the election, I have been making the big choices that will bring about the deep structural changes that our economy needs so that it works again for working people: the choice to take on vested interests and back the builders, not the blockers; the choice to increase public investment and protect our public finances with new fiscal rules; and the choice to give people in all parts of our country the opportunities that they deserve by reforming the Treasury spending rules in the Green Book to unlock investment in all of our urban, rural and coastal communities. Those are the right choices for our country—for security, stability and growth. Today’s forecasts from the Office for Budget Responsibility show that they are starting to pay off. I am clear-eyed about where the opportunities for the British economy lie in this Parliament and beyond.
In my second Mais lecture in two weeks’ time, I will set out three major choices that will determine the course of our economy into the future: to go further in strengthening our global relationships, breaking down trade barriers and deepening alliances with our European partners for a more secure and connected economy; to go further in backing innovation and harnessing the power of AI, so that entrepreneurs and innovators thrive here in Britain, and so that working people reap the rewards; and to go further in transforming our economic geography so that we can build growth on a broad and stable basis, spreading opportunity and unlocking opportunity in every part of Britain.
I came into politics because I believe in Governments who stand up for working people; that everyone, no matter where they grow up, deserves security and a fair chance to achieve their potential; and that being able to manage the bills, afford a home and pay for a holiday should never be too much to ask. When Governments lose control of the economy, as the Tories did, it is working people who pay the price—in their pay packets, in their bills and in their mortgages.
That is what the Conservatives inflicted on working people over 14 years. We had austerity, which cut off investment; Brexit, which cut us off from our closest trading partners; and Liz Truss’s disastrous mini-Budget, cheered on by the Leader of the Opposition and by the hon. Member for Clacton (Nigel Farage)—oh, he’s not here today. [Laughter.] Five Prime Ministers, seven Chancellors, and 11 plans for growth, and at the end of it all, it was the only Parliament on record where living standards were worse at the end than they were at the start, and there was a £22 billion black hole in the public finances. That is the Conservatives’ legacy.
And make no mistake, the Tory tribute act on the Reform UK Benches would do exactly the same thing. They may have changed the colour of their rosettes, but the British people will not forget that they are the exact same people who wrecked our public services and our public finances in the Tory Government—the same people, the same policies, and the same disastrous outcomes for working people.
The Tories left our country, our people and our allies exposed. They had no plan and no intention to fund their pledge to spend 2.5% of GDP on defence. Reform UK would go one step further, by ditching our allies and siding with Russia, while the Green party wants to take us out of NATO and jeopardise our alliances. Green Members are shaking their heads. I do not know if they have changed their policy, but it was to take us out of NATO. Let me be clear: it is Labour and only Labour that can provide social justice, national security and fiscal responsibility.
In its forecast today, the Office for Budget Responsibility shows that we are set to reduce borrowing by nearly £18 billion compared with the autumn. This year we are set to borrow less than the G7 average—something that the Tories never achieved in any of their 14 years. The forecast today shows that public sector net borrowing is set to fall from 4.3% this year to 3.6% next year, then to 2.9%, 2.5% and to 1.8% in 2029-30. Even after funding other measures announced since the Budget, including the new special educational needs system that was set out by my right hon. Friend the Education Secretary last week, headroom against the stability rule in 2029-30 has increased from £21.7 billion to £23.6 billion, and headroom against the investment rule is also higher at £27.1 billion. Debt is now set to be lower in every year of the forecast compared with the autumn. It is because of the choices that I have made to keep our public finances stable and restore our credibility that we can invest in the priorities of working people. That means investment in our communities with Pride in Place; investment in our schools to fix crumbling classrooms and give every child the education that they deserve; and investment in our NHS, to bring waiting lists down and with a record cash settlement.
I have never accepted that we have to choose between social justice and fiscal responsibility, because there is nothing progressive, nothing Labour, about spending £100 billion a year—that is £1 in every £10 of what the Government spend—just paying the interest of the debt racked up by the Conservatives. After their disastrous mini-Budget, our debt interest rate soared towards the highest in the G7. From my Budget to this forecast, while average yields rose for the rest of the G7, yields on UK Government debt fell. The Tories squandered Britain’s credibility. My plan is rebuilding it.
Already, because of the action that I have taken, we are expected to spend nearly £4 billion less on debt interest next year than was forecast in the autumn. If we stay the course and stick to our plan, and our debt interest returns to the G7 average—where it was before the Conservatives wrecked things with Liz Truss’s mini-Budget—we will have £15 billion a year more for the priorities of working people and to make working people better off. That is the prize on offer. That is the prize within our grasp.
This is the right plan—a plan that is more necessary than ever before in a world of uncertainty. It is a plan for a stronger and more secure economy; inflation and interest rates falling; resilient public finances; and in every part of Britain working people better off. Every additional patient treated in an NHS hospital, every child lifted out of poverty, and every breakfast club in every school is because of the choices that we have taken and because I have the right plan for our country.
Let this House be in no doubt: every pound that we have invested, every pound in the pockets of working people, and every pound that we have secured in this forecast today can be wiped out by a change of course. We must reject a return to austerity, protect our public services and invest in Britain’s future. We must reject the temptation of easy answers and reckless borrowing, protect family finances and get the cost of living down. We must reject the political instability that would put at risk all the progress that we have made.
My plan is the right one. I am in no doubt about how great the rewards can be if we stay the course. The forecast today confirmed that the choices this Government have made are the right ones: stability in our public finances, interest rates and inflation falling, living standards rising, more children lifted out of poverty, more appointments in our NHS, more investment in our infrastructure, a growing economy, and more money in the pockets of working people. These are the right choices, this is the right plan, and I commend this statement to the House.
Sir Mel Stride
Our borrowing is even higher than Greece’s. Indeed, if debt were a Department, it would be the third largest spending Department in Whitehall. That is money not going on the people’s priorities, but simply being flushed down the drain. The right hon. Lady puts great store in the latest forecasts on debt and says that it is coming down, compared with the forecasts back in the autumn, but if we strip away her dodgy definition of debt, we can see that it will be going up in just about every year of the forecast period.
The right hon. Lady has the audacity to praise her own performance. She points to growth, but does she not know that, only last month, the Bank of England downgraded growth for both this year and next year? A moment ago, she said that the Government had beaten the forecasts for growth from last year. The forecast at the beginning of last year was for 2% growth, but the growth outcome at the end of last year was 1.3%. By my mathematics, that is not an improvement. It should be of considerable concern to the entire House that the right hon. Lady clearly thinks that it is.
The right hon. Lady points to interest rates coming down, but does she not know that her ruinous inflationary policies have seen interest rates higher for longer, meaning more expensive mortgages for hundreds of thousands of people across our country? She was slightly coy about unemployment—because, of course, we know that it now stands at a five-year high. Under every single Labour Government in history, unemployment has risen, and this Government are no exception.
The right hon. Lady is fond of saying that she is simply asking people to pay a little more tax. Well, I do not remember the taxman phoning me up and asking me if I would awfully mind paying a little more tax. And what does it mean? It means workers struggling, employers laying off staff, and tens of thousands of the most talented people in our country going to other places, where they believe the opportunities are greater. That is what a little more tax means. And what has that tax done? It has destroyed and deeply damaged entire sectors of our economy. Hospitality has seen almost 100,000 job losses since this Government came to office, and that has particularly impacted our youngest people.
Youth unemployment is the highest in Europe for the first time in a quarter of a century. The dreams, aspirations and hopes of young people—of all those bright young faces—have been smashed on the altar of the right hon. Lady’s incompetence. What is her message to young people today? Her message today has been that her so-called plan is working, but what is the reality? Inflation? Up. Borrowing? Up. Spending? Up. Tax? Up. Welfare? Up. Unemployment? Up. All this speaks to the weakness and chaos of this Government. Is it any wonder that her so-called plan is not working? Our energy costs are among the highest in the world, and yet she is doubling down on net zero. Given where we are, the first thing that the right hon. Lady should do is get rid of those taxes on North sea oil and allow us to start exploiting those opportunities.
We have a welfare bill that is spiralling ever upwards, but what does the right hon. Lady do? She removes the two-child benefit cap. We have taxes heading to the highest level in history because of her choices, destroying the futures of men, women and children right up and down our country—and there is no contrition, no apology and no plan to do anything about it.
It does not have to be this way. At our conference, we set out how we can control public spending with £47 billion of savings, especially on the welfare bill, with some £23 billion of savings. We are a party that believes in work, rather than benefits. We are a party that will do something about it. We are a party of work; Labour is the party of “Benefits Street”. We will bring taxes down to kick-start the economy, abolish stamp duty, scrap business rates for businesses on our high streets, and give our young people a £5,000 tax cut. We have a cheap power plan. We will fix student loans and invest in apprenticeships. Though our golden rule, we will get on top of the deficit and, by doing that, grow the economy.
That is our plan. What is the right hon. Lady’s plan? The truth is that she has no plan, or, as her Health Secretary said, there is
“no growth strategy at all”.
Even if she did have a plan, she would be too weak to deliver it, given the psychodramas swirling around No. 10, the almost daily scandals visiting the door of the Prime Minister, the sight of a person once at the highest level in the diplomatic service being carted away in a car by the police, and Back Benchers calling the shots. The Chancellor’s credibility has gone. The Prime Minister’s chief of staff has gone. His Cabinet Secretary has gone. But somehow the Chancellor hangs on.
Through the chaotic fog, the drums are drawing ever closer. The British people deserve so much better. So, for the hard-working people in our country crushed by taxes, for those denied employment, for the farmers and the family business owners who have suffered in fear for too long, for every hollowed-out high street, for every young person robbed of their future, for every elderly person struggling to survive and for the generations yet to come, we say: go!
Rachel Reeves
I know that the OBR did not publish the forecast until I sat down, but I still think the shadow Chancellor could have done a little bit better than that. To be honest, I was hoping that the Leader of the Opposition was going to respond today; after that performance, I expect she does, too! [Hon. Members: “More!”] Don’t worry; I’ve got more.
The right hon. Gentleman said that the Conservatives set out their economic policy at their conference a few weeks ago. Well, they had 14 years to set out their economic policy, and it is because of their economic policy that they are now sitting on the Opposition Benches. Today’s performance is yet another reminder of how irrelevant the Conservative party now is. I hate to break it to the shadow Chancellor, but people stopped listening to the Conservatives a long while ago. And we can see why: because whether it is in office or in opposition, the right hon. Gentleman’s party and his leader have been wrong about the economy time and time again. They opposed economic responsibility and backed Liz Truss—wrong. They opposed closer ties to Europe and backed Brexit—wrong. They opposed cuts in child poverty and want to repeat austerity: wrong values, wrong economics—they are just plain wrong.
After last year’s Budget, the right hon. Gentleman’s leader predicted with characteristic foresight that borrowing would increase every year. She was wrong: borrowing is now coming down faster. That is faster than under the Tories—well, that is not difficult, because under them it went up—it is faster than forecast in the autumn and it is faster than in any other G7 economy. Last year, the Leader of the Opposition told us that energy bills would rise. She was wrong; they are coming down by £117 next month. She also told us that there would be no more Tory defections to Reform. How is that one going?
Let me let me return to the substance of the shadow Chancellor’s remarks—although I have had to reduce this section somewhat! He mentioned student loans, but he neglected to mention that he was in the Government who tripled university tuition fees, froze thresholds and oversaw higher interest rates, which led to the problems we are in today. On special educational needs, the Conservatives left a system in utter crisis, as every parent, every child and every school will tell you, so we will take no lessons from them. But in terms of where the money is coming from, that is set out today in the documents. Of course, the shadow Chancellor does not know that because he did not even bother listening to my statement.
The shadow Chancellor mentioned defence, but he neglected to mention that it was his Government who left office without any plan to fund their pledge to spend 2.5% of GDP on defence. It is this Government, with me as Chancellor, who are delivering the biggest increase in defence spending since the cold war.
