The Financial Secretary to the Treasury (Lord Livermore) (Lab)

I am very grateful to the noble Baronesses, Lady Neville-Rolfe and Lady Kramer, for their comments and questions on yesterday’s spending review Statement. It would have been perfectly credible for the noble Baroness, Lady Neville-Rolfe, to say she cannot support any of this investment because she did not support any of the difficult decisions that we took to make this investment possible. It also would have been perfectly credible for her to come here today and say she has changed her mind, now supports the difficult decisions that we took and therefore will support the investment that those difficult decisions have permitted. Unfortunately, the noble Baroness did neither of those things. We heard her support for the huge amounts of spending we announced yesterday for the nuclear programme—for example, £30 billion into nuclear. We heard her support the £3 bus fare cap, even though her party had refused to fund it any longer than last December. Yet she has opposed every difficult decision every time we have stood here for almost a year now. She has opposed every single difficult decision we have taken to repair the public finances and fund the public services. Even today, she was opposing the changes to the fiscal rules that enabled the additional investment spending we have made. She supported the nuclear spending, which is investment spending, but she opposed the fiscal rule change that enabled that spending. That simply is not credible. The party opposite cannot support the investment in the spending review without supporting the money to pay for it. We all know exactly how we ended up with a £22 billion black hole in the public finances. That is exactly the approach that Liz Truss took in her mini-Budget, which crashed the economy and sent mortgage rates spiralling. We will not be repeating that mistake. The shadow Chancellor is distancing himself from the Liz Truss approach, and the noble Baroness should distance herself from that approach too. She talked about the money that is being allocated. I am not sure she understood the process of the spending review: the envelope was set by the Chancellor last spring. She cannot say in any way that we have lost control or are deviating from that envelope, because the Chancellor allocated every single penny of that envelope and not a single penny more. I fully understand what she is saying—that she understands that—but, in that case, I do not understand why she made the criticisms she did. The Chancellor was simply allocating the envelope that she set out in the spring. The noble Baroness also said that the last Government delayed the spending review. We all know why the last Government delayed the spending review: because their sums did not add up. They had a £22 billion black hole at the heart of it, and they knew that the moment they did a spending review that black hole would be revealed. That is the reason why they delayed the spending review. The noble Baroness talked about growth and the performance of the economy. In the first quarter of this year, the UK was the fastest-growing economy in the G7. Under the forecasts inherited from the previous Government, this year the UK would have been the slowest-growing economy in the G7. If she wants to compare growth stats, I am more than happy to do that with her all day. The figures out today show that April was a challenging month, given global headwinds. That was the month in which the tariffs were imposed by the US, and it was before we had agreed the trade agreement with the United States. If you dig into those growth figures, you can see that a lot of it is driven by a decline in exports because of that. It underlines the need to continue to deliver on our growth mission. The noble Baroness talked about facts. The facts are that living standards are now forecast to grow four times faster than in the previous Parliament. Real wages have already grown by more in the first 10 months of this Labour Government than in the first 10 years of the previous Conservative Government. She often talks about productivity and GDP per capita, but GDP per capita fell in the last Parliament. It is now forecast to rise by 5.6% in this Parliament. On top of that, the IMF has upgraded our growth forecast, as did the OBR in the Spring Statement. It is disappointing to me that the noble Baroness often says that she and I agree on growth, but she did not mention any of the growth-boosting measures included in this spending review. She did not mention that capital spending would increase growth by 1.4% in the long term. She did not mention the £39 billion affordable homes programme, which is vital for growth. She did not mention the record amounts of R&D funding rising to £22 billion a year. She did not mention any of the major rail projects to connect our towns and cities and make sure that growth is felt right throughout the United Kingdom. She did not mention the skills budget and the amount of money we are spending on skills. It is disappointing that she says she supports growth but then does not welcome or mention any of the investment that we are doing to get that growth. The noble Baroness mentioned borrowing and the public finances. Average borrowing in this Parliament will be 2.8% of GDP, compared with 5.6% of GDP over the previous 14 years. She talked about the investment rule. Obviously, we have changed that fiscal rule—quite rightly—to enable the much-needed investment infrastructure to deliver stronger growth in the future. She opposes that change to that fiscal rule and yet somehow also claims to support the investment that the rule brings about. The noble Baroness talked about tax. Yesterday’s spending review allocated the envelope set out by the Chancellor in the spring. These record settlements have been made possible only by the tough but necessary decisions we took in the Budget last October. On future decisions on tax and spending, I am not going to write four years’ worth of Budgets at this moment, even if that was in my power. The independent OBR will produce a new forecast in the autumn for the Budget. The Chancellor will take decisions at that point based on that forecast, and I will not prejudge those now. The noble Baroness asked me about funding of the winter fuel during Question Time earlier. As she knows, we will set that out in full at the time of the Budget. The noble Baronesses, Lady Neville-Rolfe and Lady Kramer, both asked about defence. As the Chancellor made clear yesterday, increasing defence spending is a strategic necessity, and that is why we will be spending 2.5% of GDP on defence by 2027. The noble Baroness, Lady Kramer, asked about the precise definitions: 2.5% will absolutely be the case by 2027. If she wants to include the intelligence agency spending and the other spending she mentioned, it is 2.6%, but it is 2.5% excluding those things—I can give her that absolute certainty. Our ambition is to reach 3% in the next Parliament when fiscal and economic conditions allow, but we will not be putting arbitrary dates on when we will meet that. I have two final points: the noble Baroness, Lady Neville-Rolfe, asked about efficiency and productivity. This is the first zero-based review done into spending for 18 years. The previous Government had 14 years to do a zero-based review, if they really cared about efficiency in public spending, and they did not do one at all over the course of 14 years. The noble Baroness did not mention any of the reforms we are doing in the NHS. In fact, she sounded quite sceptical of additional money going into the NHS, which is a great shame as we know it is the most treasured public service in this country. She did not mention digitisation, for example—putting £10 billion into the NHS app to make it far more efficient in its spending. We are doing a great deal more on efficiency savings. All departments have identified at least 5% savings and efficiencies by 2028-29. Finally, the noble Baroness, Lady Kramer, spoke about social care. I am grateful to her for welcoming some of the other additional spending, particularly on the NHS and housing, for example. She talked about social housing: we have made the £39 billion investment into the affordable homes programme. That is crucial for growth, as she said. I pay tribute to the noble Baroness, who has consistently campaigned on social care. The spending review provides an increase of over £4 billion available for adult social care in 2028-29, compared with 2025-26. That includes an increase to the NHS’s minimum contribution to adult social care via the better care fund, in line with the Department of Health’s spending review settlement. This will support the sector to improve adult social care, with further details to be set out shortly. The noble Baroness asked about the fair pay agreement. As the Chancellor said yesterday, we remain committed to delivering a fair pay agreement in line with our manifesto commitment, and we will set out further details of that shortly. She also asked about the British Business Bank. There will be an increase to £25.5 billion, and it will set out further details as to how that will be allocated. In the industrial strategy in a few weeks’ time—access to finance is obviously a major issue for all those sectors—we will set out how the British Business Bank can help with those access to finance issues.