Autumn Budget 2024

Motion to Take Note

15:19:00

Moved by

That this House takes note of the Autumn Budget 2024.

My Lords, it is a privilege to open this Budget debate in your Lordships’ House, and to speak alongside so many distinguished and expert noble Lords. It is, of course, a particular pleasure given it is the first Budget of a Labour Government in 14 years. I take this opportunity to welcome the noble Baroness, Lady Penn, to her place and to welcome the noble Lord, Lord Booth-Smith, to your Lordships’ House. I very much look forward to his maiden speech. This was a Budget to fix the foundations; to restore stability by repairing the public finances; to rebuild our public services after years of neglect; to choose investment rather than decline; and to keep our promises to working people. It was a once-in-a-generation Budget, on a scale commensurate with the challenging inheritance we faced. That meant taking difficult decisions, but they were the right decisions. As a result of those decisions, we have now wiped the slate clean. We have created a foundation of stability on which we will take forward our agenda of growth and reform, delivering the mandate for change on which this Government were elected. Let me set out first the inheritance we faced. As noble Lords will know, on her arrival at the Treasury in July, the Chancellor was informed of a £22 billion black hole in the public finances—a series of commitments made by the previous Government which they did not fund and did not disclose. Ahead of this Budget, the independent Office for Budget Responsibility conducted a review into the circumstances surrounding a meeting it held with the Treasury on 8 February this year at which the Government were obliged to disclose all unfunded pressure against the reserve. The OBR’s review has established that at that point the previous Government concealed £9.5 billion. The OBR’s report states that they “did not provide the OBR with all information available”. It has made 10 recommendations to prevent this happening again, which we have accepted in full. Of course, at that point, the previous Government still had five months left in office, during which time they continued to amass unfunded commitments which they did not disclose. By the Spring Budget, Treasury records show these had reached £16.3 billion. By July, they had reached £22 billion. The Treasury has now provided to the OBR a line-by-line breakdown of these unfunded commitments —260 separate pressures that the previous Government did not fund and did not disclose. Neither did they budget for costs which they knew would materialise, including funding for compensation schemes for two terrible injustices. So, this Budget provides, for the first time, funding of £11.8 billion to compensate victims of the infected blood scandal and sets aside £1.8 billion to compensate victims of the Post Office Horizon scandal. However, the country did not just inherit broken public finances; it inherited broken public services too: NHS waiting lists at record levels, children in portakabins as school roofs crumbled, rivers filled with polluted waste. Yet since 2021, there had been no spending review—no detailed plans for departmental spending set out beyond this year. Faced with this reality, any responsible Chancellor would have to act. Some may argue otherwise: that we should have ignored the problems in the public finances. But that is the path of irresponsibility, the path chosen by the Liz Truss mini-Budget, when mortgage costs rose by £300 a month, for which working people are still paying the price. This Government’s number one commitment is economic and fiscal stability. That is why the very first Act we passed was the Budget Responsibility Act, strengthening the OBR, and why we have established robust fiscal rules. These fiscal rules put the public finances on a sustainable path while allowing a step change in investment to drive long-term growth. The first rule is the stability rule. This brings the current Budget into balance so we do not borrow to fund day-to-day spending. The significant fiscal consolidation over the course of this Parliament takes borrowing as a share of GDP from 4.5% to 2.1%, as we achieve the biggest current budget surplus in over 20 years. Over the past 14 years, borrowing averaged 5.6% of GDP; over this Parliament, it will average 2.6%. But while being tough on spending, we must create the space for investment. We inherited a situation where the UK is the only G7 country with private investment levels below 20% as a share of the economy, and we inherited plans where public investment was set to fall from 2.5% to 1.7% of GDP. As the IMF has said, more public investment is badly needed in the UK. So, the second fiscal rule is the investment rule. As set out in our manifesto, we will target debt falling as a share of the economy, which will be defined as “net financial debt”, a measure that has been published by the Office for National Statistics, and forecast by the Office for Budget Responsibility, since 2016. Net financial debt recognises that government investment delivers returns for the taxpayer by counting not just the costs of investment but the benefits too. Like our stability rule, the OBR has confirmed the investment rule will also be met two years early. To meet our stability rule, in the context of the hole in the public finances, the compensation schemes that were not funded and the need to avoid austerity in our public services, the Budget raises taxes by £40 billion. Of course, before any Government can consider changes to taxation, they must first ensure efficiency and reduce wasteful spending. The Budget set a 2% productivity target for all departments; it took steps to ensure welfare spending is more sustainable; and it ensured more people will pay the tax that they already owe. This Budget made another important choice: to keep the manifesto commitment we made to working people to not increase their income tax, their national insurance or VAT. And we went further, by freezing fuel duty and raising the national minimum and living wage. Compare that to the choice made by the previous Government, who froze income tax thresholds, costing working people nearly £30 billion. We could have extended that freeze, but that was not the choice we made. Instead, from 2028-29, personal tax thresholds will be uprated in line with inflation once again. However, this Budget does involve some very difficult choices. We will increase employers’ national insurance contributions by 1.2 percentage points to 15 % from April 2025 and reduce the secondary threshold from £9,100 to £5,000 per year. At the same time, to protect the smallest companies, we will increase the employment allowance from £5,000 to £10,500, meaning 865,000 employers will not pay any national insurance at all and over 1 million employers will now pay the same or less than they did before. The lower rate of capital gains tax will be increased from 10% to 18%, and the higher rate from 20% to 24%, meaning the UK will continue to have the lowest capital gains tax rate of any European G7 economy. We have maintained the lifetime limit for business asset disposal relief at £1 million to encourage entrepreneurs to invest in their businesses. Business asset disposal relief will remain at 10% this year, before rising to 14% in April and to 18% from 2026-27, maintaining a significant gap compared to the higher rate of capital gains tax. The Budget also set out additional tax measures including introducing a new vaping products duty and measures on tobacco duty, vehicle excise duty, air passenger duty and alcohol duty, as well as making reforms to inheritance tax on pensions and on agricultural and business property. We also delivered on our commitments to abolish the non-dom tax regime, replacing it with a new residence-based scheme, introduced a fairer approach to the way carried interest is taxed as well as reforms to the stamp duty land tax surcharge for second homes and to the energy profits levy, and we introduced VAT on private school fees. There was no bigger failure of the previous Government than on growth. First, they introduced austerity, which choked off investment. Then their Brexit deal created new trade barriers equivalent to a 13% increase in tariffs for our manufacturing sector and a 21% increase in tariffs for our services sector, permanently reducing growth by 4%. Finally, the disastrous mini-Budget crashed the economy and sent inflation and interest rates soaring. Had the UK economy grown over the past 14 years at the average rate of other OECD economies, it would have been £171 billion larger. When the Bank of England cut interest rates last week, it forecast that the Budget would add 0.75% to growth next year and that unemployment will now fall. Over the course of this Parliament, the OBR says that growth will be largely unchanged, in the context of a Budget that had to take some very difficult decisions to clear up the mess that we inherited; and, over the longer term, the OBR says that this Budget will permanently increase GDP by 1.4%. The IMF has welcomed “the Budget’s focus on boosting growth through a needed increase in public investment”, but, of course, we need to go further and faster. That is why economic growth remains this Government’s central mission. We have set out extensive planning reforms, a new national wealth fund, new local growth plans and a modern industrial strategy. We have created Skills England and the new growth and skills levy. We will shortly publish the “Get Britain Working” White Paper to tackle inactivity, and the Chancellor will set out pension reforms in her Mansion House speech later this week—all of which will significantly boost growth and none of which are yet included in the OBR’s forecast. Our growth strategy must also, of course, be developed and delivered alongside business. We are very aware that we are asking business to contribute more and that impacts of the rise in employer national insurance will be felt beyond business, as the OBR has set out. We know that successful businesses depend on the skilled and healthy workforce that these funds aim to deliver. But most of all, we know—because they tell us—that businesses depend on the stability that this Budget, by repairing the public finances, provides. To ensure certainty, alongside the Budget we published a corporate tax road map, which confirms our commitment to cap the rate of corporation tax at 25%, the lowest in the G7. We are maintaining full expensing and the £1 million annual investment allowance, and continuing the current rates for research and development reliefs to drive innovation. We have announced permanently lower business rates for retail, hospitality and leisure properties. We have frozen the small business multiplier, extended the enterprise investment and venture capital trust schemes until 2035, and taken action on late payments and non-financial reporting burdens. Finally, we know that the significant new capital investment in transport and housing that this Budget delivers is vital for businesses to grow. The difficult decisions that this Budget takes are for a purpose: not just to repair our public finances but to rebuild our public services. In this, the first phase of the spending review, we have prioritised day-to-day funding towards delivering on our manifesto commitments. Day-to-day spending from 2024-25 onwards will now grow by 1.5% in real terms. In addition, the £100 billion of capital that we set out will drive growth across our country. To unlock the growth industries of the future, we will protect investment in research and development with more than £20 billion of funding. We are providing over £5 billion to progress our manifesto commitment to build 1.5 million homes. On transport, to help grow our economy across the north of England, we are investing in faster and more reliable services, including the trans-Pennine upgrade. We will deliver east-west rail to drive growth between Oxford, Milton Keynes and Cambridge, and we have committed the funding to begin tunnelling work for HS2 to run through to Euston station. To bring new jobs to Britain, the Budget funded 11 new green hydrogen projects across England, Scotland and Wales. We have also announced significant investment between government and business in carbon capture and storage. We are also increasing the core schools budget by £2.3 billion next year to support our pledge to hire thousands more teachers into key subjects, and we are tripling investment in breakfast clubs, putting them into thousands of schools. Of course, we are also beginning the work of fixing the NHS after years of neglect. Because of the difficult decisions that we have taken on tax, and because of our investment rule, the Budget announced that we are now able to provide a £22.6 billion increase in the NHS budget over two years. That is the largest real-terms growth in NHS spending, outside Covid years, since 2010. Because of this record injection of funding, the thousands of additional beds that it will secure and the reforms that we are delivering, we can now bring waiting lists down more quickly, moving towards our target for an 18-week waiting time, by delivering our manifesto commitment of 40,000 extra appointments every week. This Budget delivers on the mandate the British people gave this Government: to fix the foundations of our economy and deliver change. The choices we have made are the right choices. They are not the easy ones but the responsible ones: to repair the public finances, restore stability, rebuild our NHS, invest in the national interest and protect working people. There are, of course, different choices that could be made. Let us be clear, however: not to make the choices we made on tax would make it impossible to protect working people; not to support the funding for public services would mean cuts to schools and the NHS; and not to support our investment rule would mean delaying or cancelling thousands of projects delivering growth right across our country. We have made our choice: restoring stability, protecting working people, fixing the foundations of our economy, investing in our future and rebuilding Britain. I beg to move.

15:35:00

My Lords, I thank the Minister for introducing this debate. I am very much looking forward to hearing the noble Lord, Lord Booth-Smith, make his maiden speech in this debate, and I welcome him to his place. I congratulate the Minister on such an excellent performance: I slightly think that if he delivers it in one single tone, it will slip past us as if there are good things contained. Looking at the Benches behind him, I noticed there were no cheers of “Hear, hear”, no smiles and no congratulatory nods, because noble Lords, like me, see this Budget for the three things it is: dishonest, unkind and—worst of all for the sake of the British people, our economy and country—incompetent. The Budget is dishonest because it breaches the promises Labour made to the British people. These were promises made by the Minister, his colleagues and the noble Lords I am regarding across this great historic Chamber of ours today. It is fundamentally unkind—and I never thought I would say this about a Labour Budget in this Chamber—because it hurts hard-working people at every stage of life. And I am afraid it is incompetent because, fundamentally, in almost every action, word and sentence of this Budget, there is not a single pro-growth measure. Everything is designed to make life more difficult for us to realise the best version of ourselves in whatever manner that may be. During the general election, many Labour politicians spoke of fixing the foundations of the economy. They talked of their fiscal rules; their manifesto claimed that this changed Labour Party would be based on sound money and economic stability. Yet, in their first Budget, they have genuinely fiddled the rules. Frankly, they have plunged our country into a further £32 billion-worth of debt by the end of the Parliament. The Minister described it as a “once in a generation” Budget. Well, all I can say is, thank goodness for that, because we could not possibly put up with this year after year. I find it distressing to be continually told about the so-called black hole. The numbers moved around, even in his speech, from £16 billion to £22 billion to £30 billion. I still cannot keep track of where the black hole actually is. We know full well that the black hole has been created by this Government to give excessive pay rises to those people who they want to ensure support them into the future. It is a perfectly sensible political tactic; in some respects, I may even admire it slightly. But it is fiscally incompetent, it causes huge long-term damage and it is fundamentally dishonest when it comes to running the economy. The Prime Minister was asked many times this summer whether Labour would increase taxes. Do any noble Lords remember those comments? He said time and time again the same line: “Labour will not increase taxes on working people”. The Labour Party’s manifesto, quoted by the Minister, was categorical. He quoted these very words: “We will not increase national insurance, the basic or higher or additional rates of income tax or VAT”. We know now, however, that the Office for Budget Responsibility—about which we have heard so much from the Minister—has estimated that 60% of the cost of the increased employed national insurance contributions will be passed on to working people through lower wages and higher prices. I must ask the Minister: why have they done this? Tesco came out over the weekend and said that its additional costs would be £1 billion a year—£1 billion a year for Britian’s biggest supermarket. I hear cries that it can come out of their so-called profits or through lower dividends to pension funds—probably in which many of the unions that have backed so many of my noble colleagues opposite invest—but the reality is that it will simply result in higher costs in supermarkets, or the organisation employing fewer people as it has less capital to deploy or less money to reinvest. I see noble Lords opposite who know this to be a fact: if you raise costs on businesses at that level, the economic costs on the economy will be substantial. It is a simple, measurable economic fact. I find it very alarming that the Minister, who with his experience understands these economic principles, is not so aware as to be honest about the true long-term economic damage that the national insurance contribution change will have across the country. It will result directly in unemployment rising. Sadly, for me, with young children coming into the labour market—particularly sadly since I have to pay their additional school fees before they get there—they will find it even harder to find work. We see this in other European countries, where tax rates are so high on the national insurance side that, if you are a young person coming into the market, you simply cannot find work. I do not understand how that could possibly be at the core of the tenets of the Labour philosophy. Frankly, I would feel a great sense of shame if I had to present this Budget from the Government Benches because it is doing nothing at all for the social values we purport to hear from their side. It fundamentally goes against the principles of how they campaigned in the election—that they would effectively be tax-neutral on the working person. This was fundamental, not just in technical terms. People who have been in government understand the need to be flexibly minded. I am talking not about the details—a penny here or a point there—but the principle of how this Government went into the election saying that they would not raise taxes on working people. They have, in magnificent quantities and to huge effect. I would like to hear from the Minister and his colleagues how this could possibly be justified. This is also unfortunately an unkind Budget that harms people at every stage of their lives. The first announcement made by the Labour Administration—going into the election, in fact—was that they would raise VAT on tuition fees, which the OBR believes will affect 600,000 students. It will have huge ramifications on the private education sector, which is an enormous export. Aside from anything else, it is a crucial component of our economy. This is aside from all the specialist and small schools that provide such an enormous, essential service to people in their communities. Why would this Government, who talk about growth and their desire to see a stronger and growing economy, want to attack aspiration? It is because of ideology. That is what I find so depressing. This should be a Budget about economics, to make people richer and make our country stronger, but it is about ideology, the dislike of people having some type of advantage and the idea that a parent does not want the best for their children. I will say one thing to the Minister: you are not attacking me. I have been to school, although it may not look like it. The people you are attacking are children. I do not understand why your first measure—I see the guilty expressions on the faces of the noble Lords opposite—should be to attack the aspirational opportunities and life chances of children. Shame on the Government for doing this. I feel sorry for my colleagues opposite for having to face their constituents and their Peers knowing what they have done to young children’s futures in the name of socialism. The next group in the catalogue of people to whom this Government have been unkind in this Budget is the vulnerable elderly. I will not repeat the well-made arguments on the iniquities of changing the regulations on the winter fuel allowance, but I would like to come on to the second component, which is relevant. I declare an interest in that I had rather hoped to inherit relations’ pension pots tax free, but now that will not be the case. These people, who have worked all their lives, paid their taxes and built up their pension funds, will now be taxed on the point of inheritance and then further taxed when their beneficiaries and descendants try to access those funds. Can that be right? This goes back to the Minister’s point on predictability and certainty. The Government want to bring some type of consistency back to the Budget process, which I thoroughly applaud. But how can it be considered predictable and certain? How can we make long-term investment decisions when at every turn they are making significant, radical and deadly changes to the very essence of our system of economic foundations, which is to have long-term pensions that are allowed to be invested in this economy to try to produce the growth this Government want? How does the Minister defend this concept of eating into our pensions savings and destroying the principle of the inheritability of the pensions pot? I turn to two groups that particularly deserve representation. I can understand that a socialist Government do not like private schools or people who make money on capital gains. I can understand a Government who may not want people to inherit the pension pots built up by their parents and grandparents. But why would any Government want to attack small family farmers and small businesses by ending the business inheritance relief on agricultural inheritance? I do not understand that, when this entire country is based so centrally on small businesses. This is not just an economic question but a social point about the vitality of small businesses and small family-owned farms. Why would a Government want to deliberately target those two sectors of our communities and our economy, to make their lives not just difficult but impossible? It will be fundamentally impossible to inherit an average-sized farm in this country in two years’ time. I do not know how many noble Lords on my Benches or elsewhere are from the farming community, but I ask all noble Lords, and the Minister: who on earth will feed us? Who will be the guardians and custodians of our countryside if the farming community does not take the baton from the previous generation? I am genuinely interested to know how many people have gone out today and said, “I wish to buy a 250-acre dairy farm and make that my living”. As the noble Lord has just intimated, I would have thought there is hardly anyone. The only reason why these people do what is frankly a national service is because they inherit this legacy, and it is shameful and destructive to target that community in such a way. Frankly, it is also deadly for the long-term survivability of our nation. I turn to young people and stamp duty. The Minister calls it “stamp duty land tax”—by using as many acronyms as possible, you can cover up what is actually happening. We promised to cut the rate at which it is paid, and that has now been reversed. Again, I do not understand this. Before the election we went clearly into that process, with clear commitments from the Labour Opposition at that time—which I and many of my noble friends on this side of the House thoroughly supported, by the way—to build more homes and give more people in this country greater access to the dream of home ownership. Why on earth would the Minister and his colleagues decide to make that more difficult? Why would they decide to end—or, in fact, restrict and narrow—the passageway to owning your own home, when we all agreed that this was a central and good thing to do? This is particularly true given that I do not believe it will raise a significant amount of money for the Exchequer. I turn to the other areas of the economy that we depend on: the voluntary sector, charities and the Government themselves. Increasing these levies on how people operate with their employees will increasingly make it incredibly difficult for so many of these smaller organisations. I know full well that so many noble Lords in this House are associated with voluntary and community organisations that will no doubt have come to them in the last week and said, “Please do something about this iniquitous change in the tax rule, which will prevent us carrying out work that people rely on”. This is not just hitting hedge fund managers or taxing carried interests in a different way; it is a hypodermic syringe of poison into the very root of our community activity. The Government have a lot of serious questions to answer about how they will ameliorate these measures for these organisations. I turn to the third point that I made at the beginning. If noble Lords think that the Budget is both dishonest and unkind, it is also, unfortunately, incompetent, which is probably worst of all. We have had a chance to look at the OBR’s economic and fiscal outlook, and we now know how much damage this Budget will do to our economy. Across all the key metrics, the Government’s policies will leave the UK with a weaker economic future. The Minister spouted various statistics, but the OBR has actually now revised down its estimates for GDP growth. I am never quite sure how important GDP growth is, but I would have thought it is probably better if it is going up rather than down—and it is going down by nearly 0.5% from the March forecast, when the last Government were purported to have colluded with their officials to obfuscate the information given to the OBR. That is a very serious claim in its essence, and it should be looked at closely. Instead, the Government have put taxes up and they are borrowing more. The Minister mentioned the concept of “no money without reform” but I have seen absolutely no evidence of reform. I say in all truth and sincerity, as a patriot before I am a party-political politician, that we need reform of public services—desperately. Yet I see no evidence of that at all. It is irresponsible and, frankly, bad politics to have paid out so much money at the beginning of the process without any sign of reform. I am afraid that this Government will live to regret this significantly. If I may come to a conclusion—

Oh!

I thought that noble Lords opposite would be pleased. I could go on. There are so many other areas where the Government have driven a dagger into our economy that if your Lordships want me to, I would be delighted to carry on listing them. However, given the many speakers after me who will no doubt be repeating the points I have made and, almost assuredly, building on them in a more intelligent and capable manner, I say this. After all the promises and pledges made by Labour, we now know the truth. Working people, small business owners, farmers, charities, young people—all will be worse off under Labour. Ministers have shamefully broken the promises they made earlier this year, leaving us with an economic forecast bleaker than when they took office. This Budget is nothing less than dishonest, unkind and incompetent. I am afraid to say that, after 100 years of testing socialism to destruction, it appears that we are still giving it another try. The British people placed their trust in this Government, in all truth, and through this Budget they have shown themselves to be unworthy of this trust. I ask the Minister: why he has done these things to our country?

15:51:00

My Lords, it is a great pleasure to speak in this debate and to welcome the noble Lord, Lord Booth-Smith, to his place and the noble Baroness, Lady Penn, back to her place. The noble Lord, Lord Johnson, is taking his new job as party co-chairman very seriously. Clearly, to entertain his troops, he has turned up the rhetoric to 11. However, for all the huff and puff we have just heard, His Majesty’s loyal Opposition have no moral authority to criticise those who are picking up the mess they left. The parlous state of the economy, the near collapse of public services and the sheer level of financial mismanagement that we saw from the former Government was a disgrace. One of the benefits of your Lordships getting to debate this Budget somewhat after it was released is that its effect is starting to crystalise, and I suspect that the Minister may be disappointed by the way it has been received. Then again, as he is a seasoned Treasury hand, I would ask him whether he was surprised by the reception the Budget got. OBR data and that of countless other analysts shows that UK households, which are still struggling to absorb the shocks from the pandemic, inflation and the energy crisis, will now be hit by the tax increases in this Budget, one way or another. Meanwhile CPI inflation is expected to rise above previous expectations and interest rate cuts will probably slow. So it cannot really be a surprise that the Chancellor failed to inspire a mood of national cheer. Nevertheless, we are glad that the Chancellor listened to Liberal Democrat calls for more investment in the NHS in order to start repairing the damage done by the Conservatives. We will now hold the Government to account on delivering their promises, so that people can, for example, see a GP or dentist when they need to. However, we must ensure that this money is not used to paper over the cracks. Structural reform is needed, but more than that, the Government are still ignoring the elephant in the room: the social care crisis. In fact, it is likely that they are making the situation worse, because the employer national insurance increase will hit social and primary care. Thousands of private care providers are now facing increased costs, forcing them to reduce services and increase charges or even pushing them into collapse. GPs, who are already stretched, will also be hit by this tax change. GPs and social care providers cannot afford these tax rises and you cannot fix the NHS without fixing primary and social care. We urge the Government immediately to sort out the challenges facing these health providers. They must also start cross-party talks on the long-term future of social care and get on with reforming it. Having boxed themselves in during the election from using big tax opportunities, the Chancellor could have done what we campaigned for: reverse Tory tax cuts in the bank tax, implement an increased tax on betting companies and levy the digital giants. Instead, the Chancellor turned to business to raise a spectacular amount of tax. As a result, the UK tax take is set to rise to a historic high. This was a tough Budget for employers to swallow, particularly small and medium businesses, social enterprises and charities. SMEs have had a tough time for years, struggling with rising energy prices, Covid loans, high interest rates and rocketing input costs. They were hammered by the previous Conservative Government, who broke their promise to reform business rates and tangled them up in red tape. Given their importance to our economy, it is wrong to hit them like this. The burden of this Budget should fall on the likes of big banks, social media giants, gambling companies and oil and gas firms—not small businesses. Added to increased NIC costs, the living wage increases will have a big effect. Leaders in the hospitality and retail sectors told the Business Secretary that the tax bill for employing a part-time worker had increased by 73% as a result of lowering the threshold for national insurance contributions. This sort of rise cannot be absorbed in these low-margin sectors. Then there are the changes in agricultural and business property relief. Your Lordships will likely hear today—and already have—how these changes threaten the generational chain of family farm ownership. I add my voice to that. As someone from Herefordshire, I know the effect this is already having on rural communities. Less publicised is the possible plight facing family businesses. Will the Minister say how these businesses will be valued when they are taxed? How does the introduction of this liability encourage family firm entrepreneurs to grow their business? I note that these changes raise little more than £500 million overall. Given the individual anguish they are already causing in our communities and the political trouble they are causing him, I wonder whether the Minister would rather have increased the betting tax instead. With all this, the Chancellor looked to sweeten the pill. The Minister set out those measures very well. The message is that, in return for the pain, there will be progress: an industrial strategy, infrastructure investment, including accelerating the drive to net zero, and investment in people and skills. These Benches say “bravo” to that, and I congratulate the Chancellor on continuing the industrial strategy put in place by Vince Cable on and investing in key sectors. Capital-intensive sectors have also welcomed the commitment to long-term political stability, be it through the corporation tax road map or the full expensing regime, but what new ideas can we expect? On infrastructure and net zero, it is all about delivery. The startling thing about the Chancellor’s projections is the very low level of growth over the next five years: 2% or less is not a good return on the investment the Government say they will make. It should also be noted that this Budget is very front end-loaded. The money going into public services in years four and five dwindles spectacularly. The Government are hoping that actual growth will increase beyond current projections to bail out those last two years. That requires delivery. We want this Budget to succeed. The list that the Minister just rattled off was full of important things that this country needs, but we have no time to waste. We will be strong on chasing delivery. I for one worry whether the UK has the capacity to absorb investment on the scale the Government intend, not least because they are moving slowly on the skills sector. The Minister mentioned Skills England, but when will any results of that start to affect how investment is delivered? Where is the workforce going to come from to deliver the growth we need, and how will investment be delivered? We await the Government’s 10-year infrastructure strategy. What will the vision be for infrastructure investment? How will projects be prioritised? Can the Minister please clarify how the new national infrastructure and service transformation authority will improve delivery, and when will we see all of this? Of course, there is a golden opportunity to boost growth. If the Government are serious about growth, they have to materially fix our relationship with the EU. That means beginning the work that will set us forward towards future membership of the single market. In summary, burdening small businesses, GPs and small care providers with a jobs tax is wrong. Small businesses have had a very tough time for years and countless small care providers are on the brink. Making things even harder for their workers is not right. Family farms have experienced one shock after another in recent years, from spiralling energy, fertiliser and feed prices to the Conservatives’ terrible trade deals. This Government should not have dealt them another blow, especially when they are making real-terms cuts to the Defra budget. We will be standing up for family farms. We are also calling on the Government to exempt social care providers and GPs from the employers’ national insurance tax rise, and we will continue to speak up for those struggling with the cost of living crisis, holding the Government to account on their decisions to cut the winter fuel payment and to increase bus fares. I look forward to hearing from your Lordships in the debate.

16:01:00

I thank the Minister for his introduction to the debate. The first Budget of a new Government is always a significant event, and I am very pleased to see the emphasis on sustainable public finances. However, I worry that in the Budget speech there was too much attention on the short-term politics of dealing with the “black holes” and, by contrast, rather insufficient attention on the lasting impact of the major worldwide shocks of the past 15 years, which continue to cast a shadow on economic performance. At the time, there was general political consensus that these crises—the global financial crisis, the Covid crisis and the energy crisis—should be dealt with by large-scale government borrowing and spending. As a result, public sector debt increased from under 40% of GDP in 2007 to 100% today. This has inevitable consequences and implications for the cost of government borrowing, and debt interest has become a significant budgetary item. It has also been painfully clear that, in common with many other countries, the underlying growth rate in the UK has been lower since the global financial crisis. That means a slower growth in the tax base, which of course matters hugely for public finances. For many years, we became used to a growth rate of about 2.5%. Since 2008, the annual growth rate has averaged only 1% a year. There are other consequences of the crises. There is the continuing concern about the impact on health, as evidenced by the continuing high welfare claims for long-term sickness. Consumer prices in the services sector are still rising well above the 2% inflation target, and there is general concern about the disruptions to major public services despite a considerable increase in the number of people employed in those services. In addition, we face major challenges over the next 15 years which will throw up problems of their own. These have been set out in recent reports by both the Lords Economic Affairs Committee and the OBR: a growing proportion of people at or above retirement age; the need to develop infrastructure for achieving our carbon targets; rising defence expenditure; and the amount of labour market inactivity among those of working age. This all means that it has been clear for some time that taxes were going to have to go up. This was no secret, but the previous Government struggled with the question of how to pay for the massive recent public spending interventions and too little attention was given to the need to raise more revenue. It now falls to the new Government to address how to get the debt ratio back on a downward path. As I said, the need for higher taxes has been evident for some time; however, in this first Budget, the increase in spending is well ahead of the increase in taxes, rather than the other way around. I fear that these tax increases are unlikely to be the last. I am generally content with the new draft charter for the OBR; in particular, the emphasis on a balanced current budget and the need for the public sector debt ratio to fall over time. I also understand the separate treatment of fixed investment—not so much because I am greatly convinced that it is better for growth than day-to-day spending but because it is much easier to cut back fixed investment than current expenditure, as the costs come well before the benefits. It needs some protection, and I am pleased to see that we have in place an arrangement that will give it protection. History shows that fixed capital has often been hit disproportionately when savings are needed. I will offer three observations about the detail of the Budget; I will leave much of that to other noble Lords. First, I agree that it is unfortunate that the Government’s manifesto pledge has led to increasing national insurance contributions on employers rather than reversing the previous cuts for employees. Secondly, it is disappointing that, once again, we are overriding the indexation of fuel duties. Fuel duty has been falling in real terms almost every year since the time of the financial crisis, despite our net-zero objective. Finally, when the primary objective is raising revenue, my own experience in dealing with Budgets suggests that it is much better to focus on the major taxes, where the consequences are reasonably predictable. The impact of changes to taxes on wealth and inheritance are very difficult to predict. They are largely about incentives and fairness, and they are much better handled under the heading of tax reform than as part of a tax-raising Budget.

16:06:00

My Lords, I will focus on the Budget in the context of criminal justice, and declare my interest as the Anglican Bishop for HM Prisons in England and Wales. I was encouraged to hear from the Chancellor that the Government intend to “begin to repair the justice system”, and I welcome the extra investment in the Ministry of Justice—although how that will be spent is vital. We need to ensure that the aim is not to finance our way out of a prison capacity crisis. Let us first address the purpose of prison and then put the resources in the right place, with a long-term vision of enabling strong and healthy families and communities. As a Christian, I hold fast to hope and transformation. Reoffending continues a pattern of broken relationships and is costly, not only to the fabric of society but in financial terms: it costs approximately £18 billion per year. Let us not increase funds simply to do more of the same, because all the evidence is that it is not working. I am delighted that the sentencing review will look at alternatives to custody. As we know, a prison place costs more than £40,000 a year. A community sentence costs about 1/10th of that and with better results, yet the use of community sentences has been falling over the last decade. Incidentally, we are currently haemorrhaging money through the dysfunction and delays in courts and the record high numbers held on remand. In the Crown Courts, approximately 14% of people on remand are subsequently acquitted. Over 15% are then given a non-custodial sentence, but by that point a costly pressure has already been placed on prison capacity, as well as the impact on victims, families and wider communities, with monetary implications for health, care and education. Funding additional Crown Court sitting days is only scratching a symptom rather than addressing a cause. Returning to the sentencing review, I hope that it will shape a criminal justice system that better delivers for victims as well as offenders, such that offenders are enabled to desist from crime, which will in itself have financial benefit. I reiterate that many offenders are also victims—often as children—and I do not believe that we can talk about a justice budget without looking up stream. How I long for us to look at financial resources in a person-centred way, rather than through a departmental lens. What we spend on education, health, and social care—not least in the early years—has a knock-on effect for who does and does not enter the criminal justice system, and all that that means for subsequent generations, the wider community and, of course, public finance. For a child born today, how will the whole Budget, across departments, enable them to flourish as an individual within a network of relationships? Then there is the issue of how money is spent on prisons so that they can be places of transformation, including purposeful activity, therapy, education and developing healthy relationships. We do not need more prisons: what we do need is to replace and repair much of what we already have. Let us not forget that, for many people, prison is a place of work. I pay tribute to the committee of prison officers, governors, chaplains and all those who work in prison, often out of sight and too often out of mind. I note a minimum additional investment over the next two years of £500 million to recruit new prison and probation staff. Yet extra resource for recruitment will work only if it is coupled with resources for staff training, development and boosting morale, not least so that existing staff are retained. Unless there is good and adequate resourcing and valuing of probation, it will not be possible to have alternatives to custody or to reduce reoffending through community-focused solutions. With spending front-loaded for the first two years of this Parliament, I fear we run the risk of short-termism. Reforming the criminal justice system is a long-term and overdue project, but the financing cannot be separated from areas of spending in other departments. We must ensure that our approach is well co-ordinated and far-sighted. In the meantime, this Budget is a step in the right direction for criminal justice, and I look forward to engaging with the Government further on this vital work.