The shadow Chancellor mentioned the welfare bill. I have to say that that was a little bit rich, because he neglected to mention that the welfare bill rose twice as fast in the last Parliament and that he was Secretary of State for Work and Pensions. His Government broke the welfare system, and it is this Government who are fixing it.
The shadow Chancellor mentioned youth unemployment. As I said, there is more that needs to be done, after the Conservatives increased the number of young people not in education, employment or training by 113,000 and slashed the number of young people starting apprenticeships by 40%. We will take no lessons from them. They are the arsonists, not the fire brigade, and if they cannot be honest about the mess they made, no wonder they cannot recognise that we are fixing it.
Today’s forecast shows that debt is down, borrowing is down, inflation is down, and interest rates are down from 5.25%, where the Conservatives left them, to 3.75% today. And what about investment, living standards and growth? They are all up. Let me break it to the shadow Chancellor and to his leader: there is no blank page for the Tory party—no year zero. They gave us chaos and instability; Labour is fixing it. They gave us austerity; Labour is investing in Britain. They gave us 14 years of barely managed decline, and we are reversing it. We know that if they ever get the chance, they will do all of the same again: more chaos, more kids in poverty, and more and deeper cuts. It would be terrifying if there was any prospect at all that they would ever win an election again.
The Leader of the Opposition can keep turning up every week, but it is a total waste of time. Her party is the past and not the future. I do not know what is more pathetic: the culprits who jumped ship and joined Reform and its Russian mates, or the culprits who stayed in the Conservative party and pretended that the last 14 years never happened. Either way, the choices are clear: investment with Labour or austerity with the Conservatives; stability with Labour, or more chaos with the Conservatives—wrong leader, wrong choices, wrong plan. Only Labour has the right plan for our economy and for our country.
Dame Meg Hillier (Hackney South and Shoreditch) (Lab/Co-op)
I have to say that the sound and fury from the shadow Chancellor is extraordinary, given that it was his Government who ran the country and its citizens into chaos, with interest rate and inflation increases under the Truss mini-Budget. I welcome today’s forecast partly because there has been so little speculation along the way, which I am sure the Chancellor, the markets, the public and businesses welcome. That is the stability and confidence that we need to see. The Chancellor laid out her three choices to promote growth. She will be appearing in front of the Select Committee next week, when we hope to probe her further. In the meantime, can she tell us which of those three areas to grow the British economy she is most excited about?
Rachel Reeves
I thank my hon. Friend for that question. The biggest change that we can make is ensuring that growth takes place in all parts of our country, rather than just for a few people in a few parts of Britain. The changes to economic geography that we have started by changing the Green Book to give every part of our country the fair chance to get the investment and opportunity that they deserve mean that growth will benefit everybody, not just a small few.
Daisy Cooper (St Albans) (LD)
The country is paying the price for two anti-growth Labour Budgets. Growth has flatlined, youth unemployment is up, and the cost of living crisis grinds on, pushing people and businesses to the brink. So we plead with the Chancellor: please, for the sake of our country, put a laser-like focus on getting a better trade and defence deal with Europe so that we can protect our country, get Britain growing again and end the cost of living crisis.
The Chancellor said that she will make an announcement about trade relationships in a couple of weeks, but the Government are already 18 months in. The Chancellor could have used today’s spring statement to announce the Government’s intention to negotiate a new UK-EU customs union to kick-start growth, cut red tape for business and build ties with our reliable allies in the face of Trump’s chaos. Why didn’t she?
The spring statement comes at a critical time for our national and economic security. OBR projections will soon be out of date. Trump’s illegal actions in Iran this weekend will be felt in people’s pockets right here in Britain, with the cost of fuel and food set to rise. The Chancellor could have used today’s spring statement to scrap the fuel duty hike, which is due this September. Why didn’t she?
Young people are angry and fed up. The next generation of young people could always expect that they would have a better life than the generation before, but that promise for today’s young people has been ripped away. Almost 1 million young people—the highest in more than 10 years—are now unemployed. We are facing a youth unemployment crisis. The Chancellor’s youth guarantee is simply a sticking plaster for the damage that has been done by the jobs tax. The Chancellor could have used today’s spring statement to reverse the jobs tax changes that have undermined job opportunities for young people and part-time workers. Why didn’t she?
Graduates are being ripped off. They have studied hard—[Interruption.] Graduates are being ripped off—[Interruption.] They have studied hard, they have done everything they were told to do, but they are facing eye-watering repayment costs and they are struggling to get on in life. On this issue, it is a plague on all our houses—partisan point scoring does no favours to those young people. We have set out what we would do. The Chancellor could have used today’s spring statement to end the repayment threshold freeze, putting £100 back in graduates’ pockets in the first year, rising to £210 in the third. Why didn’t she?
With great instability and conflict around the world and a move away from the rules-based system to great power politics, we must look urgently at building our national energy, defence and food security. In so doing, we can and must turn the necessity of building national resilience into strategic opportunities for economic growth. We welcome the fact that the Government have done a deal for helicopters with Leonardo, as a result of the calls from these Liberal Democrat Benches, especially hon. Friends from the south-west, who have raised this issue week in, week out. The Chancellor could have used today’s spring statement to launch a new defence bonds programme as part of a plan to spend 3% of GDP on defence by 2030. Why didn’t she?
Finally, I will come full circle. I said that the country has paid the price for two anti-growth Labour budgets. The OBR today is clear: the downgrade in growth in 2026 is bigger than the upgrade in the next two years combined. We have to stop the cycle of short-term Treasury tax grabs over long-term growth. Our United Kingdom is an amazing country and has enormous potential, but we cannot take that for granted. We must accept that we are stuck in a rut, in a doom loop of low economic growth, and that is a big problem. I urge the Chancellor to take the measures that I have outlined to protect our country, to get Britain growing again and to end the cost of living crisis.
Rachel Reeves
The hon. Member gives less an economic programme and more a wish list of things that she would like to see, without any means at all of paying for them. She seems oblivious to the things that the Government are doing. She says that we should have a closer relationship with Europe, and I agree—I said it in my speech—yet she omitted to mention that that is exactly what the Government are doing. We have taken action, as the hon. Lady knows, with a sanitary and phytosanitary deal to back British agriculture and on Erasmus, and it is this Labour Government who are working with our EU neighbours to tackle illegal gangs and to improve our security.
The hon. Member calls for a big cut in taxes, but VAT at 20% as the standard rate is the rate the Liberal Democrats introduced when they were part of the coalition Government, and it has been ever since. We have provided £4.3 billion of support in business rates and further support for pubs and live music venues. If the Liberal Democrats want to deliver on this enormous unfunded promise, perhaps the hon. Lady would like to tell us which public services they would like to cut this time. They cut enough public services when they had a chance and were in office, but they are too scared to tell us which ones they would cut today. Is it the NHS? Is it schools? Is it investment in our regional transport infrastructure? Who knows? She will not tell us.
It is quite extraordinary to hear the Liberal Democrats having the nerve to raise student finance when they trebled tuition fees when they were in government and created the plan 2 scheme. In fact, it was a Liberal Democrat Secretary of State who oversaw that policy, and the leader of the Liberal Democrats, the right hon. Member for Kingston and Surbiton (Ed Davey), was in that Cabinet meeting when they signed off that decision. We will take no lectures from them about how to support our young people.
The hon. Lady says that they have set out what they would do on student finance. Is that a bit like what they did in 2010, when they set out what they were going to do on student finance? In 2010, what was it that they were going to do with tuition fees? I think I remember. That’s it: they were going to abolish tuition fees. But that is not what they did, is it? What did they do? Oh, they tripled them. Why should we believe a word that the hon. Lady says now on student finance?
Some of us have not forgotten that they teamed up with the Tories to cut our police, cut local government and cut our armed forces spending. We are dealing with the consequences. This is why we are investing in our public services: to fix the damage that they did with the Conservatives. What have they been doing? They are opposing our investment in the NHS, because that is what it means when they say they want to reverse the tax changes that we have brought in. The only reason we have £29 billion more a year to spend in the NHS is because of the tax changes that we made. The Liberal Democrats need to understand that they cannot have one without the other. They oppose our plans to build more homes. They oppose our plans to make work pay. They opposed VAT on private schools to help the 93% of kids in our state schools. They are simply not serious.
Yuan Yang (Earley and Woodley) (Lab)
I thank the Chancellor for her strong statement and, in particular, for her words on deepening our alliances with our European partners. This is crucial for bringing down the cost of food and for healing the economic self-harm done by the Conservatives. The Bank of England has said that her cuts to energy bills will help bring inflation down to around its target from next month. Will she commit to going further and continue to shield our constituents from global price shocks?
Rachel Reeves
The Bank of England forecast that the actions that I took in the Budget last year would reduce inflation by around 0.4 percentage points, and that inflation will be back close to target from April. That reflects not just taking £150 off energy bills, but freezing prescription charges and rail fares. The events unfolding in Iran and the middle east have resulted, over the last couple of days, in gas prices going up by more than 60% and oil prices by more than 10%. That shows why our plan to take money off energy bills and ensure that our public finances are in a stronger place mean that we are in a better place than we would have been 18 months ago, after the mess left by the Conservatives.
Sir Jeremy Hunt (Godalming and Ash) (Con)
Given what the Chancellor has just said about gas prices going up by nearly 50% in the past week, her Budget promise to reduce household energy bills by £150 will ring hollow for many people. If the cost of living is the real concern, is the biggest mistake not to increase taxes by £66 billion, which is the equivalent of nearly £2,300 per household? If that money is needed for public services, nearly all of that—£54 billion, in fact—could be got by reducing the welfare bill to 2019 levels. Is it sustainable to keep raising taxes on people in work in order to pay ever more benefits to people not in work?
Rachel Reeves
I have huge respect for the right hon. Gentleman, but he left a massive black hole in the public finances. There had not been a spending review for years, and during that time inflation went through the roof because the Conservatives lost control of the public finances. We had to find the money to properly fund our national health service. It is a bit rich for the Conservative party to say that we should bring welfare spending down when it presided over a huge increase in welfare spending.
On the burden of taxation, our choices ensured that those with the broadest shoulders pay higher taxes. We got rid of the non-dom tax status and we are introducing the higher value council tax, VAT on private school fees and the energy profits levy. We are ensuring that those with the broadest shoulders pay the higher prices, rather than allowing the increases in inflation and interest rates in the last Parliament, which hit working people.
Liam Byrne (Birmingham Hodge Hill and Solihull North) (Lab)
The plan that the Chancellor has set out this afternoon shows that inflation, debt and bills are down, and that headroom, growth and living standards are up. That is testament to a plan for stability that is working, but that stability would be undermined if she surrendered to the idea of the £47 billion-worth of unfunded tax cuts set out by the Conservatives, so will she resist those calls? As fiscal headroom opens up, will she look again at what can be done to drive down energy costs for small business and genuinely reform business rates, so that we are backing our wealth creators, and not gambling with the public finances, as the Conservatives did?
Rachel Reeves
We are backing the innovators through the reforms that we made in the Budget last year to make it easier to list in London, and easier to raise finance in the UK. We have permanently changed business rates, so that we have a lower multiplier for high-street businesses and smaller businesses, particularly in the retail, hospitality and leisure sector. We did that by putting £4.3 billion into the system. All of that money would have been withdrawn by the Conservatives.
John Glen (Salisbury) (Con)
Undoubtedly, every Government deals with different challenges, and I note that the Chancellor did not mention the challenge of covid in the last period of government. When I was in the Treasury, I did everything I could to support businesses with bounce back loans, and to support our public services, but clearly, covid significantly scarred the economy. When the Chancellor last stood at the Dispatch Box, the “Economic and fiscal outlook” said that growth this year would be 1.4%. It is now 1.1% and flat over the period. The big strategic choice that this Chancellor faces, as the world is different in her tenure in office, is whether she will grip welfare spending at a time of grave insecurity in the world, because an open promise to raise defence spending some time over a five-year period will not cut it for this country’s best interests.
