Statement of balances

These accounts are produced annually for the National Insurance fund. Many of the people commenting on the State Retirement fund seem unaware of this structure. Most the so called benefits paid out by the Fund  are the   State Retirement Pension entitlements, based on people’s age and past NI contributions.(97%).

The government Actuary makes an annual appraisal of solvency, with five year forecasts. His 2026 Report stated there is likely to  be a surplus  of tax revenue over spending every year from 2026-7 to 2030-31, a five year run. The fund needs to keep a substantial working cash balance to pay  pensions. This is likely to be over £100 bn this year and rising.He thinks the accumulated surplus will reach £160 bn  2030-31.

The Treasury has to make payments to the Fund if the Actuary judges it to need them, last required ten years ago. The Treasury may not take surplus money out to spend elsewhere without a change of law or Parliamentary approval to do so .

A proportion of National Insurance, currently £35 bn, is sent to the NHS every year and not transferred into the Fund. Increasing  the proportion of NICs taken in this way would also need a law change. I am setting this out as so many people debating NIC s seem unaware of the special treatment and their special purpose, which is to pay pensions  based on contributions.

The needless and damaging increase in NI Contributions by Reeves means the Actuary forecasts a surplus as high as £160 bn by the end of the decade.

My Lords, the Conservative Government were swept from power, first because they did not deliver on immigration control in the way that they promised but, secondly, because they presided over a very major surge in inflation in the early 2020s, which had been brought about by excessive spending, excessive borrowing, the deliberate repression of interest rates and the artificial creation of very large sums of money by the Bank of England. Like many, I supported the first very substantial injections into the economy when lockdown was first announced. Lockdown took a lot of activity and income out of the economy and a very major offset was needed. However, I became increasingly critical and impatient in the recovery period because the Government and the Bank of England did not seem to understand that we were into recovery and carried on with excessive borrowing, excessive spending and excessive money creation. I and others told them that it was bound to be inflationary, but much of the great British economic establishment was slow to see that and the result was a nasty cost of living crunch that did damage to the electorate and drove the Conservatives from power in a perfectly understandable way.

By 2024, however, the Conservative Government had got much better control of the economy and, for the first six months of 2024, under Conservative direction, the inflation rate came back down to the 2% target. For those six months, it was the fastest-growing economy of the G7. The Government set out a five-year plan in their 2024 Spring Budget, as always, which had entirely credible figures to show the deficit and therefore the borrowings coming down year by year to reassure bond markets. Under the Conservatives, of course, it was considerably cheaper than it is today for the Government to borrow because there was a bit more credibility in the medium-term prospects for controlling borrowing than there is today.

I think the fairest thing to do to try and analyse where we are, because I want the Government to succeed and I think they need to consider very carefully where they are when framing their next Budget. Let us compare the plans of the outgoing Conservative Government in the 2024 Budget for 2027-28 with those of this Government. Let us concentrate on 2027-28 because that is when the new Prime Minister and his new Chancellor can make any changes they like. They have inherited the current year and have chosen not to make many changes, just a few incidental, very small increases in spending. They have basically lived with the Reeves/Starmer construction of this year, but let us hope they think carefully about what they want to do for 2027-28.

What have they inherited from Reeves and Starmer? Well, in two Budgets, Reeves and Starmer increased taxes by £66 billion by policy changes—there is also, of course, a much bigger increase in taxes from fiscal drag and inflation—and for 2027-28 they suggested that they wanted to borrow £97 billion more than the outgoing Conservative Government had planned to do. The Conservatives were planning to borrow £50 billion in 2027-28, and the current Government inherits £147 billion of planned borrowing. There is then the level of spending: the Reeves/Starmer Government added £145 billion extra spending for 2027-28 compared with the £97 billion extra that the Conservatives were planning for that year. So spending will be £242 bn up. The total package is to borrow a lot more, tax a lot more and spend a great deal more.