16:11:00

My Lords, I must start by drawing attention to my entries in the register of interests. I also want to start by congratulating the Minister on an excellent and very detailed introduction to this debate and on what I assume will be his stamina. If this debate does go on for about eight hours, to open and close such a debate is quite a feat and I wish him well for that. I would also like to congratulate the Chancellor on her bravery and her strength in setting out a Budget in these very difficult economic circumstances. I am sure that we will have a long debate this afternoon and this evening, going through many of the details of that Budget, but no one can doubt her commitment to the economy and the people of this country, and I wish her well in the years ahead. I am particularly pleased to see the level of increased investment in education, because education is undoubtedly the best investment not just for individuals, children and families but also for our economy and for our country. That educational investment contributes to a very sizeable increase in the resources available for the deployment of the Scottish Government. While I remain concerned about the continuing dependency in the relationship between Scotland and the rest of the UK, the level of investment in this Budget removes any excuse for the Scottish Government for the poor quality of public services in Scotland. They need to stop penalising taxpayers in Scotland and focus on delivery, whether that is in the education system, which has suffered so much at their hands over recent years, or even something as basic as delivering lifeline ferries to our islands. In the middle of the pandemic, the previous Prime Minister, when he was Chancellor, cut the overseas aid budget by one-third. He did so at a moment when our interdependent world could not have been clearer, and when the world needed an integrated, comprehensive effort to secure global health provision and to preserve trade routes and other economic links. The uncertainty over Britain’s development aid, over recent years, and the level of spending on refugees in the UK from that aid budget have diminished our reputation internationally and damaged the lives of many poor people around the world. So I have to say that it was with profound disappointment that I saw, in the Budget, that the new Government will cut the overseas aid budget from £15.3 billion in 2023 to £14.3 billion in 2025. I do not think there is a moral case for spending a third of our aid budget, in country, on asylum seekers, refugees and the work of the Home Office and the borders agency. If we want to be a reliable partner internationally and to restore our global reputation, I believe that spending that money better and ultimately, eventually, spending more will be a central part of that. I hope that the Minister will be willing to take that message back to the Chancellor and that there will be a review in future spending rounds. Finally, on the 11th day of the 11th month, today we all remember the impact of conflict. We remember that deeply. Many in your Lordships’ House have personal memories, in their families or even themselves, of that impact. For maybe 15 or 17 years, the United Kingdom has had a pooled approach to spending on conflict prevention, peacebuilding and peacekeeping. More recently, the last Government created the Integrated Security Fund from what was previously the Conflict, Stability and Security Fund—a development of Labour’s own Conflict Pool back at the end of the last Labour Government. It is not clear from the Budget what will happen to that Integrated Security Fund; there is an opaque reference to an amount that might be available in the FCDO budget, although the fund lies within the responsibilities of the Cabinet Office. So, in closing, I ask the Minister to spell out in more detail whether its budget has been cut. If so, when will we get a Statement on that and what will be the priorities of the new fund, moving forward?

16:17:00

My Lords, as the first Labour Budget for 14 years, this was bound to be a very big occasion, and indeed it was: it was a bold Budget, with bold increases in taxation, bold increases in borrowing, bold increases in spending and a bold tearing-up of everything that Labour said in the general election. As we heard from the Minister, this is all justified on the basis of the spurious £22 billion black hole. But Paul Johnson, the IFS director, said that there was no “unknown black hole”. The OBR, despite the Government trying to enlist its support, said that nothing legitimised the figure of £22 billion. It talked of an unaccounted for £9.6 billion, but how does that justify tax increases of £40 billion? The party opposite—the Government—says it has the worst economic inheritance since the Second World War. In fact, the UK economy is recovering faster from the twin shocks of the pandemic and the energy price rises than our EU partners and all the countries in the G7 other than the United States. The financial position—the deficit—was better than the Conservative Government inherited when they came to office as a coalition. Labour’s fiction is necessary to justify eating their words and breaking their promises, but the truth is that Labour always intended massive increases in spending but did not dare put forward the tax increases to pay for this during the election. The Chancellor promised that she would not change the fiscal rules, but she has done exactly that and changed the definition of government debt, in effect to exclude borrowing for investment from the total. This mantra of borrowing for investment, which we first got from Gordon Brown, is questionable. First, the distinction between current spending and investment is not clearcut. Some current spending has favourable long-term impacts; Ministers frequently refer to more spending for nurses as an investment, and one understands why. Borrowing for investment is justified, so the theory goes, because it supports growth as long as the return exceeds the cost of borrowing. But this assumes that projects are well-designed and completed to time and on cost. I need highly emphasise that our record, nationally, does not need very much emphasising. The argument for borrowing to invest might apply to power stations or infrastructure, but not all public investment yields an economic return. We welcome investment in health or education—it is a good thing in itself—but it earns an economic return only very slightly and over the very long term. If we are serious about sustainable public finances, borrowing for investment should not be accounted for outside the Government’s measure for meeting their own debt target. The truth is that this is not a Budget for growth or investment; it is simply a Budget for the public sector. There is no ideal target for debt sustainability. What the markets are interested in is a country’s ability to service its debt. Note that, under the plans that the Government have put forward, interest payments have now risen to over £120 billion—over 3% of GDP; over 7% of public spending. The Chancellor believes massive borrowing for public investment will lead to growth, but that is not what the OBR’s forecasts show. They show that growth in the next five years will be less than it said it would be in the next five years during the last Conservative Government at the time of the Budget in March. The OBR says that the Budget will have little positive effect until 2032 or later. The Government fought the election saying that they intended to have the fastest rate of growth in the G7; they never said they intended to have the fastest rate of growth in the G7 in 10 years’ time. Debt remains at just under 100% of GDP at a time when the IMF has warned that, internationally, government debt is becoming a problem worldwide. The OBR has warned that UK debt is on trend to reach an unsustainable level of 270% of GDP. You may say, “That won’t happen”, but it will not happen only if we have our eye on the long term and make some very difficult decisions. The Prime Minister a few weeks ago said that this Government were all about “wealth creation”. When I heard that, I am afraid I laughed out loud. Then he said that the Budget would be a Budget for business. It is a strange Budget for business which has a main tax increase aimed fairly and squarely at the corporate sector. Many observers question whether the increase in national insurance contributions will raise the £25 billion forecast for it. Paul Johnson of the IFS has forecast that the Government will have to come back for more tax increases in the next couple of years. One can make the pips squeak, but our tax base is relatively narrow. The top 1% of all taxpayers paid 29% of all income tax and the top 10% paid 61%. Those individuals involved are not numerous, and so it does not require a big change in behaviour by these top earners to do huge damage to the country’s tax revenues. The Prime Minister talks about putting “country before party”. He talked about governing for people who had not voted for him. Where is the sign of that in this Budget? It is massively divisive, it is a massive gamble and it has massive increases in spending and borrowing and a new high for taxation. If the gamble fails, the country, alas, will pay a painful price.

My Lords, the advisory speaking time for this debate is five minutes. I urge all noble Lords to keep remarks within that limit so that the debate may finish at a reasonable time.

16:23:00

My Lords, no pressure there then. Let me first say, in contrast to the noble Lord, Lord Lamont, how pleased I am to see the Government shifting their rules to deliberately allow for greater public investment spending as a share of GDP. As a vocal advocate of such a move, I think it is highly welcome. Keeping it at 2.6% is a vast improvement over what otherwise would have been a further decline to 1.7%. In my view, there should now be an ambition to get towards 3.5%—closer to that of our developed country peers, most of which, unsurprisingly, have considerably higher productivity. Whether the specific choice of PSNFL—“persnuffle” as it became known—or, more easily on the tongue, “net financial debt”, is the right new specific debt target is of secondary importance. In principle, it should allow for more ambitious public spending in terms of rewarding investments than the previous, quite stupid, rule. Secondly—and here I have a bit more sympathy with aspects of what the noble Lord, Lord Lamont, said—what is more important, and in my view key, is not only the ambition but the mentality behind such investments and, in my judgment, the proper, credible guardrails to ensure that projects that come forward have independent, credible and transparent validation. In principle, I welcome the enhanced role for the new NISTA and the National Audit Office and also, presumably, more specifics so that the OBR can give more detailed macroanalysis of any such benefits. These institutions’ real skill sets used in this way will be much more fruitfully put to use. Thirdly—and perhaps where the markets had somewhat of a brief wobble—it is important that the Government use these guardrails about what investments they choose to make. Fourthly, I hope that the 10-year infrastructure plan that the Chancellor announced is to be presented in the spring will have gone through this new set of guardrails. I hope it will include projects that are much more likely to encourage the OBR to raise its forecast of the trend rate of growth of the economy. I can think of reasonably obvious ones—again in contrast to the noble Lord, Lord Lamont—such as early years education and preventive healthcare, including obesity, as well as more traditional things, my favourite being Northern Powerhouse Rail. However, it is not for me but for NISTA and the NAO to give their transparent and objective assessments of these benefits and then for the OBR to demonstrate the consequences for long-term growth, welfare and, of course, debt. On a separate topic, fifthly and finally, and in contrast to widespread belief, of course the increase in employers’ national insurance will have its consequences for the labour markets along with the increase in the minimum wage. In my view, if this plays a role in encouraging companies to invest more in capital and to focus on higher-skilled labour, it might end up having more useful benefits for productivity and real wages than I hear across the widespread commentary. We live in a very interesting time in the world and financial markets, yet again, especially with the US bond market watching what the returning President Trump is really going to do. This background will mean that our markets will reward credible, transparent, growth-boosting investments but will be less kind otherwise.

16:28:00

My Lords, the Minister, in his speech, criticised the previous Government’s record on growth. Well, this is certainly a Budget for growth, is it not? There will be massive growth in taxes, massive growth in the debt that our children and grandchildren will inherit, and growth in the cost of it too, as the noble Lord, Lord Burns, pointed out. There will be growth in inflation, with supermarkets already warning of food prices rising as the Chancellor adds billions to the cost of staff. There will be growth in blocked beds and hospital waiting lists, as yet another Government fail to tackle social care. With employers’ national insurance increases being imposed on low-paid, part-time workers for the first time, we can be certain of care home closures, rising fees that councils cannot pay and our most vulnerable citizens being denied the support that they need, as the noble Lord, Lord Fox, pointed out in his remarks. Building costs will soar too, undermining the Government’s housing targets. There will be growth in class sizes, as pupils are forced to leave private schools, with a vicious, wicked mid-term tax on education leading to private school closures and heartbroken parents being forced to tell their children that they can no longer stay at school with their friends because of this Government. There will be growth in the number of family-owned businesses and farms—held for generations—that are forced to throw in the towel and be broken up, reducing competitiveness, enterprise and choice. There will be growth in the number of wealthy individuals leaving our country and, with them, the private investment capital and tax revenues we desperately need. There will be growth in human misery, as children with special needs are forced out of the security of their specialist school places with no alternative support available from a state already struggling to meet demand. There will be long-term growth in the number of folk with inadequate pension provisions as constant changes, state interference in investment policies, new taxes and uncertainty destroy trust in saving for a pension. There will be growth in the size of the state and, with it, unaffordable, unfunded, index-linked final salary pensions. There will be growth in unaffordable student debt. When we looked at this in the Economic Affairs Committee some years ago, we were told that, by 2050, student debt would amount to £1.2 trillion on the Government’s balance sheet. This Government are adding to that. There will be growth in private sector unemployment as firms are forced to shed labour to meet the tax burden, business rate increases, and the costs and risks of Labour’s so-called employment rights. Insolvency numbers are already rising. The growth our country desperately needs if we are to have decent public services, and which this Budget does not provide, comes from private enterprise, from releasing the forces of competition, from flexible labour markets, and from government as referee and not player. It comes from unleashing the aspirations of the British people, from rewarding hard work and thrift, and from giving folk in genuine need a hand up and not a handout. It comes from nurturing the family, encouraging self-reliance, independence and excellence, and from encouraging the basic aspiration to hand on a better life to our children, not taxing it. The adage “primum non nocere”, or “first do no harm”, is often associated with the medical profession. It also applies to Chancellors of the Exchequer. I fear that our first woman Chancellor will be remembered for having forgotten this. Of course the Government inherited a bad situation, as the costs of Covid and war in Europe were funded by quantitative easing, but to deliberately set out on a path that history tells us will sink our economy in pursuit of failed dogma and class war is unforgivable. It is astonishing, is it not, that in a matter of weeks the Government have squandered a great victory, set a course heading for the rocks and betrayed the trust of millions of voters who supported them in the general election? It is said that the crew rearranged the deckchairs on the “Titanic” when faced with inevitable disaster. In Downing Street now, they are rearranging the pictures; out go the portraits of Margaret Thatcher and William Gladstone, both of whom understood, as Gladstone put it, that “money is best left to fructify in the pockets of the people”. Having broken their election promises, the Government now pledge that there will be no return to austerity. Without growth and the kindness of strangers, that is just empty rhetoric. This divisive, nasty and irresponsible Budget puts both prospects in mortal danger.

16:33:00

My Lords, the challenge faced by the Chancellor was to change the economy and to achieve a decent rate of equitable growth after 14 years of economic neglect and rising inequality. The black hole of Conservative economics is there for all to see: crumbling schools, the largest ever waiting list in the NHS, a wrecked criminal justice system, pothole-strewn roads, struggling local authorities and the lowest investment in the G7, with an economy on its knees from the neglect of the public sector and a Conservative Government with no clue as to how to nurture the private sector either. To face up to this challenge, the Chancellor had to first begin to repair the damage, creating the foundations for the change necessary to achieve the growth that Britain needs—hence the expenditure to repair the health service, refund our education system and sustain public services, and the replacement of the Tory Spring Budget cuts in public sector investment with growth in public sector investment and increased research and development spending. It is noticeable that, in the criticism from the other side, there has not as yet been a single positive proposal as to what they would do instead. The question then raised is: why the apparently limited impact on growth? After all, the OBR forecasts that growth will tail-off after a couple of years. There are two reasons for that. First, it must be remembered that it is far easier to follow the Conservative Party strategy of providing a short-term sugar rush by boosting consumption while neglecting investment. Secondly, investment is a relatively smaller proportion of GDP, hence it has a lesser impact, and the benefits of investment take time to realise. However, the really important point is that a successful growth strategy will involve major changes that would never be picked up by the OBR’s focus on tax and spend. As the Chancellor argued in her Mais lecture, the dismal economic performance of the past 14 years derives from “a failure to deliver the supply side reform needed to equip Britain to compete in a fast changing world”— hence economic policy must “begin with getting the institutional framework right”. Getting the institutional framework right means ensuring that capital flows into new investment, whether in productive capacity, research and development or skills. Is there anything more dispiriting than the strategies of Britain’s major banks, from which capital flows predominantly into mortgages, bidding up the prices of assets that already exist rather than creating new productive assets? Is there anything more dispiriting than the conclusion earlier this year of the Treasury Select Committee in another place that: “Confidence amongst small and medium-sized enterprises … in accessing finance has fallen … This is accompanied by increasing de-banking … Unfair banking practices … may have further limited access and suppressed demand”? This difficult small business environment is disincentivising risk-taking and innovation, and reducing growth. That is why the national wealth fund, incorporating a reinvigorated, proactive British Business Bank, is so important. Financial flows in Britain need to be redirected towards investment in new productive assets in the new industries of the future and in updating the everyday industries that shape our lives. Britain’s financial services industry must follow the wealth fund’s lead. I offer one example of what can be done. Despite current financial difficulties, it is widely acknowledged that our universities are first-class centres of research. Some have created institutional mechanisms for translating that research into globally successful companies, but every one of our more than 160 universities should have a dynamic business advice and incubation unit, and should have access to the dedicated finance necessary to translate new ideas into new businesses. Those new businesses, like the universities, would then be spread throughout the country. That is a job for the British Business Bank right now, but we cannot just rely on the public sector to take all the risks. The Chancellor has already indicated that reform of pension funds’ investment strategies is an immediate priority. Further reform of financial services is necessary. Funds must flow to new, real investment, not just to secondary markets. This Budget, by having the courage to identify honestly the true state of affairs and fix the foundations, indicates that the Government’s strategy of reform is on track to succeed.

16:38:00

My Lords, the Government, the Chancellor and the Prime Minister keep talking about growth, but to do that the private sector has to be supported to grow. It is the private sector that creates the jobs that pay for the taxes that pay for the public services—no growth means no taxes, and if you put up taxes by £40 billion then you get no growth. That is the paradox. Tax on employment generates £455 billion, which is 45% of total public sector receipts, but high employment taxes can discourage firms from hiring. On top of that, I am sorry to say that the previous Government are to be blamed for raising taxes to their highest level in 70 years. I implored Rishi Sunak, when he was Chancellor and I was president of the CBI, “Don’t put up taxes”. What did he do when he became Prime Minister? He put corporation tax up from 19% to 25%. Higher taxation is associated with reduced labour supply. Studies show that a 1% rise in tax correlates to a 0.5% drop in hours worked, and studies indicate that higher labour taxes increase unemployment levels. The Labour Party has promised no increases in certain taxes. That is all very well, but, for example, removing the non-dom regime is going to have a hugely detrimental effect. Those 75,000 people pay £9 billion of tax a year; they invest and spend in this country; they are mobile, and that money will fly. What about IR35? There was no mention of that. Maybe the Minister could say why not. GDP per person in the second quarter of 2024 was 0.6% lower than before the pandemic. Public sector net debt is now almost 100% of GDP. That is four percentage points higher than a year ago and at a level last seen in the early 1960s. According to the IFS, as a share of GDP, the rise in taxation by the end of the decade will be the second largest of any post-war fiscal event. The tax take is forecast to increase to a peacetime record of 38% of GDP. The removal of inheritance tax relief in terms of a 20% tax for business and agricultural property, AIM shares and pensions is so harmful, particularly for farmers. I do not think that has been thought through. Some 70% of farmers will be hit by it. Will they be able to sell their land to be able to pay the tax? If they are tenants and do not own the land, they cannot even do that. How do you value businesses? How do you sell? This is going to be a disastrous move. As for VAT on private schools, with £1.3 billion forecast to be raised, in the debates we have had previously we have demonstrated that it will probably cost the Government £1.6 billion, with a higher burden on the state sector and a drop in the number of international boarders. This is a penny-wise and pound-foolish move. Total public spending is forecast to settle at 44.5% of GDP by the end of the decade. That is almost five percentage points higher than before the pandemic. This is not good news, although the Government are doing the right thing with the blood scandal and the Post Office Horizon scandal. The OBR has forecast that real household disposable income per person will grow at just over 0.5% a year on average for the next five years. That is the joint lowest on record. According to an article in the Telegraph today, for many businesses the biggest shock was not the rate increase but a near halving of the threshold at which they have to start paying national insurance, from £9,100 to £5,000. The hospitality industry has warned that this change will cost over £1 billion. Taken together, the changes mean that a company employing a part-time worker doing 15 hours a week will see its national insurance contribution bill increase by 73%. That is ridiculously high. Kate Nicholls, the chief executive of UKHospitality, describes this increase in costs as “eye-watering” and warns that it disproportionately hits companies in her sector given that many employ part-time staff in roles such as waiting and bartending. Whenever you get a significant cost increase, what do you do as a business? You can put up your prices, reduce your costs or stop investing. The OBR has warned that all the measures in this Budget will lead to low growth. The highest forecast is 2%; most are just over 1%. Inflation is going to go up. Businesses are bearing the brunt of the £40 billion tax increase, and relief on business rates is going down from 75% to 40%. How are pubs and restaurants going to manage? How is the high street going to manage? On top of this, we have the £5 billion costs and the impact of employment regulation. We have one of the most flexible labour markets in the world. That is a huge advantage now being eroded. After 16 years of financial crisis, austerity, Brexit, the pandemic, the Ukraine war, inflation at 11%, energy inflation, the cost of living crisis, 7 October, the tragedy after that and the uncertainty every way that you look, how much more can business deal with? How resilient can our businesses be? This is not a pro-business Budget or a pro-entrepreneurship Budget. It is government’s job to be a catalyst and create the environment for businesses and entrepreneurship to flourish and grow. I am sorry, but this Budget does exactly the opposite. I am afraid to say that I warn the Government that this Budget is going to come back like a boomerang and bite us.

16:43:00

My Lords, I am speaking from the Back Benches today about productivity, but I want to start with a thank you to the Minister on two counts. He has rightly resisted the temptation to erode further horse racing’s competitiveness, vis-à-vis France and Ireland, by increasing betting duty—I declare an interest as a member of the racing APPG. I was also pleased to hear that the Government are going to tackle the ever-exploding level of retail crime. A few years ago, from the Back Benches, I sought an amendment to the Policing and Crime Bill to achieve just that, but although I worked constructively with the noble Lord, Lord Coaker, on a proposed amendment, I could not persuade him to be sufficiently radical. This Pauline conversion is most welcome. As a country, our greatest economic challenge is to increase the growth rate, by which I mean GDP per person. The only sustainable way to do that is to increase productivity, and I was disappointed that the Budget includes so little to advance that aim. The truth is that the productivity figures since the financial crisis of 2008 make depressing reading. The situation is not the same everywhere, and I note that, in my old sector of retail, matters are somewhat better than elsewhere. According to the BRC, productivity in retail is 8.1% higher than in Q4 2019—which was before Covid—while the equivalent figure for the whole economy is 1.45%. What should we do? The most important change is to have efficiency in mind when taking all decisions. The Government state that growth and productivity are right at the forefront of their concerns. That is a good start, but they have to act as though they mean it. They state in the Red Book that, in the medium term, above-inflation pay awards will be funded from improved productivity—good. It is a pity they did not follow that policy when, on attaining office, they awarded public sector bodies above-inflation pay awards costing £9.4 billion without any productivity conditions. I am glad the Government have seen the light on this, but will Minister look at my proposal for a new productivity and growth assessment to accompany all legislation, which I mentioned in our debate in the House on 9 October? Other necessities are to reduce unnecessary bureaucracy and to examine environmental requirements. On bureaucracy, I do not believe that checks to counter money laundering need to be anything like as onerous and time-consuming as they are. The march of the data society, with its many benefits, has made government, regulators and others lazy. They do too much checking and collect too much information, instead of focusing on what really matters and doing that speedily. It creates some pretty awful jobs too, in both the public and private sectors. David Graeber, in his splendid book Bullshit Jobs, stresses how depressing this can be. On environmental protection, I read with despair that HS2 has spent £100 million on building a tunnel to protect bats. Can we have a sense of proportion? Moreover, why are our electricity prices for industrial users, which make up the most productive part of the economy, treble those in India and the US? Both phenomena seem good candidates for early study by the new Office for Value for Money. I turn to construction, including housebuilding and infrastructure; I have two points. The first relates to planning controls, which need simplifying and speeding up. The second relates to the building-related workforce. There is much evidence that more skilled labour of every kind will be required for the foreseeable future. What plans do the Government have to help in that regard? Likes others, I am very concerned about the triple whammy of increased national insurance—especially the lower threshold—the new national minimum wage and the new regulation on workers’ rights. I know from my own experience that these are particularly difficult for SMEs because of the extra cost and bureaucracy that they will bring. The “good news”—I suppose—from a short-term productivity point of view is that this will send the less efficient into insolvency, but that is a very hard way to improve productivity. As our new Conservative leader has so rightly said: “It is not the Government that creates growth, it’s business that creates growth”. The Government’s attitude to business and public sector efficiency so far is unsatisfactory. If they are to achieve their growth ambitions—which we all share—they need another Pauline conversion.

16:49:00

My Lords, listening to the Benches opposite, from the comedy turn at the beginning and onwards, there is no recognition of how they managed to get the worst result in the party’s history at the last general election. It is because they crashed the economy; that is, purely and simply, at the core of things as we discuss this today. This was always going to be a difficult Budget, the first for a new Government and Chancellor after 14 years out of power. I can remember going into the Treasury in 1997 to find a bank of paper in the gloriously grand office that I was given. It was the identification of all the things that we did not know about. You do not know what you do not know until you walk into that office; that is the challenge the Chancellor has had to face in putting together this Budget. The Budget’s understanding of the need for investment across both the public and private sectors is reassuring. The changes to the fiscal framework might not get people terribly excited, but that is a framework to encourage investment to modernise our country and make life easier for our citizens. It also sets out to match the modernisation that we have seen among our international competitors. Even before the Budget, the changed relationship with business leaders unlocked more than £60 billion of investment. Turning around the economy comes at a cost, and sometimes it is painful. The alternative is to blight the future for so many of our citizens, and that is not acceptable. We have to ensure that the most vulnerable are protected. Like others, I want to see the “Get Britain Working” White Paper. Along with a number of Members in the House today, I serve on the Economic Affairs Committee. Some of the stuff that it is unveiling now in relation to poverty and people’s inability to get back into the labour market makes for very difficult reading. Within the Chancellor’s Budget, we have seen an allocation of £240 million for 16 new trailblazer projects, aimed at getting people into work and in so doing reducing the benefit bill. I can remember something similar to that from when I was a Member of Parliament under the previous Labour Government. One of the changes made by the Chancellor is very special to me: keeping the promise to transfer the investment reserve fund into the Mineworkers’ Pension Scheme. I come from a community of miners; I lost my grandfather and two of my uncles to disease caused by working in the pits, so I was over the moon when I heard about that. I turn to the situation in Scotland, where £3.4 billion is going to the Scottish Government through the Barnett formula. That was introduced in 1978 by Labour’s Chief Secretary to the Treasury, Joel Barnett, who went on to join this House. Now, all these years later, it has delivered to Scotland a record £47.7 billion from the Westminster Government. That is a sign of partnership. The First Minister was all lined up to condemn the Budget, wanting an end to austerity, and what did he get? The biggest bonus in history—and that is not the end of the story. An SNP-led committee has reported that it is deeply concerned about how Scottish Ministers are spending the country’s money. The lack of the medium-term and long-term planning that we are beginning to see here in the rest of the United Kingdom has never managed to surface in Scotland. I can see why people are concerned about some of the measures in the Budget. They probably would not have been in it, had it not been for the state that the Chancellor acknowledged. That was at the heart of what had to be sorted out. We are at the beginning of a five-year term, and I can see the commitment of the Chancellor to things that I am interested in. Carbon capture and storage has always been very close to my heart. I am the president of the CCSA; we are promised increased investment in CCS and many other schemes. This was going to be a difficult Budget. We know that we have to deal with some of the downsides of trying to get the economy right, but we have a Chancellor who is courageous and that gives us an opportunity to get this economy right.

16:54:00

My Lords, the Government are hoping to launch innovative companies into exports, growth and wealth creation. Unfortunately, that will not happen without fair procurement and ending the unfair way in which departments are encouraged to get intellectual property on the cheap. Help may come following the Procurement Act, but if the Government are serious they should revoke the Cabinet Office’s Intellectual Property Rights Guidance Note dated June 2023—although I know that some of it has been going on rather longer. In the recent science and technology debate, I explained how feasibility studies and early-stage commercialisation contracts require the recipients of grants to give government and its partners free, perpetual, irrevocable and royalty-free licences, together with the right for them to grant sublicences to anyone to use all the information, data, results and conclusions arising from the project. The intention is that all the IP is given to competitors. This appears in contracts for as little as £30,000—for slave labour rates, a grab at IP rights that could be worth a million and a company’s future if they were not expropriated by the Government to give to competitors. Such treatment destroys opportunity to scale and creation of home-grown technology unicorns and decacorns. On page 14 of the guidance note—which is about procurement, not grants—it encourages departments to retain IP rights and “gain some future financial benefit from its exploitation”. That is expropriation for financial gain. On the same page, the prime directive—if I can call it that—is: “First and foremost in your thinking should be the needs of the department”. That is not the public interest, scale-up in the economy or fair dealing, but the department. It does note that: “The greater the restriction over the IP for the supplier, the higher the cost of the contract will likely be”. I can think of lots of abuses for that. Who is valuing the IP? How can small companies negotiate? Will the fact that IP is existential to them be taken into account, or are they just quashed because they have no leverage? IP does not neatly divide into background and foreground, so the use and the reach go deep. Contracts with large organisations press IP requirements into the supply chain. It is becoming obvious why we are unproductive, as we are not commercialising promising R&D. Outside military use, the big excuse is that expropriation of IP is a useful way to avoid subsidy control issues. That is simplistic, and I am very sceptical. It levels things down in the UK. It undermines innovation and small companies, based on assumptions that cumulative experience, experiments and trials have no value, and everything can be given away to copycat scroungers or insider incumbents who do not carry those costs and can underbid and be fed the IP ripped out of those who have invested in R&D. We need to think harder. What other countries give IP away like this? Do foreign companies have similar terms imposed in their UK contracts? Or is this just Brits on Brits and why contracts go overseas? What is the NAO analysis of the valuations and additional cost of contracts due to the presence of these clauses? What of investors in innovative companies? At the innovation summit, were foreign investors told to kiss goodbye to any IP, or do they get better treatment? With this IP grab, how can companies be invested in if the route to market needs to be via procurement? Now I understand why the country is failing and why our technology growth companies leave. It is rip-off Britain.

17:00:00

My Lords, the Chancellor’s mission to deliver sustained growth brings a sense of purpose that the country needs so desperately. Investment in the UK has to increase, and the Chancellor has provided a clear sense of policy and governance stability that is essential to attracting that investment. I was rather encouraged by the response of the CBI which, while acknowledging that in the short term they would be tough on business, went on to commend the Budget changes that will provide a predictable tax environment and support business confidence. The Chancellor said that she wanted to turn the page on the last 14 years. In its integrated focus on growth and the improvement in public services, the Budget Statement rang a very welcome and optimistic bell about the way the Government will do that. I will call out just a few of the elements in the Budget which contribute to my sense of optimism: the increase in the national living wage; the prospect of rebuilding the NHS and cutting waiting lists; preserving the pension triple lock; investing £40 million in a growth and skills levy to replace the struggling apprenticeship levy; increased investment in R&D and capital investment for skills; and the commitment to deliver a lifelong learning entitlement to expand access to high-quality flexible education and training for adults throughout their working lives. I congratulate my noble friend Lord Vallance on protecting tomorrow’s economic opportunities in a science settlement that was more positive than many feared. It is clear that the Chancellor had to be both bold and make some hard choices if she is to deliver the necessary growth and national well-being for the country. I found it immensely encouraging that she is so focused on increased private sector and government investment in UK infrastructure and productive assets, underpinned by supporting the net-zero transition in the longer term. I was also pleased that, within the tough choices the Chancellor had to make, there were some very welcome announcements in the Budget on social and affordable housing, including a £500 million top-up for the affordable homes programme to prevent a sharp fall in social housing delivery. The Government’s decision to review right-to-buy discounts was right—with record levels of overcrowding and child homelessness, it is vital that we protect our existing social homes. Also very welcome is the additional funding and action to solve the building safety crisis. The shortage of housing, the decline in the percentage of working-age people owning their own home, people bearing mortgages till much later ages, and ever-increasing rents for those in the private sector, impacting in turn on their ability to save for a home, all combine to increase the crisis of securing a decent home for ordinary people. A significant part of the Budget was the announcement of a new consultation on social rents. Social housing providers and local authorities have faced 15 years of funding cuts. The previous Labour Government introduced a convergence settlement that led the way to a fairer, more transparent system for settling rents. Reintroducing it would unlock additional financial capacity to invest in homes and services, while ensuring that tenants can afford their rents. Can the Minister set out the Government’s view? Will they reintroduce the policy? It was brilliant to have the Chancellor commit to “invest, invest, invest” after such a long period of underinvesting. I appreciate some of this will, in part, be from tax rises, but I wanted to point out one consequence of the changes to NI contributions. Homeless and supported housing services are not-for-profit organisations, and those additional contributions will make a significant hit on their funds. One in three have already been forced to close in the last year. Will the Minister consider a rebate or relief for those providing these much-needed housing schemes, particularly at a time when rough sleeping is at record levels? Housing policy affects so many aspects of public services. Social housing can bring down the benefits bill and end reliance on the temporary accommodation that is so costly to local authorities. Looking ahead to the spending review, will the Government commit to a comprehensive housing strategy alongside ambitious financial commitments to build more social housing? I want to end with one other tough but necessary decision in the Budget: to inflation-proof tuition fees and maintenance loans for higher education students. Some 7,000 jobs in higher education institutions have been lost this year because of financial constraints on them, and this step is a starting point for finding a longer-term solution.