Rachel Reeves
The right hon. Gentleman mentions the work that the previous Government did on covid, and of course it was right to support people with furlough and bounce back loans, but it was not right to hand money to friends and donors to the Conservatives through covid contracts. We are getting the money back that they wasted. I say again that it is a bit rich of the Conservatives—especially as the shadow Chancellor was previously the Work and Pensions Secretary—to talk about welfare spending when they presided over a 113,000 increase in young people not in education, employment or training. We have already made reforms to universal credit to narrow the gap between the health element and the standard element. That will ensure that more people are out looking for work, and employment has increased since the start of last year.
Jim McMahon (Oldham West, Chadderton and Royton) (Lab/Co-op)
A fair day’s pay for a fair day’s work is a fundamental part of the British contract, but many self-employed people, and many of those on low wages, are paying to work because His Majesty’s Revenue and Customs has failed to update its mileage rates for 15 years, while the cost of petrol, road tax and the rest has increased significantly. Can the Chancellor do what the Conservatives failed to do, and ask HMRC to update its mileage rates, so that working people are not paying to go to work?
Rachel Reeves
I would be happy to arrange a meeting between my hon. Friend and the responsible Minister. I recognise that this is an issue; it is being raised with me by the trade union Unison, among others. This does not just affect self-employed people; it also affects other people in work.
Sarah Olney (Richmond Park) (LD)
In the three months to December, unemployment reached 5.2%, the highest rate for nearly five years, and youth unemployment has hit a staggering 16%. Training, hiring and retaining a skilled workforce are issues affecting businesses of all kinds across the country. The 2024 Budget added over £5 billion of employment costs on to retailers, almost half of which came from the changes to employer national insurance contributions, with the cost of employing a full-time worker in a retail job rising by 10%, and by 13% for those working part time. One in five people’s first job is in retail, so what steps are the Government taking to tackle these unaffordably high employment costs for the businesses that provide entry for young people into our job market?
Rachel Reeves
What the hon. Lady fails to mention is that the Office for Budget Responsibility has forecast that unemployment will come down in every year of the forecast, and will end at a lower rate than it started. It would be a bit more plausible for her to make these points if she did not oppose everything we are doing to grow the economy, whether that is constructing a third runway at Heathrow airport or building the homes that families desperately need.
Jessica Morden (Newport East) (Lab)
The rail fare freeze benefits constituents who have seen rail fares rise by 60% since 2010. Also, the recent announcement of two new railway stations in Newport East is warmly welcomed. Can I encourage the Chancellor to continue to invest in Welsh transport infrastructure?
Rachel Reeves
Constituents in my hon. Friend’s Newport constituency will benefit when they commute to work or college, or travel to meet friends in Cardiff, Swansea, Bristol and elsewhere. In addition, we are building new railway stations and investing in new transport infrastructure in Wales with the £450 million that we announced at the spending review last year.
Dame Caroline Dinenage (Gosport) (Con)
The Chancellor’s words on defence simply do not reflect the reality, at a time when the world has never felt more unstable. Every corner of our armed forces is being asked to find cuts. People in Gosport need only look out of their window to see that all our Type 45 destroyers are laid up in Portsmouth harbour, and this is the first year since the 1980s that we have not had a ship in the Gulf, at a time when the middle east is a tinderbox. The Royal Fleet Auxiliary is on its knees, and defence companies are being tied up with bureaucracy, dither and delay. The Chancellor has mentioned a couple of contracts, but so many of them are bogged down with dither and delay from this Government. She is gaslighting the British people. This is a disaster for our defence, and for our armed forces. When will she face reality?
Rachel Reeves
I am the Chancellor who has overseen the biggest uplift in defence spending since the end of the cold war. We are spending more on defence than the previous Government were spending. That is why I was able to announce a helicopter contract worth £1 billion yesterday. It is why a new frigate came from Rosyth last week, and it is why we have been able to invest in the Typhoon jets. I will not take any lessons from the Conservatives, when we are increasing defence spending and they oversaw a cut.
Jayne Kirkham (Truro and Falmouth) (Lab/Co-op)
I welcome the changes to the Green Book to support investment in coastal and rural areas. Can the Chancellor confirm that they will lead to investment in transport infrastructure in places like Cornwall, to support the investment being made in our industries, particularly the £50 million going into our critical minerals strategy?
Rachel Reeves
I thank my hon. Friend for the work that she has done to promote the investment opportunities in Cornwall. The Green Book means that for the first time, different parts of the country—urban, rural and coastal communities—will all have a fair chance of getting the investment that they need. This Government’s critical minerals strategy will have a direct impact—it is already having it—on Cornwall, where the National Wealth Fund is investing in lithium and tin, as I saw at first hand when I was there last summer.
Dave Doogan (Angus and Perthshire Glens) (SNP)
We have just heard a 40-minute, self-aggrandising monologue on how wonderful everything is in the economy. Does the Chancellor have any clue how her tone-deaf monologue will have landed in the real economy, where growth has been downgraded, unemployment is soaring and the cost of energy has just spiked? There was nothing in her statement about what she intends to do on a strategic level when energy goes to the price it was during the height of the Ukraine crisis. Rather than reading her pre-prepared SNP attack lines, will she guarantee that she will step in and protect bill payers if those prices endure?
Rachel Reeves
We have taken action to reduce energy bills by £150 from next month. As I said in my speech, because of the stability that we have returned to the economy, and the cuts in interest rates, in inflation and in the cost of Government borrowing, we are in a strong position to respond to the headwinds from the middle east and Iran.
Bill Esterson (Sefton Central) (Lab)
The conflict in the middle east is a reminder of the need to reduce our dependence on fossil fuels, which set the price of our energy bills for consumers and businesses; 80% of the time, gas sets the price of electricity. The £117 reduction in bills that the Chancellor announced in the Budget is welcome, but will she recommit to giving long-term stability to our energy prices, and to bringing bills down in the long term, by supporting investment in the generation of renewables and nuclear, in the expansion of the grid, and in battery storage, which will help domestic and industrial consumers at the same time?
Rachel Reeves
I thank the Chair of the Energy Security and Net Zero Committee for that important question. He is absolutely right: whether through the successful auction round 7 that we have just completed for investment in new renewable energy, or through the planning reforms to make it even easier to build grid connections and wind farms, we are taking action to secure our energy supplies. Through the spending review last year, we invested in Sizewell C and small modular reactors, which will be built in Wales by Rolls-Royce.
Esther McVey (Tatton) (Con)
Does the Chancellor now accept that there is a correlation between increasing national insurance contributions on employers and higher unemployment, or does she still believe that those two things are not connected in any way?
Rachel Reeves
There is definitely a correlation between the number of years that the Conservatives are in office and how much worse off working people are.
Johanna Baxter (Paisley and Renfrewshire South) (Lab)
I welcome my right hon. Friend’s statement, and her commitment to growth in all parts of the United Kingdom. Could she set out in a little more detail what Barnett consequentials arise from her statement? Does she agree that it is increasingly important that, in May, we elect a Government who will spend that money wisely, which means electing a Labour Government in Holyrood, led by Anas Sarwar?
Rachel Reeves
In last year’s spending review, we set out a record settlement for the Scottish Government, as well as for the Welsh Government and the Northern Ireland Executive. I can tell the House and my hon. Friend that, because of the decisions that we are making, I am able to announce an additional £900 million in resource departmental expenditure limits spending, and £20 million in capital departmental expenditure limits spending, for the Scottish Government over the spending review period between 2026-27 and 2028-29. Like her, I very much hope that it will be Anas Sarwar and a Labour Government spending that money, rather than the SNP wasting it and presiding over longer NHS waiting lists.
Robert Jenrick (Newark) (Reform)
The Chancellor is like a rogue landlord who keeps squeezing the tenant with higher and higher rent, and all the while, the property is going to rack and ruin. I do not know who she is speaking to, but she needs to get out and talk to hard-working people who are hard up right now—people who are worried about their bills and the lack of good jobs—rather than the extremists she cosies up to for votes. The Chancellor’s next scheme for raising taxes on working people is to hike fuel duty at the pump. Will she cancel that measure, and give some relief to care workers, white van men and other hard-working people who get up in the morning and drive to work? They are the backbone of this economy.
Rachel Reeves
May I be the first to congratulate the right hon. Gentleman on his new role? I know that it was not the first job that he wanted, or indeed the second, but he makes a spirited intervention none the less. I am not sure whether he shared that one with George Osborne. I can offer one piece of advice: the thing about betraying your party is that you have to stop asking your old friends for advice. Perhaps, given that the right hon. Gentleman called his new colleague “Zia Useless” a couple of months ago, he needs all the friends he can get. It might have been a couple of weeks ago, but he used to be in a party that, just three months after losing office, was going to get rid of the fuel duty support. That was in the plans that we inherited, and we scrapped them. [Interruption.] Conservatives Members say that is rubbish, but it was in their last Budget. Indeed, it was in the right hon. Gentleman’s Budget and manifesto.
Debbie Abrahams (Oldham East and Saddleworth) (Lab)
I welcome my right hon. Friend’s statement, and I absolutely agree that this year the British public will start to feel the difference that it makes to have a Labour Government. Will she expand on what she is doing to ensure that all dimensions of inequality—inequality of income, wealth, power and health—are tackled, and that the benefits are felt in all communities across the country?
Rachel Reeves
The OBR confirmed today that, by the end of this Parliament, people will be £1,000 a year better off. That is compared with the fall in living standards under the previous Government. My hon. Friend’s constituency benefits from Pride in Place funding, through which we are investing in the places that were forgotten about and left behind during 14 years of Conservative government.
Sir Julian Lewis (New Forest East) (Con)
I hope the Chancellor will accept that I have challenged successive Governments over inadequate defence spending. If she does, will she also accept that it is not a wise idea to keep comparing current defence spending with the levels of defence spending “since the cold war”? We are not in “since the cold war” now; we are in a hot war in Europe and an incendiary war in the middle east. Does she know what percentage of GDP Mrs Thatcher spent during the cold war years of the 1980s? I will give her a clue: it was twice what we spend now in terms of percentage of GDP.
Rachel Reeves
A year and a half ago, the right hon. Gentleman stood on a manifesto that had absolutely no explanation of how his party would increase defence spending. This Government have increased defence spending. I am surprised that he criticises that, rather than welcoming it.
Florence Eshalomi (Vauxhall and Camberwell Green) (Lab/Co-op)
I thank the Chancellor for outlining how we will finally turn the corner on the 14 years of suffering felt by many of my constituents and people across the country. Many people still complain about the cost of living, and they are impatient for change. I hope that, through what the Chancellor has set out this afternoon, we will start to see that turn. Rightly, we are seeing a change in business rates, but my constituent who owns Chocolate Dino has highlighted that central London rateable values are still high, while small business rates relief thresholds have remained static. That is having such a big impact on independent and small businesses. Can the Chancellor look into other areas to ensure that such businesses, which are the backbone of UK plc, can thrive?
Rachel Reeves
In my hon. Friend’s constituency, thousands of children will be lifted out of poverty from next month because this Labour Government have chosen to get rid of the two-child policy that was introduced by the Conservatives and supported by their Tory tribute act friends on the Reform Benches. On business rates, I am sure that the Secretary of State for Business and Trade or a relevant Minister would be happy to meet my hon. Friend. The changes that we have made mean that there is a permanently lower multiplier for smaller businesses and high street businesses.
Richard Foord (Honiton and Sidmouth) (LD)
Many small and medium-sized enterprises add value to our towns and villages, but I am concerned about their survival. The Community Waffle House in Axminster is a community interest company that is struggling under the pressure of last year’s national insurance increases. Waffle Axminster boasts £3.9 million in public sector cost avoidance and value created, according to the Department for Culture, Media and Sport wellbeing valuation for reduced loneliness. Will the Chancellor consider VAT relief to take account of the public sector cost avoidance by that CIC and other hospitality businesses?
