My Lords, I have doubled the time available for Back-Bench questions to 40 minutes. The House wants short, sharp, succinct, to-the-point questions, not speeches. We will go around the Chamber, seeking to get as many noble Lords in as possible.

Please note that, when a noble Lord asks a question, it is unlikely that the next question will come from the same Benches.

I am grateful to the noble Lord for his question and for his concern and compassion in the examples he sets out. I will set out our three principles when it comes to welfare.

First, the state should always be there to support people when they need it, and I think the reforms set out in the Green Paper deliver on that point. Secondly, the system should better incentivise work, and everyone who can work should work.

Thirdly, we need a system that is sustainable, so that we have a welfare state that is there for generations to come. As I said in my answer earlier, the impact assessment that has been published today does not take into account the £1 billion being reinvested into the system from the £4.

8 billion of savings. It is very clear that that £1 billion will help people get back into work. As we know, and I am sure he knows, work is the best route out of poverty.

Oh!

The noble Lord’s question is about the impact assessment, and I am answering that. The impact assessment takes no account of the extra £1 billion being invested. The OBR will look at that £1 billion over the summer and will come back with an updated impact assessment at that point.

My Lords, the UK continues to lag behind many EU countries in overall productivity—something that cannot be explained solely by differences in how the French choose to measure theirs.

Could the Minister outline which specific measures in yesterday’s Statement are designed to boost productivity both within the Civil Service and across the wider economy?

My Lords, would the Minister agree that neither the Autumn Budget nor the Spring Statement mentioned trade at all?

I have been appointed as the chair of the International Chamber of Commerce—the ICC UK—and we have just unveiled that we could unlock £25 billion in trade growth, £224 billion in efficiency savings and £22 billion in SME working capital by digitising trade and cutting transaction times, from two to three months to one hour, and reducing trade transaction costs by 80%.

So why do the Government not run with this, full steam? With the trade and tariff wars emanating from the United States of America in full flow, digitising trade is the way ahead; modernising trade is the way ahead.

The noble Lord is quite right to focus on trade and the importance of trade to growth. I think he is wrong to say that neither the Budget nor the Spring Statement mentioned trade; I think both did, because clearly trade is a big part of our growth strategy.

We want to increase our trade flows with our nearest neighbours and biggest trading partner, the European Union, through our reset of our relationship with the EU.

The Chancellor has been to visit China, the third largest economy in the world, which I think the previous Government had not engaged with it at all since 2019.

We are engaged in trade negotiations with India and the GCC, and we have just acceded to the CPTPP, so trade is absolutely at the heart of it.

Of course, many of the conversations already have revolved around our trading relationship with the United States, which again is a very incredibly important trading relationship to us. On digitising and streamlining trade, he is absolutely right.

The Government have an agenda in that respect, but it is very expensive and we need to move ahead when fiscal conditions allow.

I agree with much of what the noble Lord says: supporting carers is very important. He talked about the spending review leaving them unsupported.

Of course, the spending review has not yet taken place; it will take place in June of this year, and I think perhaps we should wait until the spending review reports to see what it has to say.

Some 250,000 more people will be plunged into poverty, including 50,000 children. The OBR forecasts lower employment as a direct result of Labour’s welfare announcements, with unemployment rising overall and even more applications for PIP with changes to the UC health element.

We will face the worst of all worlds, with arbitrary cuts and the Government dismissively discarding the previous Government’s proposals. Over 1 million people will be impacted; they face fear every day.

When will the Government communicate to those people individually how they will be impacted, so that we do not see a rise in the genuine distress that people are facing right now?

I am grateful to the noble Baroness for her concern. She talks about employment, but, according to the OBR, it will rise by 1.2 million people over the course of the forecast, so I am not sure that what she is saying there is correct.

As I have said repeatedly during this Question, the impact assessment she refers to takes no account of the £1 billion investment in helping people get back into work, so I am afraid that the impact assessment figures she is using are not correct.

The OBR will look at the additional £1 billion over the course of the summer and come back with an updated impact assessment that takes it into account.

My Lords, I appreciate the work that the Government are doing to stimulate the economy and to get people back into work. I understand the dilemma that the Government face with the spiralling costs of welfare.