17:04:00

My Lords, I welcome my noble friend Lord Booth-Smith to his place. I very much look forward to hearing his speech and his contributions. I will pick up on what my noble friend Lord Forsyth and the noble Lord, Lord Burns, said, and I will focus on one word: debt. Taking a step back, global public debt is expected to exceed $100 trillion this year—about 93% of global gross domestic product. As a number of noble Lords have said, our debt here is sky high, and we need to ensure that it remains sustainable and that we can service it while overcoming other challenges. I have spoken of these before, and they also begin with “d”: defence, demographics, decarbonisation and deglobalisation. As the recent Economic Affairs Committee inquiry into the sustainability of our debt concluded, tackling these challenges means that we must take tough decisions this Parliament—I stress that—if our debt is to be put on a sustainable path. The committee also said that “to maintain the level and quality of public services and benefits that people have come to expect”, the choice is between tax rises or the state doing less. Meanwhile, as so many noble Lords have pointed out, we must ratchet up our growth and improve our productivity, as my noble friend Lady Neville-Rolfe just said. That obviously involves choices—about tax, spending and borrowing. So this Budget was, in so many ways, about how we choose to make our debt sustainable. My position is simple: I trust people to decide what is best for themselves and to spend money as they wish. Like my noble friend Lord Forsyth, I believe that Governments do not create growth; people do. Their hard work, inventiveness and risk-taking are what drives us forward and what Governments should reward and support, not crush. This is the best way to get the growth we need, not just to support the public services we want but to put our debt on a sustainable path. The brutal truth is that, during 15 years of Conservative government, our record on growth and productivity was not as good as it should have been, as my noble friend Lady Neville-Rolfe said. We can all argue why this was so: we can cite Brexit, Covid and the energy shock. But, as the Chancellor said—here, I agree with her—there is no escaping the fact that we have become a high tax, low growth country. Now is decision time: on that we can agree. We have to choose how to make our debt sustainable while supporting growth. That brings me to the Budget. As the Minister said, Labour has made its choice. It is there—£70 billion higher spending every year, paid for by historically high levels of taxes, and £32 billion more borrowing every year. We can, should and must hold Ministers to account for breaking their manifesto promises and picking their own so-called tax lock on not raising taxes on working people. But more serious, in my mind, are the consequences of this Budget and what it will do to growth. As has been remarked, after an initial sugar rush, it will lower growth in the medium term, between 2026 and 2027. As my noble friend Lord Lamont said, only some time in the next decade will growth perhaps rise to a sustainable level. When I read the Budget, the only growth I can be absolutely sure of is 5,000 more tax inspectors. Meanwhile, underlying debt, excluding the Bank of England, rises as a share of national income in every year of the forecast. So, unsurprisingly, the Chancellor did what she said before the election that she would not do: she changed the debt rule to find more so-called “headroom”—which is, by the way, an absurd concept, as if money can be whistled up from thin air. But this is the point: even her new rule is forecast to be met by just £16 billion. That would be wiped out entirely if the Government met their commitment to spend 2.5% of GDP on defence, and it would be wiped out entirely if interest rates or bank yields were 1% higher. If annual productivity growth—which, as I said, we have struggled to improve—were just 0.5% lower, borrowing would rise by £40 billion. Put that together and it is not surprising that, just last week, the OBR told the Economic Affairs Committee that the Budget increases the risk of our debt becoming unsustainable. So we are on a tightrope, which has become even more precarious after last week’s election in the US. How do we finance increased spending if the US pulls back? How would new US tariffs hit growth? President Trump’s plan is forecast to increase debt by a total of $7.75 trillion. Who is going to buy all that? Labour promised to turn the page on an era of high tax and low growth. We have turned that page and what do we read? Higher taxes, lower growth. The Government promised to kick-start economic growth. Instead, they have kicked growth into touch. Finally, they said that they would build strong national finances. Instead, they have weakened the foundations, increased the risk of our debt becoming unsustainable and made matters worse.

17:10:00

My Lords, having trussed themselves into a fiscal straitjacket to get elected, the Government are to be admired for achieving a Budget that delivers both short and long-term investment in public services without spooking the bond markets. To achieve this without raising taxes on working Britons—however they may be defied—has required some notable contortions. One was the decision to revalue government debt—an alchemy I will not pretend to understand but which I suspect may come back to bite us. The second, on which I will focus, is to lay the fiscal burden on small and medium-size enterprise, the engine of our economy, which the Government also expect to drive their growth agenda. I am not an economist, but I am not confident that SMEs can deliver both tax and growth. I will speak to the impact of the Budget on rural Devon, where I live and operate a family-owned heritage and farm business. The headline has been the fundamental changes to agricultural property relief, APR, and BPR, the impact of which will be earth-shattering for many family-owned farm businesses with elderly proprietors who have long-planned successions dependent upon those exclusions. Having repeatedly promised, both during the election and since, that no changes would be made, it is disappointing that such a fundamental adjustment to the taxation of family farms is proposed without consultation and seemingly without any consensus on its likely impact. The figures put forward by the Treasury are hotly contested by the NFU, the CLA and others, creating unnecessary and damaging mistrust across rural communities. I implore the Government to think again and to consider how the potentially disastrous impacts of this proposal for family farms—which are so central to food security and the rural economy—can be ameliorated. Get it wrong and we lose many hundreds of family farms, which will be swallowed up by commercial farming interests replete with the professional advice and corporate structures that will navigate the Chancellor’s family farms death tax. Maybe this is what the Government desire. In some respects, the phasing out of APR, if properly planned and delivered, could be beneficial. It may encourage the transfer of family-owned farms and other rural businesses earlier in life, thereby decreasing the average age of farmers and increasing productivity. I note my own interests as a farmer and land manager who underwent succession not long ago. I recall vividly my disappointment when realisation dawned that it would be most efficient for my father to own the business at the moment when he died. As a relatively young farmer with, hopefully, time on my side, I am not our concern. As proprietor of a 28th-generation family enterprise, whose forebears steered our ever-dwindling resources through rapacious capital taxes, civil wars, attainders, beheadings and the theft of the Isle of Wight, I am not our concern. Our concerns must be for those distressed farmers who cannot readily afford professional advice, whose meagre earnings afford them no provision for retirement and who may not have seven years left to live. They are very afraid right now. I was with a number of such neighbours over the weekend and, having toiled for decades with little reward—save the knowledge that their farm will stay with their family—they are bereft and confused. This treatment by the Government is cruel. Also confused are the professional advisers charged by the Government with guiding those poor farmers through the transition. They complain of a surprising lack of policy detail and uncertainty over how the changes will be implemented. There is no clarity on the application of rules for lifetime gifts and no information on how the changes will apply to trusts or the apportionment of APR within the 10-year principal charges; there is uncertainty regarding the transfer of farming assets between spouses; and it is totally unclear whether there will be interest charges when paying inheritance tax in instalments. The Budget has other considerable impacts on farming. The carbon border adjustment mechanism, by which the Government intend to levy a carbon tax on imported fertiliser, will have a huge impact on the cost of food grown domestically in comparison with imported food. Given that we no longer produce fertiliser in the UK, a carbon tax will be levied indirectly on all fertilised produce grown in Britain, yet there is no proposal to tax imported food for fertiliser used overseas. While the Government’s commitment to the agricultural budget is appreciated, in particular their confirmation of funds to support ELMS, the commitment is only short-term. Given that agricultural budgets are planned over multiple harvests, sudden changes are hard to adjust to. Therefore, the accelerated decoupling from BPS will cause a number of already stressed farms to face yet further hardship. This will not assist in our environmental goals. Finally, the most significant tax increase is that levied on the costs of employment. Given the amount of economic activity in the south-west peninsula that is found in employment-heavy, low-margin sectors such as food processing and hospitality, this will hit the whole region particularly hard. What assessment have the Government made of the regional impact of the increase in employers’ NIC and the minimum wage? Can the Minister provide any assurance that it will not unevenly impact our rural economy?

17:16:00

My Lords, I add my congratulations to the noble Lord, Lord Livermore, on his coherent and brilliant introduction to this debate. I am also looking forward to the maiden speech of the noble Lord, Lord Booth-Smith. It occurred to me, while listening to the very powerful speech of the noble Lord, Lord Bridges, that the noble Lord is in a very good position to tell us where the Conservative Party would have done less in order to balance the books. We hear all this talk about the need for the state to do less; we never hear what it means in practice. Is it not time, after 14 years of failure on this score, for the Conservative Party to tell us what it intended to do? You see, I take a completely different view. For far too long in Britain, we have been trying to have European levels of public service with American levels of taxation, and we have to face up to that problem. I congratulate our Chancellor, Rachel Reeves, on what she has done and the tough decisions she has taken to make sure of the possibility of a catch-up and restoration of standards in our public services. I also congratulate her on the fact that we have restored public investment to at least a sensible level. Here I agree with the noble Lord, Lord O’Neill, who is no longer in his place, that we need a sustained increase in public investment, which of course would bring in private investment, if we are to raise our rate of long-term economic growth. Investment is crucial for reform of public services and we must make sure that the money we provide is spent on reform. Simply repairing school buildings and hospital roofs is not reform; we must be very rigorous about how we spend the money. I cannot remember who mentioned it, but I worry that the boost to public investment is not being matched by a boost in skills training and apprenticeships, and providing the people who can actually do the work. We will set up the national skills council and are committed to firm action in this area, but I would like the Government to tell us what we are going to do to make sure we do not have lots of skilled labour shortages. I agree with the noble Lord, Lord O’Neill, that this increased public investment has to have strong guard-rails around it. We have to demonstrate, not least to the financial markets, that the investment is being spent in a wise way. We have got to be more ambitious for growth. I think people are being a bit unfair on the Government, in that the OBR does say that the longer-term impact of increasing public investment will be to raise the rate of growth over a five to 10-year timeline. More immediately, the big challenge we face is on trade. As the noble Lord, Lord Bridges, said, that has not been made easier by the election of Donald Trump. It is in the national interest that we prioritise getting a much better trading relationship with the European Union, our main economic partner in the world. I look forward to assurances from the Minister that that will be at the top of the Government’s priorities.

17:21:00

My Lords, it is an immense privilege to be able to speak today. I am incredibly grateful to the many noble Lords who have shown me such great generosity of spirit since I was introduced. As this is my first spoken contribution in your Lordships’ House, I would like to put on the record how incredibly grateful I am to Black Rod and her team, the doorkeepers, the clerks and all the staff here in the House who have been incredibly kind to me since I was introduced. I thank my supporters, the noble Lords, Lord Finkelstein and Lord Petitgas, and also my mentor, the most optimistic man in Parliament, the noble Earl, Lord Effingham. It would be remiss of me not to thank noble Lords in the Chamber today who have offered their welcome to me. I must admit that it is quite humbling being here. If I could go back in time 30 years to the younger version of myself and tell him that one day he would be standing here, I feel pretty confident in saying that he would not believe me. In looking back on my life and experiences, I have come to realise how much I am going to be drawing on them as I forge my way in your Lordships’ House. In particular, I think of my professional experiences, whether that has been working in the public or private sector, running a small organisation, being a writer, or being an adviser in multiple government departments, most recently based in the Treasury and lastly as the Downing Street chief of staff. This was a job in which I managed to survive the entire tenure of the Prime Minister I served, which, going by recent history, is sadly a much more impressive achievement than it should be. On that point, I note that I owe a debt of gratitude to the former Prime Minister, Rishi Sunak, for the faith he placed in me. I hope to meet the measure of the decency and calm competence which are ever-present in his character. Like him, I care deeply about the economic future of our country; it is an area on which I intend to focus in your Lordships’ House. Whether that is on the sustainability of our public finances through to the measures necessary to drive economic growth, I know that in this Chamber I am in esteemed and knowledgeable company. I very much look forward to learning from noble Lords here. I have been told that the convention for a maiden speech is to remain uncontroversial, so I am happy to assure the Minister that, today, I will keep faith with the form. That means that I cannot answer the question of the noble Lord, Lord Liddle, but that is probably more beneficial for me. With that, one point I would like to make with regard to the Budget—which I think I am allowed to make—is simply to say that however a Government choose to dress it up, debt is debt and borrowing is borrowing, and it must always be paid back. This was a point made by my noble friends Lord Lamont and Lord Bridges. That is important not just because we want to manage short-term market sentiment and how it has a material impact on the way our debt is priced and it being affordable; it is more important in the longer term as part of a more fundamental strategy to ensure that, should a crisis ever emerge, the Government have both the fiscal flexibility and the market credibility to respond as appropriate. I experienced that first hand in the Treasury during Covid, and I know how absolutely critical it was, and it was the work of many previous Chancellors and Governments. Perhaps more than the issues which I care so much about and on which I hope to make a meaningful contribution in your Lordships’ House, it is the greater virtues of the House which I sincerely hope to live up to: namely, compassion and wisdom. That is the compassion to see the world through the eyes of others, to hear their arguments and to understand them, and then the wisdom to know when those arguments are superior to my own and the graciousness to learn from them.

17:25:00

My Lords, I draw attention to my register of interests. It is a huge privilege to congratulate my new colleague and noble friend Lord Booth-Smith on his wonderful maiden speech— and made without notes. A previous Cabinet Minister once suggested that we should relocate the House of Lords to Stoke-on-Trent; instead, we welcome one of the finest sons of Stoke-on-Trent to your Lordships’ House. A disciple of Roger Scruton, my noble friend is a deep thinker of Conservative philosophy. Talent-spotted by James Brokenshire, he worked with Roger Scruton to make all new buildings beautiful. Indeed, in No. 10, a bust of Sir Roger kept a watch over him. It is to my noble friend’s lasting credit that the philosophy of building beautiful has been at the heart of policy for all subsequent Secretaries of State in the previous Government. At the Treasury, he was instrumental in designing the furlough scheme that saved the livelihoods of so many during the ravages of Covid. As chief of staff to the Prime Minister, he helped to bring order to the public finances, ensured that inflation was brought down and, as a champion of the levelling-up agenda, secured support and investment for so many of our towns. Despite his usual leather jacket and the John Travolta moniker, my noble friend is steeped in the ancient wisdom of Conservatism. He has already played a huge role in making this country stronger and more beautiful. With his formidable intellect and great political acumen, he will be an enormous asset in this House. The global financial crisis, the Covid pandemic and the 2022 energy crisis all prompted previous Governments, for entirely understandable reasons, to expand sovereign debt significantly. Successive Governments of both parties have reached the same conclusion: that improving the UK’s growth prospects and productivity are the ways to avoid some very difficult choices about public services in the years ahead. This Budget was hailed as a moment to reshape tax and spending in the UK so as to ignite growth. It has certainly reshaped tax, with the biggest increase in a generation. The £40 billion whammy means that it is the highest tax burden on record. The election promises not to raise national insurance have been comprehensively broken. The tax on farms and other family businesses will potentially kill off homegrown family businesses and start-ups. You do not encourage growth by punishing the very businesses that create that growth. The Office for Budget Responsibility’s forecast following the Budget shows that growth is forecast to fall steadily. Incidentally, the OBR was also unable to corroborate the figures quoted by the Chancellor about the fictitious black hole she has repeatedly claimed to have inherited. The Chancellor has opted not to confront our ballooning public debt, instead electing to change how that debt is measured to facilitate ever-higher levels of borrowing. This was justified on the grounds that new borrowing will be allocated to capital investment, yet, on closer inspection, the lion’s share of the money raised is for day-to-day expenditure and not capital investment. The real concern is that the eye-watering rise in taxation is not accompanied by any appreciable plans for public service reform, despite specific assurances by the Prime Minister and the Health Secretary that money would come only with reform. The Government have instead cancelled plans to reduce the Civil Service to pre-pandemic levels and increased the salaries of train drivers without asking for any improvement in productivity in return. The much-vaunted reforms to the NHS seem to have been reduced to an online national conversation, despite a 22% pay rise for junior doctors—although I look forward to the Health Secretary’s Statement later this week. I read today that the Chancellor will ask for help from businesses with reducing waste. I suggest she looks to the example of the coalition Government; in five years, they cut the running costs of government by a cumulative £52 billion, as well as introducing reforms that led to this country being ranked No. 1 in the world for digital and open government. What is the money being spent on? If the party opposite is serious about growing the economy through investment, surely its priorities should be transport, housing and big regional capital projects. In fact, transport capital spending will be cut in real terms in future. There is no plan for new nuclear power stations; no money for the Deputy Prime Minister’s highly publicised new towns; and no clarity on spending 2.5% on defence. The Chancellor claimed her Budget will bring growth of up to 1.4% in the longer term; she neglected to point out that the OBR says this longer term comes in 2074. Keynes pointed out that: “In the long run we are all dead”. I am an optimist, so perhaps I will make it to 106, but I suspect we will clearly see long before then that this Budget will have squandered the growth our economy was enjoying; burdened businesses with new tax and costs they cannot easily absorb; and led directly to higher inflation, lower wage growth and higher interest rates.

17:31:00

My Lords, there was much comment about the new Government’s first Budget not being delivered until 117 days after they took office—one of the longest intervals in recent history. George Frideric Handel may, famously, have written “Messiah” in 24 days, without much sleep or even food—which I am sure my noble friend the Minister will recognise—but for a Budget of this importance and complexity, with the accompanying new fiscal framework, the time taken and the preparations before the election are justified and have been well-spent. I pay tribute to my noble friend the Minister for the important part he has played, along with my right honourable friend the Chancellor, as well as for introducing today’s debate with such authority. I am the first speaker from these Benches to have the opportunity to congratulate the noble Lord, Lord Booth-Smith, on his outstanding maiden speech. He may not be the youngest of the recent appointments to this House, but for many of us he still feels extremely young, and he has packed an extraordinary amount of public service and experience into his career so far. I welcome the new fiscal framework, like the noble Lord, Lord O’Neill of Gatley, and the adoption of public sector net financial debt as the primary measurement, which brings sensible changes to the treatment of at least some government investment. The obstacles to productive public investment presented by irrational fiscal rules and their erratic interpretation seem to have prevailed throughout my adult life. I well remember, though not, I suspect, as vividly as the noble Lord, Lord Howell of Guildford, the collapse of the important gas-gathering pipeline project in the North Sea over 40 years ago, because the proposed guarantee by HMG was going to be included within the PSBR, which was the fetish of the then Prime Minister. Operating within this new framework, the Government have introduced a well-judged package of measures, balancing the need to fund public services, reintroduce honest financial discipline and support and encourage investment. The incremental increase in employers’ national insurance to a level that the last Government previously imposed is a fair and reasonable ask for larger employers to contribute to the improved resilience of the society from which their employees and customers are drawn and will be to the ultimate benefit of their own businesses. The noble Lords opposite express outrage at the idea that their Government left a financial black hole. The Economic Affairs Committee report on the sustainability of public debt, to which the committee’s chair, the noble Lord, Lord Bridges, has already referred, referred to two numbers provided to the OBR by the then Government: total current spending and total capital spending. Richard Hughes, the chair of the OBR, gave evidence to the committee and said: “Some people have referred to that as a work of fiction. That is probably generous, given that someone has bothered to write a work of fiction, whereas the Government have not even bothered to write down their departmental spending plans”. Is it surprising that the new Government inherited a black hole from the old Government? I come finally to the increases in inheritance tax on agricultural land and private company shares, including those traded on AIM, albeit to only half the rate applied to other assets. The noble Lord, Lord Johnson of Lainston, in his intemperate and dishonest remarks from the Opposition Front Bench, concentrated on the issue of agricultural land, but as a former investment manager, he will be even more familiar with aggressive promotion of IHT-avoiding AIM portfolios by members of the industry of which he was a member. He may, none the less, have forgotten that the Office of Tax Simplification, created by the then Conservative Government, recommended the abolition of the distorting allowances lying behind these avoidance schemes. Of course, the then Conservative Government ignored the recommendations and abolished the Office of Tax Simplification, demonstrating perhaps once again the prioritisation of vested interests over professional, independent advice.

17:36:00

My Lords, as speaker number 22 of 75, can I open with a quick observation? Over eight long hours, we each wait to speak for five minutes, raising scores of questions that the Minister will struggle or fail to answer. Is this a great advert for public sector productivity; then again, is the Budget? I will avoid the bipartisan ping-pong match over that black hole, and, instead, I will start with macro and move on to micro; specifically, the impact on our SMEs, which is my background. The Chancellor was right on a number of big calls: the tax burden had to go up; spending has to increase, especially in health, defence and education; and there is a strong case to increase borrowing for investment, whatever definition of debt you choose. For the UK has an ageing, increasingly sick and economically inactive population, resulting in a shrinking workforce and a surge in dependency ratios. Spend on health and social care, welfare and net zero will significantly outpace the OBR’s trend forecast of just 1.5% growth. As we know, the tax burden climbed under the Conservatives from 33% of GDP to more than 36%, and it is now heading for 38%; and unless we tackle our low-growth, low-productivity malaise, it is set to reach 40% very quickly. So, yes, Jeremy Hunt’s 2% cut in National Insurance was a reckless fiscal act; the new Chancellor could and should have reversed those cuts to send out a message that it is economy first, politics second—opportunity missed. Instead, she and the Prime Minister tied themselves in knots by pledging not to increase taxes for the “working people”. As a result, business and wealth creators are being saddled with almost the entire £40 billion tax rise, making a mockery of Labour’s core mission to deliver “the highest sustained growth in the G7”. To hit employers, especially SMEs, with a £25 billion national insurance tax hike, while raising the minimum wage by more than three times the rate of inflation, is an act of self-harm. Ultimately, of course, it will hit the workers where it matters most, which is in their gross pay. My Lords, I was an entrepreneur for 30 years and, for the last 10 years, I have backed, chaired and advised over 20 start-ups. I declare my interests as set out in the register. I will briefly share the feedback on the Budget that I have received over the last two weeks from founders and CEOs at the coalface. In short, they will cut pay increases and staff bonuses. They will cut back on new job creation and trim headcount. They will scale back on plans for expansion in both 2025 and 2026. Those who can will pass on the increased costs of employment and their supplies to the consumer. We are not only taxing jobs and growth, but doing it in a grossly disproportionate way, hitting the small to medium-sized businesses that employ between five and 200 staff. They make up a crucial component of GDP growth. One of the businesses I support is a rural community pub—the only employer and social hub within a five-mile radius. It tells me that this Budget, combined with the minimum wage hikes which account for a 16% increase over two years, will entirely wipe out their modest profit margins. I will finish with three quick questions for the Minister. First, why target entrepreneurs, who create jobs and take great risks, while income tax and national insurance for the highly paid is untouched? Secondly, one of the biggest growth blockers in our tax system is stamp duty; why raise it? Thirdly, if you are claiming to be fiscally responsible and committed to net zero, why continue to freeze fuel duty? This Budget may be bold, but it is unbalanced. It is tough on growth and tough on the causes of growth.

17:41:00

My Lords, no one in the Chamber should be in any doubt over how much of a challenge setting the Budget must be, given the signs of structural decline that regrettably seem evident in this economy today. It is, for example, worth reminding ourselves that, today, if Britain were ranked against each of the 50 US states in terms of wealth, it would be last, with Britain’s GDP per capita performing below America’s poorest state, Mississippi. Moreover, Britain’s per capita income has flatlined over the last 10 years, going from £31,000 in 2014 to around £33,000 in 2023. While only 25 years ago, Britain’s economy was larger than China’s, it is now just 20% of its size. This is not simply about China’s exceptional growth trajectory over 30 years; it is also about Britain’s multi-decade policy choices, which have inadvertently created an economic environment that is largely not attractive to investment. Of course, statistics that compare countries against each other over time have their limitations, but these data show trends that have deleterious consequences for the real economic life of citizens and the Government’s ability to fund public goods such as health, education and infrastructure. These facts also support a damaging narrative of Britain not being a top destination for investment. To this end, as we scrutinise this Budget, a key question is whether private investors, both domestic and international, are now more likely to allocate investment capital to the United Kingdom. The answer is that the future flow of investment into Britain on the back of this Budget will be limited. On the positive side, there is some investment, as has been mentioned already. Just before the Budget, investment pledges of £60 billion were made at the International Investment Summit. In the Budget, the Government commit to investment in the key industries of the future through the national wealth fund—aerospace, life sciences, green hydrogen, carbon capture, ports and gigafactories. The Budget also earmarks investment for public services, in line with the recommendations of the IMF, to bring the UK’s public spending in line with her peers. All of this sounds promising. However, this Budget has not adequately addressed the considerable barriers to private investment that remain. First, in spite of the Budget, Britain’s economic growth outlook remains tragically low—below 2% over the next five years. Secondly, the lack of breadth and depth of UK capital markets is a deterrent for new and important start-ups. The FTSE 100 remains dominated by traditional industries such as mining and banking. This could partly explain why, this year, Britain traded at a 40% discount to developed markets. Related to this, Britain’s reputation for burdensome regulation risks it substantially missing out on dividends from the emerging AI and energy transition growth-enhancing supercycles. Regulatory logjams gum up capital markets, meaning scarce opportunities for innovation and technology start-ups to list in London. We know that global investors have compelling investment opportunities. The magnificent seven technology stocks last year returned 76%. Fast-growing Middle Eastern economies, including those in the GCC, are forecast to be larger than the UK economy by 2026. There is even the ability to generate 5% per annum returns simply by allocating cash to US treasuries—the risk-free rate. As a director on corporate boards and a member of an endowment’s investment committee, I am aware that many investors will not yet allocate capital to Britain based on this Budget. This is because they interpret it, as it has been described in the Chamber, as a stabilisation Budget; it is largely seeking to reduce political and economic uncertainty and not to spur growth. It is an opportunity to demonstrate credibility and competence in managing the government fiscus, but not to spur growth. While investors see public investment as necessary, they do not see it as sufficient in the pursuit of economic growth. Crucially, investors see this Budget as only an interim step to pave the way for future growth policies. As such, they will need to see much more aggressive policy, regulatory and fiscal reforms that go for growth, such as overdue reform of the capital markets and especially the easing of regulation. More generally, investors will tolerate either high taxes or heavy regulation, but not both. Over time, remembering this principle will put the UK in a position credibly to compete for investment once more.

17:47:00

My Lords, I add my welcome and congratulations to the noble Lord, Lord Booth-Smith, on a very wise maiden speech. In the lead-up to Budget Day, the new Chancellor faced big decisions about how to deal with the black hole she inherited. Those who criticise her Budget need to explain what alternative choices they would have made and how they would have made the sums add up. First, do they agree with the Chancellor that the NHS and education in particular urgently needed funding, or would they have returned us to the false economy of austerity and cuts? Secondly, if they recognise that public services are on their knees and need fixing, who should pay—people who must work for a living, or business and the wealthy? Thirdly, what would they do differently to tackle the low-investment, low-productivity, low-growth doom loop the previous Government presided over and which, as the IMF noted recently, relegated the UK to the bottom of the G7 league? The new leader of the Opposition has said that her party needs to be “honest about the fact that we made mistakes, honest about the fact that we let standards slip”. Perhaps there is not enough time to assess all those “mistakes” in this debate, but I highlight just one: the former Conservative Chancellor Jeremy Hunt’s plans relied on cutting public investment from 2.4% to 1.7% of national output by 2028-29—the equivalent of £24 billion a year by the end of the current Parliament. That was a recipe for national neglect, decline and poverty. In contrast, Labour has set out a plan for a fairer, more prosperous Britain: getting people into work and with a better NHS, skills and education system—a welcome boost for those who work for the minimum wage, especially young people; I remind noble Lords that workers are wealth creators too and deserve a fair share—and a commitment to invest, invest, invest. Rachel Reeves thinks it makes sense to borrow to invest in transport and secure energy because this will lead to faster growth, higher tax revenues and scope to spend more on public services—she is right. We can discuss whether the Budget could have included more taxes on wealth and excess profits, but surely we can agree the principle that those with the broadest shoulders should contribute a fair share of the cost of rebuilding the UK’s vital national infrastructure, because we all benefit. Like my noble friend Lady Liddell, I end by celebrating one Budget measure that may not have attracted many national headlines but speaks to Labour values. I should probably declare an interest as my own brother and friends have benefited from this. Rachel Reeves announced that the £1.5 billion mineworkers’ pension fund will be handed over in its entirety to former miners and their families, providing an average increase of £29 a week from November this year. Back in 2019, Boris Johnson promised pensions justice but miners never saw a penny of the money they were owed. Now, Labour has delivered. As the leader of the National Union of Mineworkers, Chris Kitchen, said: “This is the change we voted for”.

17:51:00

My Lords, it is a pleasure to be able to welcome, with that wonderful maiden speech, my new noble friend Lord Booth-Smith. It is also a pleasure, if I may say so, to follow the noble Baroness, Lady O’Grady. I understand that it may have been her birthday over the weekend. I have a birthday in a couple of days too, so at least we Scorpios have this to share even if we share nothing else in the Chamber today. I thought some of our Budgets over the years were pretty rubbish. I went to bed last night counting the various definitions the Government offered about what a worker is. I had reached 23 before I fell fast asleep, so I guess I missed a dozen or more. Labour is, of course, the party of the workers, for the workers—up the workers. The trouble is, there are going to be fewer workers as a result of this Budget. You cannot raise £40 billion without hammering ordinary people. The increase in national insurance will be passed on to employees, not matter what the Chancellor has offered. In ordinary English that means lower pay, slower hiring, fewer jobs and fewer workers. It is sad, it is unintended—I am sure—but it is inevitable. This is a Government of change. They have said that, and perhaps they will change this. After all, they changed their chief of staff pretty quickly. Did your Lordships notice, by the way, that they changed their policy on freeports? Two days before the Budget, the Prime Minister announced that they would create five new freeports. I thought that was rather a good idea, but then that policy changed too—no new freeports at all. A No. 10 official explained what had happened. They had misread the email from next door. It was, in his words, “a total cock-up”. No change there, then. There will be no flood of exports as the noble Lord, Lord Liddle, wanted—not from those non-existent free ports. Instead, noble Lords may have noticed that Labour has been concentrating on exporting dozens and dozens of advisers across the Atlantic to help its relentless battle against Donald Trump—a masterstroke. Then there is the Foreign Secretary’s view that President Trump, the next leader of our biggest export market and trading partner, is a “neo-Nazi … sociopath”. It is a fascinating negotiating tactic. This Budget is an attack on workers. You cannot live, work, farm, go to the shops or even die without getting clobbered, unless of course you happen to be a train driver. It is not just the farmers, factory owners, service industry and supermarkets. Our charities, GPs, care homes, schools and even hospices are all being beaten under Labour’s national insurance hammer. Some workers are luckier than others. Some can find a helpful handout: the odd football ticket, an occasional concert ticket, even a friendly local clothes bank. That was something else that was changed, of course, once it all became public—another policy that, how can I put it, seems to have been tailored swiftly to the moment. In its entire history the Labour Party has never been further from real workers than it is right now, and it must be our ambition on this side of the House to fill that gap between now and the next election. To govern is to choose, and the Chancellor has chosen badly. It is a Budget that will hit workers. This is another Labour Government who will leave office with unemployment higher than when they came in. The other day the Chancellor said that this is a Budget she does not want to repeat. I commend the Chancellor’s conclusion.