Rachel Reeves
This Labour Government have permanently reduced the multiplier faced by small businesses and high street businesses—the business rates system that we inherited from the previous Government. The hon. Gentleman mentions VAT. When Labour left office in 2010, VAT was 17.5%, and the Conservative Government, with the help of the Liberal Democrats, increased it to 20%. It has been there for 15 years. If his party wants to cut taxes, it also has to explain which public services it is going to cut. We have increased spending on the health service by £29 billion. That was the right decision, but it was only possible because of the tax decisions we have made.
Andy MacNae (Rossendale and Darwen) (Lab)
The stability the Chancellor has brought back to our economy has allowed us to allocate record levels of infrastructure investment. Alongside the Green Book review, this creates the conditions for meaningful investment in previously left-behind places like Lancashire. Yet, as the review highlights, places like Lancashire that do not yet have a mayor can lack the capacity and capability to bring forward fully investable business cases. In recent months, myself, Lancashire colleagues and leaders of Lancashire combined authority have written to the Government asking for interim capacity funding to develop fully investable proposals. The need is urgent, so will the Chancellor meet me and colleagues to discuss how we can bring forward the game-changing growth projects that Lancashire needs?
Rachel Reeves
My hon. Friend is a strong advocate for his constituents in Rossendale and Darwen, and he was also a big advocate for the reforms to the Green Book that we managed to bring in at the Budget last year. Because of those changes, we will now look more favourably at investment opportunities in rural areas, coastal communities and places that have been left behind. I welcome any suggestions for specific investments in his constituency, either through the British Business Bank, UK Export Finance or the National Wealth Fund, all of which have had their budgets expanded under this Labour Government.
Katie Lam (Weald of Kent) (Con)
The Chancellor stands there and says that living standards are up and the economy is growing, but people can see the reality in their everyday lives: unemployment up month on month and energy bills higher than when Labour came to power. The latest figures in fact show that per person, our economy is shrinking, yet she stands there and says she has
“the right economic plan for our country”.
Does she have any idea how that sounds to people out there who are working harder than ever, with less and less left over at the end of every month?
Rachel Reeves
It is good to see the hon. Member still on the Conservative Benches—I thought she was going to be joining her Tory tribute act friends over there with the right hon. Member for Newark (Robert Jenrick). What the Office for Budget Responsibility document shows today is that people are going to be £1,000 better off by the end of this Parliament, whereas under the previous Government living standards fell, and GDP per capita is set to be 5.6% higher by the end of this Parliament, whereas under the previous Conservative Government GDP per capita fell.
Mr Toby Perkins (Chesterfield) (Lab)
My right hon. Friend will hear a lot from politicians today—although it appears not from Reform Members, because they have all gone—but does she agree that the most important people to listen to are not those making the sound and fury in this room but those who lend money to the Government? They believe that her proposals are worth lending money against, and for that reason, the amount we will be spending on debt interest is falling. Unlike the Conservative party, they think the UK is a good credit risk in comparison with other G7 nations. Will she say more about how she can bring electricity prices down to support the growth that she is all about?
Rachel Reeves
My hon. Friend knows that if we can improve living standards and also reduce how much we are spending on servicing the debt racked up by the Conservatives, we will have more money to spend on the priorities of people in Chesterfield and elsewhere. The numbers today confirm that we will be spending £4 billion less on debt interest next year than was forecast even in the Budget just a couple of months ago, and that is because of the stability that we have managed to return to the economy. Under the Conservative Government, before Liz Truss, we were spending the average of the G7 on our debt servicing costs. That rocketed under Liz Truss. We have already managed to reduce some of that borrowing premium, but if we continue, we have a £15 billion prize on offer, and that will be money to spend in our communities, on the priorities of working people, whereas under the previous Government, we just spent more and more on servicing debt interest costs.
Siân Berry (Brighton Pavilion) (Green)
The result in Gorton and Denton shows that voters want bolder action from politicians against sky-high privatised bills and rents and want no families to be left struggling in poverty. Will the Chancellor listen and scrap her dysfunctional fiscal rules, starting with scrapping the overall family benefit cap, which still means that over 200,000 children are not getting the help they need to live if not a nice life, at least one without needless grinding hardship?
Rachel Reeves
I believe in fair taxes, and I believe the wealthy should pay their fair share, but I believe in bringing that about in a credible way that actually delivers for our constituents. That is why, in my two Budgets, I have ended the non-dom loophole, charged VAT and business rates on private school fees, raised capital gains tax and introduced a high-value property tax, which I believe the Green party opposes in London. The hon. Member failed to mention her party’s policy on defence and defence spending. This is important, especially now. We know that the Green party wants to leave NATO. She does not want to say it, but it is her party’s policy.
Alison Taylor (Paisley and Renfrewshire North) (Lab)
Does the Chancellor agree that sound management of the economy has provided the fiscal headroom to invest in large infrastructure projects, in contrast with Scotland, where the SNP Government cancelled the Glasgow airport rail link and sold off the land at a loss?
Rachel Reeves
To be honest, when the SNP gets involved in infrastructure projects like trying to build a couple of ferries, it all seems to go horribly wrong. That is why, despite the fact that the SNP Government have had a record settlement from us, NHS waiting lists in Scotland continue to increase, while in England and Wales, under Labour Governments, they are falling.
Graham Stuart (Beverley and Holderness) (Con)
Business has been crushed by the taxes brought in by this Chancellor. Just a year ago, in a fairly gloomy forecast by the OBR, it was suggesting 1.8% GDP growth over the forecast period. That has now been reduced to 1.5%. If the central mission of this Chancellor—and supposedly this Government—is economic growth, how can she stand there today and say it is working, when it has been marked by the OBR that she is going in exactly the wrong direction, making all our constituents poorer? Can she please explain that to the House?
Rachel Reeves
That is just completely wrong. What the OBR says today is that people will be £1,000 a year better off by the end of the forecast period and that GDP per capita will increase by 5.6% after having fallen under the previous Government. Yes, productivity growth was revised down at the Budget, because of the policies of the previous Government. It has not been revised today.
Rosie Wrighting (Kettering) (Lab)
I was a young person while the Tories were in power, and the reality is that they locked my generation out of home ownership, living standards were worse than those of our parents, and the public services we relied on growing up were cut because of decisions made by their Government. I remember the mini-Budget, which meant that I saw interest rates on my student loan rise—a student loan that is so high because of the plan introduced by the coalition Government and because they changed maintenance grants to loans. Does my right hon. Friend agree that only the Labour party can change this country for young people, who finally have a Government that will match their ambition?
Rachel Reeves
When I visited Kettering with my hon. Friend recently, it was just ahead of the capital investment in new SEND provision in her constituency, so that more young people—some of the most vulnerable—can be educated locally in Kettering, with better outcomes for them.
On student finances, the last Government lost control of inflation, and, of course, student loans under plan 2 and other schemes are linked to inflation. Because we have reduced inflation, we will be reducing how much interest people pay on their student loans. That is the best way to help them.
Rachel Reeves
I hear some shouting from the Conservative Benches. Inflation went to more than 11% when they were in government, and they froze the threshold on plan 2 student loans—which they introduced —for many years.
Sammy Wilson (East Antrim) (DUP)
The Chancellor raised a laugh at the start of her statement when she said she was following the right policies for this country—policies that have resulted in lower economic growth, higher unemployment, people staggering under an increased tax burden and businesses being damaged by employment taxes, and yet she has shown no change. Why has she not addressed the issues of lowering the cost of employing people, reducing the tax burden on hard-working people to help with the cost of living crisis, and reducing energy prices, which have been driven up by the net zero policies followed by this Government? Does she realise that people will be angered and amazed at her complacency today?
Rachel Reeves
GDP per capita, which is what matters in people’s everyday lives, has been revised up by 5.6% over the course of this Parliament. Unemployment is set to fall in every year of this Parliament, and to be at a lower rate at the end of the Parliament than when it started. We are taking £150 off energy bills from next month. In the spending review last year, we announced a record settlement for the Northern Ireland Executive. I can confirm today that that settlement increases further, by £318 million over three years for RDEL spending and £10 million for CDEL spending, and that money can be spent on the priorities of the people in Northern Ireland.
Catherine West (Hornsey and Friern Barnet) (Lab)
I commend the Chancellor on her laser-like focus on young people, including on apprenticeship starts and maintenance grants. Will she work with the Education Secretary so that by the autumn, when the exact impact of this awful war in the middle east will be clear, we will know whether any help can be given to graduates, so that they can become the next people to get mortgages and to get on to the housing ladder?
Rachel Reeves
The £800 million that we are spending on the youth guarantee, together with the increase in money we are spending on further education and apprenticeships, will all benefit young people, including the 60% of young people who never go to university. We are also reintroducing maintenance grants to help the poorest students and we are reducing inflation, which will mean that people pay less back every month on their student loan. My hon. Friend rightly mentions that we set out major fiscal policy in the Budget, but with the events unfolding in the middle east and Iran, we need to ensure we can fund all the Government’s priorities and all the priorities of our constituents.
Ben Obese-Jecty (Huntingdon) (Con)
We have heard several different discussions about defence today, but may I remind the Chancellor that yesterday morning an Iranian Shahed drone struck the runway at RAF Akrotiri? It was not taken out by any counter-drone technology—technology that was due to be included in the defence investment plan that the Minister for the Armed Forces informed me would be announced in autumn 2025. It is now spring 2026 and, despite the fact that we have had a Budget and now a spring forecast since the autumn, we have still not seen the defence investment plan. Will the Chancellor assure us that all the recommendations from the strategic defence review that the Government have pledged to deliver will be delivered in the defence investment plan when it is announced?
Rachel Reeves
I can assure the hon. Gentleman that we will be able to do an awful lot more because we are increasing defence spending compared with the legacy that was left by the Conservative Government, and it will be the biggest increase in defence spending since the cold war because of the decisions that we have made as a Government. Because of our Prime Minister’s decisions at the weekend, we are degrading Iran’s capability to continue these attacks.
Luke Murphy (Basingstoke) (Lab)
I thank the Chancellor for her statement. The thing that animates my constituents most is the cost of living and the crisis in their living standards—a crisis that came about as a result of the failed economic policies of the Conservative party, whose record on living standards in the last Parliament was the worst on record. My constituents particularly welcome the action on energy bills, rail fares and childcare, but will the Chancellor confirm that she and the Government will continue to focus on driving up the living standards of my constituents through every future policy, piece of legislation and Budget?
Rachel Reeves
People in Basingstoke will benefit when they commute to work on a train, when they pay for their prescriptions and when they get their energy bills, which are coming down next month. Reducing borrowing and the cost of borrowing means that we have more money to spend on the priorities of people in Basingstoke, rather than just paying the interest on the debt racked up by the Conservative party.
Harriet Cross (Gordon and Buchan) (Con)
The OBR’s forecast has again downgraded oil and gas revenue. From March to November last year, it was downgraded by over 41%, and from November to March this year, it has been downgraded by another 20%. By 2030, we are now expecting only £100 million in tax returns from the oil and gas industry, which used to return billions of pounds every year, because production is falling and investment is going abroad. When the Chancellor meets oil and gas companies tomorrow—I hope she has a great meeting—they will tell her that they need the energy profits levy to be taken away, because it is costing jobs, investment and energy security. Will she listen to those companies or will she keep ignoring the sector?
Rachel Reeves
Our country will continue to rely on oil and gas from the North sea for many years to come, but I encourage the hon. Lady to read the documents properly. The reason why the money from the energy profits levy—just that levy, not all the other taxes paid —falls is because oil and gas prices have fallen sharply since last year’s Budget. Of course, oil and gas prices have increased hugely in the last couple of days. The increase in oil and gas prices was the reason why the Conservative Government introduced the energy profits, and they used that money to take money off people’s bills—[Interruption.] The hon. Lady needs to go back and do her homework—that is just the money from the energy profits levy and the amount reflects the lower energy prices. As some of her colleagues have mentioned, those energy prices are unlikely to persist after what Iran has done.