But I am left to wonder: how is it that the DWP’s own impact assessment, which I understand includes the £1 billion investment that the Minister referred to, does also state that 250,000 people will be pushed into relative poverty, including 50,000 children?

How can the Government of one of the richest countries in the world justify policies that push people into poverty?

My Lords—

My Lords—

We will hear from my noble friend Lady Hayter and then from the noble Lord, Lord Lansley.

I congratulate the Government on grasping the nettle of the security challenge caused by Putin to the integrity of both Ukraine and the UK, and on repairing the damage that the party opposite did to our Armed Forces and growing it now for new challenges.

Does my noble friend the Minister agree that our own national security and economic stability are absolutely linked?

Does he also agree that we need a strong, resilient economy independent of global uncertainty and that the welcome increase in defence expenditure will boost jobs and growth across the whole of the UK?

I am grateful to my noble friend for the points that she makes. I of course agree very much with her. As she knows, it was announced yesterday that we are increasing the defence budget by £2.2 billion in 2025, taking additional spending on defence to over £5 billion since the Autumn Budget.

She is absolutely right that defence spending is a huge contributor to the future growth of our economy. That is why in the industrial strategy we have set out eight sectors that we believe will fuel the growth of the economy in future, and defence is one of them.

Shortly in the spring, we will publish an industrial strategy for defence, which will set out how we can get highly skilled jobs throughout the UK as a result of the increase in spending that we are carrying out.

When the Government came into office, the disability employment gap was 28.6%. With the £1 billion return-to-work funding that the Minister has referred to repeatedly, what is the Government’s target for reducing the disability employment gap by the end of this Parliament?

I am afraid that I do not know what that target is. If there is one, I will find out for the noble Lord and write to him.

I will follow up on a key point raised by the noble Baroness, Lady Neville-Rolfe.

While the OBR forecast for growth has halved to just 1%, which I think many would argue still looks optimistic, it is forecasting that we will see a net gain of 400,000 people joining the workforce and becoming economically active this year, even though unemployment is forecast to rise.

Can the Minister shed any light on this forecast? Specifically, how many jobs will be created in the public sector and how many in the private sector?

My Lords, there are clearly a number of lessons to be learned from the Spring Statement, but I will draw two quite serious ones: an omission and a failure of communication.

Turning first to the serious omission—noble Lords who know me will expect me to say this—this was an opportunity to attempt to improve our relations with the European Union, given the benefit that it would have for trade and growth, as my noble friend Lady Kramer indicated.

I would welcome the Minister giving somewhat more extensive comments on that when he responds. The second is the failure of communication. There is no doubt whatever that the problems around the Welfare Reform Act in this area have become far too high.

The Economic Affairs Committee of your Lordships’ House, on which I have the honour to serve, looked at that several months ago and concluded that the structure and incentives are wrong and that something needs to be done about it.

How did the Government manage to implement a potentially very successful reform in such a disastrous manner? They have all the disability charities down their throats and the noble Lord, Lord Lamont, complaining about it. How did they manage that?

I am not sure that I liked the last part of the noble Lord’s question there. On our relationship with the EU, I am not sure that the Spring Statement is necessarily the place in which you update every single part of the Government’s policies.

The Government are engaged in a reset of our relationship with the European Union. Anyone who has heard me speak in this House will know that I have very clear views on the economic impact of the previous Government’s Brexit deal; it reduced our GDP permanently by 4%.

So, when we have a conversation about growth, we have to take that into account. That is exactly why the Government are engaged in resetting our relationship with the European Union.

We have set out ambitious proposals for increasing our trade relationships and improving our security co-operation with the European Union.

This Chancellor was the first to address European Finance Ministers since Brexit and this Prime Minister was the first to address his European colleagues since Brexit. This is a very serious set of proposals and we are taking it forward at pace.

We are ambitious, even though we know that it will take time. The welfare reforms were set out by the Secretary of State for Work and Pensions in the House of Commons last week. She said that the figures were subject to final costings by the OBR.

The Chancellor came to the House yesterday and updated those costings.

My Lords—

My Lords—

We will hear from the noble Lord, Lord Wigley, next and then from my noble friend Lord Davies of Brixton.