17:56:00

I welcome the Budget. I give it about two cheers, not three, for reasons I shall describe. First, I am very much in favour of high taxation. Indeed, I am notorious for having been sacked twice from the shadow Front Bench for proposing higher taxation when I was in the Labour Party, so I am very pleased that my recommendations, or desires, have been fulfilled. As the noble Lord, Lord Liddle, said, we have to stop believing that we can have an American level of taxation and a British level of welfare state. We should be much more like the northern European countries, which have a 40% or 45% taxation of GDP. Unless we get to a seriously good rate of taxation we shall have a bad welfare state, bad schools and no growth. We have to stop this delusion that tax cuts lead to growth. We tried it for 14 years during the Conservative Government, and every tax cut destroyed the infrastructure more and more. We cannot go on living like that. When we compare ourselves with America, we forget that in America there is not just the federal tax rate but the state tax rate. Americans have no healthcare and very expensive education, unlike what we have here. We should stop comparing ourselves with Americans and compare ourselves with Sweden, Denmark, Finland and countries like that, which know how to sustain a welfare state in a healthier way. We have to congratulate the Chancellor on having made a beginning to changing this old psychology of having tax cuts all the time and putting us on the path to finally getting a decently financed welfare state. Having said that, I cannot resist proposing one more tax. It is necessary to say that growth does not come only from investment and, even if it does come from investment, we have to ask how we can encourage people to save more than they do. One of our problems is that the personal savings rate, or investment by private citizens, is not as high as it should be. I think that is because our tax structure is biased against investing in equities and encourages investing in bricks and mortar. There is only one asset in this country that is tax-free. If you have your own house and invest in it, when you sell it, if it is your principal residence, you do not get taxed on the capital gain. Imagine an asset with a 0% taxation rate for capital gains. Obviously, everybody from a very young age wants to get on to the mortgage ladder. Everyone wants to go on investing in housing. In continental Europe, there is a good, healthy rental market, but we do not have a healthy rental market because we destroyed it 50 years ago. I think we need to make people invest not in bricks and mortar but in stocks and shares. If you are going to do that, you have to tax capital gains from housing properly. I urge the Chancellor, next time she has the chance to have a Budget, to tax bricks and mortar properly so that people will stop investing too much in housing and go into stocks and shares.

18:01:00

My Lords, I declare my interest as chief executive of United Against Malnutrition and Hunger. I congratulate the noble Lord, Lord Booth-Smith, on his excellent maiden speech. I acknowledge the terrible fiscal legacy that was inherited by the new Government and the need to increase revenue, but I had hoped that the first Labour Budget in 14 years would be one that delivered sustainable development at home and reinvigorated our commitment to sustainable development overseas. At home, the decision to hike employers’ national insurance contributions is one of the worst tax choices that could have been made. It will, as we have heard, cost jobs, reduce pay growth and impact care and GP services. Alongside that, there is one other thing I shall highlight: the hiking of the bus fare cap while fuel duty remains frozen. That is a deeply regressive move and is also counter to the Government’s climate agenda. If we want growth, we need not only better targeted tax rises, as my noble friend Lord Fox argued—and I commend in particular his call for increased taxes on the gambling industry that is spreading misery through our communities—but, beyond that, we need to overhaul our regulatory and bureaucratic systems. In the Budget, the Chancellor referred to the importance of life sciences to our economy, but, while public investment in the Life Sciences Innovative Manufacturing Fund may be welcome, it will not do much good if the Medicines and Healthcare products Regulatory Agency remains swamped and its processes remain slow and expensive, leading UK firms to look to jurisdictions overseas. Equally, the increased R&D funding announced in the Budget is welcome, but it will not do much good if the system cannot deliver. Just last week, I was speaking with a leader of one of our medical diagnostic companies, who told me that applications for HMRC R&D tax credits used to be processed in six to eight weeks, but he was still waiting after 14 months for a determination. Businesses are going bust waiting. If we cannot get these basics right, we will not deliver sustainable development at home. As to our commitment to sustainable development abroad, I share the profound disappointment of the noble Lord, Lord McConnell, at this Budget and the further cuts to the aid budget that result, coming on top of the drastic cuts under the previous Government, in breach of their clear manifesto commitment. One does not need to be an international affairs expert to recognise that need around the world is greater than ever, with rising levels of hunger and malnutrition, multiple crises and climate change bringing more misery to millions. As the Save the Children Fund has noted, the change to the debt rules in the Chancellor’s new fiscal framework have not been matched by a change in the fiscal tests that were set to return to our legal—and, I would say, moral—obligation to get back to our 0.7% commitment. This means that those tests are basically unmeetable, so the Government have effectively abandoned that 0.7% commitment. This will not only diminish our international standing and impact millions of people around the world but is deeply harmful to our self-interest. The International Rescue Committee notes that 680,000 refugees have fled Sudan for Chad since April 2023, yet the humanitarian response plan for eastern Chad is just 27% funded. With tensions rising due to resource competition, refugees are on the move. Some are already in the camps around Calais and some will almost inevitably end up in the UK, at a cost to the Exchequer far higher than if they could have stayed where they were, close to their home country and able to return when, God willing, peace is restored. This is not the only short-term decision-making. Conflict prevention and stabilisation, as the noble Lord, Lord McConnell, also recognised, was cut under the previous Government and needs to be restored. In conclusion, the Minister told us that this was a Budget of choices. On employment taxes and the aid budget, they have made the wrong choices.

18:07:00

My Lords, I welcome a Budget with a notable change in direction for our nation’s finances. This Government’s ambition to improve the growth rate, productivity and public services and take control of the country’s debt is commendable. The need to raise taxes to fund these ambitions was clear, but it was not made clear in the election by either of the main parties. No one ever welcomes tax rises, but tax rises should be targeted at people who can afford to pay them. They should not force businesses to change fundamentally or individuals potentially to lose the way they earn a living and their way of life. I note my entry in the register; I work for a veterinary practice relying on the farming industry. The change to the agricultural property relief rules is devastating news to the farming community and has created a lot of anger. The community felt let down by the Government’s assurances made in speeches in the past year that APR would not change. The Government stated that 73% of farming businesses will not be affected by this change. This statistic is challenged by farming professional bodies such as the NFU and the Central Association of Agricultural Valuers. Is the Treasury able to publish more detailed figures that support this statistic? I understand why the Government wish to close a foreseeable inheritance tax loophole, but, when you do such a thing, there are always unintended consequences. That is why the farming community is so upset. Inheritance tax is something you can plan for, as my noble friend Lord Devon explained earlier, but these changes will leave many farmers who believed that APR would remain in place with no time to plan for a significant liability. Farmland is a unique asset. It differs from many other assets in that the value is high but the return is very low. It generates income only if farmed in some way. If we wish to protect our food security, environment, rural economy and the countryside that most of us love, we need to think again about this policy. In 2023 the average agricultural land value, according to Savills, was between £5,000 and just over £9,000 per acre, depending on land type. If you take a typical 450-acre farm—which is not a large farm—with mixed land types, the value alone could be over £3 million, without even considering the farm machinery, animals, farm buildings and farmhouses. So, even allowing for a possible £3 million exemption when a couple own a farm, there could be a tax liability of at least £200,000 or more. Where are these family businesses meant to find this money, as such a business may have a turnover of only £1 million? A family could sell land, but the result could be that the farm becomes unviable as a stand-alone business. Some upland hill farmers in Wales and Scotland may not be able to sell part of their land. Farmers cannot raise prices as they have extraordinarily little control over the sale price of the goods they produce; prices are set by supermarkets or food processers, based on a world food market. Farming is an industry that requires government subsidy to make business viable and to achieve food security and improve the environment. Therefore, why are we implementing a policy that will remove a possible £450 million from this industry in 2027-28? On behalf of the farmers of the UK, I ask the Minster whether a full impact assessment of these changes can please be done within the next year to assess the effect on medium to large family farms.

18:11:00

My Lords, I am very pleased to be able to participate in today’s debate. I congratulate the noble Lord, Lord Booth-Smith, on his maiden speech; he is not in his place right now but I am sure that the noble Lord, Lord Dobbs, will pass on those good wishes. The problem with having been on the Front Bench for the best part of the last 16 years is how rarely one has been able to participate in these great set-piece debates. I thank my noble friend the Minister, who did his usual brilliant job in opening the debate today. After every Budget, I always look to see what the Women’s Budget Group has to say about its contents. In recent years, in government the party opposite has not scored too well at all, it has to be said. The WBG’s gendered impact assessments have become increasingly important. I invite my noble friend to join me in congratulating the group on the important work that it does. The first Labour Government Budget in 14 years is very important and marks a shift in the UK’s economic direction, with more resources for public sector spending and investment. This change of direction is welcome news, particularly for women, who have borne the brunt of the austerity-driven public service cuts since 2010. I agree with the Women’s Budget Group when it says that the Budget offers “some promising green shoots” for women through “additional investment in the NHS and schools and … additional spending for local government and social care. Women and those they care for rely more on these services and are more likely to work in them”. Indeed, the above-inflation increase in the national living wage was very welcome and will particularly benefit women, who make up the majority of low-paid workers. I hope that we can look forward to the child poverty review, led by my right honourable friend Liz Kendall, and the spending review next spring, as an opportunity for the Chancellor to build on what she has started with this Budget. I seek assurance from my noble friend the Minister that this is but the first step in helping the poorest in our society, and those women. I turn to early years provision, as mentioned by the noble Lord, Lord O’Neill. If my great friend June O’Sullivan, chief executive of the over 100 year-old social enterprise, the London Early Years Foundation—which, of course, provides the nursery here in Parliament—says that she is concerned about some aspects of the Budget’s impact, then so am I. Childcare is part of our national infrastructure; without it, many people simply cannot work. Social enterprises, charities and small businesses running nurseries, whose largest cost is staffing, may be taking a hit from this Budget. This will have a detrimental effect on the 28,000 nursery owners. Given the Government’s commitment to getting people back into the workforce, can my noble friend help me in squaring this circle? We need sustainable childcare, of course, to get people back to work. When my right honourable friend Bridget Phillipson said that early years education is “more than just childcare” and is about giving every child the “best start in life”, it was a profound moment of recognition of investment in early years. Given the effectiveness of early years professional development programming, giving practitioners the skills they need to help our young, can we have some reassurance that there is a commitment to continue to fund this work post March 2025 and into the future, in the light of the commitments the Government have made? If my noble friend the Minister does not have this information, I would be happy for a letter to be placed in the Library. This leads me to my last point, which concerns the social enterprise sector providing public services such as healthcare, social care and children’s services. The Department of Health and Social Care, which is responsible for this, said: “In line with precedent from the Health and Social Care Levy, the Department of Health and Social Care is working through the implications of the Chancellor’s tax announcements with the Treasury. We hope to provide further information soon”. The last time this happened, it came good for social enterprises and charities. I hope it will do so this time, too.

18:16:00

My Lords, Ministers, in trying to defend the Budget, keep saying in a rather pained way that they have had to take some very difficult decisions; the Minister said that today. Of course, that is what government is all about, and they should not be surprised by that. However, I do accept that the Chancellor had a particular challenge which all Chancellors face when presenting their Budgets: the voracious demand of the public for ever more public spending. Yet every Government know that these expectations are unrealistic. So why is it? How does this happen? The reason is that Governments, of all parties, hide from the public basic information. The 362 pages of this Budget do not contain the information the public need to have; it is deliberately hidden. That is the problem Chancellors have to face. Let us take taxation. Nobody has the faintest idea how much VAT they pay. People know the cost of their BBC licence fee because they pay it directly; it is visible. They know the price of their council tax bill. The things they pay for directly, they know. However, they do not know that, when they go to John Lewis and buy a washing machine for £350, £60 of that goes to the taxman. They do not know that, when they get a £25 takeaway, £4 of that goes to the taxman. Every time those prices go up, the Government are taking more—a bigger amount of tax. Of course, the Chancellor does not go to the House of Commons to say that taxes are going up, but they are. And how the Treasury loves it. It likes nothing more than stealth taxes, which make it much easier to raise tax without protest. How much more honest it would be if, as in the United States, all goods and services showed their net price and, separately and just as clearly, the tax being levied on them. When people go to the States, they are often amazed that they have to pay tax on the goods there, while they do not have to pay it here—they think. How wrong they are. When you do see the VAT—when, for example, you are having building work done and your builder is in the VAT system and charges you £1,000—you then realise that you are paying a whopping £200 on top. What an eye-opener that is. Let us take income tax. Freezing tax thresholds will, as people earn more, push them unwittingly into a higher tax bracket and paying more tax than they should. If you are on PAYE, the only figure you really see is your take-home pay. Why are gross pay, net pay and tax not shown deliberately and separately—all equally clear? Again, the Treasury would hate that, because its job is so much easier if people do not know how much they are paying. The same is true about public services. Soon after I came into the House, I heard a speech made by the noble Lord, Lord Desai, who was then speaking from the Labour Benches. He said that it would be a good idea if, when people went for medical treatment, they were shown how much that would cost—not to charge them, but simply to inform them. I remember seeing on television some years ago a young man who thought he was having a heart attack. The NHS treated him brilliantly with an ECG and other tests. He was okay, and he asked the consultant afterwards how much that would have cost. The consultant said £25,000 and he was amazed. I just think that if people were aware of how much such things cost, they would be aware not to expect too much from endless public services. The Government may say, “It is very difficult to provide this information”, but surely, if an organisation is well run, and if the NHS is well run, that information should be available. If Governments are not more honest and open with the public about the cost of public services and the total amount of tax the public are really paying, I am afraid that the public will go on making unrealistic demands on the public purse. That will go on being a problem for all Chancellors, and it will be a problem partly of their own making.

18:21:00

My Lords, in my contribution to this debate, a debate so well led by my noble friend Lord Livermore, I will focus on growth and vocational skills. We have to start by honestly acknowledging that the UK performs a lot worse on growth and skills than other comparable countries and similar democracies and that, as a consequence, our productivity, as others have mentioned, is disappointing. There is nothing new there—successive Governments have tried to remedy that; ever since I started work, they have been trying to remedy it and it is very difficult—but now we are about to embark on another quest for the holy grail of high and sustainable growth. Historically we have tried a national plan; we have tried deregulation, low tax and privatisation. We have welcomed globalisation and high immigration, and now we have left the European Union and its single market to try to go it alone. None of those initiatives have been game changers and some, such as Brexit, have been positively harmful, but we are still stuck with the problem that we have identified, even since the 19th century, of a record that is unimpressive in many ways. I believe that one key reason for that is the narrow focus of much of British business on short-term shareholder value. It produces too many anaemic companies that are too feeble to grow our market share of world trade and lead the way in particular product areas. How are the Government going to encourage longer-termism in Britain’s boardrooms and try to get British companies on a better footing than they are at the moment? One necessary component is a highly skilled and motivated workforce, with a culture of excellence and an emphasis on lifelong learning that shows that people can change and be flexible. That opens the door to intelligent and constructive relations between management, workers and trade unions. We also need urgent action immediately to boost colleges and vocational education. The Budget proposes a £300 million cash injection, which is welcome and will, I hope, boost FE, too often squeezed as it is between schools and universities. I wish Skills England well. This whole area is littered with failed institutions, with most industrial training boards, the Manpower Services Commission and learning and skills councils among the most prominent. Can Skills England be a game-changer and make the crucial differences? To me, frankly, it looks a bit of a medium-term project, and I am looking for more urgent action. As has been said, the capital investment plans being developed will need a lot of skilled workers, but they are not around at the moment. Could we have a national crusade on skills, with crash programmes to tackle likely vital areas of skills shortages? We would not hesitate to do that in wartime conditions. We are in peacetime now, but we have some big problems that need a huge national effort to overcome. Lastly, on a different tack, I ask the Government to re-establish the TUC’s Union Learning Fund. This brought into the world of skills training and education people who were mostly very poorly educated and unconfident about taking training courses. It set them on a skills improvement trajectory that would benefit them and the community. Successive Education Secretaries—Conservative ones included—supported it, but Gavin Williamson, foolishly, did not. Can it please be reinstated?

18:26:00

My Lords, my comments will be more nuanced than some of those from this side of the Chamber. It may not be for me to say this, but I am not sure it assists our debate for noble Lords to trade accusations of dishonesty across the Chamber. I agree with the noble Lord, Lord O’Neill, that it was sensible to change the fiscal rules to allow for more productive investment. Within that, I welcome the extra £500 million for more affordable housing. On the revenue side, I welcome the extra £200 million for homelessness and rough sleeping support as well as the extension of the Household Support Fund. However, we should judge this Budget by the criteria that the Minister himself chose at the beginning of our debate when he said it was about growth and reform. In the debate on the King’s Speech, the Prime Minister said his plan for government would “take the brakes off Britain”.—[Official Report, Commons, 17/7/24; col. 59.] That is not a verdict that we have seen widely reported in the press. The OBR’s comment on the Budget has been referred to before: it will “leave GDP largely unchanged in five years”. The Minister sought to downplay that by saying that the OBR had not taken into account all the planning reforms and the rest, but the point made by the noble Baroness, Lady Moyo, is crucial: institutional investors, both in this country and overseas, will have read that the independent forecaster, the OBR, has said GDP is going to remain unchanged for five years, and one cannot downplay the impact of that verdict. On reform, I was struck by what the rather thoughtful Cabinet Minister Pat McFadden said recently in the Times. He said that “with extra money comes reform. We cannot keep spending taxpayers’ cash on the same problems without changing the way we tackle them”. However, the record so far is not good. The train drivers’ dispute was settled with none of the productivity improvements that the employers wanted, and the employers now include the Government; likewise the junior doctors’ dispute, while the extra £22 billion for the NHS was accompanied by no proposals for reform until next spring. I note in passing that that £22 billion dwarfs the extra £600 million for social care next year; again, as my noble friend Lord Forsyth said, problems due for reform have been ducked. Much of that £600 million will be absorbed by the national insurance contributions that providers of care homes and of domiciliary care will have to pay. You cannot fix the NHS without fixing social care. While I understand the Government’s wish to block IHT loopholes, I agree with the noble Earl, Lord Devon, and others that they have pitched the exemption for farmers far too low. Let me respond to the challenge from the Government to say how I would find the extra money—here, I agree with the noble Lord, Lord Burns; this may upset some of my colleagues. The £3 billion cost of the freeze on fuel duty was wholly misguided, a point made by the noble Lord. The Resolution Foundation estimates that the tax cost of driving has gone down by 38% in real terms since 2010, while cars have become more efficient. Further, petrol now costs 60p per gallon less than it did two years ago, so freezing the fuel duty was quite unnecessary and sits uneasily with the Government’s ambition to promote purchase of electric vehicles and to hit their carbon reduction target. It is perverse to freeze fuel duty while increasing rail fares by 4.6% next year and lifting the cap to £3 on bus fares. The £600 million for social care is not going to be enough. I think it is absurd that council tax has not been revalued for over 30 years. The highest band in Westminster pays £1,828, whereas the same band in Liverpool pays £4,615. That is absurd. If we are not going to revalue, we should at least introduce two higher bands and put the extra money into social care. I will end with a sentence from the Budget speech: “When it comes to choices on tax, this Government choose to protect working people every … time”.—[Official Report, Commons, 30/10/24; col. 821.] One tax it is indisputable that working people will pay is council tax, so will they be protected from an increase in council tax next April when the bills go out, or will local government get blamed for the breach of a government pledge?

18:31:00

My Lords, I declare my agricultural interests as detailed in the register. My concern about the Budget is the effect it will have on small businesses and small farmers. The Budget has put a cap for inheritance tax relief of £1 million for both agriculture and small businesses, or, if the business or the farm is owned by a couple, the cap is effectively £2 million. The new Secretary of State for Environment, Food and Rural Affairs announced when he was appointed a list of five priorities. The first, which received much approval in this House, was to clean up rivers, lakes and seas. The third priority was to support farmers to boost Britain’s food security. Last Tuesday, on “Farming Today” on Radio 4—I listened again to the clip this morning—he said: “The wealthiest landowners and the wealthiest people in the sector can afford to contribute more”. Earlier in the same interview, he said that the new cap was intended to catch the “wealthiest people” buying up land to avoid paying inheritance tax. Everyone will understand that policy, but the question which I hope the Treasury Minister will address when winding up the debate is whether a farmer owning 50 hectares, or a couple owning 100 hectares, are, in the Government’s opinion, sufficiently wealthy to have to pay inheritance tax. By the way, the figures for the 50 and 100 hectares are calculated by the CLA. During the passage of the Agriculture Bill in 2020, I and others expressed our concerns about the small family farms not receiving enough taxpayer support. Anyone knowing anything about agriculture in this country will understand that farms of 50 or 100 hectares, unless possibly they are horticultural holdings, are difficult to make a living from, although the underlying value of the asset may, on paper, be considerable. This new tax may have the effect of lowering the price of land—which, of course, would be a good thing—but the number of farms bought by investors wishing to reduce their inheritance tax liabilities is, according to the industry, a very small proportion indeed. So, while the Government through this measure are aiming at relatively wealthy people trying to pay less inheritance tax, in fact they are catching in the net many small to medium-sized farmers who are “strivers”—to use the Chancellor’s word—and hard-working people who do not deserve to be treated in this way by the tax system. Perhaps I might gently suggest to the Minister that he and his colleagues in the Treasury should seriously consider raising the bar from £1 million to possibly £2 million or £3 million. This would, I respectfully advise the Minister, help to achieve greater growth in the rural economy. The removal of tax relief at so low a level can only discourage the investment that is a certain necessity to achieve growth. To conclude, I hope that the Minister when he winds up can explain how putting a cap on business and agricultural property relief will encourage growth, and how this new tax is falling on the broadest shoulders.

18:35:00

My Lords, this first Budget from a woman has some good news for women, as we have already heard, especially the investment in our much-depleted public services—though sadly not nearly enough in social care—the very welcome improvements to carer’s allowance and the increase in the national living wage. But, important as it is, a living wage has less effect on poverty than is often assumed. Women are the main shock absorbers of poverty, which has grown so much worse under the Conservatives. Yet it was mentioned only once in the Budget speech and there has been considerable disappointment among charities that the Budget did not promise more. That is not to discount the positives. There is the new fair debt repayment rate for universal credit, although the money will still have to be repaid eventually and the five-week waiting period which accounts for many of those debts must be tackled. There is the extension of the household support fund, although there is no mention of work on a longer-term plan for local crisis support, and additional investment in free breakfasts, but nothing on free school meals. We are told that these represent downpayments on the plan to drive down poverty being drawn up by the child poverty task force, whose work I warmly applaud. After 14 years of slash and burn policies, which have, according to CPAG—of which I am president—cut £50 billion a year from social security, experts agree that social security has to be central to such a plan. To quote Brian, a benefit claimant from the Changing Realities project, these “positive steps … do not tackle the core issues of inadequacy within our social security system”. Of course, rebuilding social security cannot be done overnight. But surely it was possible to address now the two interrelated key drivers of child poverty, including deep poverty—the two-child limit and the benefit cap—without awaiting the full strategy. There was not even a commitment to the inflation proofing of the cap to prevent it hitting harder and trapping more struggling families whenever benefits are uprated. Seven out of 10 of those caught are lone parents, mainly women. As the Resolution Foundation warns, “leaving the two-child limit and the benefit cap intact even for the next five months prolongs the burden on low-income families … and intensifies the effect as new families are affected”. And what a burden it is for mothers struggling daily to meet their children’s needs. The foundation estimates that 63,000 more children will be hit by the two-child limit by April, and there is no hint that it will even be scrapped then. That is 109 a day, according to CPAG. The continued freeze in the local housing allowance is also disappointing, given the extent to which private sector rents are contributing to high poverty levels. Instead of hope of future repair of the shredded social security system, those claiming disability and sickness-related benefits face possible further cuts, which is causing considerable anxiety. Yet, according to the Women’s Budget Group—of which I am a member and which has already been mentioned—disabled women are among those who have been hit hardest by Tory cuts. The Chancellor is rightly asking those with the broadest shoulders—largely men—to forego some of their tax privileges, but many argue that she could have gone further and released the money needed to take more decisive action on poverty and inequality, in the interests of women and children. Without it, as Trussell warns, we will not end what the manifesto described as the “moral scar” of mass dependence on food banks. The case for transformative action is not only moral but economic, as it would bring cash into deprived communities and reduce pressure on services, and it is political, given inequality’s role in fuelling right-wing populism. To conclude, in the Budget debate, the Work and Pensions Secretary promised a “bold, ambitious, cross-Government strategy to tackle child poverty” next spring, but that “we will not wait to act, particularly for those facing the deepest poverty”.—[Official Report, Commons, 4/11/24; col. 68.] These are encouraging words. All I ask is that we act more resolutely now.

18:40:00

My Lords, I feel my B in GCSE maths is challenging my ability to speak with any fiscal authority in this debate, but I am glad of the opportunity to do so. I offer my congratulations to the noble Lord, Lord Booth-Smith, on his excellent maiden speech and I welcome him to your Lordships’ House. I recognise that the decisions the Chancellor has made have not been easy, but balanced alongside the Government’s long-term priorities we must consider how this Budget will serve the needs of people who are struggling today, and affect what surely must be a significant long-term ambition—perhaps I can use the word “mission”—to improve social cohesion. As I listened to the Chancellor’s Budget speech, I was struck by two things: first, the determination to grasp nettles; and, secondly, the resolute focus on investment. Increasing fiscal confidence creates the right conditions for growth. This has short, medium and long-term objectives and outcomes. People, communities, organisations, businesses and even this Chamber represent complex ecosystems. The granularity on the ground makes it harder to see this complexity, yet its effect locally can be keenly felt. For example, the decision not to proceed with dualling the section of the A1 that lies in the north of my diocese arguably makes that area and its connectivity routes less attractive to potential investors. The 50% increase in the bus fare cap will impact people who can least afford it, further disconnecting people from places and opportunities. The flipside is welcoming the alignment of Budget priorities with regional devolution. This is having a positive impact on the north-east region; increased voice, agency and confidence have the potential to raise aspirations. Last week, I attended the Northern Farming Conference in Hexham. I commend attempts to address anomalies in the tax system, but I echo the apprehensions I heard at that conference and in this Chamber that this was not a Budget that really understands the needs of those in rural communities who have this year already faced huge challenges from the weather and flooding. I therefore add my voice to those of others urging the Government to rethink the APR decision. Farmers have a key role to play in assuring food security in an increasingly volatile global context. Can the Minister please assure me that the impact of the APR and BPS measures on farming will be assessed and reviewed? I welcome the extension of the household support fund and the steps taken to reduce the impact of universal credit debt deductions, but we must address why these measures are necessary in the first place. With a disproportionately high number of children living in poverty in the north-east, I believe this Budget missed a crucial opportunity to lift children out of poverty by removing the two-child limit and benefit cap. Child poverty is a stain on our society and I urge the Government to take bolder action in addressing its causes and consequences. There is much that I welcome in this Budget, but the decisions I have mentioned have consequences that must not be overlooked. I urge the Government to consider the impact of these decisions carefully, making sure that they truly uplift the most vulnerable to ensure the flourishing of all.

18:44:00

My Lords, like others, I welcome the maiden speech of my noble friend Lord Booth-Smith. It had the additional quality of supreme brevity, which is always welcome in these debates. I had hoped for a moment that we were going to get some extra titbits of life in Downing Street and his role as strategic director, but all we got was common sense. I recommend that he continues with common sense and leaves Downing Street out of it as far as possible. You would not really sense from this relatively civilised debate that in fact this is a time of enormous danger, for the whole world and for us here. I do not mean danger just of an economic kind but of a physical kind. There is a real threat hanging over the world, vastly amplified by the silicon chip, which has altered and recreated almost every aspect of the modern world. Indeed, some would say that it is the chip and hyperconnectivity that are the major cause of the current tensions, instabilities, violence and evident collapse of the international rule of law. Some of the most serious minds in today’s world—philosophers and others—tell us that we are on the edge of a precipice, that humankind is looking into the abyss, and many other terms of doom and gloom. This has duly fed through, via a cacophony of populist influences, to the forming of a vast new nexus in world finance, trade and investment, and spending and taxation, which completely changes the axis of political debate and economic policy priorities. That is what we are discussing now: whether this Budget and the thinking behind it responds to and picks up these new, rather frightening realities. At the centre of it all is the need for a truly enormous increase in investment—both public and private—around the world, and certainly here, while remembering that when it comes to Governments trying to boost investment one needs to recall, as I fear some Ministers do not seem to, that the British economy, like a lot of advanced democratic economies, overwhelmingly, at some 99.2%, consists of small and medium enterprises. If you try to kill them off then the whole economic evolutionary process comes to a sickening halt and withers away. It may be said that small businesses rely on big business, but it is the other way round as well. The big businesses of tomorrow are somewhere in that smaller and medium-sized pattern and its source of innovation. If they are poisoned then the whole of our economic progress is brought to a halt. This new scene has key components, which I will list not in any order but quickly in my last few minutes. First, the state has most of the infrastructure demands and the private sector has most of the money, so it is perfectly obvious that new ways have to be found for the state and private capital to work together. That is a sort of evolution of what we had at the end of the last century, with the private finance initiative—it failed, but it was the right idea. Secondly, we need to attract a far bigger flow of foreign direct investment, not least to help with the energy transition which we are embarking on. Thirdly, the sovereign wealth funds long to invest but cannot find the right investment vehicles here in the UK. I declare an interest in that I advise one of them, and I know that that is exactly the position they face at meeting after meeting. Fourthly, there are the pension funds and insurance funds, said to be more than £2.5 trillion, from which the Chancellor says she is seeking to tap surpluses and encourage bolder equity investment. Some 20 years ago, 53% of those enormous funds used to go into the UK and now it is 6%; obviously, that has got to change. Fifthly, we must greatly widen our own domestic sources of share capital and asset ownership in a way that, crucially, spreads the benefits of capital growth far more than at present to millions of households to enhance their dignity and security. I think that is the next stage in the development of popular liberal capitalism, which we do not seem to be addressing as vigorously as we should. There is certainly not much in the Budget for it. Finally, there is the overdominance of our national investment allocation and strategy, which must be shifted away from the Treasury. This would not be very popular, certainly not with the Treasury, but it was recommended in the report by the noble Lord, Lord Maude—an excellent document—and in the Harrington report, and by some of us for the last 50 years. Until there is a key shift at the very centre of the government machine, nothing will go quite right on the investment front. I see all this as common ground for the future. The party to realise that these are the new priorities will be the winner if it gets there first.

18:50:00

My Lords, the noble Lord, Lord Howell of Guildford, reminds us that we are living in very dangerous times, and I agree. I recall my noble friend Lord Fox saying in the early part of this debate that we want the Budget to succeed. I say clearly: I want the Budget to succeed, and for me the key reason is that it is important for the public’s confidence in their governance that the Budget should succeed. I am not looking at this Budget as a one-off; I see it as part of a number of Budgets and spending reviews. I thank the noble Lord, Lord Burns, for reminding us of the level of UK debt. The noble Lord, Lord Booth-Smith, reminded us in his maiden speech that debt has to be paid for and paid back. I would have liked it a little more had Conservative Members speaking in this debate not been so reluctant to take responsibility for their role in increasing UK debt from 65% of GDP in 2010 to 97% today—almost 100%. I welcome the Government’s determination to secure better value for money, particularly from infrastructure projects. One of the notable things about the previous Government is that they seem to have presided over cost overrun after cost overrun on major infrastructure projects. They also presided over Brexit, which has not really been mentioned but has had consequential damage on our investment and growth. The jury is out on this Budget. Clearly, the increase in national insurance on employers will have some impact, but I hope very much that the Government will reflect on this and manage to seek ways out that drive growth, as they are trying to do. It might help the Government if they paid more attention to the importance of impact assessments. There was not one for the winter fuel allowance decision. On the matter of inheritance tax on farms, I heard on “Farming Today” that the Treasury is saying that only 27% of farms are affected, whereas the farmers and their professional bodies are saying that it is two-thirds. These facts matter to the general public. I should remind the House of my entry in the register of interests, because I welcome the extra funds for housing, schools and the NHS. But as a number of speakers have said, this extra money for the NHS will not fix the crisis in social care. I suggest to the Minister that there has to be cross-party discussion about a way forward. The extra £600 million for social care is obviously welcome, but it is virtually wiped out by the rise in national insurance that those employers have to pay, as do GP surgeries. If they were not in the private sector, they would not have to pay it. The Government should be trying to sort out social care, which should be seen in the context of spending to save. That is: fixing the social care crisis means that significant savings can accrue to the NHS if bed blocking is ended. Yet most councils with social care responsibilities are well on course to overspend in this and future years, and their position is not helped by the NI increase on employers in the care sector, as I said. Two-thirds of revenue spending by many councils now goes on providing social care; it has simply got out of control. The reason is council tax—the failure of council tax reform, with no mention of the fact that it is a regressive tax and a means to increase taxes on households when the Government insist that they are not increasing taxation. They blame local government instead as, since 2016, the social care precept can be increased by up to 2% of the council tax bill each year. That has closed libraries and reduced services for young people; it has closed leisure facilities and worsened road safety—and, indeed, every non-statutory service that we can think of. There is a lot to say about housing, but that is for another time. As I say, the jury is clearly out but I hope that the Government manage to get a spending review and a Budget next year that will actually address some of the problems that the public feel strongly about.