Callum Anderson (Buckingham and Bletchley) (Lab)
The OECD and the International Monetary Fund have both recognised the importance of the Government’s fiscal discipline, which is important given the increasingly volatile global economic environment. Will the Chancellor set out more actions that she has taken with others across Government to control public spending, so that the Government can prioritise the long-term investments that boost our global competitiveness and dynamism, and fulfil our defence spending requirements?
Rachel Reeves
By controlling public spending, we can get the cost of borrowing down, as we saw in the most recent public finance numbers. They showed the biggest ever January surplus—in fact, the biggest ever surplus—on the Government national accounts, meaning that we have more money to spend on people’s priorities because we are controlling spending and bringing in the tax revenue that is needed. That is the first time that has happened, and it is because of the choices that we have made as a Government.
Ian Roome (North Devon) (LD)
The Chancellor refers to opportunities that young people deserve. However, hundreds of college students in my North Devon constituency have spent weeks unable to travel to college due to flooding and rail closures. Will the Government confirm that they will invest in their life chances by doing more to upgrade our transport infrastructure, especially our rural railway lines, such as the Tarka line in North Devon, because that infrastructure is not working?
Rachel Reeves
I am happy to ask the Secretary of State for Transport or one of her Ministers to meet the hon. Gentleman to talk about that specific issue in his constituency. As he knows, as a Government we are committed to increasing capital investment by £120 billion over the course of this Parliament, because we know about the importance of infrastructure, whether it is energy infrastructure to get energy bills down, rail infrastructure to get people to work or digital infrastructure to make the most of the AI revolution.
Dame Nia Griffith (Llanelli) (Lab)
While I recognise the wisdom of increasing budget headroom and I very much welcome the record Budget settlement the Chancellor has given to Welsh Government, so that they can fund and improve public services, can she explain how she is ensuring that those with the most wealth pay their fair share, so that our Welsh Labour aspiration of “fairness you can feel” becomes a reality for my constituents in Llanelli?
Rachel Reeves
I can confirm that because of the choices in today’s spring forecast, the settlement for the Welsh Government over the next three fiscal years will mean an additional £514 million RDEL and £15 million CDEL to spend on the priorities of the Welsh people. It is important to me and to this Government that we ensure that the wealthiest pay their fair share. We have introduced VAT and business rates on private schools, we have got rid of the non-dom tax status, and we are introducing a high-value council tax to ensure that those with the broadest shoulders pay their fair share, and that, as a result, we need to ask for less from ordinary working people.
Ben Lake (Ceredigion Preseli) (PC)
Small businesses play a critical role in the economy of places such as Ceredigion Preseli. As the Chancellor will know, increased energy costs have put real pressure on their ability to operate in recent years. In the light of events over the weekend and the crisis in the middle east, what consideration are the Government giving to additional support to help small businesses to meet rising energy costs?
Rachel Reeves
We are only a couple of days into this conflict, and it is important to see where things go in the next few days. As I said in my statement, I am in regular contact with international counterparts right across the world, including in the middle east, with the Governor of the Bank of England, and with sectors—both maritime and oil and gas—that are most affected by what is happening. However, people can see from the actions of this Government—whether that is taking £150 off domestic energy bills or the extension of the supercharger to help energy-intensive industries with their energy costs, which will come in next month—that we are determined to help people. In addition, as I just said to my hon. Friend the Member for Llanelli (Dame Nia Griffith), today’s spring forecast includes an additional £540 million of RDEL spending and £15 million of CDEL spending, which the Welsh Government can spend on the priorities of the Welsh people.
Perran Moon (Camborne and Redruth) (Lab)
Through the National Wealth Fund and the Kernow industrial growth fund, this Labour Government have invested over £100 million in Cornish critical minerals and renewables, which in turn has unlocked vast sums of private sector investment. Does the Chancellor agree that it is precisely because of this Government’s careful nurturing of the UK economy that she can help unleash the Cornish Celtic tiger, and that while Opposition parties scurry around TV studios trying to talk down the UK economy, she is just getting on with the job of fixing the mess they created?
Rachel Reeves
There are huge opportunities in the Cornish economy—in defence, energy and critical minerals—as I saw when I was in Camborne and Redruth and in other parts of Cornwall last summer, including visiting the South Crofty tin mine, which has received National Wealth Fund money. That, alongside the Kernow plan, gives me great confidence that the opportunities that exist in Cornwall will be invested in, both by this Government through our public finance institutions and by the private sector.
Dr Luke Evans
I want to raise the issue of the freezing of thresholds and its effect on the state pension. When the Chancellor froze thresholds in the Budget, she told Martin Lewis that some people would be pulled into paying tax, but would not have to pay small amounts of tax or do a tax return. The updated forecast now says that 600,000 pensioners will be drawn into paying tax this year, and that figure will rise to 1 million by the end of this Parliament. Could the Chancellor set out what the definition of “small amounts of tax” is, and what mechanism she will use to ensure that those pensioners do not have to do a tax return?
Rachel Reeves
As I said after last year’s Budget, if a person just gets the basic state pension, they will not be paying tax. We will set out more details in the coming months.
Amanda Martin (Portsmouth North) (Lab)
In Portsmouth North, we inherited a new reality from the previous Government. People felt that new reality in the form of a closed shipyard, stretched households and Tory food banks that kept popping up everywhere. People were struggling with higher mortgages, high street shops and pubs were closing, and there were cuts to education, SEND and apprenticeships. I know that many are desperate for rapid change, but I hope they can see from our statement today that we are on the right track, with retail sales and wages rising, six interest rate cuts, defence investment backing jobs in my city, and a renewed focus on SEND, education and apprenticeships. Does the Chancellor agree that in coastal communities like Portsmouth, stability and long-term investment, not cuts, are how we build household confidence, put more money in people’s pockets and secure a future for my residents?
Madam Deputy Speaker (Ms Nusrat Ghani)
Order. To support me in getting more Members in, can questions please be short?
Rachel Reeves
I know that my hon. Friend’s Portsmouth constituency will benefit from Pride in Place funding to invest in those places that were forgotten by the previous Government. It will also benefit directly from the uplift in defence spending, which will ensure not only our country’s security, but good jobs that pay decent wages in Portsmouth. Our reforms to the Green Book mean that coastal communities will get their fair share, and will get an opportunity to bid for funding to help grow their economy through the £120 billion that we are putting in for capital investment.
Gareth Bacon (Orpington) (Con)
If lifting the two-child benefit cap is such a moral imperative for this Labour Government, could the Chancellor advise the House why only 20 months ago, a commitment to do so was entirely absent from the Labour party manifesto and why, 19 days after that election, Labour withdrew the Whip from seven of its MPs for the apparent crime of voting for that moral imperative?
Rachel Reeves
I have always been clear that any policies that this Government announce will always be fully costed and fully funded. It was not until last year’s Budget that I was able to guarantee that. We have set out how that policy will be funded—through the gambling tax and by cracking down on tax avoidance and evasion. Perhaps the hon. Gentleman could advise the House why he wants 500,000 children to return straight into poverty.
Sarah Coombes (West Bromwich) (Lab)
We have heard a lot about young people today, but in my constituency, the thing that young people really want is the chance to own their own home. For years, they have been locked out of that because of sky-high mortgage rates thanks to the policies of the Conservative party. I welcome the six interest rate cuts that this Government have overseen. Will the Chancellor elaborate on what more we are doing to help young people in West Brom get on the housing ladder and to bring down the cost of borrowing?
Rachel Reeves
I know that families and young people in West Bromwich and across the country want to get on the housing ladder. That is why we have committed to build 1.5 million new homes in this Parliament and why we have returned stability to the economy, allowing the Bank of England to cut interest rates six times. It is also why, in my Mansion House speeches, I have announced regulatory reforms to make it easier for banks and, crucially, building societies to lend more to first-time buyers, and they are doing just that.
Bobby Dean (Carshalton and Wallington) (LD)
The Chancellor must be concerned that none of the good news she has shared with us today is being felt by people in the real world. Inflation is down, but she will know that that does not suddenly make things more affordable, and interest rates are down, but she will know that millions will lock into higher-rate deals this year when their fixed-rate terms expire. Combine that good news with higher taxes, higher unemployment and a slowdown in growth, and it is no wonder that people still feel as squeezed this year as they did last year. If the Chancellor’s plan is working, when will people actually feel the benefit?
Rachel Reeves
In every month since I became Chancellor of the Exchequer wages have risen faster than inflation. We have increased the national minimum wage and the national living wage to put more money in the pockets of the poorest people, and the interest rate cuts mean that a typical family getting a fixed-rate mortgage will be paying £1,300 less a year than when I became Chancellor. The OBR confirmed today that GDP per capita will rise by 5.6% over the course of this Parliament. I recognise that the legacy of the previous Conservative Government still runs deep and that it will take a while for people to feel the impact of these policies, but I am confident that this will be the year that things start to turn around.
Sureena Brackenridge (Wolverhampton North East) (Lab)
Does the Chancellor agree that restoring confidence and hope for families in Wolverhampton and Willenhall is achieved through a stable economy, with borrowing, debt interest and inflation falling faster than expected, moving away from the chaos of spiralling mortgage rates and towards the stability of falling rates?
Rachel Reeves
I was very pleased recently to spend some time in my hon. Friend’s constituency, where we met a family who are now able to get on the housing ladder because of the reduction in interest rates. Instead of living with mum and dad, that couple and their young child are now able to get a home of their own. That is only possible because of the stability that we have returned to the economy, giving the Bank of England space to cut interest rates six times since I became Chancellor.
Mike Wood (Kingswinford and South Staffordshire) (Con)
The Chancellor claimed to be cutting debt, but she will know that paragraph 5.9 of the OBR’s “Economic and fiscal outlook” says that
“Public sector net borrowing is forecast to increase”
public sector net debt
“in each year, by an average of £92 billion”.
To avoid misleading the House, will she correct the record?
Rachel Reeves
The OBR has revised down the level of debt in every year of the forecast.
Mrs Elsie Blundell (Heywood and Middleton North) (Lab)
I thank the Chancellor for her statement, and for the decisions she has taken to ensure the stability of our public finances so that we can improve our public services. As she will know, the number of individuals in the probation system is at an all-time high, with violent reoffending perpetuating the cycle of crime and leaving the public at risk. What steps will the Treasury take to drive down the number of staffing vacancies in the Probation Service, so that those in the service can work relentlessly to reduce reoffending and ensure the safety of the communities we represent?
Rachel Reeves
As Chancellor, it was my responsibility to make sure that we had fair settlements in the spending review for every Department. That included a big uplift in the settlement for the Ministry of Justice so that we can invest in probation staff, in prison officers, and indeed in prisons, which were full to bursting point when we came into government because of the legacy of the previous Government.
Kirsty Blackman (Aberdeen North) (SNP)
It is not just an uncertain period for North sea workers; it is a crisis, and it has been a crisis for years. Investment has completely disappeared, jobs are being haemorrhaged and events make it even more clear why we need a home-grown energy supply and why we cannot rely on importing from overseas. Will the Chancellor, as she meets North sea leaders tomorrow, listen to their calls on the energy profits levy, give confidence on the future of the industry and ensure that my constituency and those across the UK do not continue to haemorrhage these jobs?
Rachel Reeves
I am meeting representatives of the North sea oil and gas sector tomorrow because of the huge volatility we are seeing in oil and gas prices. Since the Budget, the OBR forecasts show a sharp fall in oil and gas prices, but we have seen some of that reverse in the past few days. If that continues, it will put pressure on the bills that all our constituents pay. It is important that we get the right balance between taxing profits and making sure that our constituents can fill up their car and pay their gas and electricity bills.
Anna Gelderd (South East Cornwall) (Lab)
I warmly welcome that the UK will now, thanks to these Labour choices, spend £3 billion less per year on debt interest up to 2030. My constituents need to feel that in their daily lives, so will the Chancellor further outline how we will unlock the ability to tackle living standards by spending less to service debt? How might that support local infrastructure?