Looking at the economic performance of the last two years, we see that this has not been a benign policy mixture for the economy. Unemployment has gone up and inflation has gone up, not entirely because of world events in the Middle East, but also driven by public sector costs where there has been a very big increase in public sector wages. I have no problem with paying people in the public sector more, but there should be productivity gains to help pay for it, and those have been sadly lacking. We have seen the Government stumbling to maintain tax revenues at the more elevated levels because they have triggered what in the 1970s was called a brain drain. A lot of talented people and a lot of people with wealth have decided that they want to make their lives or to make their investments elsewhere, which is a considerable concern. I have no problem with wanting to tax the rich more than everybody else, because they have the money to tax, but if you overdo it they do not stay to pay the money you wish to raise from them and then everybody else has to pay rather more. You lose those easier amounts you can get if you tax the rich in a sensible and internationally competitive way.

As has been made very clear by my noble friend Lord Bridges, the Government has to take action on spending. I do not think higher taxation is going to help get the Government out of this, given that they have ruled out the main taxes on most people. They would have to target the wealthy, the energetic, the people who work harder rather more than anybody else. More of that would do damage to growth and would mean less revenue rather than more, so they have to find public expenditure reductions that can start to bring the budget into a proper shape.

I do not share the view of those who think we should pick on the pensioners or the disabled to make particular sacrifices at this juncture. Those who are genuinely disabled need our proper financial support and I think both parties were right to promise the triple lock in the election and should keep to their word. There are many easier targets, which I have often mentioned, but which time does not permit me to handle today. My party has set out a very good set of cuts for the benefits bill to start us off.

My Lords, I welcome these probing amendments and look forward to the Minister’s response to some very important general issues. It is right that the staff in all the operating companies that will be affected by this should have an early idea from the Government about what is planned for their future employment.

I am one of those who welcome the idea that we want a well-paid profession serving on the railways. For the sake of taxpayers, who are putting in substantial grant in aid and capital money, and of fare-paying passengers, who often have to pay very high fares, we need a system for negotiation between staff and Great British Railways which is more likely to achieve the increase in productivity that could justify the higher pay for staff without imposing an ever-higher charge on the taxpayer and fare-paying passengers. This is more than a detail that can be left open; we need to know who the employer will be, what the status of the current contracts is and how they will be put into transition to new contracts for the staff when their employment changes.

Is there anything the Government can tell us about how they might—they hope—have better relations with the unions in future? Can we  look forward to a better experience in getting that balance of better pay for better delivery, smarter working, adopting work practices and being willing to operate new capital investment in a way that delivers higher productivity and higher quality of service?

I also welcome my noble friend Lord Moylan’s draft of what the purposes should and could be, which may not entirely match all the Government’s aims. It would be interesting to hear from the Government which of his suggestions are intended or implied in the current legislation, so that we can have some early indication of what the mission statement of the new railway might be.

I think taxpayers and railway users are expecting more services, not fewer. That has not been the early experience of the last two years. They are expecting better punctuality and timeliness, which would also be welcome. What the new railway will definitely require is more feel for where more passenger movements are required or possible. As in the early days of privatisation, surely the early days of full nationalisation they might want to achieve a trend of rising passenger numbers. Privatisation  achieved that very well, with  the ability of companies to develop timetables and services more suited to modern travel needs and therefore fuel the continuing progress of providing more growth in passengers and revenue.

If a new railway management—the controlling mind of GBR—knows how to do that, it will make everything a lot easier if the background of the completion of these arrangements is rising passenger use, rising revenues, greater flexibility over timetables and thinking about growth rather than cost cutting and the elimination of less profitable routes. That can easily get you into a spiral of downturn, as with the nationalised railway experience for most of its time post war, until privatisation reversed those difficult trends.

I hope that the Minister will not rule out one of the modest successes of recent years, which is the ability to have a competitive challenge to the monopolist. There are times when people outside will see ways of harnessing people, talent and capital to provide additional and better service using the existing track, and for that they will clearly need fair terms for access, and that will provide an innovative stimulus to the nationalised monopoly. However, I fear that the Government will not want to do that, and so I think they will find it that much more difficult to innovate and improve the timetables without that stimulus or spur from others generating such ideas and providing such a challenge and opportunity for the growth of the railway.