18:56:00

My Lords, I am glad to follow the noble Lord, Lord Shipley, because he reminds us that solving the economic and fiscal problems of the country requires solving the economic and fiscal problems of local government and its services, of which social care is one of the biggest. That needs to be part of the Government’s economic strategy. I congratulate the Minister on giving us such a coherent introduction; I add my congratulations to his boss, the Chancellor of the Exchequer, who gave a bravura speech, which I listened to in full the other day. She has given the country at least a sense of direction and hope, even though there are some details that the House has demanded. I warn the Minister that I was going to focus entirely on the areas I disagree with or feel need revisiting. But I was so provoked by the lead spokesperson for the Opposition being so blind and in a sense of denial and misrepresentation about the inheritance we have received. There was the whole period of austerity, followed by ludicrous claims about Brexit and then serious increases in taxation for businesses and individuals. The legacy we have had is a very difficult one for Treasury Ministers and the Cabinet to deal with, and this Budget makes only a start on that. As the noble Lord, Lord Shipley, emphasised, it has to be paralleled with other key strategies, two of which I have a particular interest in. One of them is environmental and the other is on equality. My noble friend Lady Lister talked about the equality impact of this Budget, particularly in the social security system. I agree with her about some of the measures that are implied in this Budget in relation to the winter fuel arrangements and the two-child limit. I feel those both need to be revisited by the Government at some time during the next few years, if not immediately in this Budget or the next. On the environmental side, I welcome the allocations to what are basically green projects and support for green energy but, as the noble Lord, Lord Young, who is no longer in his place, and others have said, the interventions on transport seem completely wrong. The previous Government were completely wrong in freezing fuel duty when we have a problem. I was on the committee that recently reported to your Lordships on the difficulty of changing to electric vehicles; that is not helped by the freezing of fuel duty on fossil fuels. We need to do the opposite and raise fossil fuel duty while encouraging the uptake of electric cars to reduce congestion and the air quality effects of fossil fuel emissions. If we are moving in the wrong direction on the environment in certain key aspects, we need to review the basis of taxation policy in transport as a whole, as others have referred to. That needs to be part of the project for the next five years. We also need to look at the basis of local authority finance. There are local authorities up and down the land, of all political persuasions and sizes—from regional mayors down to local town councils and so forth—who get nothing from this Budget. We need a new, solid and growing basis for financing the services that are delivered through local authorities. Unless the Treasury is prepared to look at that in real detail over the next few years—starting with a spending review this year and hopefully subsequent Budgets—we will not be able to deliver not only social care but most of the services to which people have referred, including education, that are so vital to sustaining the growth strategy. So, this is a good start on a growth strategy, but it needs a lot more solid allocations to other strategies. In particular, it requires us to address the growing inequality that has persisted in our land over the last few years, and at the same time to address the problems of the environment which are threatening our whole world.

19:01:00

My Lords, I note my interests as a board member of the Bank of England and Taylor Wimpey, but speak in a personal capacity. The inaugural Budget of any new Government is always a defining moment. I therefore joined a number of your Lordships, including the Minister, in listening to the Chancellor’s Statement live from the Gallery of the House of Commons. As the Budget Statement unfolded, gilt yields started to widen, which brought a sense of foreboding. But, fortunately, bond markets have since settled down—or likely been distracted by more consequential events on the other side of the Atlantic. The immediate impression of the Budget was mild relief —not as bad as feared—but that was before reading the OBR report, which painted a different picture. This disconnect between the Budget rhetoric of promoting business, investment and growth and the projected economic outcomes is stark and has been a recurring theme throughout today’s debate. Yes, our economy is set to experience a sugar rush next year, but the expansionary fiscal effects will fade rapidly and come at the expense of higher than expected inflation and, potentially, interest rates. The increase in employers’ national insurance has multiple consequences, proving that the incidence of any tax is different from where it is originally levied. Businesses will mitigate the impact and we should therefore expect lower wage settlements, higher prices, less flexible working opportunities and reduced business investment. Hence, setting restrictive manifesto commitments on taxation which seek to protect certain groups is a red herring and unhelpful to the sound management of an economy. A more straightforward and less distortionary method of raising £25 billion from businesses might have been to increase headline corporation tax—more so as the full expensing regime now helps to shield any impact on business investment. For those of us keen on an economic course correction, the Budget almost felt like everything had changed, but nothing has changed. That is not to question the new Government’s intent—which is genuine—but reflects the herculean task of turning round the supertanker. If nothing else, this episode provides an early reality check for the new Administration, spanning both the handling of the pre-Budget hiatus period, when economic confidence was unnecessarily dampened, and the post-Budget mismatch between reality and expectations. But enough of the post-mortem. Looking forward, the Chancellor has certainly grasped the crucial role of supply-side reforms in spurring economic growth, especially given the fiscal constraints and record size of the state and tax burden. The early announcements on planning reform are a positive first step and, importantly, not yet reflected in the OBR forecasts. The Prime Minister’s remarks at the International Investment Summit about ripping up bureaucracy that blocks investment and upgrading the regulatory regime to take account of the impact on economic growth were refreshing. We now need concrete follow-through on both counts. More so as the world is not standing still, and doubly so following last week’s US presidential election. Elon Musk may not be the current Government’s favourite business leader, but his role and influence within the new Trump Administration will clearly be significant, including leading on a new US Department of Government Efficiency. That might sound like an oxymoron, but the intent is clear: to torch waste and bureaucracy and sharpen incentives for delivery and innovation. Our competition was already stiff but just got harder. Finally, I will touch on investment allocation within the UK economy, a theme which the Chancellor is expected to address in her first Mansion House speech later this week. Many of us hope that she will accelerate and amplify the reforms already announced by the previous Government to address the under-allocation to UK assets. Introducing so-called “mandation”, requiring pension funds to allocate a specific percentage of their investments to UK assets to retain tax advantages, appears seductive but may be a step too far. However, there are other ways of pooling local authority pension funds and crowding in flows. Ultimately, however, there is a structural nexus around accounting treatment, pension regulation and risk incentives that needs to be broken. I hope the Chancellor will be bold. In conclusion, we have been reminded in recent months that politicians campaign in poetry but govern in prose. Unfortunately, it has almost felt like the opposite since the election in July. I hope the Budget marks a turning point and the Government will now pivot to the hard yards of implementing the fundamental reform that our economy desperately needs and our fiscal straitjacket dictates.

19:06:00

My Lords, I welcome the opportunity to speak in this extremely important Budget debate. I start by congratulating the Chancellor and her Treasury team on facing what is an extremely difficult situation, having inherited some very difficult fiscal realities. That should not be denied by anybody in this House. Of course, a Budget is about choices, and for every decision that is made there will be many critics and many opponents. This is the first Labour Budget against, as I say, a very difficult background. Growth and productivity are crucial. I listened to the opening remarks of the noble Lord, Lord Johnson, and I would have given them more credence if there had been a degree of humility and a degree of acknowledgment of the inherited situation we have on these Benches. But of course I understand that there are different views. What is important to me, as well as economic competence, is what values run through any Government. It has to be both. I am not an economist, but I would like to say that I am a fair-minded individual and I understand that what the Chancellor has done, ably abetted by her team, is address some of the big issues. Not everything can be addressed in one Budget. Why would we expect it to be? I look at some of the policies in this Budget and will say this about the exam question. The exam question is whether this Budget delivers. It cannot be answered in a Budget debate; it will be assessed over time and, I am sure, in future Budgets as well. In my previous incarnation as a trade union official we also faced the issue of productivity, and the noble Lord, Lord Monks, made a very compelling argument about skills. Productivity cannot be done on a short-term basis. I have been opposite many progressive employers who understood that it is not just about pay, it is about improving the skills of the individuals who work for them, and also retaining them. If you do not win the hearts and minds of your staff, they will take a short-term view of the workplace. One of my roles was at the Low Pay Commission for 11 years. It was a great policy introduced by a previous Labour Government. Many of those years I shared with my noble friend Lady O’Grady. That a was great example of compromise and reaching an outcome when there were sometimes many frustrations at the level of the settlement. I welcome the increase to the minimum wage in this Budget, because we have to value some of the lowest paid in society if we are about anything. The increase for carers is another significant policy. I have heard speeches in this Chamber about how much we value them and now, rightly, the Labour Party has put some finance behind that good will. These are unsung heroes who deserve full recognition. I am conscious of time and repetition. I have learned over many years that, when you start repeating too much, you lose the audience. So, I am not going to go over things, but I could—I could do a longer speech than this one. I have to say to my friends on the other Benches that the one thing you cannot say is that we came into this Budget in the best position. I suppose for any Chancellor it is a bit like dancing on the head of a pin, making the choices that you hope will carry you forward and benefit the people of this country. I am confident that we have made a good start, but I am confident that it cannot be fixed in one Budget. I make this appeal to any employers listening: if you really want to do as my noble friend Lord Monks said, upskill the workforce, train them and pay them well and you will get a benefit on productivity.

19:11:00

My Lords, I start with a few notes of welcome to the noble Lord, Lord Booth-Smith. On the Budget, I was very pleased that the Government have put aside money for the compensation of victims of those outrageous goings-on at the Post Office and to do with infected blood. In fact, to be honest, I felt ashamed to be part of, if you like, the establishment—an establishment that failed to pick up these bills while these poor people suffered so appallingly. I am very pleased that this will be put right. I am pleased that there will be more teachers, and I hope that will be very much in the arts and music. I am delighted that the Prime Minister plays the flute. But—here is the first but—VAT on specialist schools is going to be a real problem. I ask the Government to look at that particular part of education again. If we have the teachers to create aspirations in things such as the arts, then we need to look to small venues and museums, which at the moment are about to fall by the wayside if they are outside London. I agree with the Labour Party that the wealthy must do their bit to help those who are less fortunate, but sometimes I think there is a misunderstanding. I could not agree more with my noble friend the Duke of Wellington, who so pointedly showed how the Treasury has a fundamental misunderstanding about the economics of small and medium-sized agriculture. I declare an interest, as I have built up over 40 years, field by field, a farm with a local family, all of whom have to go out and do contract work to make ends meet. Farms of the kind of size that my noble friend the Duke of Wellington mentioned do not make much money; they hardly make any. What I think has not been understood is that, if you have to sell something like 30 to 50 acres to pay the inheritance tax on a farm of 250 or 300 acres, you are making that farm less viable. It is impossible to make a living off, for example, 100 or 150 acres. You need these bigger farms. Therefore, my noble friend the Duke of Wellington is quite right to ask the Minister to think about raising that cap, because otherwise he will be punishing precisely those he wants to help—those who have less. We have heard the Opposition Benches agreeing with the Government that it is people that create growth. If we want to help people to create growth, we must not cut the ground from under them. What could happen with this tax, unless this is changed, is that it could kick-start a vicious circle where, in order to pay inheritance tax, part of the farm is sold; the farm then becomes unviable and therefore bigger landowners will snap it up if they can. One farmer said to me, “How much is this going to raise?” I said, “On the Government’s figures, £500 million”. He said, “Well, why don’t they put a penny or two on petrol?” That would solve the problem, without completely ruining a whole level of farming in this country, which is vital. I can understand why the Government would want to stop people putting millions into land to save inheritance tax. Like my noble friend the Duke of Wellington, I agree that you want to stop that. But surely, as with the winter fuel allowance, the Treasury must be able to come up with formulas that actually mean that the top strata pay but the lower strata do not. I cannot believe it is beyond the wit of man, or woman, in the Treasury to come up with a formula which would tax those who were seeking just to avoid inheritance tax, without punishing those who are working hard every day on the land to provide food for this country. Do we dare risk that?

19:16:00

My Lords, as my noble friend Lord Johnson of Lainston said in his opening remarks, this is, in its effect, an unkind Budget. Its consequences are punitive. As we have just heard, if you identify as a farmer, be prepared to be punished for investing in your farm so that you can feed us. If you are a pensioner, be prepared to be punished for putting money aside so that you can live independently and leave a legacy to your loved ones. If you are a disabled child and your family have sacrificed everything to send you to an independent school with smaller class sizes, prepare to be punished for having special educational needs. The Minister said that these are difficult choices. I agree—just ask a disabled child, forced to leave their school and join the state system, which the National Audit Office said very recently is in urgent need of reform. These choices do not make sense, particularly given that the splurge in public spending makes growth even more important and, at the same time, even less likely. This Budget will, I am afraid, stifle growth. It could put the very sustainability of the welfare state, on which I and so many other disabled people depend, at risk. We cannot afford to accept the status quo—the pervasive view that the state must grow inexorably, and that the Government have the right to spend an ever-increasing share of people’s hard-earned money in that quest. They do not; it is not their money to spend. Disability policy, particularly relating to employment, is an area that has for too long been bedevilled by a blinkered belief in the status quo. All parties, including my own, need to look beyond its constraints if we are to tackle the completely unacceptable and expensive disability employment gap, which remains stubbornly at almost 30%. The last thing one would assume that an employers association with “disability” in its title would do is perpetuate a failed status quo. Indeed, when I was chair of the Centre for Social Justice’s disability commission, I was delighted that the chief executive of the Business Disability Forum—BDF—signed up as a fellow commissioner to challenge the status quo by calling for mandatory disability employment and pay gap reporting to be introduced. So I was mystified when the BDF, without warning, then performed a U-turn on the basis of research that it has to this day declined to publish in full. Suffice to say that findings published at the weekend by Disability@Work on BDF’s effectiveness in improving the experiences of disabled people in its member organisations does not cast it in a positive light. I close with a question for the Minister. Given rumours that the BDF’s chief executive will be joining your Lordships’ House in the near future—and mindful of the Nolan principles of public life, particularly those relating to integrity, accountability and openness—can he assure the House that, as part of their due diligence, No.10 and all appropriate bodies will ensure that, before her appointment is recommended to His Majesty, BDF publishes in full the methodology of the research underpinning its sudden policy change on mandatory reporting? Can he also say whether they will ensure that its chief executive will be required to explain why this policy change coincided with an increase in its membership income by almost 50% between 2021 and June 2023, and why a corresponding increase of over 45% in its membership has had no positive effect in challenging the status quo and in decreasing the disability employment gap? Disabled people deserve better.

19:22:00

My Lords, in many years as a Member of this House, I have never dreamed of speaking in a Budget debate. Why have I changed my mind today? I want to say a few words because this Budget springs from a view of the world—an approach, or a political philosophy, if that does not sound too grand—that, rightly or wrongly, happens to fit in with my own beliefs or, as some opposite might say, my prejudices. I am particularly excited by its emphasis on stability, combined with its emphasis on investment and growth—getting that balance right is everything. I believe this Budget succeeds here. It does not revert to austerity but is determined to move forward while protecting those who have the least. Its insistence on improving our desperate public services is an essential part of that crucial balance, which has been found successfully by the Chancellor. That balance has been difficult this year, given the economic legacy bequeathed by the last Government. They will have to understand that that legacy is widely and correctly criticised, and it explains the general election result to an important extent. My gentle advice to the Opposition is to stop defending their record, stop beating their heads against a brick wall and move on as fast as they possibly can. Austerity as a policy is, thankfully, dropped. It did untold harm. I was a police and crime commissioner for five years and, every working day, I saw the effect of austerity on police numbers and on an excellent force’s ability to do the job it wanted to do. Neighbourhood policing suffered badly, and it followed, like night follows day, that anti-social behaviour and other crimes flourished. Austerity was a disaster for the poorest and most vulnerable—not least for the young, with the inevitable closure of youth clubs and other provision. I am delighted by the plan set out in the Red Book for visible neighbourhood policing to be boosted by 13,000 neighbourhood officers and PCSOs. My concern today—here I remind the House of my declared interest as the chair of the board of trustees of the Leicester law centre—is about law centres and advice centres generally, which give vital legal advice to those who need it at the time that they need it. Given the effective destruction of social welfare law legal aid over the last 14 years, they will struggle to find the increase in employers’ national insurance. That advice, if given, can save money for the state, as well as protecting people’s lives, of course. Although I personally understand the importance of, and support, raising employers’ national insurance as a way of moving forward, I invite my noble friend to look again, if possible, at the issue as it affects the people I have referred to. I repeat how proud I am of this Budget. I congratulate the Government on having presented a Budget that is both sensible and radical, and that represents the best hope for the future of our country.

19:26:00

My Lords, I wish to identify with some of the comments of the noble Lord, Lord Monks, who is not in his place, that we were searching for the holy grail in economics—we have been at this for a long time. The noble Lord mentioned the Union Learning Fund. As a former Skills Minister in Northern Ireland, I worked with it and thought it was excellent. It gave confidence to workers and mentored people who would never have dreamed of improving their skills. It was an excellent organisation, and I hope we can get back to a sensible policy for skills, because we are very bad in this country at doing that. Innovation can propel small business, growth and employment, but I am sorry to say that the Government have missed an opportunity here in going after large companies that have used the purchase of land and other assets to avoid tax, which we all understand. A number of Members—the noble Lord, Lord Berkeley, and the noble Duke, the Duke of Wellington—pointed out that farms are small family businesses. To give a local example, the average farm in Northern Ireland is below 100 acres, but the land price can be anything from £10,000 to an average of about £14,000, while good land can even get more, so a very small family-owned farm that is virtually economically unviable comes into this bracket at significant amounts. The average farm income is about £24,000 to £25,000. Even if you get 10 years to pay, how will you find any money to reinvest in the business? It is impossible. Although I understand the targeting of what the Government are attempting to do, the threshold is dangerously low and will have a very negative effect, damaging local businesses, schools, shops and all the rest. The winter fuel payment decision is the most un-Labour decision I can imagine—it was the Labour Party that established it. We know there are people who do not need it, but we can find other ways of dealing with that. It could be taxed, but the threshold has to be raised, because, as the noble Lords, Lord Fox and Lord Oates, pointed out, we allow the gambling industry seemingly to have a free pass, yet we are taking a couple of hundred quid off a pensioner. I just cannot get my head around that—I do not understand it. We know from committee work that those companies have algorithms—they know who is watching the television at three in the morning and they know whom they can exploit, but we give them a bye ball. I do not understand that. So, although I understand the need to raise money, that is exactly the wrong place to look for it. Social care is an issue that we as a country have dodged for years. Several attempts have been made to deal with it; Boris Johnson made an attempt, but that stalled. We need a political consensus across the country and across the political parties to deal with it. Some 10% to 14% of hospital beds are blocked because the social care is not there. We need to have a conversation about that. The other thing the Minister did not mention was the costs of our failed immigration policy. We are paying probably £200 a day to put somebody up in a hotel, yet somebody can have £200 a year taken off them in winter fuel allowance. It does not make sense. I hope the Government will tell us the real costs we are facing with the immigration system—whether it is asylum seekers who come here legally or people who come here in boats as victims of criminal gangs. The Government must have at least an average figure of what this is costing per head. It has not been disclosed or taken into account. I understand that the Government are in a tough position. The previous Government were faced with Covid and decided to borrow large amounts of money to keep the economy going; I think we all accept that that was the right thing to do. It has left us with a huge task. But to raise money, we are focusing on some of the wrong things while some of the people who can afford it, whether the gambling industry or others, are getting away in the smoke. That is not the right thing to face people with as they go into the very difficult winter ahead.

19:32:00

I welcome this Budget, which represents a fundamental transformation in our nation’s fiscal priorities. After 14 years of Conservative government that has impacted profoundly negatively on our public services, this UK Labour Government’s first Budget marks a decisive shift towards rebuilding our society on foundations of fairness and social justice after over a decade of austerity. The evidence before us is unambiguous. In the previous Administration’s last Budget, Wales received £1 million in capital funding. Under this Labour Administration, Wales is receiving £235 million, which is 235 times more investment in Welsh communities. It is not mere figures but tangible means to repair schools, construct hospitals and build the homes our communities so desperately need. The Benches opposite may offer criticisms, as in that barnstorming opening speech by the noble Lord, Lord Johnson, but they surely must acknowledge in their quieter moments the profound impact that their approach to fiscal management has had on communities across the United Kingdom. When they question the decision to reform taxation of non-domiciled individuals and second homes, they reveal their priorities. This is fundamentally about fairness. Those who have benefited most from our society must contribute appropriately to its renewal. Let us consider what this Budget offers for my home country of Wales: £774 million of additional revenue for this year, £695 million the following year, and £235 million in capital funding—a real-terms increase of 7% compared with the previous 0.5% annual average. These are not abstract numbers; they translate into meaningful change for communities in Wales. I draw attention to the redressing of historic injustices. My dear late stepfather was a collier. He followed his own father underground aged 15 in the early 1950s. Unfortunately, the Labour Government’s decision has come far too late for him, but the transfer of £1.5 billion of the mineworkers’ pension scheme investment fund to its rightful beneficiaries demonstrates respect for our mining communities, who have waited far too long for such recognition. To those in the House who question the approach to taxation while our public services face such challenges, I ask: what interests do you serve? The Budget delivers an above-inflation 6.7% increase in the national living wage and reduces universal credit deductions from 25% to 15%, benefiting 1.2 million of our poorest households, and it secures a 4.1% increase in state pensions against 1.7% inflation. Furthermore, the Labour Government are investing in Wales’s future through £25 million for essential coal-tip safety, new hydrogen projects in Bridgend and Milford Haven, and £80 million for the Port Talbot steelworkers—funding that was promised but not set aside and never delivered by the previous Tory Government. Under the leadership of my noble friend Lady Morgan of Ely in Wales, working in partnership with our UK Government, we can now advance a truly progressive agenda. Every pound will be directed where it delivers maximum benefit: our NHS, our schools, and supporting vulnerable families. The Treasury’s analysis, available to all, demonstrates that households in the lowest income brackets will benefit the most significantly, while necessary tax increases will affect only those with the highest incomes. This is the hallmark of progressive governance, delivering for Wales and across the United Kingdom. This Budget represents not merely a series of fiscal decisions but a fundamental reset, moving beyond the policies of the past towards a fairer, more prosperous future for all our communities.

19:36:00

My Lords, my focus tonight is squarely on health and social care. As we have heard, the Chancellor announced £22.6 billion over two years in new day-to-day funding for the NHS, and £3.1 billion in capital funding. This funding boost is very welcome and long overdue. These are very large sums and must be spent both well and in the right places. She also announced an extra £600 million next year for social care, a very small amount given the acute challenges faced by the sector. The recently published autumn survey of directors of adult social services shows that adult social care budgets are under acute strain, with many overspending their budgets. That £600 million, while welcome, is so very meagre, especially as it has to be shared between children’s and adult’s services; indeed, it has been described by some as a drop in the ocean. Yet again, social care is the Cinderella of the NHS. As my noble friend Lord Shipley explained, most of this funding is likely to be wiped out instantly by increases in the national minimum wage and employers’ national insurance contributions. This is simply giving with one hand and taking with the other. This tax rise could force care homes to close, and certainly will do very little for the stabilisation of the sector that is so badly needed. It is also inconsistent. The Chancellor is compensating the NHS and other public sector employers for the cost of the tax increases. However, given that GP surgeries and most care providers are private, they will not benefit from this help. This is simply counterproductive and—dare I say it—just has not been thought through. It has just been estimated that more than 2 million GP appointments per year could be at risk. My central call today, along with other noble friends on these Benches, is that the Government exempt social care providers and GPs, along with NHS dentists, pharmacies and charitable providers of health and care, from the employers’ national insurance tax rise. In responding, can the Minister tell me what impact assessment the Government made when preparing the Budget of these additional costs to social care providers, and how they expect that money to be found? While all this is being picked over, the seemingly endless wait for the far-reaching fundamental reform of social care that is so badly needed goes on, which is heartbreaking for all the older and disabled people who need social care, and for their families. As my noble friend Lord Fox said, unless the Government get a grip on social care, we will not be able to end the crisis in the NHS and patients will pay. I join the noble Lord, Lord Empey, in urging the Government to launch urgent cross-party talks so we can set social care on a sustainable footing. Frankly, the very last thing we need right now is a royal commission—we need a 10-year plan for social care sitting alongside the NHS 10-year plan, promised for the spring. The decision to increase the earnings limit for carer’s allowance was very welcome and a good first step that Liberal Democrats have long campaigned on. The entire social care system depends on the good will and unpaid labour of millions of families and friends who are carers. Without them, the whole system would grind to a halt. However, on its own it will not end the repayments scandal or fix the system. The Government need to go further, get rid of the cliff edge altogether and launch a broader review to give carers the wider support they deserve, including increasing the rate of carer’s allowance. I am pleased that there will be further opportunities to look at this in forthcoming legislation. Mental health has not really been covered so far. Along with many in the sector, I am waiting with bated breath to see what proportion of the £22.6 billion increase will be allocated to it. There must be a specific allocation. What assurances can the Minister give me on this point? At present, people with mental illness face some of the longest delays to care. The Chancellor has committed to providing specific funding for more hospital beds and to improving the health estate. This must be fairly distributed, so that mental health patients do not have to be seen in dilapidated buildings which predate the NHS or sent hundreds of miles away for care due to a lack of locally available beds. Good-quality mental health services in the right place will ultimately boost the nation’s productivity. There is much more that I could say, but time is running out, so I will finish by reverting to my central theme and asking the Minister: what additional levels of service will be achieved by this extra NHS money in terms of timely GP appointments, cancer treatment targets and NHS dental services?

19:41:00

My Lords, I refer to my entry in the register of interests. This Government say that their first priority is to achieve economic growth, which, as the noble Baroness, Lady Neville-Rolfe, pointed out, must be in GDP PC—growth per capita, not just GDP. The money they are lavishing on the economy cannot be paid for unless the economy grows, and without growth they will not get elected in five years’ time. But for the economy to grow, they need to spend and tax less. Does this Budget do that? Not so much. Spend rises by £70 billion a year. Tax rates increase, with the dubious claim that they will pay for only half of the new spend. Borrowing increases dramatically. The OBR describes all this as “one of the largest fiscal loosenings of any fiscal event in recent decades”. We have not grown much for many years; real wages are still 5% lower than they were 17 years ago. Other countries have recovered economically from Covid and the great financial crisis, but we have not. The Budget will make things worse. The Budget plays all sorts of jolly japes with the numbers. Spending is dubiously described as “investment” rather than what it is—cash out. National debt is redefined to be lower because of amounts that we expect to receive from future student loan repayments. This is meretricious when that debt calculation at the same time excludes our £2.6 trillion liability, growing every year, for future public sector pension payments, because of which our national debt is twice as large as we claim it to be. Higher government expenditure causes lower growth because a larger, unproductive public sector squeezes out the growth-producing private sector. Increasing employers’ NIC and the minimum wage and putting VAT up on private schools means that businesses can neither afford to employ as many people nor grow their companies as they might otherwise have done. The reality of that is already coming home to the Government, with furious complaints from almost all business sectors: there will be lower receipts on corporation tax, income tax, employers’ and employees’ NIC and capital gains tax. Extra tax revenues will not be £36 billion; tax revenues will not rise to 38% of GDP. There will be further diminution in economic growth from the flood of entrepreneurs, non-doms, young high achievers, millionaires, billionaires, people planning to sell their businesses and people avoiding inheritance tax all leaving the country. There will be the most astonishing level of departures, and so even less tax revenue and economic activity. HMRC could tell us and the Government how many people have left or become economically inactive, but why spoil a beautiful illusion about tax revenues going up by getting factual? There is worse even beyond that, with disability and mental health numbers climbing, the slow-motion car crash of public sector pension payments, the triple lock on the state pension more and more out of control and the folly cost of net zero rapidly becoming clear. The deficit, already a disastrous 4.5% of GDP, will widen rather than decline. It is not sustainable. Over the past two decades, we have joined ourselves to that class of social democrat economies in countries such as France and Germany where GDP PC growth is a thing of the past. Surely, we can do better. One pines in vain for our own Javier Milei or Elon Musk to chainsaw our bloated, inefficient, unproductive public sector. One pines in vain for a Margaret Thatcher to explain that, sooner or later, one runs out of other people’s money. One pines for politicians who will tell the truth to the people of this country: that there is no money; that we have brought this on ourselves in the past 20 years by overspending and overtaxing, making our country poorer and making it impossible to provide those things that we would like our citizens to have. A Budget that cut spend and taxes would be a great start to solving this dilemma.

19:47:00

My Lords, I congratulate the Minister on his clarity and stamina and the noble Lord, Lord Booth-Smith, on his noteless and apt maiden speech. My five minutes will be devoted to farming and inheritance tax changes. I declare my interests as president of the Countryside Alliance and as having a small livestock farm on Exmoor. It is so small that I do not believe the APR changes will affect me, although they certainly affect a great many in the very rural community from which I come—and will affect all of us, not for the better, if they go through in this form. On general election day, there was real good will towards the forthcoming Labour Government. Results showed that “It’s time for a change” was a universal feeling throughout the country, including in rural areas. Where there had been only 17 Labour MPs in rural seats during some of the 14 years of the Conservative Administration, there are now more than 100. That good will has, sadly, evaporated very fast. It is hard to be a Labour MP in a farming area right now. There is certainly anger but, perhaps even more, anxiety and a very real fear for the future. My local livestock market at Cutcombe now has a drop-in centre for mental illness. Before the election, Steve Reed, then the shadow Minister, now the Environment Minister, publicly and privately assured the farming industry that this policy was not even in contemplation. I believe he was honourable in what he said, but that is an indication of how hasty and inadequate the preparation has been for this policy. Since then, there has been no consultation or impact assessment and, as we have heard, there is great confusion over the number of people who will be affected. I understand why the Chancellor might wish to bring those who had bought farmland to shelter funds from tax with no intention of farming it themselves within the tax threshold; they pushed land prices sky-high. However, this measure pushes the genuine farming family into a position where they will have to sell land, and presumably—I ask the Minister to clarify—in addition to paying inheritance tax, pay capital gains tax on top of that. This has simply been pitched far too low, and there are many other ways in which those investors could have contributed to the Treasury without pitchforking the very people the Prime Minister promised to protect from tax: working people. It is not just the farmers themselves; it is their employees, contractors, suppliers and customers, and even the local community, of which family farms are so often the cornerstone, who will be affected. The word “unkind” was used. It is unkind, but I do not think it was deliberate. I think it was inadvertent, because the research had not been done, clearly the consultation had not taken place, and the results of this policy—if it were to go through—were not appreciated. Do we really want to see productive farmland transferred to companies and large-scale agri-businesses, probably to be used for carbon off-setting, greenwashing or large-scale industrial livestock production, or do we want to see that land farmed by people who know it and love it, who produce high-quality local food, and whose work has made our countryside one of our greatest assets? Henry Dimbleby, in producing the National Food Strategy, said we need to be resilient to withstand global shocks. The next food crisis may well be one not of distribution but supply, and if we reduce our home production, we will all have very good reason to regret this proposal. From every side of the House in this debate so far, there have been calls for the Government to look at this again. How do you increase productivity by forcing people to sell off their means of production? I ask the Minister to take this back and look at it again.

19:51:00

I begin by noting the economic background to the Budget. The economy is growing, albeit modestly. Unemployment is around 4% and CPI inflation fell below the 2% target in September. Public sector borrowing, though still too high, has fallen from pandemic levels and is lower than during the financial crisis of the late 2000s. Speaking as a veteran economy watcher, I would not describe this as the “worst set of economic circumstances since World War II” —far from it. What about the £22 billion black hole in the public finances? Granted, the OBR in its recent review of departmental expenditure limits criticised the Treasury over the March Budget, but the OBR’s chair, Richard Hughes, concluded that: “Nothing in our review was a legitimisation of that £22 billion”. Moreover, I cannot emphasise too often that the economy has had two major shocks in recent years. First, there was the pandemic and the associated lockdown, which was enthusiastically supported by the then Opposition. It cost the Exchequer £380 billion and has weakened the labour market. According to the ONS’s latest numbers, the number of economically inactive people aged 16 to 64 is still over 700,000 higher than prior to lockdown. Secondly, the Russian invasion of Ukraine in February 2022 resulted in a major inflationary shock and a significant increase in the Bank rate. I turn to the Budget itself. The OBR concluded that Budget policies will increase spending by almost £70 billion a year over the next five years. As a result, total managed expenditure will be around 44% to 45% of GDP, from around 40% prior to the pandemic. Note that this spending will be on an unreformed public sector, where productivity was around 6% lower at the beginning of this year than it was in Q4 of 2019 prior to the pandemic. Productivity in the public sector has fallen. Higher taxes will fund about half of this increase in spending. They will raise about £36 billion a year and push the tax to GDP ratio to an historic high of about 38% by the financial year 2029. The rest of the increase will be funded by a £32 billion a year increase in borrowing. According to the OBR, as has already been noted, this is one of the largest fiscal loosenings of any fiscal event in recent decades. Such borrowing, of course, has to be financed, irrespective of any tweaks to the fiscal targets. Unfortunately, the financial markets have already shown some concern. Unsurprisingly, the debt to GDP ratio remains close to 100%, at around 97% over the forecast period. In this context it is instructive to note that the OBR warned in September that the longer-term pressures on the public finances, including the ageing population, would eventually put the public finances on an unsustainable path. This was before the Autumn Statement, with its large and sustained increase in spending, taxation and borrowing. Concerning the OBR’s economic forecasts, it was decidedly downbeat, suggesting little by way of an overall boost to growth. Granted, Budget policies would temporarily boost output in the near-term, but they would leave GDP largely unchanged in five years’ time, at the end of its forecasting period. Moreover, the OBR increased its forecast for CPI inflation and interest rates, with all the implications therein, which the Bank of England echoed last week. Disappointingly, it suggested that business investment, so vital for growth, could be partly crowded out by the increase in government spending and net fiscal loosening. What about the impact on business, that vital engine for growth? Businesses will face sizeable increases in employer national insurance contributions, though it is possible that some of the higher costs will push through to lower wages. This is at a time when they will face the sizeable increase in the minimum wage from next April and the costs resulting from the implementation of the Employment Rights Bill, which could be up to £5 billion a year. In the meantime, they have to cope with the highest industrial electricity prices of any industrial economy, including those in the EU and the G7.