Rachel Reeves
We are spending £100 billion a year on interest payments on Government debt. That is spending not on reducing Government debt, but just on the interest on Government debt, which is £1 in every £10 of what the Government spend. I think there are better ways to spend that money, and that is why I am determined to start bringing down the debt and, crucially, to reduce the interest payments on that debt. The OBR confirmed today that next year we will spend £4 billion less on interest on Government debt, because of the decisions we have made to return stability and give confidence to investors.
Dr Andrew Murrison (South West Wiltshire) (Con)
The spring statement began well by outlining the desperate international situation and by praising our armed forces, but does the Chancellor agree that her remarks would have been all the more credible had she announced that the dither and delay that has plagued defence spending over the past 18 months would be brought to an end, and had she set a date for the publication of the much-delayed defence investment plan?
Rachel Reeves
It is a little rich for the Conservatives to talk about dither and delay when it comes to defence spending. They had 14 years and defence spending fell as a share of GDP. We are providing the biggest uplift in defence spending since the end of the cold war, and that is the right decision in light of the challenges we face. Frankly, if the Conservative Government had made those choices sooner, we might not be in such a position today.
John Grady (Glasgow East) (Lab)
I welcome the Chancellor’s commitment to reducing Government debt, the 95,000 children in Scotland being lifted out of poverty and the revival of Glasgow’s military shipyards, where we will build Labour boats, which, unlike SNP boats, will work and have real windows. Does the Chancellor agree that it is a disgrace that, despite more than £11 billion extra for the Scottish Government, NHS waiting lists in Scotland are at a record level and standards in schools are falling?
Rachel Reeves
Some 95,000 children in Scotland will be lifted out of poverty, and today we have been able to announce a further uplift in the budget available for the Scottish Government. We can only hope that it is a Labour Government, not an SNP Government, who have the chance to spend that money. Otherwise, I fear more increases in NHS waiting lists and worse results for kids at schools, because that is the SNP’s legacy.
Carla Lockhart (Upper Bann) (DUP)
The Chancellor calls this the right plan, but for whom? Is it the right plan for farmers being taxed to death, WASPI women still waiting for justice, small businesses and hospitality firms barely surviving or hard-working childminders set to lose their 10% tax allowance? The price of energy is rising excessively because of the escalating conflict involving Iran. Families and businesses are already worrying about heating their home or filling their cars, and they have been given no hope—nothing—today. What they see is soaring public spend on housing and support for asylum seekers, and unachievable and expensive net zero spend while their own bills are rising. When will this Government put hard-working British families first?
Rachel Reeves
The Northern Ireland Executive came to us asking for additional money this year to fund their priorities, which we have provided. Today’s settlement includes an extra £380 million in day-to-day spending and £10 million in capital spending for the Northern Ireland Government to invest. If the hon. Lady does not want that money, I am sure other parts of the country would like it.
Catherine Atkinson (Derby North) (Lab)
Derby will be the home of Great British Railways, which, with rail continuing its journey back into public ownership, will be focused on serving passengers rather than profit. Under the previous Government, rail fares rose by 60% between 2010 and 2024. Under Labour, they are frozen. Does the Chancellor agree that bold measures such as that to tackle travel costs will help bring down the cost of living?
Rachel Reeves
I was pleased in the Budget last year to announce the plan for Derby, alongside my hon. Friend and her neighbour the Member for Derby South (Baggy Shanker) and the Mayor of the East Midlands. Derby will benefit from hosting Great British Railways, and we will all benefit from better train services under Great British Railways. Rolls-Royce will benefit from higher defence spending and higher energy spending, including on small modular reactors, bringing more good jobs paying decent wages to Derby.
David Reed (Exmouth and Exeter East) (Con)
Blairite policies told 50% of my generation to go to university. Looking back at those conversations, we see that rarely did anyone ever talk about who would pay for those students to go to university, or how the jobs market would then take on that amount of graduates. It is clear that the student finance system does not work, and the goalposts keep shifting with Government policies. I think there is a cross-party view that something needs to be done. Does the Chancellor view it as a serious issue, and what does she plan to do about it?
Rachel Reeves
The view of the electorate just 18 months ago was that it was time to get rid of the Conservatives, because of the broken system that they had left, whether that was student finances, the NHS, our prisons or our crumbling schools. As a result, the hon. Member is sitting on the Opposition Benches, where I expect he will be for many years to come.
John Slinger (Rugby) (Lab)
Does my right hon. Friend agree that we saw with the shadow Chancellor’s performance that the number of times a politician points their finger is often inversely proportionate to the number of valid points they make? The valid points that really matter to my constituents in Rugby and the surrounding villages are that there have been six interest rate cuts under my right hon. Friend’s chancellorship, inflation is coming down, we have the highest growth of European nations in the G7 and far too much more to mention.
Rachel Reeves
It was a real pleasure after the Budget last year to join my hon. Friend at a community centre in Rugby, where I was able to talk to his constituents about the benefits of the £150 cut in energy bills. The conversation I remember most from my hon. Friend’s constituency was with a woman who had lost her husband just six months before. She had four children and will benefit from the changes we made by getting rid of the two-child limit. That is a conversation I will not forget, and it is the difference we are making in government.
Gideon Amos (Taunton and Wellington) (LD)
Monkton Elm garden centre, with its 400-cover restaurant employing 120 staff, has been hit by a £70,000 increase in its business rates this year as part of £178,000 in costs put on by the last Budget. If the Government will not accept the 5% cut in VAT that the Liberal Democrats propose—we would fund that by a tax on banks, by the way, not from cutting services—those at the garden centre would like to know whether the Chancellor will none the less extend the 15% discount to pubs on their business rates to restaurants? That would give our local businesses the support they need and give everyone the boost they want to see in our economy.
Rachel Reeves
As the hon. Gentleman knows, we are conducting a review of how the Valuation Office Agency calculates business rates, including for our hospitality sector. The last time that the Liberal Democrats were in office and they had a choice over VAT policy, they increased it from 17.5% to 20%. I am not sure why the public should believe that this time it would somehow be different.
Graeme Downie (Dunfermline and Dollar) (Lab)
I thank the Chancellor for acknowledging the incredible contribution of the workforce at Rosyth to the roll-out of the Type 31 frigate last week. I also thank her for the ongoing investment in energy infrastructure, particularly as we see increasing challenges in the middle east coming towards energy bills. May I ask her to ensure, as she has up to now, that we keep an eye on that situation involving energy bills and, whenever possible, that we invest both for our future energy security and to help people in the short term when that is necessary?
Rachel Reeves
It was a real honour for me to be able to visit my hon. Friend’s constituency and see the Type 31 frigates being built there. This Government are investing in defence, and in the skills of our young people so that they can get the jobs in these expanding sectors—unlike the SNP Government in Scotland, who are not investing in our young people. Too many defence companies are having to bring in labour from abroad because of the SNP’s dislike of defence spending.
Greg Smith (Mid Buckinghamshire) (Con)
For all the Chancellor’s words about forecasts, reality bites when the real unemployment figures are examined. The figure today is 5.2%, the highest since the pandemic, and youth unemployment is at a considerable high. Instead of relying on forecasts that are never, ever right, should we not be asking how many more people need to lose their jobs, and how many more young people need to go without one, before the Chancellor accepts that it is her policies that are not working?
Rachel Reeves
The previous Government presided over a 113,000 increase in the number of young people not in education, employment or training, and the number of youth apprenticeships was cut by 40%. Why does the hon. Gentleman think that unemployment among young people is a challenge? It is because of the decisions that the previous Government made. That is why we are putting more than £800 million into a youth guarantee, it is why we are putting more money into further education—which his Government failed to do—and it is why we are expanding the number of youth apprenticeships. We recognise there is a challenge. The difference between our Government and the hon. Gentleman’s is that we are doing something about it, and they never did.
Lauren Edwards (Rochester and Strood) (Lab)
I thank the Chancellor for her statement, and welcome the OBR forecast that unemployment will fall to 4.1% by the end of the current Parliament. No doubt that will have been driven by excellent policies such as the youth guarantee and the apprenticeship reforms. The NEET rate remains stubbornly high, though, so may I urge the Chancellor to target any additional headroom that may be available at helping more young people into work and training? Investing in young people is good for them, good for society and good for the UK’s finances, and it is also the best way in which to reduce our welfare bill in the long term.
Rachel Reeves
This Government are investing in young people, by ending the two-child limit, investing in further education—which was neglected by the last Government—and increasing the number of young people who can go on to study or take apprenticeships, and, indeed, through the youth guarantee, which is worth more than £800 million. As I said in my statement, though, we want to do more to tackle the legacy that we inherited from the Conservative Government to ensure that more young people have the opportunity of work, training or a college place.
Dr Ben Spencer (Runnymede and Weybridge) (Con)
Given what is happening in the middle east at the moment, there is a concern that petrol and diesel prices will spiral upwards. If that happens, taxation revenue on fuel will do the same. Can the Chancellor commit today to keeping taxation revenue at its current level, thereby reducing tax on fuel to help ease any future cost pressure?
Rachel Reeves
I think it can be seen from the policies that we have introduced over the past year that we are determined to address the cost of living challenges that we inherited from the Conservative party, whether by freezing rail fares, freezing prescription charges, extending the 5p cut in fuel duty until September this year or, indeed, introducing Fuel Finder to improve competition between forecourts and bring down petrol and diesel prices—but of course, as I said in my statement, we are carefully monitoring the impact of what is happening in Iran and elsewhere in the middle east, and we will do everything in our power to ensure that working people do not pay the price for that conflict.
Lizzi Collinge (Morecambe and Lunesdale) (Lab)
We know that the volatility of oil and gas prices has driven the high cost of living over the last decade. We also know that renewables cut the wholesale costs of electricity because they reduce the amount of time for which electricity prices are driven by gas. Does the Chancellor agree that, given the inevitable impact of the events in the middle east, our drive for clean energy is the right thing to do both for bills and for economic stability, and that those who are advocating continual reliance on oil and gas, and not investing in clean energy, are actually committed to higher bills and to our continued reliance on foreign instability?
Rachel Reeves
Oil and gas will play an important part in our energy system for many years to come, including oil and gas from the North sea, but we do need to improve our energy security. That is the lesson from Ukraine that this Government are addressing by investing in small modular reactors at Sizewell C, but also investing in wind farms and solar farms, because we have got to wean ourselves off foreign oil and gas and prices that are dictated by international markets. That is why we are investing in clean energy, and what we are seeing unfolding in Iran and elsewhere in the middle east shows how necessary those policies are.
Manuela Perteghella (Stratford-on-Avon) (LD)
A large part of my constituency’s economy depends on hospitality, tourism and our independent high streets. Those who run pubs, cafés, arts venues, restaurants and hotels are telling me that they are being squeezed from every direction, by higher employer national insurance, rising energy bills, and uncertainty over business rates relief. Does the Chancellor understand the damage that this is doing to communities like mine, and will she commit today to proper business rates reform and targeted support for hospitality and leisure?
Rachel Reeves
The best thing we can do to support our high streets and small businesses is ensure that more people have more of their money in their pockets to spend not on the essentials but on the things that they want to do—for instance, in local shops in the hon. Lady’s constituency. That is why we are taking £150 off people’s energy bills, have frozen prescription charges, and are freezing rail fares.
Baggy Shanker (Derby South) (Lab/Co-op)
I thank my right hon. Friend for her statement. Whether by delivering a record-breaking fair funding settlement for our council or backing Team Derby, this Government are definitely turning the page on years of brutal Tory austerity. However, many in our city still feel left out and left behind because of the depth of those austerity cuts. Will the Chancellor work to give every neighbourhood the tools that it needs, so that every place is decent to live in?
