House of Lords STUNNED at Rachel Reeves' 'DISASTROUS' economic plans in King's Speech

Added: 2026-05-15

[00:00:00]My lords, when the chancellor of the excheer made her first speech in that office on the 8th of July 2024, she said that by growing the economy, the government could rebuild Britain and make every part of the country better off. My lords, that was not a modest claim. It was the central economic wager of this government. Ministers told the country that the hard arithmetic of our public finances could be overcome by sustained growth across the parliament.

[00:00:29]that higher productivity, higher investment, stronger real wages and the higher sustained growth in the G7 would produce abundance and avoid difficult choices. And that ambition is not wrong.

[00:00:43]Britain needs growth. We want the country to be more prosperous, more productive, and more secure. However, growth is not summoned by slogans. It is not delivered by a press release, a reset, a mission board, a pillar, or another ministerial speech. Growth is earned by those who embrace risk and sustained effort to produce value.

[00:01:06]Government can at best help enable growth by making this country the best place in the developed world to invest, to hire, to build, to innovate, and to make things. Two years on, the question before this house is not whether the government's ambition was the right one, but whether their policies have matched that ambition. The answer, I am afraid, is clear. The government have borrowed too much, grown too little, and regulated to excess.

[00:01:35]>> The Office for Budget Responsibility tells us that successive plans to reduce borrowing and stabilized debt have, in its words, not yet materialized. Public sector net borrowing was 152 billion pounds in 2425 and is forecast at 132 billion this year. Underlying debt has continued to rise. Debt interest spending is forecast to rise from 110 billion in 2526 to 137 billion by 2030 to31. And while government debt is rising and borrowing costs are at a 30-year high, the government is spending33 billion pounds annually on welfare. My lords, that is more than the government receives in income tax. That is the very definition of unsustainable.

[00:02:25]And when the government sought to cut the rate of increase in that spending, they U-turned. On Tuesday, the prime minister showed us how determined he can be in the face of unsustainable and soaring pressure. But when it came to the essential battle on welfare, the real test of his ability to get those tough and big calls right, the prime minister capitulated. And the government plans would merely have slowed the rate of gra growth, not reduced the bill. If we are to deliver the brighter future young people deserve, we need to be much more radical. So can the noble baroness the minister say what measures in the king's speech will bring our unsustainable welfare bill under control and can she say why welfare which is so great a challenge is not the subject of one of our debates this week.

[00:03:16]>> My lords those are not abstract numbers.

[00:03:19]Every pound spent servicing debt is a pound that cannot be spent on defense roads hospitals skills or tax reductions. High debt interest is not a symbol of compassion, but the price of policy failure. At the same time, growth is disappointed. The IMF has cut its forecast for UK growth this year from 1.3% to 0.8%.

[00:03:41]The economy grew by just 0.1% in the final quarter of 2025.

[00:03:46]Youth unemployment is up. There are now more than 700,000 unemployed young people aged 16 to 24. and youth un and the youth unemployment rate has risen over the year. This is the reality behind the rhetoric. Ministers promised through their words a growth government, but they have produced through their actions a high borrowing, high tax, high regulation government.

[00:04:10]>> As as the outgoing minister for safeguarding and violence against women and girls said on Tuesday, it is deeds, not words that count.

[00:04:19]In the first session of this parliament, the government's preferences were clear.

[00:04:24]When in doubt, tax. When in doubt, regulate. When in doubt, create a new body, a new duty, a new levy, or a new compliance burden. The rise in national insurance employer national insurance contributions was a direct tax on jobs.

[00:04:39]It was accompanied by a lower threshold at which employers became liable. At the same time, the government pressed ahead with higher wage costs and an employment rights act, which even after the important concession on day one unfair dismissal rights secured in this house, still makes it riskier and more expensive to take on staff. My lords, employment rights matter, but so too do employment opportunities.

[00:05:04]If the government makes it more expensive to hire, more uncertain to manage a probation period, and more complex to comply with the law, it should not be surprised when firms hesitate before creating the next job.

[00:05:16]The people hit first are often the young, the inexperienced, the marginal applicant, and the small business that cannot absorb another legal risk. The same anti-growth instinct is visible in energy. The government has set out plans not to issue new light not to issue new licenses to explore new oil and gas fields in the North Sea. At a time of geopolitical instability and high energy prices, it is extraordinary to choose greater dependence on imports over the responsible use of our own resources.