19:56:00

My Lords, I declare my interests as in the register. I broadly and warmly welcome this first Labour Budget for 14 years, presented so clearly by my noble friend Lord Livermore, particularly the changes to fiscal rules relating to capital investment, which should help drive up growth, prosperity and productivity. I would like to comment today on two specific issues relating to social care, the first of which is the North Manchester General Hospital redevelopment in my city. This was one of the 40 new hospitals promised but not delivered by the last Conservative Government, and understandably called in for review by the current Government. This redevelopment is a perfect example of how capital investment can be a driver for economic recovery. The 15 to 20-year £4.5 billion investment programme presents a once-in-a-generation opportunity to mobilise at pace a health-led regeneration, alongside the local authority, other housing providers, industry, and academic and community partners, both public and private sector, and to use investment in key services to stimulate civic renewal in an area that experiences some of the highest socioeconomic disadvantage and health inequalities in the whole country. I believe that this hospital-led project should now be approved. It provides a rich opportunity to tangibly demonstrate a successful Labour Government’s first term by 2029. I hope the Minister will support this at the conclusion of the debate. Secondly, I will briefly make two points on social care. The Adult Social Care Committee, of which I was a member, published a report entitled A “Gloriously Ordinary Life”, which focused on unpaid carers. It made a number of recommendations about financial support for carers. They were not progressed by the Conservative Government, but I am pleased that this Government have made a start in this Budget by increasing the earnings limit for carers to the equivalent of 16 hours per week by April 2025, and future increases will be in line with national living wage increases. However, the carer’s allowance itself is, in essence, the lowest benefit of its kind, at a mere £81.90 a week—an amount that bears no relationship to the extraordinary work undertaken by the millions of carers across the country. I understand that next April it will be increased by 1.7%, or £1.40 a week, which I am sure the House will agree is a dreadfully small amount. Will this Government look again at the committee’s recommendations that the Department for Work and Pensions must review the carer’s allowance in order to value our tremendous carers properly, and bring forward proposals in next year’s spending round? Finally, I am pleased that the Chancellor has injected additional resources into both health and social care, but as the excellent report by the noble Lord, Lord Darzi, recognised, the health and social care system must be reformed in an integrated way. The Government have accepted that premise. I welcome the intention to produce a 10-year plan for the NHS by next spring, but social care must also be reformed at the same time—not separately and not in a silo, but as an integrated system. I urge the Government to bring forward plans for social care reform when the NHS 10-year plan is published, so that the ambition to shift fundamentally from ill health to well health, and from hospital to local communities, can be successfully achieved. I certainly look forward to the Minister’s views on these matters.

20:01:00

I thank the Minister for hosting this debate, for listening so carefully to so many speakers one by one, and for his good grace. I also thank the Treasury officials who have pulled together this Budget in extremely difficult circumstances, and the many other officials who contributed, including at the OBR. They managed to produce, yet again, an extremely good report, written in that almost unknown language of plain English and the related dialect of plain maths that we can all understand. The OBR—to which the Government tied themselves very tightly, as we know, in their very first Bill of this Parliament—has been somewhat unhelpful to the Government. The Chancellor’s Statement was well received by the markets in the opening minutes, until the OBR report landed, when there was a sell-off in the 10-year rates almost immediately because its statements were quite strong. Maybe the Minister can comment on whether the Government will review the overall financial framework in which they are operating, some of which was set up long ago in different times. The Bank of England was made independent when tax to GDP was fully 10 points lower than it is today, and the OBR was set up in 2012, when debt to GDP was around 70%. In fact, debt to GDP has been moving up 2% a year since our Office for Budget Responsibility was set up, so, as we have discussed before, it is a rather unaffordable kind of budget responsibility. The overarching framework is not that ideal, and other agencies, such as the financial agencies, are also somewhat autonomous of the Treasury. The noble Lord, Lord Eatwell, referenced bank investment, but of course, that is under the PRA and the FCA, and is again at one remove from the Government. Can the Minister comment on the overarching framework in which the Government are currently operating as they pull this Budget together? The extraordinarily sensitive number in the Budget is the 38% of tax to GDP. The noble Lord, Lord Desai, believes that it could go to 44%. Just for a moment, let us hope that it gets to 38%, as it is extraordinarily important that we can fund the state on the basis of these forecasts. Getting to 38% is sort of unknowable; that is one year sooner than the previous forecast. The reason it is unknowable—to challenge what the noble Lord, Lord Desai, said—goes back to a comment made by the noble Lord, Lord Lamont: the tax system in this country is remarkably concentrated. We are resting our tax system on around 3 million people, and they are doing half of all income tax and a good deal of the rest of the tax raised by HMRC. This tax concentration has come about because our economy has changed so much, and we are now an economy of services. Britain was the world’s first industrial nation, and we are becoming the world’s first services nation. That concentration into high-value services is creating quite a bit of difficulty with our public finances. We need those services and employees in this country to keep going to support the kind of state we have—which has not been ideal even recently, as we have heard during the debate. There is a good deal of evidence that those jobs are moving. For example, thousands of jobs have gone from the London Insurance Market, which were high-paid jobs in the economy. The commonplace observation that the graduate entry of big accounting firms has been restricted means that it is limiting high-paid jobs in 10 or 15 years’ time in accounting services. They are jobs that will not happen in this country; they may be in Atlanta or somewhere else. The Government are quite rightly focusing on life sciences, which I will pause on for a moment. AstraZeneca has four worldwide research bases; it has only one in the UK. GSK has five worldwide research bases; it has one in the UK. Both companies employ fewer than 20,000 people in the UK; AstraZeneca employs below 10,000. The noble Lord, Lord O’Neill, referenced obesity. There has been an enormous miss in obesity wonder drugs in life sciences, which are accruing tremendous value creation in the US, Denmark and elsewhere, but not in the UK. Then, there is the issue of tax migration. We hope that tax migration is not going on. It is very hard to measure, because sometimes the person moves and sometimes the person does not. The US is seeing tremendous internal tax migration, and that could easily come to us. One of the reasons why the US matters so much is that we have so many citizens already in the US, making it easy for people to travel. Maybe we should take a look at that. I will turn briefly to one other point. We should thank Jessica Pulay at the Debt Management Office, who has done such a superb job in raising debt for the Government so consistently in all markets—but the DMO could also do with a little help. Pension funds have been buying gilts because they have been de-risking, and, as noble Lords know, foreign investors buy 30% of the market. Maybe this Government should look at incentivising domestic savers to hold gilts. Can the Minister comment on that too?

20:07:00

My Lords, it is a pleasure to take part in this Budget debate with so many distinguished speakers across the House. I will address the topic of the NHS. I was so pleased—and, frankly, relieved—when the Chancellor announced more than £25 billion extra funding for the NHS in the Budget. After all, the last 14 years have been so very hard on the NHS, in stark contrast to the previous three Labour Governments, which provided unprecedented levels of investment. That enabled the increased numbers of doctors, nurses and other health professionals who delivered those since undreamed of maximum four-hour waits in A&E, cancer referrals in two weeks and being able to see a GP so promptly that I recall a patient on “Question Time” complaining that their appointment was offered too soon. Everything was not perfect, of course. The importance of the social care system and its role in keeping patients from unnecessary hospital admissions and, vitally, in helping those clinically ready to leave to do so promptly, remains an as yet unachieved holy grail. However, those resources, and our health professionals delivering those services expertly and with great dedication in the vast majority of cases, are the reasons why patients were repeatedly hugely positive about GPs, hospital treatment and healthcare in general when surveyed during those years. Sadly, that is not so much the case now. Years of underfunding since 2010, the pandemic, patient demographics increasing need, and social care on its knees have all contributed to huge strains on NHS services. A huge effort will be required to tackle this, and it will inevitably take time. However, the increased resource funding announced by the Chancellor last month—3.4% per year, compared with only 2.2% on average over the last 14 years—will provide a great start, as will the £10.9 billion of capital investment to support new ways of working in the NHS through better use of IT and improved premises. These increases will make a concrete difference to so many people’s lives, as NHS waiting times start to improve as a result of the 40,000 extra elective appointments a week funded by the Budget. Under the previous Labour Government, the NHS aimed to treat patients within 18 weeks of their referral; it will be such a positive step forward for the NHS to start making progress towards this once again. The new capital funding will enable more than £2 billion to be invested in NHS technology and digital to run essential services and drive productivity improvements; free up staff time; ensure all trusts have electronic patient records; and enhance patient access through the NHS app. It will also provide vital capacity to be built for more than 30,000 additional procedures and over 1 million diagnostic tests, alongside additional beds to help reduce waiting times. Now that this Budget has provided the funding which demonstrates the Government’s unwavering commitment to supporting the NHS, it will be for doctors, nurses, other health professionals and administrators to use this opportunity to start to transform patient care. My experience of working with so many of them gives me the confidence that they will respond brilliantly, as they have so often before. I have been privileged to be a non-exec board member of primary, community, secondary, tertiary, regional and national health organisations over 22 years, including as vice-chair of UCLH in London and then chair of Cambridge University Hospitals trust. As Lambeth PCT chair over the river, I was hugely impressed by the innovation, energy and community focus of the GPs I worked with both to improve patient access and to tackle complex social challenges. Over the years, I have had the honour of chairing innumerable consultant appointment panels, as well as those for senior nurses, and was always struck by the professionalism and expertise of those we appointed. I know each one of those doctors and nurses will have been looking and praying for a financial settlement that would allow them to start turning around the quality of patient care once more. Working in partnership right across the NHS, as well as beyond, through integrated care boards and partners in public health and local government—and with the managers too, who are often externally maligned but are important to the effective running of services—there is so much to be done, and the Government’s first Budget can only get the task under way. We should all welcome this vital first step and give our full support to those we rely on day in, day out to deliver the best possible health services and outcomes for their patients.

20:11:00

My Lords, I, too, congratulate the noble Lord, Lord Booth-Smith, on his excellent maiden speech. I will speak on the arts and creative industries. I thank the Campaign for the Arts and the Authors’ Licensing and Collecting Society for their briefings. There is, of course, a one-hour debate on the effect of the Budget on this sector on Thursday, but this area is certainly important enough that both the Treasury and the DCMS should be addressed on the concerns that this sector has, not least because the Budget is a mixed bag for the arts and creative industries. Perhaps worse than that, the areas where funding is most urgently needed after so many years of underfunding have not been addressed and indeed could go backwards, which is disappointing for a Government who say they will support the arts. There is good news, hopefully, for the national museums and galleries, but questions remain: how much additional funding will be made available and when will this happen? Will the Government further help other struggling arts and cultural organisations— the plight of Welsh National Opera immediately springs to mind—through the Arts Council and other funding bodies? I thank the Government for listening to concerns about VAT on specialist performing arts schools and confirming that courses covering the Music and Dance Scheme and the Dance and Drama Awards scheme will not attract VAT. I think that will be music to the ears of the noble Lord, Lord Berkeley.

Literally.

Literally—yes, indeed. However, as the Campaign for the Arts says: “Realising the full ambition and potential of” Labour’s growth plan, including for the creative industries, “will take a level of resourcing and commitment beyond that which we have seen at this Budget”. Starting with the noble Lord, Lord Fox, earlier in this debate, we have had numerous references to concerns about the survival of SMEs. Will the Government promise to keep an eye on, or even formally assess, the effects of their measures on SMEs? This is hugely important for the creative industries after being hit so hard by both Brexit and Covid. The director of the Museums Association, Sharon Heal, said that “the urgent needs of local and regional museums and galleries have not been addressed in this budget”, and the Minister should be aware that the situation for civic museums is sufficiently urgent that a programme of emergency funding was asked for before the Budget. Birmingham Museums Trust said that “this budget leaves us worse off and we are already in a dire financial situation in Birmingham”. Similar arguments can be made about our libraries across the country, as the noble Lord, Lord Shipley, referred to, and I agree with everything that the noble Lord, Lord Whitty, said about a new basis for local authority funding. For authors, there is disappointment that the public lending right has not been addressed, seeing that there has been no increase in PLR in the last 10 years. Our own £6 million fund pales in comparison to Germany’s £14 million annual pot. Will the Government increase the fund to ameliorate these significant discrepancies? The Government intend to cancel levelling up culture projects affecting the International Slavery Museum, the National Railway Museum, V&A Dundee and Venue Cymru. Why do the Government not consider these investments to be sufficiently, in their own words, “focused on the growth mission”? Have they assessed the impact of cancelling these investments? The reduction in business rates relief will adversely affect the arts. The Music Venue Trust has calculated that this reduction will place an additional £7 million burden on 350 grass-roots music venues, put at risk more than 12,000 jobs and cost more than £250 million in economic activity. I understand there will be a consultation on business rates reform in 2026, but this will not help the hundreds of already struggling music venues that will undoubtedly be lost unless the Government rethink their decision or intervene with a ticket levy on big arena gigs that can help the small venues. While of course it is good news that the arts tax reliefs remain unchanged, it is disappointing that this has not been extended to choirs. Will the Government look again at this? Finally, Creative Europe was a huge help to our arts and culture, yet we have never had any proper replacement for that funding; indeed, we ought to rejoin Creative Europe, which the rules allow us to do. On top of that, we now hear that the UK shared prosperity fund is to be reduced and phased out. Have the Government assessed the impact of this? Why is it happening before reforms have been completed?

20:16:00

My Lords, I will speak briefly about alternative finance. The Treasury defines alternative finance as “a method of raising finance that characteristically involves the sale, purchase and renting of assets in circumstances where ‘conventional’ financing would involve lending at interest”. It goes on to say that alternative finance products are “based on Islamic financing but can be used by both followers and non-followers of the Islamic faith”. Islamic financing has long been seen as important to the United Kingdom. In October 2013, the World Islamic Economic Forum was held in London. It was the first time the forum had ever been held outside the Islamic world. At this forum, Prime Minister Cameron said: “I don’t just want London to be a great capital of Islamic finance in the Western world. I want London to stand alongside Dubai and Kuala Lumpur as one of the great capitals of Islamic finance anywhere in the world”. We have not quite achieved that yet. One of the barriers to the growth of this market has been the CGT treatment of alternative finance mortgages. Those who opted for these Islamic-style mortgages found themselves in difficulty when it came to remortgaging. Capital gains became an issue because of the structure of the finance, under which customers sell a beneficial interest to the bank for the term of the finance. This contrasts with conventional finance, where no CGT is triggered on remortgaging. This discrepancy in treatment causes serious difficulties. I know of one Islamic finance case that is appealing a CGT assessment of £600,000, which would not arise if there was an equal treatment of alternative and conventional finance. So I am very pleased that the Government have committed, on page 231 of the Red Book, to introducing new tax rules which will level the playing field, at least prospectively, from last 30 October. This is a good resolution of a problem that has unnecessarily hampered the growth of Islamic finance in the UK and has needlessly disadvantaged those whose faith prevents them from taking out interest-bearing loans. Unfortunately, it is not clear if this levelling up of the CGT tax rules is to be applied retrospectively as well as prospectively. What is the Government’s position on this? I think I can probably guess. There is a broader point here. Islamic finance must continue to be considered in the formation of policy, certainly with the aim of preventing unintended consequences such as the CGT issue, but with the larger aim of increasing London’s share of the Islamic finance market. There are two further issues to do with Islamic finance, which may be impeding growth. The first is the Bank of England’s alternative liquidity facility—the ALF—which is an important and innovative element in Islamic bank finance and which is not replicated anywhere else in the western world. The current limit is £200 million across Islamic institutions and there is a strong appetite for increasing that. The Bank of London & The Middle East said that “we hope that the Bank will extend the size of the facility in due course, enabling banks to place even more money into the facility as they grow and further secure the future of Sharia’a finance in the UK”. Is this something on which the Government would look favourably? There is also an issue with settlements. HMRC has said that it does not consider that a diminishing shared ownership arrangement, as is typical in sharia finance, should be a settlement for income tax, CGT or inheritance tax. If this is a correct interpretation of the rules, then HMT should issue binding guidance. Otherwise, rating agencies will continue to take the opposite view, making securitisation very problematic. I look forward to making further progress against David Cameron’s now 10 year-old growth objective, and I look forward to the Minister’s reply.

20:21:00

My Lords, I will focus my comments about the Budget on local government funding. I served as a unitary councillor on Telford and Wrekin Council for 22 years, holding many positions in that time, including leader of the council. So I know very well how important local government service is to our citizens. In fact, at times, I felt that council services were even more important to people than central government, because they provided them with day-to-day needs such as housing, emptying bins, road repairs, adult social care, safeguarding vulnerable children, mental health provision and so on. All these services are the hallmark of our civilised society. Councils can provide all these services only if they are properly funded. I am saddened to say that, when the previous Government were in charge from 2010 until now, we had nothing but cuts to our budget. This all started with George Osborne’s Budget of 2010. He did not value local government and the services it provided. Sadly, his legacy continued right up until the last election. This is typical of Conservative political ideology—not listening or caring for people’s everyday needs. From 2010 to 2021, according to the National Audit Office, the average real-term spending power of every council has been reduced by over 27%. Spending power from central government funding in the same period went down by over 50%. Some services were cut by 70%, with cultural services cut by 43%, roads and transport by 40%, housing by 35% and trading standards by 50%. All these cuts are in real terms. Councils up and the down the country struggled and some even went bankrupt, unable to provide proper social care for vulnerable adults and children, fix potholes, provide homes for families or help rough sleepers. I know how bad it was because I lived through it as a council leader and I still have the scars on my back from that time. That is why I wholeheartedly welcome the Chancellor’s Budget. I fully welcome the extra funding from our new Labour Government—a real-term increase of 3.2%, with £1.3 billion new grant funding, including over £600 million for social care. Earlier in this debate, the noble Lord, Lord Forsyth, who is not in his place now, suggested that the Budget did not include anything for special needs services. The Budget includes an extra £1 billion for children with special educational needs. It includes £233 million for families in temporary accommodation and to prevent homelessness; more to improve local bus services and to fix potholes; extra kinship allowance; and so on and so forth. This is a typical Labour Government Budget: caring, sharing and listening to the people who really matter. It is, as the chair of the Local Government Association, Councillor Louise Gittins, said, “a step in the right direction”. I wholeheartedly agree with her. However, the damage that the previous Government has done to local government funding and its infrastructure will take a long time to rectify. I congratulate the new Chancellor on listening to the Local Government Association and acting upon its advice, but the black hole that the Conservative Government have left will take many years to fill.

20:25:00

My Lords, this Budget makes history for the wrong reason. It is the first ever Budget to place a tax on education in our country. Over the years, all Governments have regarded education as being so invaluable to individuals and society alike that nothing should ever be done to obstruct its success and growth in all the varied forms that it takes. Other countries agree. Greece briefly thought otherwise but quickly recognised its mistake. The Government are now breaking a universal golden rule by slapping VAT on independent school fees, not at a fairly modest rate to ease the process of adjustment but at a whopping 20% from 1 January, just a few weeks from now, during the course of a school year, which is the worst possible time. Far from taking money from independent schools, Tony Blair’s Government provided a little—just a little—in order to get more state and independent schools working together in the interests of all their children. Modest government funding in 1998 for a joint state/independent partnership group helped stimulate all manner of hugely successful projects. There are now thousands of them up and down our country. Last week, inspiring teachers and other representatives from both sectors came to Parliament to celebrate their latest achievements. They are helping many independent schools to thrive, which is what the Prime Minister said in September last year that he wanted to see, telling the publication Jewish News: “We have got fantastic independent schools”. How can these words be squared with his VAT levy, which reverses the policy of the last Labour Government and jeopardises the partnership work that is one of their legacies? I was able to give that work a small helping hand as general secretary of the Independent Schools Council—that gives me an interest in this subject, which I declare along with my current position as president of one of the council’s constituent bodies, the Independent Schools Association, which works on behalf of some 670 schools, most of them small in size and widely cherished, often because they provide with great care and warmth for special needs, different religious faiths, the performing arts and other specialisms. That leads me to a crucially important point. The kind of independent schools I have mentioned are far more numerous than the large schools with their well-known names that attract so much media attention. It cannot be said too often that 40% of independent schools have under 100 pupils. Enormous value is placed on them by their local communities. Who will be most seriously and widely affected by the VAT levy? Not the rich, who are the Government’s target in this Budget. Their children go to a small minority of independent schools, which can certainly be expected to go on thriving. The education tax will fall mainly on working families of limited means—just the kind of families the Government say they want to protect. They cannot rely on the Government’s assurances that they will escape most of the tax because schools will be able to absorb it. Small schools have no handy financial reserves into which they can dip. Absorbing a proportion or all of the VAT levy—which the Minister says he expects—would mean cuts, above all to staff, who account for some 70% of school costs. What have the teacher unions got to say about this? They have called for the tax to be delayed until the start of the new school year so that its impact can be properly assessed first. Amazingly, the Government think that there is no need for a proper and full impact assessment before inflicting this unprecedented tax on our country. So the Treasury and the Government sail complacently on, insisting that the many worries that are driving thousands of parents to distraction will evaporate when education VAT comes in a few weeks’ time. They say there will be no large, involuntary movement of children to state schools, some of which will be unable to provide the courses that such children have been studying. They say that irreplaceable little faith schools for Jewish and Muslim children will not fold. They say that service families will not be driven from boarding schools, and that some 100,000 special needs children without EHC plans will not suffer. These are mere hopes. A policy that breaks all precedent ought not to proceed on the basis of mere hope and a single report from the Institute for Fiscal Studies that other experts dispute. Above all, it ought not to come into effect on 1 January, just five months after independent schools, then on their summer holidays, were told that their plans and budgets for the next school year would have to be redone. Was that not utterly unforgivable? Can there be a single teacher who believes it is right to upset and distress children during the course of a school year?

20:31:00

My Lords, I congratulate the noble Lord, Lord Booth-Smith, on an absolute humdinger of a maiden speech. I predict standing room only for his next contribution. No Budget pleases everyone, and there has certainly been plenty of criticism in this debate. It is only right that the Government listen to those who believe that they have been unfairly treated, but at least serious people such as my noble friend the Minister are now in charge. We have come a long way from the bizarre and dangerous days of Liz Truss, and gone are the days of inflation at more than 11%. To boot, we have a woman Chancellor, the first ever, which is a cause for celebration. It is good that the Government are now looking forward and are focused on both economic growth and economic stability. Inevitably, with these goals in view, hard choices have to be made. Those hard choices are made in order to fix the foundations, and goodness did they need fixing. It is good that the Chancellor has made the commitment not to borrow to fund day-to-day spending, for that way lies disaster. It is good that there is a timetable, perhaps far too long for some, for the elimination of the national deficit and a reduction in government spending. It is good that there is a Covid corruption commission at last set up, “to uncover those companies that used a national emergency to line their own pockets”.—[Official Report, Commons, 30/10/24; col. 815.] I hope that the leadership of those companies, wherever they are, are listening. It is good that the national living wage is rising. It is good that the triple lock is to be maintained, despite—and we have to acknowledge this—the very real disappointment among pensioners about losing the winter fuel allowance. It is good that there are going to be more teachers and more money for schools and breakfast clubs. It is good that there is a crackdown on fraud from the DWP, for that fraud takes money from people who need support the most. It is good that the carer’s allowance is to be increased, albeit from a very low base. That increase in the carer’s allowance has been a long-time campaign in this House; I am particularly thinking of my noble friend Lady Pitkeathley. It is good that the non-dom tax regime is to be abolished. It is good that NHS day-to-day and capital budgets are to rise while waiting lists fall. It is good that support for Ukraine is to be maintained, in the Chancellor’s own words, “for as long as it takes”.—[Official Report, Commons, 30/10/24; col. 822.] despite the new foreign policy being written on coasters in the dining rooms of Mar-a-Lago at this very moment. It is good that billions in compensation are to be set aside for the two greatest scandals of our time: infected blood and the Post Office—about time too. All these things are to be done in spite of the black hole left unseen by the previous Administration. It is a bit rich for sometime Conservative Ministers to pour scorn on a Treasury team that is finally trying to put things right in a way that does not threaten stability or lead to raging inflation. For the first time in 14 years I can say, “I support this Budget”.

20:35:00

My Lords, to follow on from that remark, Budgets normally have a pattern. On the day they come out there is one reaction and then, after a while and some reflection, there is a different reaction. In this case, the reaction was the same: disappointment and criticism. I do not want to go into the issue of the £22 billion black hole, not only because there are not enough Tories to boo if I do but because it seems entirely irrelevant. I do not think anyone can doubt that taxes had to rise as a result of what had happened in the past. To maintain even our existing level of public services, taxes clearly had to go up. As we know, the major tax increase was the increase in national insurance contributions for employers; from these Benches we think that was a mistake. As a number of speakers said earlier, we think it was a mistake because of the damage done to charities. We think it was a mistake because of the damage done to care homes. As Warwick University said, many care homes will go bankrupt faced with the slightest mild economic shock. We think it was a mistake because of the damage done to the catering industry. Pubs and restaurants are faced with a triple whammy of the national insurance contribution increase, the minimum wage and living wage increases and the possibility of an end to effective zero-hours contracts, which they rely on for their employees. It raised £25 billion but it was a mistake. Unlike the Tory party, we are prepared to say what we would have done as an alternative. We would have ensured that large corporations bore that burden. We would have reversed the bank levy. We would have had a proper windfall tax on the oil and gas companies. We would have increased the tax on online gambling companies. We would have had a better reform of capital gains tax. We would have had an attack on the social media companies, which have huge revenues in the UK but do not pay their fair proportion of tax. As people have said, the one thing missing from this Budget debate was the issue of growth. The Chancellor realised that and gave interviews after the event, saying that she was relying on other factors to produce growth, such as the reform of planning controls and the promise of private investment. The elephant in the room that she did not mention, and that noble Lords will not be surprised to hear me raise from these Benches, is Europe. The Office for Budget Responsibility has confirmed the ongoing damaging effect of Brexit, so what should we do now? We are not demanding an immediate return to the European Union, but we must do a number of things. We must develop closer links with Europe. We must develop a better relationship with the EU agencies, on issues from the restriction of Erasmus to help with the asylum process. We must deepen our trade discussions, giving access for food and animal products. We must negotiate work visas, particularly for the creative industries, and we must obtain a mutual recognition of professional standards. When all that has been done, in due course, we must apply to rejoin the single market. I turn for a moment to the Tories. They have attacked this Budget but have not said in any way what they would have done instead. Indeed, the noble Lord, Lord Johnson, who I have always rather respected, but who unfortunately is not in his place, said the Budget was unkind, dishonest and incompetent. I find that extraordinarily hypocritical from that former Government. Let us take unkindness. Was ignoring care for the elderly during their years in government kind or unkind? They say the Budget was dishonest. Was saying there were no parties in Downing Street honest or dishonest? They say it was incompetent. Was the behaviour of the noble Baroness, Lady Truss—no, sorry, not a Baroness yet—and Kwasi Kwarteng incompetent? On the basis of their unkindness, dishonesty and incompetence, the Tories deserved to lose the last election, and if they do not provide better opposition they will lose the next one.

20:40:00

I thank the noble Lord, Lord Booth-Smith, for his maiden speech; I welcome him to the House, and I am sure he will be an asset. I also thank my noble friend Lord Livermore for his comprehensive report to this House on the contents of the Budget, as is entirely appropriate. There is much that is good in the Budget. My noble friend Lady Crawley identified and summarised the good things in it, so I hope I will be forgiven for mentioning my major point of concern, which is the promise, made by the Chancellor in introducing the Budget, to make welfare spending more affordable. That causes me considerable concern. Of course, we will not know the details until we get the “Get Britain Working” White Paper, and I wonder whether my noble friend is able to provide us with a date. Perhaps the White Paper has been delayed because the Government are trying to learn lessons from the winter fuel payment problems. There are lessons there that I hope they have drawn. There were two specific references in the Chancellor’s speech that caused me particular concern. When we talk about a crackdown on fraud, as she did, we have to ensure that it is done in a way that does not create collateral damage for people who are fully entitled to the benefits. The problem with crackdowns is that they can affect innocent bystanders unless massive efforts are made to ensure that does not happen. I hope my noble friend will be able to assure us that everything will be done to avoid the downside of crackdowns. I have a particular concern, and we debated this in the last Parliament, about direct access to bank accounts. The Government seem to be stressing the influence of criminal gangs. My guess is that you cannot access the bank accounts of criminal gangs. Accessing bank accounts without probable cause seems a growth of the power of the Government. Again, if that is introduced in legislation, it needs to be done with considerable care. I am very pleased with what the Budget said about pensions, which was very little. Pensions are an area where stability is essential because people are making long-term plans, so I am glad that the number of changes in the area of pensions was limited. The changes to the Mineworkers’ Pension Scheme were very welcome. I need to say here that I was the actuarial advisor to the National Union of Mineworkers at one stage so I am familiar with the issues here. The mineworkers fully deserve what they are now being given. The major change affecting pensions was charging inheritance tax on unused pension. Unused pension is a new concept. If you accumulate a pension fund and it has not been used in order to provide you or your dependants with an income, from 2027 that will form part of your estate and be subject to inheritance tax. I think that is entirely reasonable. I welcome the change. The money was put in the pension fund tax free and it seems eminently reasonable that, when the money is taken out, it should be subject to tax. Pension funds are for the purpose of providing pensions; they are not for the purpose of inheritance tax planning or tax avoidance. We have a technical consultation going on that raises particular issues. I have some concerns that the proposals in the document go beyond technical issues and raise issues of principle. Of course, anyone who has dealt with a will knows that the problems of probate are profound and, when you put pensions into that mix, it is going to create considerable difficulties. I hope these issues will come out in the consultation.

20:45:00

My Lords, I want to start by welcoming measures in the Budget that support the vulnerable in our society—those on lower incomes, those with special needs or disabilities, carers, and households facing hardship—as well as the investment in the NHS. I also welcome additional support for local authorities, which will help them meet ever-growing demand and may, I hope, enable them to reinstate funding for local arts and culture. As we have heard, so many were forced to reduce and even cut it as pressure on statutory services increased. I intend to focus on the Budget’s impact on the cultural and creative industries and I note my interests as set out in the register. The industrial strategy Green Paper named the creative industries among eight growth sectors. But the term “creative industries” encompasses multiple subsectors and this Budget is largely targeted at those perceived to have greatest potential for growth. There is a new tax relief for visual effects, £3 million for promoting creative careers and the continuation of tax relief for film, high-end TV, animation and video games. There was some good news for other parts of the sector, with a renewed commitment to tax relief for orchestras, theatres, museums and galleries, and even higher rates of relief from next year. National museums and galleries won increases in both grant in aid and capital funding, but there was no parallel support for local authority-funded museums and galleries, many of which face closure through lack of funds. By and large, the package of support for the creative industries does not provide the same relief for arts and culture as it does for those subsectors described as “growth driving”. Documents published alongside the Budget revealed that £100 million of local cultural projects allocated funding through the levelling-up fund will likely be scrapped, with spend “reprioritised towards growth”. The UK shared prosperity fund, established to offset the loss of valuable EU place-based funds, will reduce from £1.5 billion to £900 million next year and then be phased out completely. Of course, difficult choices had to be made, but this is notably at odds with the emphasis of the DCMS Secretary of State on place and the regional agenda, both in the content of her sector speeches and the locations she has chosen to deliver them. Last week, she wrote that “for millions of people, geography has become destiny … This Budget has put the Creative Industries front and centre of how we write those people back into our national story and drive opportunity, jobs and prosperity into every community, in every region”. That is a great ambition, but it will be achieved only if investment takes into account the complex interdependencies between the creative industries’ subsectors and the role of arts and culture in nurturing the creativity that underpins the ecosystem as a whole. The Budget overlooks this. It also overlooks the contribution of cultural organisations to local infrastructure and their importance in multiagency place-based partnerships that help raise aspirations, build skills, generate growth and create liveable places in which people can have pride. Arts and culture have so much to contribute to the growth and opportunities mission, but it is a sector that has been underfunded over the last decade and is struggling to recover from the crises of the last five years. Increases to employer NIC and the minimum wage will pile more pressure on organisations already operating on the edge. Job reductions and scaled-back services will surely follow. Some 7,500 charities, cultural and voluntary organisations have written to the Chancellor calling for exemption from the increase in employer NIC. They are essential partners in the delivery of public services, yet they will not enjoy the same exemption as public sector bodies. Independent trusts that spun out from local authority control over the last decade to ensure continued provision of services in the face of council cuts, will pay the increased rate, while the same services that remained in the public sector will not. I conclude by asking the Minister two questions. Have the Government undertaken an impact assessment of the increase in employer national insurance contributions on these organisations and the communities they support? Will the Government commit to working with the ACEVO and NCVO to reduce the burden on their members at a time when their contribution to public services is needed more than ever?