Rachel Reeves
My hon. Friend’s question goes to the heart of the issue. We have done an awful lot in the last year and a half to bring down interest rates and ensure that people have more of their own money in their pockets—and there is more of that to come, with the two-child limit going from April, the £150 off energy bills from April, and last weekend’s changes in rail fares. But all that is against a backdrop of 14 years of people being made worse off by the choices of the Conservative party. I do not expect people to feel all the benefits of the changes we have made straightaway, but I believe that the changes that will come in the next few months will start to be felt in the pockets of people in Derby and across the country.
Jim Allister (North Antrim) (TUV)
The Government want growth—we all want growth—but surely the Chancellor can see that the carbon tax that will result from extending the marine greenhouse gas emission regulations to the ferries, which are the economic lifeline to Northern Ireland, in circumstances in which there are no zero-emission alternatives, will add hugely to the consumer costs of my constituents and will disincentivise growth. Will she look again at that imposition, especially in view of the fact that the Scottish islands, which depend equally on the ferries, have been given an exemption?
Rachel Reeves
It is important that we wean ourselves off oil and gas prices that are set on international markets, but I absolutely accept the hon. and learned Gentleman’s point, and I am happy to suggest that the relevant Minister meet him.
David Burton-Sampson (Southend West and Leigh) (Lab)
The Liz Truss Budget in September 2022 affected many homeowners, with mortgage rates shooting up and the average two-year fixed rate exceeding 6%. When I was working in the mortgage industry, I saw the impact of that on working people’s finances. That is still being felt, but does the Chancellor agree that it is because of the actions of this Labour Government in restoring economic stability that we have seen six interest rate cuts since the general election—a welcome relief for many? The Opposition parties, by contrast, have no credible plan, and would return this country to the devastating days of Liz Truss.
Rachel Reeves
My hon. Friend speaks with authority about mortgage costs, given the jobs that he did before he became a Member of Parliament. It is true that, since the general election, somebody getting a fixed-rate mortgage will be paying £1,300 less a year than they were when we came into office. That means they have more money to spend on their high streets, on their families and on the things that matter, rather than just paying for the essentials, the price of which went up under the Conservatives.
Chris Curtis (Milton Keynes North) (Lab)
Economic policies introduced by the previous Government piled more and more pressure on my generation, adding to intergenerational unfairness, and nowhere is that more clear than with plan 2 student loans; to declare my interest, I still owe more than £40,000. The policy proposed by the Conservative party will not do anything to alleviate the cost of living pressures on young people. Given the better economic outlook that we have seen today, will the Chancellor meet me and other MPs who are concerned about the plan 2 student loan system to talk about how we can make the system fairer and more sustainable?
Rachel Reeves
To help the generation that my hon. Friend speaks about, we have introduced the Renters’ Rights Act 2025, and we are also bringing down interest rates and inflation. That makes it easier to get on the housing ladder but also, crucially, reduces the interest rates on both plan 2 student loans and other students loans, the threshold for which was frozen for 10 years under the previous Government.
Andrew Lewin (Welwyn Hatfield) (Lab)
On days like this, I am particularly grateful that NHS waiting lists are falling. Although it seems a long time ago that we heard from the shadow Chancellor, I was very concerned about his blood pressure; he is no longer in his place, so I hope he has gone to get that checked.
It is important that we take a breath and look at what the economy is actually doing. Borrowing is down, inflation is down and headroom is up. I particularly welcome today’s news from the OBR that investment in housing, as part of the economy, is up. Does the Chancellor agree that we need to continue to invest in housing to make sure that people’s aspirations to buy their own home are supported by this Government?
Rachel Reeves
My hon. Friend is right about the shadow Chancellor’s blood pressure—but, frankly, I am worried about his future employment prospects.
NHS waiting lists are falling because of the money that we have put in, but my hon. Friend makes a point about overall investment in the economy. After lagging behind pretty much every other advanced country in the world, since the general election we have had the fastest investment growth in the G7.
Madam Deputy Speaker
For the final question—the one we have been waiting for—I call Chris Vince.
Rachel Reeves
It is not Shakespeare, but I always say, “Save the best till last.” If we can spend less money on paying the interest on debt, we will have more money to spend on our NHS, on our defence and on keeping taxes down. That is only possible if we return stability to the economy, and the OBR forecast shows that we have the right plan. Inflation and interest rates are coming down, while Government borrowing costs, Government borrowing and Government debt are on a downward path. That compares with the situation under the previous Government, who lost control of the public finances and, as a result, lost control of family finances. In 18 months, we have begun to turn that around. Is there more to do? Absolutely—but we have started on that course. If we stick to the plan, the prize at the end is huge.
Oral Answers to Questions
Rachel Reeves Excerpts(3 months ago)
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Elaine Stewart (Ayr, Carrick and Cumnock) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
I am very sorry to see your leg in such a way, Mr Speaker.
We are committed to driving growth everywhere. The Budget ensured that Scottish public services are fairly funded, with an extra £820 million for the Scottish Government through the Barnett formula, on top of a record settlement in June this year. We are also investing in transport for city regions, and investing £5 billion in deprived neighbourhoods through the Pride in Place programme, with some of that money going to Scotland.
Kirsteen Sullivan
I welcome the fantastic news that Edinburgh and south-east Scotland will receive £37.8 million from the new local growth fund, supporting infrastructure, business support and skills development. However, I consistently hear from businesses that they struggle to recruit people with the skill sets needed to grow their operations and fuel economic growth. Can the Chancellor set out how this investment will reach beyond the cities to tackle the acute skills shortages in my constituency of Bathgate and Linlithgow?
Rachel Reeves
I thank my hon. Friend for her commitment to her constituency. It is right that the money is allocated through the regional economic partnerships in Scotland, and I have absolutely no doubt that my hon. Friend will make the case for her local area. The regional economic partnerships have already worked together to deliver the integrated regional employability and skills programme in Edinburgh and south-east Scotland, including helping people in her Bathgate and Linlithgow constituency.
Emma Foody
Ministers will be all too aware of my campaign to unlock improvement at Moor Farm roundabout, which is currently holding back growth across the north-east and causing misery to local people on a daily basis. The Government have rightly taken steps to ensure that my region gets its fair share of investment through changes to the Green Book and place-based business cases, but will the Chancellor meet me ahead of the road investment strategy to ensure that we finally get this long overdue investment in a critical piece of north-east infrastructure?
Rachel Reeves
My hon. Friend has been a tireless campaigner for the Moor Farm roundabout, which holds back both commuters and businesses, and therefore both growth and prosperity. I will continue to work with her on this. I know that the roundabout is now being properly considered for inclusion in the road investment strategy and I would be happy to meet her to discuss that further.
Elaine Stewart
The Ayrshire growth deal, which was allocated £103 million of UK Government funds, has the potential to make a real difference to our economic prospects. Despite its clear potential, though, delivery on the ground remains far too slow in turning around real progress. What action can the UK Government take to drive momentum, sharpen the strategic direction of the deal and ensure that Ayrshire finally sees the benefits of this investment?
Rachel Reeves
This Labour Government are investing more than £250 million in economic development and regeneration in Ayrshire, including but not limited to the Ayrshire growth deal. My hon. Friend is a great champion of Ayrshire, and I look forward to working with her and my good friend Anas Sarwar in the months and years ahead to deliver for the people of Ayrshire and those right across Scotland.
Christine Jardine (Edinburgh West) (LD)
According to a report this morning from the Jobs Foundation, the energy sector in north-east Scotland is on a cliff edge, with Robert Gordon University estimating that 400 jobs will be lost every two weeks. Given the importance of that sector not just to Aberdeen or Edinburgh West but to the Scottish and UK economies, will the Chancellor think about providing the regional development support that the Scottish Government are failing to provide?
Rachel Reeves
At the Budget, we published our North sea oil and gas plan and provided certainty by announcing that the energy profits levy introduced by the previous Government will end at the end of this Parliament. At the same time, we are supporting the transition to new jobs in new industries right across Scotland, including in Aberdeenshire, because the opportunities to transition to jobs in clean energy are very real, and we need to ensure that those jobs come to Scotland.
Mr Gregory Campbell (East Londonderry) (DUP)
I know the Chancellor would say that the Northern Ireland budget was an exceptionally good one, but would she agree that there are extreme circumstances pertaining to three areas in particular—policing, education and health—at the moment? Will she at least get into discussions with the First and Deputy First Ministers in Northern Ireland to see what can be done to alleviate the problems that are coming towards us?
Rachel Reeves
My right hon. Friends the Northern Ireland Secretary and the Chief Secretary to the Treasury are in discussions with the Northern Ireland Executive on some of the additional pressures they are facing. We are working through those plans and will have more to say shortly.
Dr Ellie Chowns (North Herefordshire) (Green)
Regional funding must not come at the expense of local authority funding and all devolved funding must recognise the realities in the places where funding is needed, yet under the so-called fair funding review, in just three years Herefordshire council will see a reduction in UK Government fundings to 78% of current levels. The Government have also removed the remoteness adjustment for anything except social care, but rurality does of course matter for bin collections, school transport and many other aspects. Will the Chancellor look again at the fair funding review, which is unfair for so many places, like Herefordshire, and ensure that remoteness is properly adjusted for in the calculation?
Rachel Reeves
My understanding is that the Ministry of Housing, Communities and Local Government is still consulting on this matter, so the hon. Lady and other colleagues will have a chance to feed into that process. In the spending review, we put an extra £600 million into supporting local authorities after the years of austerity under the Conservative Government. While the previous Conservative Prime Minister said he would take money away from poorer areas and give it to Tunbridge Wells, we are investing more fairly in the areas that need it most.
Richard Foord (Honiton and Sidmouth) (LD)
Lillian Jones (Kilmarnock and Loudoun) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
This Government are determined to get back all the money that was lost through covid fraud and corruption. That is why I appointed the covid corruption commissioner when I became Chancellor, and we have already brought in £400 million that the previous Government gave up on.
Lillian Jones
This Government have recouped £400 million in covid fraud and error, with HMRC recovering a massive £1.3 billion, as well as aggressively pursuing the firm linked to Baroness Mone, PPE Medpro. Does my right hon. Friend agree that this Government’s relentless recovery action demonstrates that it is only under Labour that this money is recovered from fraudsters to do what it should do, which is to fund our public services?
Rachel Reeves
Sadly, I cannot comment on any individual cases, but I am absolutely determined to get that money back, because that money belongs in our schools, hospitals and public services, not in the pockets of Tory friends and donors.
Lincoln Jopp (Spelthorne) (Con)
The Chancellor of the Exchequer (Rachel Reeves)
While the Bank of England has overall responsibility for returning inflation to target, this Government are taking the action that we can: £150 off energy bills from April this year, freezing prescription charges for the second year in a row, and freezing rail fares for the first time in 30 years. As a result, the Office for Budget Responsibility forecast that inflation will be 0.4 percentage points lower in 2026-27 than it otherwise would have been.
Lincoln Jopp
On Friday, I visited Primark in Staines, in my Spelthorne constituency, where the team, led by Luke, is doing a fantastic job in creating a vibrant retail experience. However, the British Retail Consortium has said that the Chancellor’s jobs tax is pushing up prices and raising the cost of living, and that the Employment Rights Bill will also be inflationary. When did the Chancellor stop listening to business?
Rachel Reeves
I was at Primark just ahead of the Budget, where we announced that we were going to take action on low-value imports. That was welcomed by Primark and many other retailers who are undercut by foreign importers that do not pay customs duty on what they bring into the country. Far from working against business, we are working in conjunction with business to grow our economy. Our economy exceeded expectations for growth last year, and I am confident that it will do the same this year too.
Tom Hayes (Bournemouth East) (Lab)
The Conservatives may want to talk down Britain, but Bournemouth is building again, with a £350 million expansion at J. P. Morgan Chase following the Chancellor’s visit, a £100 million expansion planned by AFC Bournemouth, a £50 million airport upgrade, £26 million invested in Bournemouth and Poole College, £500 million provided for the Royal Bournemouth hospital development, and new land at Wessex Fields to build key worker housing and medical research facilities. Will the Chancellor continue to prioritise stability, bringing down costs, and the free trade that we need in our world, so that we can continue to protect and expand these investments into Bournemouth?