[00:05:50]>> It means less domestic investment, fewer highskilled jobs, and more exposure to shocks beyond our control.

[00:05:59]So my lords, when we turn to the bills announced in the greater speak, the official opposition will apply a simple growth test to each of them. Does it make it cheaper to hire? Does it make energy cheaper? Does it make it faster to build? Does it increase productivity?

[00:06:16]Does it make investment more attractive?

[00:06:18]And does it reduce the burden of regulation rather than merely reabel it?

[00:06:22]Where the answer is yes, we will be constructive and we will support the government. where the answer is no.

[00:06:28]Where the bill where a bill creates another regulator, another levy, another licensing regime, another statutory duty, another offense, another code, another reporting requirement or another cost on business. We will challenge it firmly.

[00:06:43]And on the issue of productivity, um I'd be grateful if ministers could provide more detail on the proposals to strengthen the productivity of the civil service.

[00:06:53]The government, the country, my lords, cannot afford another session in which every problem is met with a new rule and every industry is treated as a revenue stream.

[00:07:05]An alternative king speech would start with what the economy actually needs.

[00:07:10]Lower business taxes, cheaper energy, faster planning, lighter regulation, and a serious commitment to competitiveness.

[00:07:19]It would slash business rates for the high street and for hospitality. It would remove the most damaging part of the Employment Rights Act. It would bring bring forward a serious deregulatory program, not another request for regulators to write letters about growth. It would make energy policies serve industry and households, not ideology. And it would use our freedoms outside the European Union to strike a more agile, more pro-innovation path where that is in the national interest. So I asked the noble baroness the minister which measures which measure in the king's speech will make it cheaper for a small firm to employ its next worker which will bring down the energy bill of a manufacturer which will cut the number of forms approvals and licenses faced by a growing business and which will tell investors that Britain is open not merely in rhetoric but in law tax and regulation.

[00:08:12]My lords let us turn to Europe. Like many noble lords, I listened to the prime minister's speech on Monday of this week, hoping that the government might have learned from the public's verdict in the local elections and changed course. I was disappointed. What we heard was not a reset. It was a retreat into the fil familiar instincts of the left. More state direction, more nationalization, more guarantees announced from the center, and closer alignment with the European Union.

[00:08:42]There is a place for government action.

[00:08:44]But the government cannot substitute itself for enterprise. It cannot nationalize its way to productivity. It cannot guarantee its way to opportunity if the private sector is being taxed, regulated, and second guessed at every turn. And it cannot align its way to competitiveness by binding Britain more closely to a European model whose own leaders now acknowledge is failing to deliver the growth Europe needs.

[00:09:10]>> My lords, this is not an argument for hostility to Europe. Britain should trade with Europe, cooperate with Europe, stand with Europe on security, and work constructively with our neighbors wherever our interests coincide. But cooperation is not submission. Friendship is not ruleaking, and a reset must not become re-entry by stealth.

[00:09:33]>> The British people voted in 2016 to leave the European Union. At the last election, the prime minister promised not to rejoin the single market, the customs union, or free movement. Yet, with every speech, every summit, and every reset, the government appears to edge closer to the EU's regulatory orbit, closer to payments, closer to mobility schemes, and closer to alignment for its own sake. And the irony is that Europe itself is now warning against the very model to which this prime minister seems so drawn. At Davos this year, the German Chancellor Friedrich Mertz said that Germany and Europe had wasted incredible potential for growth. He said Europe had become the world champion of overregulation.

[00:10:17]A few weeks later at the indust European industry summit, Chancellor Mertz went further. He said overregulation hampers our economic growth. He called for a regulatory clean slate and said that Europe must deregulate every sector. My lords, those are not the words of a British euro skeptic caricatururing Brussels. They are the words of the Chancellor of Germany speaking from the heart of the European project, >> warning that regulation has damaged growth, investment, and innovation. The Draggy report made the same diagnosis.

[00:10:51]It said that Europe largely missed out on the digital revolution. It observed that only four of the world's top 50 technology companies are European. It warned that innovative companies are held back by inconsistent and restrictive regulations.

[00:11:08]My lords, if the leaders of the European Union now know that their ponchum for overregulation is a central cause of their economic weakness, why is Britain being drawn closer to that system?

[00:11:19]>> Why would we import the very burdens that Europe itself is trying to cut? Why would we trade the freedom to be faster, lighter, and more agile for the comfort of alignment with a model that has underperformed?