20:50:00

First, I declare my property and land interests, as per the register. When voters returned a Labour Government, they may have believed they were electing a party with similar views to the Blair Administration in 1997. Then, business capital gains tax was lowered to 10%, £10 million entrepreneurs’ relief was introduced and there were no capital tax increases. Instead, we are heading back to the 1970s. We are going to be suffering the highest tax rates since the Second World War, unions are demanding ever higher wage settlements, and businesses are being used as cash cows rather than being encouraged to grow. The main area of growth will be public sector spending. Handing £22.5 billion to the National Health Service is a measure that many voters would instinctively agree with, but, if it is not followed by a rigorous programme of reform, increased productivity and falling waiting lists, that money may well be wasted, like other funding settlements announced in the past. As the Times pointed out: “What a familiar definition of Labour in power it is … and a Bill underwritten by employers and the asset rich”. The Chancellor would argue that her Budget fulfils Labour’s promises of protecting the income of working people. It is clear at least who these working people are: those who work for other, richer people who now face an unappetising menu of fiscal disincentives to business expansion and job creation. Whatever she claims, the Chancellor did not once indicate that she planned to raise an additional £25 billion from higher rates of national insurance on employers. Of the claimed £22 billion black hole in the nation’s finances, £9 billion is public sector employee pay, but can the Minister explain the mystery figure of “normal reserves claims” of £8.6 billion? I am not quite sure what that represents. What is bad for bosses in this instance will ultimately be bad for the workers the Chancellor is seeking to protect. Firms could well invest and hire less. According to the OBR, some 60% of additional costs will be passed on to employees. None of this is good news for Labour’s working people. To continue on the tax theme, Labour have failed to explain how its tax hikes are anything but prejudicial to small businesses—enterprises that ought to form the backbone of its growth strategy. It is hard to avoid the conclusion that Labour does not understand how growth is generated. The Chancellor seems to lack an instinct for timing. Over the four months before she delivered her Budget, she encouraged negativity to drive capital out of the country, particularly with regard to non-domiciled individuals who, contrary to the Treasury’s belief, contribute hugely valued tax revenue. Speculation also depressed consumer expenditure and unsettled private sector confidence. In the days since the Budget, the Treasury’s reaction has been ponderous and largely defensive. It was not until five days after the election that the Chancellor grudgingly conceded the obvious truth that Labour had erred in promising voters that there would be no need to raise taxes in government. More disappointing, however, than that broken but largely unconvincing promise, has been the Chancellor’s failure to live up to another pre-election pledge: that of running the “most pro-business Treasury our country has ever seen”. None of the Government’s fiscal measures suggests they are serious about creating the conditions necessary for private sector growth. The employers’ national insurance increase will especially penalise small businesses wishing to expand. Added to this anti-employer agenda, Labour’s package of strengthening working rights is expected to cost firms some £5 billion a year. This is a recipe for smothering growth. Less defensible still are Labour’s punitive reforms to business and agricultural property relief. The Government’s proposed 20% hit at the point of inheriting a company will be sufficient to force the selling of many smaller companies’ businesses, yet the UK’s 5 million family firms provide some 14 million jobs, generating billions in tax revenues. Discouraging this wealth creation is a transparent act of economic self-harm. The end of inheritance exemptions for farmland will hugely damage the smaller family farm, particularly as the farmhouse and machinery element will quickly eat into the £1 million exemption. Such policies damage enterprise for meagre gains to the Treasury. In contrast to the previous Government, notably few of Labour’s Front Bench have experience of building a firm or even working in the private sector. Their misjudgments manifest this lack of experience. The Chancellor seems not to appreciate that it is the industry of private citizens within a favourable regulatory environment that acts as the engine of growth and, eventually, of enhanced living standards and public services. In opposition, she paid lip service to such ideals; now, she must get down to business and deliver. In summary, this is an old-fashioned Labour Budget of the 1970s, and we know what happened to the country’s finances then.

20:56:00

My Lords, poverty and inequalities hold back economic development and prevent people living fulfilling lives. Our political system is now disconnected from the masses, as evidenced by the 59.7% turnout at the last general election. Many are drifting to the far right, which scapegoats minorities and threatens social stability. Against that background, the Budget is a missed opportunity to reshape the social landscape. No one can build a sustainable economy unless the masses have good purchasing power. The Budget could have alleviated poverty by abolishing VAT on domestic fuel and reducing the standard rate of VAT, but the Chancellor followed Conservative policies and did not do that. The Budget could have abolished the two-child benefit cap, restored winter fuel payments to pensioners trapped below the poverty line and put a triple lock on benefits. It did not do that. The Budget could have increased personal allowances by at least £1,000 and lifted millions out of poverty. It could have provided free school meals for all children to reduce hunger, but the Chancellor followed the Conservative policies. In 2021-22, 31 million people paid income tax; that number is set to rise to 40 million by 2028-29. The result of following Tory policies is that the average family will be £770 worse off in real terms by October 2029. Progressive taxation can reduce inequalities, but the Chancellor seems reluctant to embrace it. Despite promises, the carried interest of private equity managers will be taxed at rates lower than wages. Despite some tweaks, capital gains will also continue to be taxed at rates lower than wages and its recipients will pay no national insurance. Dividends will continue to be taxed at lower rates. The result is that there will be plenty of tax avoidance opportunities for the rich—the very thing the Chancellor wants to stamp out. There is no justification for taxing rentiers at a lower rate than workers. That is unfair and fuels inequalities. For example, capital gains per capita are four times higher in London than in less prosperous parts of the UK, so somebody living in Kensington receives a lot of benefit from that compared to somebody living in Wales. The richest fifth pay 31% of their gross household income in direct taxes and the poorest fifth pay 14%. The richest fifth pay 9% of their disposable income in indirect taxes and the poorest fifth pay 28%. Altogether, the poorest pay a higher proportion of their income in taxes and the Budget does not actually change that. The richest 1% have more wealth than 70% of the population combined. These inequalities in the distribution of wealth and income will continue. The revival of PFI for infrastructure investment is a matter of concern. Previously, every £1 of private investment resulted in £6 of repayment. The £13 billion NHS investment resulted in a commitment to repay £80 billion. This is poor value for money, as the Government can borrow at a lower cost than the private sector. Previous Governments found £895 billion of quantitative easing to support capital markets. Can the Minister explain why the same has not been done to support infrastructure investment? The Budget is a missed opportunity to reduce poverty and facilitate economic prosperity. Finally, the fake anger of the Conservatives over changes to inheritance tax and VAT on private school fees is nauseating. They showed no empathy for the people when they froze personal allowances and benefits, cut real wages of workers, imposed the two-child benefit cap and increased the standard rate of VAT to make the poor even poorer. I fully appreciate the dire financial position inherited by the Government and hope the next Budget will be more adventurous and redistributive.

21:01:00

My Lords, in 1961 Viv Nicholson won £152,319—the equivalent of about £4.3 million today. She, or rather her husband Keith, won it on the Littlewoods football pools. It was unimaginable wealth, but she spent it in a few months. She gained flashy furs and a few cars but also widespread criticism and contempt. She announced that she was going to “spend, spend, spend”. Rachel Reeves opened her maiden Budget speech with the ringing cry of “invest, invest, invest”, but what did she mean by that? There are many definitions of investment, but all of them try to draw the distinction with expenditure. I know that Whitehall would love to blur that difference, and I have heard that several Ministers in the last Government prohibited the use of the word “investment” when “expenditure” was meant. Among the rotten ideas produced by the Chancellor is the imposition of VAT on school fees. Taxing behaviour that saves the state from spending money is daft. This particular change would have been impossible without Brexit, but that does not make me content. Children will be moved to state schools, increasing pressure on the best schools because those parents will be extra demanding by demanding that their child gets an education equivalent to that provided by a private school. Just recently, I was told by a headmaster of an excellent state school that his school has six teachers seconded from a private school, and there was no guarantee that generous gift will continue by the charitable arm of the private school. We congratulate the right honourable Lady on being the first female Chancellor, even though there have been four female leaders of the Conservative Party and two or more of ethnic minority background, but none in Labour history. But “spend, spend, spend”—or “invest, invest, invest” is Rachel’s motto. It was remarkable how quickly the public in 1961 saw that Viv Nicholson was a spendthrift. However, it was Viv’s own money, not taxpayers’ money. The Chancellor will increase the national debt by a huge amount. Borrowing money to spend it is not wisdom. I am sure that it is possible to borrow it in the short term, but is it wise? I am sure it is not. It is just deferred taxation. Increasing the national debt is not free money. It will have to be repaid eventually, and the interest on it will have to be paid continuously, by us, our children and our grandchildren. It might be okay for companies to borrow to invest, but there is a stream of accounting standards defining investment. Those business standards are unknown to government and there does not appear to be much spending which does not get included in the phrase “invest, invest, invest”. Training schemes of remarkable idiocy will doubtless be included. Will we see training schemes to allow overpaid train drivers to work from home? Any independent financial adviser who advised a client to borrow money to pay for day-to-day spending would lose their authorisation—a sad end for both adviser and client. What was the sad end for Viv Nicholson in the 1960s? Her last job was in a nightclub, singing “Big Spender”.

21:05:00

My Lords, the UK economy has been in structural decline for many years; that analysis is absolutely true. My only surprise on hearing it delivered during this debate was that it came from a leading economist sitting on the Conservative Benches. The noble Baroness, Lady Moyo, at least had the decency to acknowledge the state of this economy—an economy that has been run for 14 years in a way that has left it, as she said, in structural decline. So it is very difficult for anybody to come up with a Budget that will put things right overnight. Things were made worse, of course, by Liz Truss. Just two years ago, inflation in this country was running at more than 11%. We have not heard much about that from the Benches opposite this evening. Nevertheless, the ramifications of that continue to be felt by people up and down this country. The Resolution Foundation reckons that Liz Truss alone cost the country £30 billion. That is a significant contribution to anybody’s black hole. No Chancellor would want to start from here—but Rachel Reeves had no choice. She made things even harder for herself by making a series of promises that I am sure she has already come to regret. As an editor, I would have had some difficulty justifying them as having been kept, in the light of what she has done during the Budget. National insurance by any other name is a tax, and increasing employers’ national insurance ends up being a tax on working people—and let us not get into a semantics debate about what constitutes a working person. I think it is probably rather wider than the definition Ms Reeves has ended up with. Nevertheless, this is where she had to start from. It was not a great hand and it could probably have been better addressed. But there are some things in this Budget which I really do applaud, including the change in the fiscal rules. Despite what we just heard from the noble Lord, Lord Borwick, it is sensible to borrow for investment. It is what households do and it is what a Government could and should do. We need investment, we need big projects—but we do not need to overspend, so the monitoring of those projects has to be absolutely watertight. It has to be constant and it has to be totally transparent. We cannot find ourselves in the sort of mess that HS2 has got into, where nobody really seemed to have a handle on what was being committed. So let us invest, but invest carefully. Let us not go anywhere near PFI, which was disastrous. As others have said, we are still paying the price. I would like to see the Government look at what is left of those PFI contracts and, if they cannot renegotiate—in most cases, they cannot—they need to find a way to simply break the contract. There are PFI hospitals which have to spend ludicrous amounts on changing a lightbulb, when what they need to do is spend money on patients. So, if you cannot renegotiate, find a means of either putting the health authority into bankruptcy or walking away from the contract. We cannot afford them any longer. I was pleased to hear, in the Budget, that we are going to spend more on trying to find the tax that people should have paid. An estimated £5 billion a year goes on tax evasion—let us have some, or all, of that back in the Government’s coffers. Investing in more inspectors will be a great way of making a start on that, but we also need much more investment in technology and we need to be tougher on finding where this money is. We need to make sure that we actually tax what needs taxing, and we need to simplify the tax system. It is crazy having a tax guide that now runs to more than 1,000 pages—the last Tolley’s guide was 1,020. But we have done away with the Office of Tax Simplification. So let us see the Government pledge to simplify the tax system and begin looking at how to do that. It is crazy: people do not understand it and those who do, pay expensive advisers to avoid or evade tax. We need to change it. The main thing we need to—in the short term, and easily—is simplify the system of property tax. I urge the Government to do that.

21:11:00

My Lords, the economic nostrums of the Thatcher era still dominate the minds of many politicians and civil servants. The Conservative ideology of the time proposed that public enterprise was everywhere economically inefficient, and it was remarked that it was primarily devoted to protecting lame-duck industries and protecting the interests of the workers at the expense of the industries. Private enterprise was expected to respond to incentives offered by the markets, and it was believed that it could be relied on to maintain the economic infrastructure of the nation. This was the rationale for the privatisation of public enterprises. The public utilities of power and transport were privatised, and inroads were eventually made into the health service and public education. The present Government are devoting their attention to the restoration of the health service and public education, but, for the present, they have set aside the task of reviving the nation’s industries, which also suffered grievously under the previous Government. It ought to be more widely acknowledged that, when private enterprise fails to generate sufficient investment, the Government must undertake to do so, either directly or by some other means. A litany of examples can be provided to show how Conservative Governments failed to sustain our industrial enterprises, but only the most prominent examples need to be offered. Their greatest failure affects the electricity generating industry, which once operated under the Central Electricity Generating Board. The privatisation of the industry plays into the hands of large foreign multinational corporations, and it was expected that these could be relied on to maintain the electricity generating capacity. In consequence of the plentiful and cheap supplies of North Sea gas, they reacted with alacrity by investing in combined-cycle gas turbine generating plant, which rapidly replaced the previous coal-fired power stations that they had inherited. On the basis of this experience, it was expected that they could be relied on to invest in nuclear power stations—but they failed to do so, and we are left with a dearth of generating capacity. If the nation is to achieve its targets for reducing the emissions of carbon dioxide, gas-fired power stations must be replaced. But the privatised industry lacks the means to do so, or is unwilling to find the means. The Government persist in believing that nuclear power can be provided by drawing on private investors. It is expected that this can be achieved under a regime of a regulated asset base, which will allow the costs to be imposed on consumers during the time it takes to construct the power stations. However, it appears that the investors are not responding sufficiently to this inducement, and a final investment decision for the Sizewell C power station has had to be postponed. The Government must emulate the Governments of the early post-war years by using public funds to re-establish the nuclear power industry, and they must also use public funds to sustain the necessary research and development into nuclear technology, as happened in those early years. The second example concerns the failure of the previous Government to provide sufficient support for the nascent industry for manufacturing the lithium-ion batteries that power electric vehicles. They allowed the collapse of the Britishvolt enterprise, which aimed at establishing a so-called gigafactory for producing the batteries. The fact that the enterprise failed to raise sufficient capital from private investors was seen by the Conservative Government as proof of the non-viability of the project. The absence of the proposed gigafactory, and of others to accompany it, almost certainly spells the demise of our native automobile industry. I conclude by addressing the notion that the lack of investment in our industries can be redressed by encouraging inward financial investment. A report by the noble Lord, Lord Harrington, which was commissioned by the previous Government, strongly advocated inward investment as a cure for our ills. Our present Government, who recently hosted an international investment summit, appear to have adopted this nostrum. Inward investment entails the sale of our industrial and other assets to foreign owners. The dividends and interest payments that are remitted abroad are an almost incalculable drain on our economy. Our lax system of corporate government facilitates the acquisition by foreign parties of many of our small high-tech industries which offer the prospect of our economic revival. It allows foreign enterprises to purchase and control British companies that would otherwise be their economic competitors. The depredations of foreign financial conglomerates that have ownership of British assets have been amply illustrated in recent weeks during our consideration of the water companies and rolling stock leasing companies that have paid vast dividends to their foreign owners.

21:16:00

My Lords, this is the first speech I have made in your Lordships’ House in the presence of the professor who taught me economics 101 at the London School of Economics. I suspect that the noble Lord, Lord Desai, will disagree with what I am about to say, but I put on record my profound regard and gratitude for his excellent teaching at the LSE. To coin a phrase, all errors are my own. I want to address the number of wealth creators living here in the UK and the number choosing to move overseas. In recent years, there has been an exodus of wealth creators from the UK. Undoubtedly, the Budget will accelerate this trend. The figures are stark. The latest UBS global wealth report forecast that 17% of UK millionaires will leave the country by 2028. That is a conservative estimate. Given the Budget, especially the changes to capital gains tax, inheritance tax and stamp duty, the final figure will surely be higher than 17%. We should not kid ourselves that this is a problem facing all western economies. The UK is unique in this respect. Every other G7 country is forecast to have more millionaires in 2028 than they have today. Why does this matter? It matters for two reasons—the amount of tax they pay and the number of jobs they create. They provide a huge tax contribution. For every top 1% taxpayer who leaves, 26 additional median taxpayers are needed to plug the gap. According to the IFS, the top 1% of earners pay around a third of income tax and the top 5% pay half of income tax. The exodus of wealth creators from the UK is generating a tax bill that will fall on the rest of us. The Government may strive to stop the additional taxes falling on working people, but who else will foot the bill? Secondly, it matters because the individuals and families who are leaving the country create so many jobs in our economy. If the Government are serious about the laudable objective of increasing employment to 80% by helping 2 million people from welfare into work, they need entrepreneurs and investors to create those jobs. The problem is that wealth creators are heading for the exit. I am not talking hypothetically. It is happening as we speak. A recent Startup Coalition survey found that 72% of entrepreneurs are exploring leaving the UK and many have already done so. I recently attended the GITEX conference in Dubai with more than 6,500 entrepreneurs from more than 180 countries. It was inspiring to see so many innovators enacting their ideas and creating the world of tomorrow. However, something was painfully striking: the number of young, British-born entrepreneurs who had left the UK to pursue their dreams. I asked them why they had chosen to do this, and a consistent theme was the UK’s business environment, including the level of taxation. These entrepreneurs, with their start-ups, create the vast majority of new jobs in the economy. These are just two benefits that wealth creators bring to the country. I could list many more. There has been a spate of articles, for example, highlighting the impact of recent tax changes on the world of art, with many galleries losing some of their most generous benefactors. We should never forget the inscription at the entrance to Birmingham’s art gallery: “By the gains of Industry we promote Art”. I make all these points not to be a shill for millionaires but because the exodus of wealth creators will devastate ordinary working people across the UK. Entrepreneurs and investors lay the foundations for economic growth and the prosperity we all enjoy. Two days after the general election a former Prime Minister wrote that “we have reached the limits of traditional tax and spend to solve our problems”. Those were not the words of Rishi Sunak or even a recycled quote from Margaret Thatcher. It was the advice given to the Government by Tony Blair. As another former Prime Minister, Winston Churchill, reputedly said: “You can’t make the poor richer by making the rich poorer”. By hitting wealth creators, entrepreneurs and family businesses, this Budget risks decimating the very people we need to create jobs and pay tax for generations to come. All our livelihoods, especially those of working people, depend on them.

21:21:00

My Lords, I make no apology for dedicating my allotted five minutes to the situation facing farmers in Wales. I associate myself with all noble Lords who have spoken on APR and thank them for their insightful comments. The president of NFU Cymru has called the reforms to agricultural property relief and business property relief announced in the Budget “misguided” and “ill thought out” and described the impact of the reforms as “feeling like a betrayal” to the farming and food and drink industry, a sector worth £9.3 billion to the Welsh economy. Until a couple of months before the Autumn Budget, farming unions had been assured by the Prime Minister and the Treasury that there would be no changes to inheritance tax. Doubts began to surface, and then Budget Day confirmed farmers’ worst fears. A paper from the Farmers’ Union of Wales explains how inheritance tax relief, through APR, has helped and incentivised Welsh family farms to pass from one generation to another by ensuring that those who inherit the farms are not crippled by taxes. Previous Governments have all recognised the need to safeguard our Welsh food production and food security by avoiding the adverse effects on rural businesses and employment that a heavy tax burden would bring. The FUW points out: “Whilst a million pounds may appear to be a huge sum for those outside the industry, for many Welsh farmsteads, even a conservative estimate of the value of accumulated land and infrastructure could see the £1m threshold easily breached”. What many outside the industry do not recognise is that a farmer’s wealth lies in his or her property and land. In reality, farms are small businesses operating on slim financial margins, and many are struggling. Having to meet such death duties as the Government are imposing could lead to the break-up of family farms. Over the weekend, I was contacted by two farmers from mid-Wales through my researcher. The first one, the mother of a farmer, told me about her family who have farmed their land in mid-Wales for nine generations. She explained that her son, who runs their large farm full-time, will have to sell the farm when he inherits it to pay the inheritance tax bill. She says that even though they have diversified and converted derelict barns into holiday lets, it is a struggle to make ends meet. The second was a farmer whose parents came to mid-Wales to be tenant farmers in 1950. The family then bought a farm, but the issue is the same: they would have to sell because of the inheritance tax burden. Their stories are heartbreaking. Farmers are rightly proud of what they have achieved. They see themselves as custodians of the land, as their families were before them, and their ambition is to hand on the farm to the next generation as a viable business so that they can continue their prime function: to use the land to feed the nation. On top of the challenges of Brexit, an unfavourable trade deal with Australia that saw Australian sheepmeat exports to the UK surge by 85%, the impact of Covid and the pressure of reforestation, this new threat has added another dimension of worry to an already pressured workforce. A briefing by PD Tax Consultants explains why APR was introduced in 1984. It was implemented “because the tax charges that would arise without the reliefs were viewed as having a ‘damaging effect on risk taking and enterprise within a particularly important sector of the economy’”. Could the Minister please explain at what point during the couple of months before the APR and BPR U-turn in the Budget did the Government decide that removing the reliefs would not have a damaging effect on risk-taking and enterprise? What evidence influenced that decision? Why do the Government no longer see the farming industry as a particularly important sector of the economy, as other Governments have done up to now?

21:26:00

My Lords, the noble Lord, Lord Northbrook, referred to a recent article in the Times. Yesterday, in the editorial of its sister paper, the Sunday Times, was this sentence: “Whoever won in July was going to need billions of pounds more for public services”. That is not from a newspaper which normally supports my party, but it went to the heart of it. Over the last 14 years, public services in the United Kingdom have declined to an intolerable degree; we are in an awful state. Public services in health, education, our railways and local government have all suffered in that period. No one wants to spend money for the sake of spending, but many of the speeches I heard today talked about spending, spending, spending. I have been involved in Budgets in public life for nearly 51 years, and never on one occasion did I want to spend for the sake of spending. You spend because you improve the quality of life of the people you represent, and that is why spending is important. You spend wisely, of course—that is a different issue altogether—but the fact that we need it is so very important. Of course, the money has to come from somewhere—from taxation or from borrowing. If you borrow then you should only borrow for investment; if you raise taxation then you should ensure that those who can afford it most will pay most. That is why, personally, I believe income tax is the best tax of all, and other taxes, important as they are, are not as fair or transparent. Earlier, the noble Lord, Lord Young of Cookham, gave us a number of examples of taxes which could be looked at, and I hope that both the Minister and the opposition spokesperson will do so. I turn the House’s attention to the situation in Wales. The Welsh Government have received this week the best financial settlement since devolution began in 1999—even better than the settlements that Gordon Brown and I gave them back in the 1990s and 2000s. It is a brilliant settlement, with £2 billion more of new money going into Wales. There is more money for our public services, £100 million for our steel communities, £25 million to ensure our coal tips are safe and much-needed money for local government, which has been underfunded for so many years. I make a plea to the Welsh Government. When they receive, as they will, many millions to be spent on the Welsh health service, can they ensure that they spend it with reform in mind? The money on its own is not right or sufficient for improvements to take place; it must be matched by reform in the health service. I will refer to something that is the responsibility of both the United Kingdom and the Welsh Governments: the position of the Welsh National Opera. It might not appear huge in the shape of things, but it was referred to by the noble Earl, Lord Clancarty. The arts and opera have suffered dramatically over the last number of years. I see no immediate prospect that they will improve, and I see the Welsh National Opera possibly disappearing unless the financial situation it faces is addressed. Arts Council England is responsible for greater funding of the Welsh National Opera than the Arts Council of Wales. I ask the Financial Secretary whether he will have a chat with the Secretary of State for Wales, who in turn can speak to the First Minister of Wales, to ensure that both Governments have a very serious look at the prospect facing one of our great national institutions in Wales. To conclude, the Budget is right in addressing the deficit in our public services. Education, health, the railways and all the other public services in Wales and the United Kingdom will benefit as a result of a Budget that is significant in its contribution and wide-ranging in its effect.

21:31:00

My Lords, there are many things to welcome in this Budget, particularly on the spending side. I am less keen on some of the tax proposals, which seem to be mean-minded and counterproductive, such as the tax on knowledge. The spending commitments are important because they reverse the disastrous policy of austerity, which has brought our public services and infrastructure close to collapse. Even the IMF, originally a champion of austerity, admitted that it had underestimated what it called austerity’s negative multipliers, which is simply code for it having been disastrously wrong in estimating the negative effects of austerity. The cost of austerity has been severe. Median per capita income is lower than it was in 2010. The public debt to GDP ratio has gone up from 70% to 100%. By far the most important reason for this has been weak economic growth. This means that the Chancellor gets less help from the denominator in the debt to GDP ratio. Austerity has been a crucial cause of low economic growth. It is a vicious circle: cuts in public spending reduce the growth rate, which raises the debt to GDP ratio, which raises the interest rate on government debt, which requires austerity to counter it, and so on. We have to get out of this. The Chancellor has tried heroically to escape this trap by tweaking the fiscal rules; for example, by reclassifying public sector debt as public sector net financial liabilities. I think that the Government hope to squeeze an extra £50 billion spending headroom from these and other measures. Perhaps one should welcome any sleight of hand which loosens the iron grip of the Treasury. However, honesty compels me to say that current capital account distinctions in the public sector are full of holes. Are student loans to be counted as assets, even though most of them will never be repaid? There are other questions such as that. The Chancellor will also need to persuade sceptical businessmen that the publicly owned national wealth fund will produce, over the years, net assets rather than net debts. I understand all those things, but economic orthodoxy forces the Chancellor to tell an incomplete story. In her narrative, there is no mention of demand, only supply. The sagacious Paul Johnson of the IFS warns that if you really want to spend more, you will have to tax more; that is right, but as any economist will tell you, how much more depends on how much spare capacity there is in the economy. Bringing idle plant and labour into use gives you a free lunch. How much spare capacity is there in the British economy? If we add up the inactivity rate and part-time working, it is at least double the headline unemployment rate of 4% or so that we read about, so there is scope to boost demand as well as to improve supply. For those who want to increase public spending while maintaining fiscal probity, I recommend an ancient piece of fiscal machinery known as the balanced budget multiplier. The idea behind it is that an increase in government spending balanced by an equal increase in taxes yields a positive multiplier—I would be happy to explain why to any noble Lords who find this puzzling. But the last thing the Conservative Party wants to do is to balance the budget by raising taxes; its fiscal zeal is concentrated on austerity. The Labour Party is more open-minded and generous; that is why it is a good thing that Rachel Reeves, and not Jeremy Hunt, is in charge of the Treasury.

21:35:00

My Lords, I would like to address the issue of sport and the recent Budget. I declare my interests as set out in the register. The funding that has been earmarked for the Department for Culture, Media and Sport is welcome. However, my concerns are that there is only a brief mention of sport in the Budget document, and there was also a lack of support for sport and physical activity in the Government’s manifesto and in the King’s Speech. As an Olympian and someone who is now involved in sport governance, I may be somewhat biased, but I believe to my very core that, while sport is recreational, it also can and should be aspirational and inspirational. It can keep people on the straight and narrow, giving meaning to purpose and purpose to life. As Nelson Mandela once said: “Sport has the power to change the world. It has the power to inspire. It has the power to unite people in a way that little else does. It speaks to youth in a language they understand. Sport can create hope where once there was only despair”. Previously, His Majesty’s Government and stakeholders across the sector in the UK pledged to make this nation the most active nation in Europe. Today, within the main European economies, the UK ranks 11th out of 15 in terms of having an active population, with around 36% inactive—only Italy, Germany and Portugal are behind us. This ranked list can be compared and seems to correlate with per capita healthcare spend related to inactivity. The UK has the third highest spend, with only Germany and Portugal ahead of us. This is not a podium, medal-winning result we should be proud of. Recent data shows that, while the gross value added of the sports sector into the UK’s economy ranked third in Europe behind Austria and Germany, government investment into sport and recreation and physical activity in the UK sits bottom of the table, along with Ireland, with a 0.4% spend of general government expenditure, which is 70% lower than the highest-placed nations and less than half the average spend of the 15 main nations of Europe. By becoming the most physically active nation in Europe, the UK could save over £1 billion in healthcare costs alone and increase productivity, adding £3.65 billion to our GDP every year. The clincher is that, according to the Sport and Recreation Alliance, £70 billion could be gained in uplifting our nation’s well-being. Other less tangible, but none the less crucial, benefits of sport and increased physical activity are: decreased work absenteeism; increased educational attainment levels; reduced crime and anti-social behaviour; improved social capital; and increased employment levels, when we assume that there will be an increased demand within the sector. Put simply, if we get investment into sport and physical education at the right levels, and going into the right places, all children and adults will be given the best chance to live well for longer; communities will be safer, greener, healthier, and everyone will feel more connected; prevention will lead to significantly less pressure on the NHS and other key public services, currently saving the NHS £9.5 billion per year by preventing illness; and our economy would be boosted by a healthier and more productive workforce. On that last point, as the economy evolves into one where manual labour is increasingly automated, more people will have significantly more leisure time, we will need to find employment for those leaving the workforce into areas where automation cannot replace human capital, and sport and recreation will have a huge part to play in this transition. I therefore ask the Minister what plans His Majesty’s Government have for increasing funding into sport and physical activity. Please can he provide specific details? Without that increased funding, the commitment made to make the UK the most active nation in Europe will be an empty promise, and the nation’s health and the wellbeing of our citizens will suffer. Can the Minister tell the House what measures and financial support—in other words, investment—will be given to forward-looking competitive bids for sporting events to be held in the UK? This is the most sustainable way that UK plc can provide the nation with inspiration to get into sport, attract significant amounts of inward investment, and have the chance to provide a sustainable future for individual sports. Give us the resources to learn how to fish; do not just give us fish. We should not be missing out on these opportunities. Can the Minister also tell the House what part of the committed DCMS funds will be ring-fenced to help the most disadvantaged children get into sports and physical activity? Lastly, what part of the DCMS budget will be invested on ensuring equal access between the sexes across all sports?