My Lords, is the Minister aware that in a Radio Wales interview this morning on yesterday’s Spring Statement, the Chancellor of the Exchequer did not seem to be aware that the First Minister of Wales, Eluned Morgan, had written to her two weeks ago about the serious financial issues facing Wales and still had not had a substantive reply?

The Chancellor also did not seem to be aware that housing is a devolved matter in Wales or of how many new jobs her announcement about Newport will generate.

In these circumstances, will the Government appoint a Welsh MP to a ministerial role in the Treasury explicitly to deal with matters relating to Wales?

I am grateful to the noble Lord for his question. I am not in charge of the Chancellor’s correspondence unit, so I cannot say whether that letter has been replied to. I am also not responsible for appointing MPs to ministerial positions, so I cannot answer that point either.

What I can tell the noble Lord is that, as a result of the measures announced in the Spring Statement yesterday, £58 million of additional Barnett consequentials will be provided to the devolved Governments in 2025-26, £16 million of which will go to the Welsh Government.

The UK Government have already made considerable progress on growth in Wales, including by confirming the Wrexham and Flintshire investment zone and designated tax sites in both the Celtic and Anglesey freeports, and by supporting steel communities through the Port Talbot Tata Steel transition board and providing £25 million of additional funding to the Welsh Government to keep coal tips safe.

My noble friend will be aware that the two key figures projected in the OBR report are the future course of income in the form of taxation and expenditure.

There is a high degree of uncertainty about both those projections, and yet under our fiscal rules, the Government are using the difference between those two highly uncertain figures as the control variable, causing an incredible degree of uncertainty. That is what the rules require.

Does my noble friend share my surprise that using this highly uncertain figure is an appropriate basis on which to take away benefits from hundreds of thousands of people and put them into poverty?

I hope my noble friend is not following the path of Liz Truss and the party opposite by criticising the OBR, because that is not a sustainable basis on which to build economic policy.

The Chancellor has been clear that the fiscal rules are non-negotiable, and the OBR has confirmed that the Government are on track to meet them. On the wider policy of welfare reform, as I have said before, the system was unsustainable.

It had the wrong incentives, and it is important that we get people back into work, because that is the best route out of poverty.

My Lords, the welfare cuts will push women, children, the disabled and ethnic minorities further into poverty and lower their living standards. Surely, this is discriminatory and in breach of equality and human rights laws. Can the Minister tell us what consideration was given to equality laws?

First, it was pensioners, now the disabled—why are this Government targeting the most vulnerable in society?

They are not, and I am sure that the policies are fully in line with all equality laws, because that would have been signed up to before the policies were published.

On what we are doing for working people, we saw yesterday that wages are now rising faster than prices, and that in this Parliament living standards will rise at twice the rate they did in the previous Parliament.

During the Minister’s main response, he mentioned small businesses, SMEs, job creation and deregulation a number of times. Can he give the House the names of any SMEs that support the Employment Rights Bill?

No, I do not have a full list of all SMEs in front of me, and I am not sure that that is a sensible question to ask me, if I am honest. Everyone is clear that we have a very clear small business strategy. We are helping small businesses to expand and grow, and to trade with the European Union.

My Lords, the fact is that areas such as South Yorkshire suffered from years of economic mismanagement and underinvestment by the previous Government.

This Statement shows that, by stabilising the economy and investing in construction, defence and clean energy industries, the Government, with a hands-on approach, can create highly skilled, well-paid jobs and stimulate growth.

But can my noble friend the Minister assure me that there will be a laser-like approach to areas such as South Yorkshire, which have been neglected for too long?

I am grateful to my noble friend for that question and yes, I absolutely can give her that assurance.

The Chancellor’s construction skills announcement yesterday—referred to by the noble Baroness, Lady Neville-Rolfe, in her opening comments –shows that, over this Parliament, the Government are funding a £625 million package to boost skills in the construction sector.

This is expected to provide up to 60,000 more skilled construction workers to support the Government’s plans to deliver 1.5 million homes and progress vital infrastructure projects right across our country.

My noble friend talks about the importance of regional growth in areas such as South Yorkshire. As she knows, growth is the central mission of this Government.

Through the growth mission the Government are restoring stability, increasing investment and reforming the economy in order to drive up prosperity and living standards across every single region of the UK—in our cities, our towns and our communities.