[00:11:33]The prime minister owes the country a clear answer, not a slogan, not another platitude about being at the heart of Europe. Will the M minister confirm that there will be no dynamic alignment with EU rules without explicit parliamentary approval? And by explicit approval, we do not mean a broadly drafted Henry VIII power. Will she confirm that Britain will not become an EU rule taker? Will she confirm that there will be no new annual payments to EU programs without a vote in Parliament?

[00:12:06]>> And will she confirm that any youth experience scheme will be capped, timelimited, and will not recreate free movement by another name?

[00:12:16]Brexit was a vote to govern ourselves.

[00:12:18]The government should use that freedom to make Britain more competitive, not bargain it away in pursuit of applause in Brussels.

[00:12:27]>> My lords, the government's problem is not that its ambition is too high. It is that its instincts are wrong. It wants growth but taxes jobs. It wants investment but raises uncertainty.

[00:12:39]>> It wants enterprise but regulates success. It wants fiscal space but allows debt interest to crowd out the future. It wants to be pro business but treats business as something to be managed, charged and corrected.

[00:12:53]>> Britain does not need another reset.

[00:12:56]>> It needs a change of course. It needs lower burdens, cheaper energy, faster building, a tax system that rewards work and investment, and a regulatory culture that asks first whether intervention is necessary at all.

[00:13:12]The the official opposition will support measures that genuinely promote growth.

[00:13:17]But we will not be silent when the government repeats the mistakes of the previous session. The British people were promised growth. They have been given borrowing, tax rises, and regulation. It is time for ministers to stop talking about growth and start removing the obstacles to it.

[00:13:36]My lords, um nearly two years ago, uh the general election resulted in a brief outbreak of euphoria in the benches opposite. Then during the long parliamentary session that followed, reality bit. But during that campaign, as we heard, growth was declared as the number one uh priority of that government. And yet during that first session part of parliament m many of the government's actions pushed in the opposite direction. The truly disastrous increase in employers NIC was a striking example but it was by no means unique.

[00:14:21]This meant that the country exited the last legislative session with greatly increased operational costs for businesses. This sent uh messages that discouraged investment and pushed thousands of high street businesses and hospitality businesses into oblivion. It was indeed the opposite of a growth centered strategy. And the hangover from that session will see yet more non-growth legislation that has yet to arrive. So now we have a new set of bills, my lords. And the prism, as we've just heard, we should look through that is how does it affect the government's mission on growth.

[00:15:02]So let's look at some of them. The small business protections late payments bill.

[00:15:06]Yes, it's important that we deal with the scourge of late payments, but we will be looking to see how the legislative backup will will be delivered to support the small business strategy that the noble baroness Anderson just spoke about. Then we have the enhancing financial services bill.

[00:15:26]Well, we welcome reforms that may support growth, but we don't want to put pressure on people's savings and undermine consumer protection. So, we'll be looking very hard at the details there. The competition and reform bill seems like an attempt to water down the work of the CMA, the competition and markets authority in the way that each digital unit has been cailed. So we'll be looking very very closely at the plans on that bill and the regulating for growth bill looks like just the sort of technical bill that your lordships would like to get your teeth into. I look forward to the many hours of that.

[00:16:05]But all four of these they make important points and I'm sure there'll be lots and lots of debate in your lordship's house. But it's hard to discern a pattern and it's hard to see the strategic drive for growth within those those those moves. There's no bold moves. And my lords, when AI is set to affect every aspect of our economy, there is no AI bill in this in this session. How can that be sensible, my lords? So, I'm going to use my final minutes to talk about two other bills, and these were the ones that the current prime minister chose to pre-announce in one of his uh fightback speeches earlier this week, and that is steel and Europe.

[00:16:52]Now perhaps summoning the ghosts of Clement Atley and Harold Wilson, Labour proposes nationalizing, or should I say reationalizing the steel industry for the third time with the steel industry nationalization bill. My lords, I do not underestimate the importance of these uh of these to the people that of this measure to those working in the industry and in the and its importance to the country's manufacturing and defense sectors and its industrial strategy. But of course the government has effectively been funding this plant since uh the summer and this move was one I think most of us expected to be brought to your lordship's house sooner or later.

[00:17:36]So we want to see the details. We want to see the plans to help find private co-investors uh who can help modernize the sites and put money in to help create more jobs. We need to see proper long-term plan for the future with an emphasis on national security and we need to know the costs.