21:41:00

My Lords, let me begin by congratulating the noble Lord, Lord Booth-Smith, on his maiden speech in which I think he warned us to be alert for the unknown unknowns. We should take note of that, and I hope to pick it up later in my speech. I also have to apologise to the House: this has been a brilliant, incredibly varied debate, so this will be a very limited summation on my part. I do not dispute the tough situation faced by the new Labour Government. Noble Lords heard that same tone and concern from these Benches, and it was very much picked up on the Labour Benches. I noted that the noble Lords, Lord Hannett and Lord Bach, and many others raised that issue. Public services are, frankly, in a dire state, both through the lack of funding and the lack of meaningful reform, as we heard from the noble Lord, Lord Murphy of Torfaen, and quite a variety of speakers on both sides of the House. We also heard discussion of an economy that has been, at best, stagnant for years. I too, like the noble Baroness, Lady Wheatcroft, commend the speech of the noble Baroness, Lady Moyo, who grasped a very difficult nettle and expressed it well for the House as a whole. There have been dismal levels of investment, persistently low productivity, as the noble Baroness, Lady Neville-Rolfe picked up and elaborated on, and workforce and skill shortages, as the noble Lords, Lord Fox, Lord Liddle, Lord Monks, and others addressed. I noticed that, when speakers on the Conservative Benches talked about economic hard times, they were keen to focus on the impact of Covid and the consequences of the Russian invasion of Ukraine, but they were remarkably silent on the impact of Brexit—the hardest blow, the deepest scar and the most persistent to our economy. I say that to the noble Lord, Lord Johnson, and the noble Baroness, Lady Lea, who both addressed those issues and carefully ignored the B-word. This House will not be fooled by that omission. I recognise that we have to move on from the past. My party recognised in its manifesto—I am picking up the words of my noble friend Lord Razzall—that taxes would have to be raised in the circumstances that we face, but we chose a different taxation approach to that chosen by the Government. I think the noble Lord, Lord Young, also proposed a different range of taxes. Let me repeat that we were looking at the oil and gas companies, the banks, social media companies, online banking companies, share buybacks and reform of capital gains. Let me suggest to the Government that they look very closely at the package that we proposed. It comes to some £7 billion to £10 billion per year. I suggest they might want to use it not to increase the overall tax take but to allow them to remove elements of the tax rises they have announced that, on reflection, they find are perverse or are hitting groups unable to cope. I will elaborate a little. We have become, in many ways, the voice of the social care sector. I know others have long been engaged, but that is the way it is breaking today. We welcome in the Budget the increase in the earnings threshold for those on carer’s allowance, as did many others throughout the debate, but we, like many others, are utterly dismayed that the Budget had so little to offer—some £600 million—for social care services, some of which are very precarious. I join others—I think this was mentioned by the noble Lord, Lord Empey, by my noble friends Lord Fox, Lady Tyler and Lord Shipley, and on the Labour Benches by the noble Lord, Lord Whitty, and the noble Baroness, Lady Lister—who called for the Government at the very least to give this sector an exemption from the increase in employers’ NICs to remove the precarious situation in which it sits and to recognise that GPs need the same exemption just to meet the need for appointments. That group should be treated like the public part of the public sector of the NHS. We in this House widely recognise that without a major step change in social care and primary care, much of the money going into the NHS will simply be swallowed up. My party has also found itself, in the most extraordinary way, becoming the voice of small business. Micro businesses receive some protection from tax increases through the higher employment allowance, but the increase in employers’ NICs and especially the lower starting threshold directly worsen one of the UK’s major economic problems: the failure of firms to scale up from micro. We are very good at starting businesses, but they fail to scale up to small and medium. This new tax burden is simply going to make that problem worse. Will the Government look again? Upscaling is vital to achieve growth. I want to put in a particular plea for the 700,000 working people who are contractors working through umbrella companies and who pay their own employers’ NICs. Very few will be in a position to renegotiate their contracts to cover the increased cost. The noble Earl, Lord Clancarty, talked about the creative industries in this context. The noble Lords, Lord Bilimoria, Lord Londesborough and Lord Howell, addressed the issues of small firms, and we ask the Government to look again. I think more people in this debate spoke on the future of family farms than on any other issue. We join in those deep concerns that many families will be forced to sell. Those families are the backbone of our rural communities and our agriculture industry. The noble Earl, Lord Devon, made a tour de force speech in describing the issue, and he was joined by many others including the noble Lords, Lord de Clifford, Lord Berkeley of Knighton, Lord Shinkwin and Lord Empey, the noble Duke, the Duke of Wellington, my noble friend Lady Humphreys, who spoke clearly from these Benches about the problem in Wales, and the right reverend Prelate the Bishop of Newcastle. They were the kind of speeches that we have to ask the Government to take notice of. Again, let us remember that our party has offered a different tax route that could enable the Government to have the flexibility to make a change. Only the noble Lord, Lord Oates, mentioned the 50% rise in the cap on bus fares for many young and minimum-wage workers. This could be extraordinary; it could cost them £500 a year. I will not have another discussion on the winter fuel allowance. It was a mistake; I have said it before and I will not go through it again. But my party also believes very strongly that independent schools should not face VAT; education is an investment in our future. I join the noble Lord, Lord Lexden, in the comments that he made. Somebody talked extensively about business rate reform, but I forgot to note whom. It should have gone much further than just the sticking plasters in this Budget, and even the sticking plasters exclude many types of small businesses. On our Benches, my noble friend Lord Fox expressed great support for the industrial strategy, except to say that the question is: how do you deliver it? We will be watching that. Many people also addressed the change in the fiscal rules. I want to say something to the noble Lord, Lord Lamont. He is possibly one of the most literate in economics and finance in our House, but he did not seem to grasp that the new fiscal rule deals with net financial liabilities. A new hospital building, or a new school, does not fall into that set of definitions; it is investments that yield a financial return. I feel that I am coming to the rescue of the Government on this one. We seem to have extraordinary confusion. I will say to the Government, as I have said it before, that it will be important to see how those guardrails work. There is an extraordinary capacity for additional borrowing that I suspect the Government will not take advantage of if they use their guardrails properly, but we will have to observe those guardrails and make sure. This is not an issue raised just by my party. It was raised also by the noble Lords, Lord Burns, Lord O’Neill, Lord Young, Lord Altrincham, Lord Monks and Lord Empey—my apologies, some of those remarks were on skills, but a whole range of people discussed that set of issues. The Government have tied their colours to the mast and will be judged on improvements in public services, especially the NHS, and growing the economy. I want to finish by going back to the point raised by the noble Lord, Lord Booth-Smith, about the unknown unknowns. We are in very turbulent times, and global events matter. If we find ourselves facing a protectionist trade war, the shock will hit UK growth by more than 0.5% each year. If the US abandons Ukraine, leaving the Baltics and Poland exposed to Putin, or if Taiwan is seized by China, the consequences will more than reverberate here. They will affect everything in our lives, including the economy. US disengagement from countering climate change would destabilise the world, not only immediately in the economy but in driving many new waves of migration. I join the noble Lord, Lord Razzall, and others in saying that this is the time to build alliances with those with whom we have common cause. That means getting closer to Europe far more rapidly than the Government have previously anticipated. We need to rebuild our economic ties to the EU and remove the trade barriers raised by the Tories; it is an obvious route. It was an issue raised by others, but I want to stress it from these Benches: this is an issue that has gone from a nice-to-have to urgent.

21:53:00

My Lords, we have had a long debate today, where, as usual, your Lordships’ House has brought its considerable expertise to bear, dissecting last month’s Budget. Not least, the eloquent maiden speech by my noble friend Lord Booth-Smith demonstrated the value that he will undoubtedly bring to this House. I shall try not to delay us much further, but the large number of speakers that we have had is befitting of a Budget with such large sums involved. It has been the largest tax-raising Budget in history, with the tax burden now at a historic high. There will be an additional £142 billion of borrowing over the forecast, with debt interest payments of £100 billion every single year—all to fund an additional £70 billion of spending, on average, every year. The Minister has tried to claim that Labour has a mandate for this Budget, but it does not. And what is the result of these decisions? Lower wages and lower living standards, lower growth and lower private investment, and higher inflation and higher interest rates. People’s bills will go up and their wages will go down. I turn first to tax. Before the election, the Chancellor promised people that Labour’s policies would be “fully funded and fully costed—no ifs, no ands, no buts”. Just last month, the Prime Minister made an absolute commitment to not raise taxes on working people. When the former Prime Minister, my right honourable friend Rishi Sunak, told people that Labour would raise their taxes by £2,000 over the next Parliament, Rachel Reeves and Keir Starmer said he was lying. To be fair, he did get the figure wrong: it was not £2,000 over the course of the next Parliament but £2,000 every single year. The Government continue to not be straight with people now, claiming that the £25 billion rise in national insurance is not a tax on working people. National insurance is literally the only major tax that exclusively hits working people. If noble Lords do not believe me, ask the Chancellor, who said the problem with national insurance was that “it is a tax purely on people who go to work and those who employ them”. If, understandably, noble Lords do not quite trust the Chancellor on this after October’s Budget, how about the Resolution Foundation, which has said that national insurance is a tax on jobs? Meanwhile, the IFS has described it as a straightforward breach of a manifesto commitment. I know that those in the party opposite will not take any advice from these Benches, but perhaps they will listen to Paul Johnson of the IFS, who said: “The continued pretence that these changes will not affect working people risks further undermining trust”. However, the problem with this Budget is not just the scale of the tax rises but the choices they have made. By reducing the threshold at which employers pay national insurance, they have increased proportionately the cost of employers employing workers at lower wages the most, making it more expensive to take on entry-level workers and to employ people part time. The noble Lord, Lord Londesborough, set out eloquently the wider impacts of this change. Can it really be the right decision at a time when one of the biggest challenges for this Government is to support people off benefits and into work? As many noble Lords have pointed out—including the noble Baronesses, Lady Warwick, Lady Thornton, Lady Tyler and Lady Bull, the noble Lord, Lord Shipley, and my noble friend Lord Dobbs, among others—nor does it seem that the Government have thought through the impact of an increase on this scale when it comes to their other policy commitments. GPs, care homes, nurseries: the Government are asking them all to deliver more, but with the national insurance rise they are making it harder and more expensive for them to employ the people they need to do it. Combined with Labour’s £5 billion bill for its employment rights legislation, the change further increases the incentive for self-employment, distorting people’s decisions in the labour market and taking them out of employee protections, employee benefits and the pensions system, and I am not sure that is something that people on the Benches opposite want to see. What about other taxes? The tax on family farms makes it impossible for family farms to be passed on to the next generation and threatens the position of tenant farmers. I hope the Minister will listen carefully to the strength of feeling, and the strength of the arguments made, in this House today on that issue. A tax on family businesses, just at a time when Labour claims it wants to encourage investment and long-term stewardship, means it is making it harder for the very kinds of businesses that often take this the most seriously. There are higher taxes specifically for first-time buyers, who find it hardest to move on to the housing ladder, and further increases in stamp duty, which the IFS has warned will drive up rents. There are taxes on education and on savings. As the former Prime Minister said during the election campaign, “You name it, they’ll tax it”. The noble Lord, Lord Desai, had some ideas to add to this further and, with the Labour Party’s new approach to taxation, maybe he will be welcomed back on to its Benches some time soon. I turn next to borrowing. Before the election, the Chancellor promised she would not “fiddle the figures or make something different to get better results. We will use the same models the government uses”— referring to public sector net debt. But changing the measure of debt used in the new fiscal rules is a multibillion-pound fiddle. We have heard in the debate today, from both sides, the case for more investment in our economy. I agree, but there are still choices to be made in where that investment comes from and how to make sure that it delivers growth. On the first point, the last Government took action to promote higher investment from the private sector, for example through the introduction of full expensing. Under this Government, the OBR predicts not only that private sector investment will fall over the forecast period but that it will fall by even more than the amount of extra investment caused by public investment going up. This brings me to my second point. As my noble friend Lord Lamont and others pointed out, we need to be really clear-sighted that investment is not an end in itself. The test is: does it lead to greater economic growth? There is very little in this Budget to give us confidence that it does. Indeed, as my noble friend Lady Finn pointed out, areas such as transport are being cut, where you would expect to see higher levels of investment if you were focused on growth. The scope for waste and inefficiency with this additional spending is significant. The Government have reassured us that this will not happen because they are establishing a new office for value for money. As my right honourable friend the leader of the Opposition has said, if you need an office for value for money, what is happening across the rest of government? Surely, value for money needs to be built in to how all public money is spent. This brings us to another challenge that the Chancellor may face with her new measure of debt: its volatility. With such little headroom against her fiscal rules already, small changes such as increases in borrowing costs or the threat of tariffs from a major trading partner could easily blow her off course. That would lead us back to the worst of all worlds of stop-start investment, driving up costs and undermining confidence from private investment. Record taxes and record borrowing lead us to record levels of spending. The challenge is to make sure that additional spending is not simply going to be absorbed by higher wages but drives reform in the public sector. But I am afraid that, after less than 20 weeks in office, we have already seen Labour’s tax record and it does not look good. It has cancelled plans to reduce the Civil Service to pre-pandemic levels, increased the salaries of train drivers by £10,000 and given junior doctors a 22% pay rise, all without asking for a single productivity improvement in return, and all while removing the winter fuel payment from three-quarters of a million pensioners on low incomes. The incredible front-loading of the additional planned spending will make it incredibly difficult for the Government to spend effectively, but the Chancellor has promised that she is not coming back for more. But what about the commitment to grow defence spending to 2.5% of GDP? As we have heard in this debate, we live in a more dangerous and uncertain world than ever. What about the commitment to restore aid spending to 0.7% of GNI? This was called for by the noble Lords, Lord McConnell and Lord Oates, and also committed to in the manifesto of the party opposite. What about the commitment to fully decarbonise the grid in just six years’ time—a commitment that has been estimated as needing £40 billion of investment a year to deliver? Perhaps the Chancellor is keeping her fingers crossed that improved economic growth will ride to the rescue. I hope, for not just the Chancellor but the country, that this will be the case. But the OBR is not so sure. It forecasts growth down, investment down, inflation up, interest rates up and living standards down. The Minister will doubtless say in his winding-up speech that these are Labour’s choices and it stands by them. But I would say to the noble Lord, and to all noble Lords opposite, that these were not Labour’s choices to make. They were choices that it should have put to people at the general election. But Labour did not trust people to make up their own minds and, in return, I doubt, after this Budget, that the public will put their trust in this Government for very much longer.

22:04:00

My Lords, it is a privilege to close today’s debate on the Budget. I am grateful to all 75 noble Lords for their insights, differing perspectives and expertise. I join others in congratulating the noble Lord, Lord Booth-Smith, on his excellent maiden speech, bringing his valuable first-hand experience of government and policy-making to your Lordships’ House. I look forward to his further contributions in debates such as this. This was a Budget to fix the foundations; to restore stability by repairing the public finances; to rebuild our public services after years of neglect; to choose investment, rather than decline; and to keep our promises to working people. It was a Budget notable in scale, but commensurate with the challenging inheritance that we faced. The noble Lord, Lord Johnson of Lainston, in his opening speech for the Opposition, began by denying the need to rebuild the public finances and the need to restore stability to our economy. He failed yet again to say sorry for the past 14 years, in particular for the disastrous Liz Truss mini-Budget. What he went on to defend was, in itself, very revealing. He defended second homes being bought up by foreign owners, pushing up prices for first-time buyers. He opposed reintroducing a reduced rate of inheritance tax above £3 million. He opposed VAT on private school fees, cutting £1.7 billion from state schools. He defended tax-relief pensions being used not as a retirement vehicle but as a tax-planning tool. It was very clear where the party opposite’s priorities lie, and the choices that it would make, and they would certainly not be for working people or public services. Several noble Lords spoke in positive terms about this Government’s economic inheritance, including the noble Lord, Lord Lamont of Lerwick, and the noble Baronesses, Lady Finn and Lady Lea of Lymm. The reality is that, over the past 14 years, the UK’s economic performance was poor, as my noble friends Lord Hannett of Everton and Lord Bach, and the noble Baronesses, Lady Wheatcroft and Lady Kramer, said. Had the UK economy grown at the average rate of other OECD economies, our economy would have been £171 billion larger. Inflation peaked under the previous Government at 11.1%, as my noble friend Lady Crawley said, and was above target for 33 months in a row. It was the worst Parliament for living standards ever recorded. The UK was the only country in the G7 to have a lower employment rate and a higher inactivity rate than before Covid. As my noble friend Lord Eatwell said, public services were pushed to breaking point, with sewage in our rivers and our schools literally crumbling. Some noble Lords focused on this Government’s fiscal inheritance and the £22 billion black hole, including the noble Lord, Lord Johnson of Lainston, who seemed to be confused by the fact that the numbers went up over time. It was mentioned also by the noble Lord, Lord Lamont of Lerwick, and the noble Baronesses, Lady Finn and Lady Lea of Lymm. The Treasury has provided to the OBR a line-by-line breakdown of the previous Government’s unfunded commitments—260 separate pressures. Noble Lords need not just listen to the OBR and the Treasury; they need look only at the outturn data. Central government current expenditure published by the ONS shows that, for the six months since March, the outturn is £11.8 billion higher than forecast. That is £11.8 billion over six months, well on course for £22 billion over the year. This Government’s number one commitment is to economic and fiscal stability. That is why we support the fiscal framework, the OBR and the independence of the Bank of England, which the noble Lord, Lord Altrincham asked about. It is also why we have established robust fiscal rules, which put the public finances on a sustainable path while allowing a step change in investment to drive long-term growth. The stability rule brings the current Budget into balance so that we do not borrow to fund day-to-day spending, as my noble friends Lady Crawley and Lord Murphy of Torfaen said. The noble Baroness, Lady Penn, mentioned borrowing. Borrowing as a share of GDP falls over this Parliament, from 4.5% to 2.1%, as we achieve the biggest current Budget surplus in over 20 years. Over the past 14 years, borrowing averaged 5.6% of GDP. Over this Parliament, it will average 2.6% of GDP. However, while being tough on spending, we must create the space for investment. As the IMF has said, more public investment is badly needed in the UK, so the investment rule, as set out in our manifesto—despite the claim made by the noble Lords, Lord Lamont and Lord Bridges of Headley—will target debt falling as a share of the economy. It will be defined as net financial debt. I am grateful to the noble Lord, Lord O’Neill of Gatley, for his welcome of this move. He stressed the need for the guard-rails we have set out and the importance of what this investment is spent on. I am grateful, too, for the support of my noble friends Lord Liddle and Lord Chandos, the noble Lord, Lord Young of Cookham, and the noble Baroness, Lady Wheatcroft. As my noble friend Lady O’Grady of Upper Holloway pointed out, the previous Government planned to cut public investment, a recipe for continued decline. To address the points made by the noble Lord, Lord Johnson of Lainston, and the noble Baroness, Lady Penn, these rules are actually tougher than those of the previous Government. To stop fiscal commitments being endlessly deferred for five years, this is the last year when the fiscal rules will target the fifth and final year of the forecast. The rules must be met by 2029-30 at this Budget, and until 2029-30 becomes the third year of the forecast, at which point both rules will target the third year of the rolling forecast period. This is a much tougher constraint than the previous Government’s borrowing rule: to borrow up to 3% of GDP by the fifth year of the forecast. To repair our public finances and rebuild our public services, the Budget raised taxes by £40 billion. It was therefore a very significant Budget, as the noble Baroness, Lady Penn, set out. It was, though, commensurate with the challenges that we faced. The noble Lord, Lord Lamont of Lerwick, described it as bold; it was of course the most fiscally significant Budget since his Spring Budget of 1993. The Budget meant taking difficult decisions, to address the point made by the noble Lords, Lord Burns and Lord Lamont. As a result of those decisions, we have now wiped the slate clean, meaning that we never have to do a Budget like this again. We have set tough fiscal rules, which we meet two years early, and set the envelope for the second phase of the spending review, which we will stick to. The noble Lord, Lord Johnson of Lainston, helpfully quoted our manifesto, as mentioned also by the noble Baroness, Lady Penn. Let me be clear: this Budget keeps every single manifesto commitment we made to working people—to not increase their income tax, their national insurance or VAT. We went further by freezing fuel duty, on which I disagree with the noble Lords, Lord Londesborough and Lord Young of Cookham, and my noble friend Lord Whitty, who said that it should have been raised during a time of cost of living pressures. I also disagree with the noble Lord, Lord Londesborough, who said that we should have increased employees’ national insurance. The choice made by the previous Government was to freeze income tax thresholds, costing working people nearly £30 billion. We could have extended that freeze but instead, from 2028-29, personal tax thresholds will be uprated in line with inflation once again. The noble Lord, Lord Sherbourne of Didsbury, mentioned how many more people had been pulled into tax. This Budget does, though, involve some very tough decisions. Several noble Lords, including the noble Lords, Lord Burns, Lord Bilimoria, Lord Londesborough, Lord Oates, Lord Shipley, Lord Gadhia, Lord Razzall and Lord Northbrook, and the noble Baronesses, Lady Wheatcroft and Lady Penn, focused on the increase in employers’ national insurance contributions by 1.2 percentage points to 15% from April 2025. We of course recognise that this involves asking businesses to contribute more. We have acknowledged that the impacts of this measure will be felt beyond businesses too, as set out by the OBR. The noble Lords, Lord Fox and Lord Northbrook, the noble Earl, Lord Devon, and the noble Baroness, Lady Kramer, mentioned small businesses and their importance to the economy. We are protecting the smallest companies by increasing the employment allowance from £5,000 to £10,500, meaning that 865,000 employers will not pay any national insurance at all, and that more than 1 million employers will now pay the same or less than they did before. The Federation of Small Businesses said in its Budget response: “Against a challenging backdrop, today’s Budget shows a clear direction in business policy now for the whole of this Parliament to target support at small businesses … prioritising everyday entrepreneurs working in local communities in all parts of the country”. Some noble Lords raised the issue of compensation, including the noble Lord, Lord Fox, and the noble Baronesses, Lady Tyler of Enfield and Lady Kramer. The Government have chosen to compensate the public sector with £5.1 billion to ensure there is sufficient funding to support our vital public services, including the NHS. We will work with departments to ensure that the funding set aside is allocated appropriately. The Department of Health will confirm funding for GPs for 2025-26 as part of the usual GP contract process later in the year, including through consultation with the sector. The spending review includes an investment of £100 million. The Government also provided a significant funding top-up to local government, which can be used for pressures including adult social care. The Government of course recognise the need to protect the smallest charities. Like any other eligible business, they will benefit from the significant changes to the employment allowance, which mean more than half of businesses with NICs liabilities either gain or see no change next year. Charities will still be able to claim employer NICs reliefs, including those for under 21s and under 25 apprentices, where eligible. The noble Lord, Lord Dobbs, asked about the impact on employment. Following the Budget, the Bank of England now expects that rather than unemployment increasing, as it had previously forecast, unemployment will now fall. According to the OBR, employment will grow over the forecast period by 1.2 million. The noble Lord, Lord Bilimoria, and the noble Baroness, Lady Penn, asked about the impact on living standards. The last Parliament saw living standards stagnate and was the worst Parliament for living standards ever recorded. The OBR forecast shows that real household disposable income will increase by an average of 0.5% in real terms each year. That is a world away from the stagnating living standards we saw under the last Government, and in the context of a Budget where we had to take some very difficult decisions to clean up the mess that we inherited. Many noble Lords focused their contributions on economic growth. As several noble Lords mentioned, there was no bigger failure of the previous Government than their failure on growth. My noble friend Lord Whitty and the noble Lord, Lord Skidelsky, mentioned their austerity, their Brexit deal—which permanently reduced growth by 4%—and their disastrous mini-Budget, which, as my noble friend Lady Liddell rightly said, crashed the economy. My noble friend Lord Liddle, the noble Lords, Lord Fox, Lord Razzall and Lord Shipley, and the noble Baroness, Lady Kramer, were right to reinforce the importance of this Government’s European reset to address the trade barriers that businesses now face. When last week the Bank of England cut interest rates, it forecast that the Budget would add 0.75% to growth next year. Over the course of this Parliament, the OBR says growth is largely unchanged. The noble Lord, Lord Johnson of Lainston, said this Budget did nothing for growth, but over the longer term the OBR says that this Budget will permanently increase GDP by 1.4% due to the investment that his party is opposing. The noble Lord, Lord Lamont, also opposed that investment but called for more growth. As the noble Lords, Lord Burns and Lord Young of Cookham, and my noble friend Lord Liddle said, we need to go further and we need to go faster. That is why economic growth remains this Government’s central mission. The noble Baroness, Lady Neville-Rolfe, rightly focused on GDP per head and productivity. She raised an interesting suggestion which I will happily look at. The noble Lord, Lord Bridges of Headley, mentioned debt. The OBR shows that the best way to make debt sustainable is to increase productivity. As my noble friend Lord Eatwell set out, long-term reforms are vital. We have set out extensive planning reforms, a new national wealth fund and a modern industrial strategy, and created Skills England. I totally agree with my noble friends Lord Liddle and Lord Monks on skills and that we must go further. We will shortly publish the “Get Britain Working” White Paper to tackle inactivity, and the Chancellor will set out pension reforms—which the noble Lord, Lord Howell of Guildford, asked about, and the noble Lord, Lord Gadhia, commented on—in her Mansion House speech later this week. All of these things will significantly boost growth, and none of them, as the noble Lord, Lord Gadhia, observed, are yet included in the OBR’s forecast. The right reverend Prelate the Bishop of Newcastle and my noble friend Lord Sahota spoke about the importance of regional growth. In the Budget we set out the first steps in our approach to spreading growth across the country through devolution, investment and reform. We gave mayors greater control of their budgets by announcing the first integrated settlements for the West Midlands and Greater Manchester from 2025-26. We invested in major railway projects, and we confirmed funding for investment zones and freeports. The noble Lords, Lord Fox, Lord Gadhia and Lord Forsyth, spoke about inflation and interest rates. The OBR is forecasting that inflation and interest rates will fall over the course of this Parliament. That is very different from the previous Parliament, when inflation peaked at 11.1% and was above target for 33 consecutive months, and when mortgages rose by an average of £300 a month following the Liz Truss mini-Budget. My noble friend Lord Bradley spoke about the importance of growth to investment, and I agree with the points that he made. As several noble Lords set out, including the noble Lord, Lord Bilimoria, and the noble Baronesses, Lady Finn and Lady Moyo, private investment is a vital part of addressing the growth challenge. That is why this Budget delivers stability by putting on a sustainable path the public finances, which are an essential foundation for growth and investment. To ensure certainty, in the Budget we published a Corporate Tax Roadmap, which confirms our commitment to cap the rate of corporation tax at 25%, the lowest in the G7. The noble Lord, Lord Londesborough, asked about enterprise. We have extended the enterprise investment and venture capital trust schemes until 2035. We have also taken action on late payments and non-financial reporting burdens. As my noble friend Lady Liddell said, at the recent international investment summit we saw over £60 billion of new investment creating nearly 40,000 new jobs. I was surprised that the noble Lord, Lord Fox, spoke against the increase in the national living wage.

I did not speak against the rise in the living wage. If the Minister goes through Hansard, he will find that to be the case.

I will check, but it did sound very much like it to me. The noble Baroness, Lady Neville-Rolfe, spoke against the plan to make work pay. But, as my noble friends Lady O’Grady of Upper Holloway, Lord Monks and Lord Hallett of Everton pointed out, there is now a wealth of evidence that greater in-work security, better pay, more skills and more autonomy in the workplace have substantial economic benefits. A more secure and productive workforce is good for business and good for working people, because each depends on the success of the other. Many noble Lords focused on some of the other tax measures contained in the Budget. The noble Lord, Lord Londesborough, asked about stamp duty, which was also mentioned by the noble Lord, Lord Elliott of Mickle Fell. We are reforming stamp duty land tax so that those who buy second homes pay two percentage points more than before. This will support an estimated 130,000 additional people to buy their first home. Many noble Lords mentioned agricultural property relief. They included the noble Lords, Lord Fox, Lord Forsyth, Lord Bilimoria, Lord Dobbs, Lord de Clifford, Lord Young of Cookham, Lord Empey, Lord Berkeley of Knighton, Lord Northbrook and Lord Shipley, the noble Earl, Lord Devon, the noble Duke, the Duke of Wellington, the noble Baronesses, Lady Mallalieu and Lady Humphreys, and the right reverend Prelate the Bishop of Newcastle. In terms of inheritance tax, currently the largest estates pay a lower effective tax rate than smaller estates. That cannot be right, so we are reforming agricultural property relief and business property relief to reduce this unfairness, while protecting small family farms. Almost three-quarters of estates claiming the relief will be unaffected. It is expected to affect around 500 claims next year. We should be clear that agricultural property relief is given on top of the normal inheritance tax thresholds. Individuals can pass up to £500,000 to a direct descendant, and then agricultural property relief will provide another £1 million tax-free allowance. This means a couple can pass up to £3 million tax free. Above that, there is a 50% discount on inheritance tax, so it is a rate of only 20% and any liability can be paid in 10 yearly instalments which, to answer the noble Earl, Lord Devon, will be interest free. The noble Lord, Lord Fox, asked about valuing property for business property relief. There is an established process for valuing business property, which will continue to apply. On inheritance tax on pensions, the noble Lord, Lord Johnson of Lainston, seemed unsure whether pensions are a savings vehicle or a tax planning vehicle. The fact is, as my noble friend Lord Davies of Brixton said, that these reforms remove distortions resulting from pensions tax policy over the past decade, which have led to pensions being openly used and marketed as a tax planning vehicle to transfer wealth rather than to fund retirement. Several noble Lords raised the issue of VAT on private schools, including the noble Lords, Lord Johnson of Lainston, Lord Forsyth, Lord Berkeley of Knighton, Lord Moynihan of Chelsea, Lord Lexden and Lord Borwick. This raises £1.7 billion a year—money to benefit the 94% of pupils who attend state schools. The new leader of the Opposition has that said she will reverse this measure, so she will of course need to say where her cuts to state schools will fall. The impact assessment, published alongside the Budget, shows that 35,000 pupils will move to state schools—less than 0.5% of the state school population and lower than previous estimates had suggested. The noble Lord, Lord Shinkwin, asked about children with special educational needs. Children with the most acute needs, whose places in a private school have been deemed necessary by local authorities, are protected from the VAT impacts because local authorities can reclaim VAT. To improve outcomes for the most vulnerable children and to ensure that the system is financially sustainable, the Budget provided a £1 billion uplift in funding for special educational needs—a 6% real-terms increase. The difficult decisions this Budget takes are for a purpose—not just to repair our public finances but to rebuild our public services, as my noble friend Lord Bach observed. I happily join my noble friend Lady Thornton in welcoming the work of the Women’s Budget Group. We have set the envelope for the second phase of the spending review, which we will stick to. That will involve some tough choices on spending. Several noble Lords asked about reform, including the noble Baronesses, Lady Finn and Lady Neville-Rolfe, and the noble Lord, Lord Young of Cookham. Our reform agenda will be central to improving services going forward, including our 2% efficiency target for all government departments. My noble friend Lady Ramsey of Wall Heath set out the increased funding that the Budget provides to the NHS. The noble Baroness, Lady Tyler of Enfield, asked what the NHS funding pays for—it is for 40,000 more appointments a week, £1.5 billion for new diagnostic scanners and new surgical hubs, and an expansion of mental health support, to name just a few. I think I heard the noble Baroness saying that more should be spent while opposing the increase in employer national insurance contributions that pays for it. As the noble Baroness, Lady Lea of Lymm, observed, and the noble Baroness, Lady Penn, mentioned, the situation we inherited from the previous Government—the only major economy where inactivity has not returned to pre-pandemic levels—is completely unacceptable. We will publish a White Paper to get Britain working; my noble friend Lord Davies of Brixton asked for a date, and I tell him that it will be later this month. Next year, we will publish a White Paper on sickness benefit reform. The noble Lord, Lord Desai, spoke about the importance of the welfare state. My noble friends Lady Lister of Burtersett and Lady Wilcox of Newport mentioned that we provided £1 billion to extend the household support fund and discretionary housing payments to help those facing financial hardship with the cost of essentials. We have reduced the level of debt repayments that can be taken from a household’s universal credit payment each month, meaning that 1.2 million of the poorest households will keep more of their award each month, lifting children out of poverty. As my noble friends Lord McConnell, Lady Liddell, Lady Wilcox of Newport and Lord Murphy of Torfaen said, we are providing funding to support public services and drive growth across Scotland, Wales and Northern Ireland, with the largest real-terms funding since devolution. My noble friend Lord McConnell and the noble Lord, Lord Oates, spoke about spending on overseas development assistance. ODA budgets have been set for the next two years to enable the UK to spend 0.5% of GNI. I reassure them that the Government remain committed to restoring development spending to 0.7% of GNI as soon as the fiscal circumstances allow. My noble friend Lord McConnell also asked about the Integrated Security Fund. The ODA programme budget, including the Integrated Security Fund, will increase by 2025-26 to £9.2 million. I am short of time, so I shall write to my noble friend Lady Warwick of Undercliffe about her housebuilding and social housing questions. The difficult decisions that we made in this Budget, which have been debated here today, were made for a purpose—to repair the public finances, restore stability, rebuild our NHS, invest in the national interest and protect working people. It was, of course, possible to make different choices, to ignore the problems in our public finances, to not rebuild public services or invest in the fabric of our nation and to fail to protect working people. But we should remember that, at the last election, the country voted for change. As many of my noble friends have pointed out, the British people did not overwhelmingly reject the previous Government because they thought the choices they had made were the right ones. They gave this Government a mandate to fix the foundations of our economy and to deliver change. That is exactly the mandate that this Budget delivers on. We have made our choices. They are the only responsible choices—to protect working people, restore stability and invest in Britain’s future.

Motion agreed.

House adjourned at 10.28 pm.