Rachel Reeves
I thank my hon. Friend for that question. He did not mention the beautiful Bournemouth pier, which we visited together in August and where we enjoyed a very nice ice cream, but he did mention J.P. Morgan, which has announced record investment in its Bournemouth campus. It is employing a shedload of apprentices on that campus, helping it to grow its business, and after this year’s Budget, J. P. Morgan has announced a new building in Canary Wharf. [Interruption.] Maybe Opposition Front Benchers do not like apprentices, but this Government do, which is why we are backing them.
Paula Barker (Liverpool Wavertree) (Lab)
The Chancellor of the Exchequer (Rachel Reeves)
This Government have a plan to grow the economy and reduce the cost of living, and it is the right plan for Britain. We are cutting the cost of living and the national debt and creating the conditions for growth in all parts of our country. We have had six cuts in interest rates since the general election, reducing typical mortgage costs by £1,200 a year, and have secured record levels of inward investment and trade deals with countries around the world. The FTSE has hit record highs, and while other countries are increasing barriers to trade, I was in Davos talking to allies about how to reduce them. Our economic plan is the right one to build a stronger and more secure Britain, and I am focused on delivering it.
Paula Barker
While I am looking forward to the statement a little later from the Exchequer Secretary to the Treasury, I would like to push him, if I may. I recently visited one of my local pubs, the Masonic Arms on Lark Lane—which is a fantastic venue—and met Guy and Amelia. Currently, the overall sector picks up 2.8% of UK business rates nationally, but has only 0.5% of the turnover of UK businesses. This is clearly not a fair tax for pubs; it is the result of a uniquely skewed business rates system that actively penalises many pubs. What long-term steps can the Minister take to help pubs like the Masonic Arms and the wider hospitality sector?
Rachel Reeves
As my hon. Friend knows, we have permanently reduced the multiplier for business rates for retail, hospitality and leisure, but my hon. Friend the Exchequer Secretary will set out the support for pubs in more detail later today. We are determined not only to support pubs, which are the lifeblood of so many communities, but also to support the whole of our retail, hospitality and leisure sector. We are putting more money in people’s pockets by cutting energy bills and train fares and getting people back to work, so that they have more money to spend on the things they love, not just on the essentials.
Sir Mel Stride (Central Devon) (Con)
Mr Speaker, I begin by associating Conservative Members with the Chancellor’s comments about your leg—we wish it well.
We are waiting with interest to hear the details of the latest U-turn on business rates this afternoon, but if the briefing is to be believed, it will be far too little, too late. The Chancellor simply does not understand the desperate situation so many of our pubs are in. Many pubs are asking why the Chancellor chose to spend billions more on the benefits bill instead of providing proper, permanent business rates support.
Rachel Reeves
Under the previous Government—when the right hon. Gentleman was in government—7,000 pubs closed. We have permanently lowered the tax rate that retail, hospitality and leisure businesses pay. When I became Chancellor of the Exchequer, we faced a situation in which all of the covid support was going to disappear overnight. We have put £4.3 billion of taxpayers’ money into supporting our retail and hospitality sector, including pubs, but we recognise the distinct problems that pubs face. That is why, unlike the previous Conservative Government, we are setting out more support.
Sir Mel Stride
They just do not get it. Of course, it is not just pubs; the whole high street—shops, restaurants and hotels—is seeing massive increases in business rates, some well over 100%. Where is the help for those businesses?
Rachel Reeves
Some of the numbers that are bandied around by the right hon. Gentleman do not reflect the reality, because they do not reflect the £4.3 billion of transitional support that we have put in to taper those increases in business rates. I do not think anyone in this House seriously believes that temporary support during the pandemic should continue infinitely. That would not be the right thing, and it would not be affordable for other taxpayers. That is why we are gradually tapering the support, with a £4.3 billion support package in the Budget and some more targeted support for pubs later today. I remind the right hon. Gentleman that he could have taken action when he was in government. Instead, there was a cliff edge, with no support for pubs or any other sector of the economy.
Dame Chi Onwurah (Newcastle upon Tyne Central and West) (Lab)
Mr Gagan Mohindra (South West Hertfordshire) (Con)
Rachel Reeves
I am not sure whether the hon. Gentleman thinks that the Chancellor of the Exchequer should not be in Davos, but I think it is important that the Chancellor is there banging the drum for Britain and bringing investment here. While I was in Davos, we secured new investment and worked with our allies on securing new trade deals for Britain. While the Opposition like to talk our country down, we are getting on and delivering a lower cost of living and higher economic growth.
Alan Strickland (Newton Aycliffe and Spennymoor) (Lab)
Rachel Reeves
I thank my hon. Friend for bringing this matter to the House’s attention. I cannot comment on individual cases of covid fraud and tax, but that person would not be the first member of Reform who took a fraudulent covid loan—[Interruption.] The hon. Member for Boston and Skegness (Richard Tice) is here just in time. I am not sure whether he is still the shadow, shadow, shadow Chancellor or not.
Munira Wilson (Twickenham) (LD)
Preet Kaur Gill (Birmingham Edgbaston) (Lab/Co-op)
Rachel Reeves
I could not agree more with my hon. Friend, and that is why I announced—on the basis of many representations from colleagues, including her—a comprehensive set of measures at the Budget to crack down on illegal high street activity. We want our high streets to thrive, but we must crack down on these illegal businesses selling counterfeit goods and often harbouring more dangerous criminal activity. That is why we put money into that area in the Budget.
Edward Morello (West Dorset) (LD)
Kevin Bonavia (Stevenage) (Lab)
I wish you a speedy recovery, Mr Speaker.
I welcome the economic steps that the Chancellor has taken against Russia’s illegal invasion of Ukraine, and I encourage her to go further, but does she agree that the British public can have confidence in our sanctions regime only if those in political leadership across all parties, including the shadow Attorney General, do not have ongoing involvement in advising Russian oligarchs?
Rachel Reeves
Like many, I was staggered by reports that senior counsel appointed by Mr Abramovich in relation to proceedings in Jersey include the shadow Attorney General. I cannot speak for the Opposition—I had many years of doing that—but our focus remains ensuring that there is no further delay in proceeds from the sale of Chelsea football club reaching humanitarian causes in Ukraine. If Mr Abramovich fails to act quickly, this Government are fully prepared to pursue legal action to release the funds. We know whose side we are on: we are on the side of the Ukrainian people, and of Britain’s national interests.
Peter Fortune (Bromley and Biggin Hill) (Con)
More than 80% of households in Bromley and Biggin Hill have at least one car or van—a figure significantly higher than the average in Greater London—so the decision to remove the 5p fuel duty reduction hits them particularly hard. This is the latest in a slew of measures against motorists, including increased congestion charges and the ultra low emission zone charge, which is really hitting them in the pocket. Why does the Labour party continue to use motorists as a cash cow?
Antonia Bance (Tipton and Wednesbury) (Lab)
There are many small and medium-sized enterprises in advanced manufacturing supply chains in my bit of the Black Country. Does the Chancellor agree that successfully implementing our industrial strategy is vital to securing the growth, through small businesses, that we need to get British industry back on track?
Rachel Reeves
I thank my hon. Friend for the work that she does to champion small businesses, and all businesses in the Black Country, but particularly those in her constituency. Advanced manufacturing is one of our industrial strategy sectors in which we have huge strengths as a country. We are determined to support such businesses in growing and fulfilling their potential.
Edward Argar (Melton and Syston) (Con)
What does the Minister say to childminders in Melton and Syston who are concerned about potentially increased administrative burdens and cash-flow pressures, as a result of changes under Making Tax Digital for businesses with a turnover of at least £50,000? It is scrapping the blanket 10% wear and tear allowance, and replacing it with a requirement for line-by-line item accounting, with childminders having to pay up front and claim back later.
Sarah Coombes (West Bromwich) (Lab)
Thanks to the policies of the Labour Treasury team, Sandwell will receive £1.5 million to smarten up our towns. Does the Chancellor agree that local people should have a say in how that funding is spent, and will she encourage people in Rowley, West Bromwich and Oldbury to fill in my survey about how we spend this Government cash?
Rachel Reeves
I very much encourage people in my hon. Friend’s constituency to fill in her survey. The Pride in Place money, which we are allocating across some of the most deprived parts of the country, will make a huge difference in regenerating areas left behind by the previous Government. I encourage everyone in all our communities to get involved, and to shape those plans, because those plans can only be improved by direct contact with the people who stand to benefit from them most.
Caroline Voaden (South Devon) (LD)
Link has doubled down on its decision not to grant Totnes a banking hub, despite the Prime Minister telling Members at Prime Minister’s questions that every community that wants one should have one. Will the Chancellor agree to review the criteria for banking hubs, so that people have access to face-to-face banking services, not just access to cash, when the last bank turns its back on its customers and leaves town?
Chris Webb (Blackpool South) (Lab)
Southshore in my constituency has the highest concentration of deprived communities and the most deprived ward in the country. We have developed a local people’s plan for work to regenerate the area. Will my right hon. Friend the Chancellor meet me to discuss this plan, so that we can regenerate the most deprived area in this country?
Rachel Reeves
We were pleased to be able to allocate Pride in Place funding to my hon. Friend’s constituency, in recognition of its levels of deprivation. That comes alongside policies such as getting rid of the cruel two-child benefit cap, which the previous Government introduced, and investing record amounts in social housing. This Government are delivering for the people of Blackpool. I am very happy to meet my hon. Friend.
Dave Doogan (Angus and Perthshire Glens) (SNP)
Constituents of mine have restored the Alyth hotel. It has gone from near dereliction to being an outstanding venue for dining and drinking, and a hotel. However, they are smothered by the compound burden of VAT rates, wage costs, duty increases, employer national insurance contributions, energy costs and the squeeze on spending. That is why there were 8,000 fewer jobs in hospitality in December than in November, and 20,000 fewer than in September. Will the Chancellor consider reducing VAT on hospitality to the 7% it is in Germany, the 9% it is in Ireland, or the 10% it is in Spain and Italy?
Rachel Reeves
I suggest that the people of Scotland ask who was in charge in Scotland for the last two decades, kick them out at the next election, and give Labour a chance.
OBR: Spring 2026 Economic and Fiscal Forecast
Rachel Reeves Excerpts(3 months, 3 weeks ago)
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The Chancellor of the Exchequer (Rachel Reeves)
I have asked the Office for Budget Responsibility to prepare an economic and fiscal forecast for publication on 3 March 2026.
This forecast, in addition to the forecast that was published in November 2025, will fulfil the obligation required by the Budget Responsibility and National Audit Act 2011 for the OBR to produce at least two forecasts in a financial year.
As set out at the Budget, the spring forecast will not make an assessment of the Government’s performance against the fiscal mandate and will provide an interim update on the economy and public finances.
The Government intend to respond to this with a statement to Parliament. This is in line with my commitment to deliver one major fiscal event a year at the Budget. This approach gives families and businesses the stability and certainty they need and, in turn, will support the Government’s growth mission.
[HCWS1219]
Sale of Chelsea FC: Frozen Funds
Rachel Reeves Excerpts(4 months, 1 week ago)
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The Chancellor of the Exchequer (Rachel Reeves)
Today, at my direction, the Office of Financial Sanctions Implementation issued a licence permitting the transfer of over £2.5 billion from the sale of Chelsea football club to a new charitable foundation. The foundation will spend these proceeds for the benefit of the victims of the invasion in Ukraine.
The Government would have preferred to take this action with the co-operation of Roman Abramovich and his company, Fordstam Ltd. However, that has not materialised, and it is unacceptable that the funds remain frozen while Ukraine continues to suffer.
The Government are urging Mr Abramovich to act without delay. We will consider any proposal from Mr Abramovich to make use of this clear legal route to establish the foundation and transfer the funds under the terms of the licence. I confirm the Government commitment to use all tools within their power, including pursuing the matter in court if necessary, to release the proceeds.
[HCWS1196]