I am updating the House on the Government’s economic plan to increase living standards, build resilience and bolster the security of the UK economy.
Today, I am reaffirming and building upon what I set out in my 2024 Mais lecture: that in this age of insecurity, the right solution for Britain’s economy is “securonomics”. This is a strategy for building secure and resilient growth by increasing public and private investment through an active and strategic state which works in partnership with business, steps up its role in expanding the supply side of the economy, and makes conscious and deliberate choices about the sectors in which we pursue leadership and the capabilities we must protect or grow.
In Iran and the middle east, we are witnessing further symptoms of that age of insecurity. This week, the Government have intervened to protect the most vulnerable households reliant on heating oil, who are not shielded by the energy price cap, and we have been clear that any exploitation of the crisis for excess profit will not be tolerated.
The effects we have already seen are likely to put upwards pressure on inflation in the months to come. However, the actions that this Government have taken to secure our economy and our national resilience have put us in a better position to respond. We have substantially uplifted defence spending, with £270 billion investment planned over the spending review. Our energy security plan is taking effect, with the UK importing 17% less gas in 2025 than we did in 2021, and from next month, the energy price cap will be £117 lower.
The age of insecurity affects every country. But since the global financial crisis, the UK has experienced the sharpest slowdown in productivity growth of any G7 economy compared with the pre-crisis trends. To address this, we must capitalise on our strengths as set out in the modern industrial strategy and fix our structural weaknesses, and the mistakes of the past caused by a passive state that believed markets should be left to their own devices and that growth could be built on a narrow geographical base of too few places.
The Government’s plan for righting these wrongs is securonomics. Securonomics provides a response to a more unstable world, prone to shocks, by focusing on economic security for working people, by increasing domestic productive capacity in areas of strength or strategic importance, and by working closely with international allies to build more resilient supply chains. Since 2024, the Government have been pursuing this strategy, and driving growth through stability, investment and reform.
Rather than turning back now, the Government must continue to take active, bold decisions. That is why we are going further on our three big choices: empowering regional growth, embracing AI and innovation, and establishing a closer relationship with the EU.
I want every part of Britain to do well. The Government have already committed to this agenda: we published the regional growth strategy in 2024, and our National Wealth Fund is already supporting local places to build on their existing strengths: investing in wind power in Orkney and critical minerals in Cornwall, while building on the north of England’s strengths to create a global clean energy supercluster. Meanwhile, our growth mission fund is driving local growth across Britain through projects such as Kirkcaldy high street, the Peterborough sports quarter and the reopening of Southport pier.
I am now going further to drive regional growth across the UK. I am backing Britain’s cities and ensuring towns do not lose out by connecting them into those city regions through better transport, housing and skills. This includes accelerating action in the Oxford to Cambridge growth corridor, doubling the Government’s initial commitment by making over £800 million available for up-front land acquisition and infrastructure to help unlock land for new homes. I am providing £2.3 billion of new grant, loan and patient capital funding over five years for city investment funds, with up to £1.7 billion going to mayors in the north. This funding will go directly into hands of mayors in major city regions to deliver city densification, supporting priority projects in local growth plans and development in the areas around Northern Powerhouse Rail stations. I am also backing growth-driving sectors by investing over £150 million through the industrial strategy-8 cluster programme in areas across the north.
Looking ahead to autumn Budget, I can also confirm that I have asked my officials to work with mayors, businesses and other experts to develop a road map for future fiscal devolution. This will set out plans to give regional leaders control of how they allocate a share of some national taxes that for too long have been allocated by central Government, looking at income tax alongside other taxes. To ensure that Government are achieving our objectives of providing our mayors with the long-term certainty that they need to invest in the foundations of growth in a way that is practical and responsible, the development of this road map will be guided by four key principles: empowerment, accountability, sustainability and fairness. This is not about new taxes or higher tax rates. I will not ask taxpayers to pay more. Reforms will be fiscally neutral, focused on sharing and retaining a portion of existing revenues, with the proceeds of growth benefiting the places that generated them.
I am also committed to going further on innovation and AI. This will ensure the UK is a world leader in AI and will enable us to benefit from the clear opportunities AI presents, while managing the risks. We are taking concrete steps to make the UK the best place for innovative firms to start, scale and stay, with a £500 million sovereign AI unit, regulatory reforms to support safe and trustworthy adoption of innovative products and services across the economy, including responsible AI applications, an AI adoption summit and a commitment worth up to £2 billion to fund quantum technologies over the next decade—including up to £1 billion to procure commercial-scale quantum computing capabilities. We want to ensure that AI serves in the interests of working people, creating good jobs that pay well, and security and hope for the future. That is why we are setting up a new AI economics institute to work with the future of work unit to understand the impact of AI on our productivity and labour markets. In January, we announced our ambition to upskill as many as 10 million workers through our AI skills hub, alongside providing £27 million to kick-start the Government’s techlocal scheme and AI scholarships at top UK universities to link training and industry.
I am also reaffirming the Government’s commitment to strengthening our partnerships with the EU to increase our resilience and our trade opportunities. We have seen instability on Europe’s border, in the middle east and in our economy—not aided by the costs of a damaging Brexit. We need to deliver security amid this volatility, strengthening resilience in the economy and stabilising trading conditions for businesses. There is now a strategic imperative for deeper integration between the UK and EU, and so today I set out more detail on the Government ambition to strengthen our relationship with Europe to benefit both partners. There are red lines in the national interest, but we choose growth and security over instability and decline, and so will be prepared to align with EU rules: if it boosts long-term growth, consumer benefits and jobs, if it fits with stable and compatible policy goals, and if it protects or strengthens the UK’s security and resilience. This is all while keeping the option of regulatory autonomy where needed in strategically important sectors.
Further supporting our commitment to defence and security, and strengthening our wider international relationships, I can also announce today that a core group of NATO allies—Finland, the Netherlands, and the UK, together with other partners—are exploring setting up a new mechanism for financing by 2027. This has the aim to aggregate demand, drive joint procurement, accelerate defence investment, and increase the availability of critical capabilities such as munitions as we step up shared defence and security commitments.
All announcements are funded from within existing departmental budgets within the current spending review period, except for the city investment funds and additional Ox-Cam financial transactions, which will be accounted for at Budget 2026.
This is the right economic plan in this age of uncertainty. I look forward to continuing to update Parliament as we pursue this strategy to deliver for the UK economy.
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