So far, we have done a considerable amount of work to increase growth and living standards throughout the country, but I am very aware there is a lot more to do.

My Lords, do the Government believe that we have a shortage or a surplus of labour? The question arises because the OBR has calculated an output gap of 0.5%, closing by 2027, which suggests that we actually have full employment, yet that flies in the face of common sense. We have 1.

5 million people, or 4%, unemployed; 8.4 million, or 20%, working part-time; 2.3 million, or 5%, on disability benefit; 3.3 million, or 8%, on incapacity benefit; and 4.2 million, or 10%, drawing sickness benefit.

I am not suggesting that they are all available to work—of course that is not true—but some of them are. Can the Minister ask the OBR to make clearer the basis of its calculations of capacity and output gaps? On those depends the whole success of the Government’s economic strategy.

I am grateful to the noble Lord for his question and his expertise on this matter. He rightly highlights one of the most important challenges facing this country, which is inactivity. We have far too many people who are economically inactive.

We are the only country in which inactivity has not reduced to pre-pandemic levels at this point, and that clearly is not a sustainable situation. A lot of our policies are driven towards ensuring that people can re-enter the labour market, exactly as he says.

On speaking to the OBR, I am more than happy to make that point to my colleagues.

My Lords, the Minister is a man of integrity whom I hold in great regard and respect. So could he just be straight with the House and acknowledge that further cuts in public expenditure or more tax rises are absolutely inevitable, given the impact of the Budget on growth?

I am grateful to the noble Lord for his very generous comments; I hold him in equally high regard and have enormous respect for him and his expertise in this matter. I do not think, however, that what he says is in any way inevitable. He talks about the impact of this Budget on growth.

As he will know, yesterday the OBR upgraded its growth forecast from 2026 onwards for every single year of the forecast. For the first time, the OBR has recognised one of the major planks of our growth strategy—the planning and infrastructure work we are doing.

It says there will be a permanent increase in growth of 0.2% by 2029, and 0.4% over the course of the decade. So the impact on growth of yesterday’s Spring Statement was positive. The noble Lord talks about the risks. Of course there are risks.

The OBR set out various scenarios for various risks, but the planning upgrade shows that there are also upside risks, as it were, in terms of growth.

It shows that tax and spending is not the only way of meeting our fiscal rules; we can use growth to meet them, as yesterday’s planning announcement shows. It reduced the deficit by £3 billion in 2029 and as a result, there was growth of 0.2%.

So I do not take what the noble Lord says as an absolute. Of course there are risks, and we are planning for those. We have rebuilt the headroom and eliminated the black hole in public finances, as he knows. That is an incredibly important way to set us up for the future.

My Lords, the OBR forecasts that the Labour Government will meet two of the fiscal rules earlier and will be within touching distance of their new homes pledge. Can the Minister comment of those areas of progress on delivering growth, particularly the new homes pledge?

I am grateful to my noble friend. Yesterday, the OBR said, as I have just outlined to the noble Lord, Lord Forsyth, that the Government’s planning reforms will increase our economic growth and, most importantly, will put us within touching distance of meeting our 1.5 million homes pledge.

The OBR said that we will get to 1.3 million homes purely on the reforms we have introduced in the first nine months of this Government. Clearly, those additional homes are incredibly important.

At the same time, we announced a major programme of construction skills works, so that we have the skilled workers necessary to build the homes we need.

Further to the question asked by the noble Baroness, Lady Kramer, regarding American corporations paying tax to the UK, what assessment has the Treasury made of the Republic of Ireland and its ability to attract American corporations?

That is due to a combination of things—the corporation tax is half that of the UK’s, and there are lots of other tax incentives that are taken directly out of the UK economy.

I appreciate that the Minister may not be able to answer this in full here, but can he write to me if there is an assessment? The Irish economy has been transformed by attracting American inward investment. Perhaps we could learn a thing or two from them.

It is right to focus on inward investment. That is a very important aspect of our growth strategy. On corporation tax, we have set out clearly that we will cap it for the duration of this Parliament. If there is a competitive threat then we will act.

That contrasts with the previous Government, under whom corporation tax rose and fell constantly, which did not give businesses the stability that they need.