This is no way to legislate for Northern Ireland. It is not right to annex part of our country to the European Union. At the time of the Windsor Framework, I and some colleagues in the Commons opposed it and pointed out that there were much easier ways of organising the trade and border arrangements between Great Britain, Northern Ireland and the Republic of Ireland. The Government should go back to that work and understand that we do not have here a system of handling Northern Ireland’s law and trade which meets the requirements of the loyalist community, and maybe others in Northern Ireland as well.

The Government should be ashamed of how undemocratic this process is. As the noble Lord, Lord Dodds, has rightly identified, there is no point in consulting all the people who are to be affected by regulations in these areas in Northern Ireland because the Government cannot change them—and the Government cannot be bothered to work out the impact costs, or even the impact benefits, of the regulations because they rightly understand that they are a spectator. They are not in charge of any of these things.

Then we are told in the documents that there is going to be no review of how this works out. All the other examples that come to the Commons and the Lords from government for consideration go through a proper process. There is consultation with the people they are going to affect. Both Houses expect a proper assessment of costs and benefits. We expect a proper debate and if the Government have got it wrong, we expect them to go away and change or amend it. We certainly expect there to be a review after the process, so that we can see whether it has worked out in the way that the Government wanted.

The fact that none of these things can happen on any of these SIs means that we are going to spend a lot of time, on SI after SI, complaining about the process, so I have this suggestion for the Government. They have embarked on negotiations for something they call the EU reset. So far, all I have seen is a list of things that the EU wants, with the Government indicating that they would like to give those away in order to purchase some greater friendship or influence. It is always very odd that they think you get influence by giving in to what the other party wants. That is not the way most people negotiate.

Would it not be a good idea for the Government to put to the EU that this is doing damage to relations between communities in Northern Ireland and to the way in which they are governed; that it is undemocratic; and that we surely need a new settlement over how Northern Ireland legislation and trade are conducted? I very much recommend the mutual enforcement model, where we say that we will not send anything that is non-compliant from Northern Ireland to the EU and that we do not want to impose any new barriers on the Republic of Ireland/Northern Ireland border—indeed, that we would dismantle all barriers between GB and Northern Ireland.

The Chancellor underwhelmed as he stumbled through a tedious and uninformative speech. There was no attempt to tell us when defence spending will reach the target he wanted when Defence Secretary and no comment even on how to pay for the increase he inherits from Rachel Reeves. He tells us about a £4.7 bn new black hole where the revenue to pay the extra defence bills should be. There was a complete absence of ideas to cut or control spending. Tax rises were not ruled out. More spending and more borrowing look inevitable.

He says he will back innovation and growth, but fails to say how beyond a £150 m fund for smaller businesses in the North. This tiny sum is just 0.005% of the economy! He promises a 25 % cut in business regulations without any clue of which he will cut. It is a ludicrous over claim, probably copied from the laughable EU pledge to cut its rules by 25%. Instead this government is likely to sign a humiliating EU Re set deal signing UK businesses in a number of important sectors to a wide range of additional EU rules. This is fatuous as  the  8% of UK businesses that do export to the EU already conform with their regs to sell into their market. The other 92% do not export so should not be lumbered with these needless extra costs.

He said he would deliver the findings of the Fingleton  Review and “ extend those to other sectors, including launch of a  review of the costs review of rail infrastructure”. Whatever does that nonsense mean?

1. National Insurance increase, taxing employers too much so destroying jobs
2. Banning all new exploration for oil and gas
3. Failing to agree the development of Jackdaw and Rosebank fields
4. Putting up Business rates on High Street, leading to shop closures and fewer retail jobs
5. Banning the production of diesel and petrol cars from 2030
6. Putting up energy prices to the highest in the advanced world, leading to industrial closures
7. The  Family Farms and Small Business tax has led to business closures
8. Employment Rights Act has led to fewer jobs
9. Borrowing too much has pushed up interest rates, hitting investment and housebuilding
10. VAT on school fees has closed down schools, sacking teachers