[00:17:58]Now, by choosing to pre-announce this measure, the the the prime minister was clearly aiming to stir the blood of those to the left of his party and it also followed the surprise appointment of Gordon Brown as some sort of global global uh emissary.

[00:18:14]I I assume the PM was searching for reflected glory from the Hian days of the Brown premiership. Uh perhaps the minister can throw some light on what Gordon Brown will actually be up to. Uh if he's the prime minister's man, how will he relate to the chancellor and the treasury? And how will his activities be accountable to parliament? Will he be summed up by select committees, for example?

[00:18:40]Now, of course, steel nationalization in in some will not meaningfully increase GD our GDP and it will not move the needle on national productivity, nor will it address the cost of living.

[00:18:55]However, the second topic that Starma pre-announced could indeed materially affect the fortunes of British people.

[00:19:03]We welcome all talk of moving closer to Europe. Of course, we do. But the European Partnership Bill seems to be just the latest example of a total lack of ambition when it comes to rebuilding trade links with the EU. It offers very little actually that's new. What the PM announced in that speech seemed only to be a restatement of where we already are with the UK at least six months into negotiating a reset with its relations in the EU. And here I would note at the same time as these negotiations are going on, the EU made in Europe regime proposals pose an existential risk to the EU UK automotive trading relationship and that's worth around 80 billion euro a year. The UK is the EU's number one trading partner for automotive trade.

[00:20:00]So, can the minister tell your lordship's house what negotiations are underway?

[00:20:07]This is a really important issue and we have to know that his majesty's government is going all out to reach an agreement. It is absolutely vital for our automotive industry in this country.

[00:20:20]But returning to the proposed le leg legislation, clearly as we've heard from the noble baroness uh um Anderson, some alignment is planned. And of course, we look forward to the long discussions that will no doubt uh ensue when we interrogate the depth of that uh alignment. However, as uh Prime Minister Sama has equivocally ruled out crossing the red lines he cautiously drew during the general election. So assuming the EU reset is successful, agreement on border arrangements for food and animals would be positive, not least for our belleaguered farmers. easier EU travel for bands and orchestras and theatrical productions, if we get it, would be really welcome, and so would anything else of the like that Baroness Anderson set out, would be welcome. But so much more is possible. If the government is bolder, there are huge wins. Business could trade with our largest market so much more easily, making jobs secure and increasing pay and delivering growth.

[00:21:33]Holiday makers could use EU egates instead of queuing for hours in the rest of the world line. And our border police could once again properly use EU data to help them more easily identify and stop the evil people traffickers. These are just three examples of what could be delivered. These and many more are possible, but they won't happen if the prime minister sticks to his red lines.

[00:22:01]The government needs to go further and faster to strengthen our relationship with the EU if it wants to turn around our very low performing economy and begin repairing the 90 billion pound Brexit black hole that the Conservatives botched deal delivered. Now I understand that these red lines were in Labour's manifesto but since then the world has changed rather our close relationship with the USA has been under pressure and Trump has indicated to all Britains where our real economic future lies this hostility from the United US president added to the war in Gaza and the Arabian Gulf an energy crisis and Putin's continued pummeling of Ukraine should set the scene for a revol ized world view and in general people out out there they recognize that the whole balance of the world has changed. An awful lot has changed in the two years since that election and that manifesto. And it seems to me that to robotically stick to an outofdate manifesto like it's a holy writer of leadership. A dereliction of leadership. Whoever turns out to be the prime minister should be bold and ambitious for our country. And they should work hard to take the country with them, hitting the road to explain why there is a need for a different approach, how people should benefit and what needs to change. That is leadership, my lords. And this is not one-sided. Our European neighbors are feeling the need to move closer, too.

[00:23:39]For example, my lords, last month I was in Berlin for a joint UK German business meeting as part of the Kensington Treaty. The Secretary of State Peter Carl MP was there, as was his German counterpart, plus the key business organizations for both countries and about 300 businesses. The energy of that meeting demonstrated we have enormous mutual opportunities. But with each day that passes, it feels like the work the work gets harder and business morale gets lower. This government has already wasted two years. The country, our economy, and our people cannot afford more years of timidity. We need a government that is bold and moves decisively. For for a start, the Liberal Democrats are clear. Ministers must straight away prioritize noa uh negotiations for a new customs union with the EU. This would turbocharge our economy and unleash British business.

[00:24:37]That would be the start of a real growth policy.