Inward investors tell us that planning is the number one barrier to bringing money into this country—it gets tied up in planning for years, with horror stories of planning applications lasting 13 years or more.

Our planning reforms are vitally important, as they will raise skills to create that skilled workforce. The number one thing inward investors are looking for is stability.

I genuinely believe that the Budget last October, in wiping the slate clean and repairing the public finances, provided an incredibly important platform of stability to allow such investment to take place.

The Minister believes in compassion and fairness.

A couple in a non-disabled house receiving universal credit will be £370 a year better off with the reforms announced yesterday, but a couple on universal credit, where one is disabled and the other is a full-time carer, will lose £10,300 a year due to changes to PIP and the carer element of universal credit.

How is this compassionate and fair?

My Lords, as has been highlighted, the core fiscal judgment of the Chancellor is that the policy measures announced yesterday will maintain the fiscal headroom of £9.9 billion. If that is a balanced judgment, the risk of that headroom growing or shrinking in the near future should be broadly equal.

However, in the light of the significant downside risks—tariffs, weak growth, policy risk—does the Minister agree that the risks are weighted to the downside?

Although spending cuts and tax rises might not be inevitable, the implication is that it is more likely than not that further tax increases or spending cuts will be required to maintain that headroom.

I thank the noble Lord for his question. I was lucky enough to work with him in the Treasury when he was an official there, so I know that he knows what he is talking about. Clearly, there are risks, as I set out to the noble Lord, Lord Forsyth.

The job of the Government is to mitigate those risks and pursue a growth policy to ensure that we have sufficient growth and are resilient to the challenges that we are going to face. We have to get our public finances in order so that we have that resilience.

We have to pursue stability, investment and reform. We are doing all those things to ensure that we have resilience. On tariffs, we are engaged in a conversation with the United States Administration, so we are doing what is necessary.

We have rebuilt the headroom in full and we have, I think, provided the resilience needed to cope with an ever-changing and uncertain world.

The Minister has repeatedly cited figures on living standards. What impact will yesterday’s Statement have on the living standards of the poorest half of our population?

The impact assessment that has been done so far does not include the £1 billion re-investment, so I am not sure that we can look at those figures right now. On real household disposable income, living standards will now grow this year at double the rate expected at the time of the Budget.

The noble Baroness was a Treasury Minister when we saw the worst ever Parliament for living standards in history. Living standards will rise twice as fast in this Parliament compared with the last.

My Lords, the noble Baroness, Lady Neville-Rolfe, said that we all want growth. She will perhaps have seen the comments of the shadow Chancellor. He admitted that the party opposite’s approach to defining its economic policy is a “blank sheet of paper exercise”.

There have been reports of Conservative Party researchers scouring their archives for policy inspiration. Is that not why we had no growth under the last Administration and why this Government need to correct the course, through the Autumn Budget and the Spring Statement?

My noble friend very well draws attention to two key problems with the party opposite: the first is its record and the second is its future plans. Its record on growth is an absolute catastrophe. We saw austerity, followed by Brexit, followed by the Liz Trust mini-Budget.

Growth was one of the biggest failures among a whole litany of failures of the previous Government. Looking forward, it has absolutely no plan for growth. All it can do is oppose. It has no plan of its own. It has no alternative policies.

It opposes our measures to get stability, to get investment into the economy and to reform our economy. All it wants to do is criticise and talk down the economy. If the party opposite is going to criticise, it must come up with an alternative plan.

My Lords, the Minister has mentioned several times this £1 billion re-investment, which is not included in the OBR forecast.

Can he confirm that the impacts of the Employment Rights Bill, which we are soon to discuss, are also not included in the OBR forecast, including the £5 billion cost to business that it will create?

The OBR says that: “Employment regulation policies that affect the flexibility of businesses and labour markets or the quantity and quality of work will likely have material, and probably net negative, economic impacts on employment, prices, and productivity”. Does he agree with that?

I am grateful to the noble Lord for his question. I hate to correct him, but I did not say that the £1 billion is not included in the OBR’s forecast. I said that it is not included in the OBR’s impact assessment; that is something different.

The £1 billion is included in its forecast, and he is right to say that the Employment Rights Bill is not.

The OBR gives a commentary on it, which he quotes from, but the Employment Rights Bill is not included in the forecast because it is still working its way through Parliament—it has its Second Reading today.

We are confident that the Bill will result in ordinary working people having more money in their pockets and the security to spend that money by not having to worry, from week to week, whether they will be in work or how many hours they will get.

My Lords, last week, the Development Minister told this Chamber that it was government policy to return ODA to the legally required 0.7% when the fiscal circumstances allowed—meaning when the Government’s fiscal tests are met.

However, yesterday, the Green Book showed a pound-for-pound cut in ODA, linked with another policy expenditure. Can the Treasury Minister be very specific that, if the Government’s fiscal tests are met within this Parliament, we will return ODA to 0.7% in this Parliament?

I am grateful to the noble Lord. The two statements that he makes are perfectly consistent with each other. We are absolutely committed to returning ODA to 0.7% when the fiscal conditions allow and we are currently switching ODA spending into defence spending.

Those two things are perfectly consistent.

My Lords, the Government have had difficulty in scoring the £1 billion that has been mentioned and predict that there will be 16,000 fewer jobs as a result of the welfare changes. How have the Government come to this huge sum, where is it going to help and how many people are predicted to be helped?

The Government must know this before the OBR revert in September. If they do not, why not?

I am grateful to the noble Viscount; he has far greater expertise in these matters than I do. The Secretary of State, when she presented the package of reforms to Parliament, said that the costings that she was setting out were subject to final costings by the OBR.

The OBR has now set out its final assessment of costings and confirmed that this welfare package will reduce welfare spending by £4.8 billion in 2029-30. Following the OBR’s final assessment of the welfare savings from the package, taking account of the £1.

4 billion of investment the Government are putting towards the reforms, including the £1 billion of employment support, the net welfare savings of this investment is around £3.4 billion.

Can my noble friend confirm that the Statement’s provision for capital spending is crucial if the UK is to sustain and safeguard its research and development budget and infrastructure, such as data centres, that will be vital for future growth?

Does he agree that we will need a combination of our world-class universities, entrepreneurs, emerging AI companies and others not only to start up but to scale up businesses in this country?

As your Lordships’ House’s Science and Technology Committee is now investigating, it is the scale-up that is the real challenge.

My noble friend is right. The Autumn Budget increased capital investment by £100 billion over the Parliament, including investment to protect record R&D funding, which, as my noble friend said, is vital for growth.

The OBR has looked at the growth impact of that investment across a decade and it has been clear that those capital investments—which, incidentally, the party opposite opposed—will lead to a significant 0.4% increase in growth over the longer term.

Not cutting capital spending, which the party opposite did time and again, was one of the most significant growth measures that the Chancellor outlined in her Statement. My noble friend also talked about start-ups and scale-ups. He knows that I agree with him 100% on that.

This country is extremely good at start-up; it is much less good at scale-up. Getting the necessary capital to those scale-ups is one of the most important things that we can do.

I am grateful to the noble Lord for his expertise and experience in this matter. I am more than happy to look back at the period that he mentioned. The world has perhaps moved on a bit since then.

Most importantly, he will see in the transformation fund that the Chancellor set out yesterday the importance of AI tools, for example, to modernise the state. Clearly, these types of technology did not exist at the point he spoke about.

Using modern technology to help us get productivity savings in the public sector, in the Civil Service and more widely, will be an important part of the modernisation programme.

My Lords, I thank my noble friend the Minister for the Statement. In the run-up to the Spring Statement there was a lot of guff, frankly, about a so-called return to austerity.

Although there have been some difficult decisions to make, is it not the case that, far from delivering the ideological austerity that we saw under the noble Lord, Lord Cameron of Chipping Norton, the Government are delivering real-terms increases in day-to-day spending, as well as much needed capital investment?

I am grateful to my noble friend for making that point. The Spring Statement confirms that day-to-day spending is growing in real terms in every single year of the forecast period by an average of 1.2% a year. The spending review envelope is fully protected.

This means that we will spend £50 billion more on day-to-day spending in 2028-29.

I remind the House that the noble Baroness opposite said in her opening remarks that she thinks spending is too high, so I am looking forward to hearing what she would like to cut from that £50 billion the next time we have a debate.