Tag: Speeches

Colin Low – 2022 Speech on the Growth Plan (Baron Low of Dalston)

The speech made by Colin Low, Baron Low of Dalston, in the House of Lords on 10 October 2022.

My Lords, the economy is not in a good state. The Budget and the so-called growth plan are not about to make things any better.

The Prime Minister and the Chancellor would like us to believe that all our economic woes are the result of Putin’s war and the resultant energy price increases. They want us to focus on the energy-capping element of their economic strategy, but the truth is that, before Putin, there were already worrying signs of output constraints, labour market distortions and inflationary pressures resulting from the disruptive effects of both Brexit and the pandemic.

Now, inflation is at almost 10%, output is still below its pre-pandemic level and wages for many, especially those in the public sector, are lagging well behind prices. Meanwhile, public services are in urgent need of resources, not just to deal with the enormous backlog built up during the pandemic but to rebuild resilience following a decade of underfunding of health, social care, education and local authority spending. Not only that but the lack of healthcare resources is almost certainly having a significant, negative impact on the labour market and, consequently, economic output.

In these circumstances, the Budget on 24 September should have confined itself to introducing the new energy price caps, with a promise of properly considered tax and spending decisions—and funding arrangements to match—to come later in the year. Instead, the Chancellor succeeded in spooking the financial markets with the promise of massive unfunded tax cuts, thereby weakening the pound and, more importantly, pushing up the cost of government debt and raising interest rates more quickly than would otherwise have been needed.

With mortgage rates already increasing to over 6%, mortgage payments as a proportion of household disposable income will be at their highest since 1989, just before the crash in house prices of the early 1990s—and this on top of record energy bills. No wonder consumer confidence and business confidence are weak and there is every prospect of stagnation, perhaps even recession, in the coming months. What is the Government’s response? It is tax cuts for the rich, benefit cuts for the poor and the prospect of a new round of austerity in public sector spending, all dressed up as a plan for growth.

How, then, are we to explain the Chancellor resorting to swingeing tax cuts, worth £43 billion at the latest count, in conditions of high—and rising—interest rates and overstretched, underfunded public services? The Government’s position, at least in public, is that tax cuts will be paid for by increased economic growth, which they will also help to generate in combination with cutting red tape and easing planning regulations. The problem, however, is that almost no one—certainly not the markets—believes that these things are likely to happen. There is no evidence from either comparison across countries or past experience that lower taxes are associated with higher productivity growth and, hence, higher trend rates of growth in output. Of course, in the right circumstances, cutting taxes can stimulate demand and so raise output in the short run, but that works only when inflation is low and there is plenty of spare capacity, which is far from the case at the moment.

As for deregulation, easing planning regulations may help a little if it is not thwarted by local opposition, including from Tory interests. However, the perennial and often counterproductive war on red tape and gimmicks such as investment zones will have a marginal impact at best.

If we cannot rely on increased growth to fund the Chancellor’s tax cuts, there is only one option for avoiding an unsustainable spiral of increasing government debt: large-scale cuts in government spending. Perhaps it is not unduly cynical to suggest that shrinking the state may have been a secondary—even primary, in some quarters—objective of the tax-cutting strategy. That would certainly be consistent with the decision to sidestep the scrutiny of the OBR when the tax cuts were announced. In any case—

Baroness Bloomfield of Hinton Waldrist (Con)

The noble Lord has had quite a lot of latitude with the advisory speaking time but is now significantly over. Perhaps he could think about drawing his comments to a close.

Lord Low of Dalston (CB)

I am on my last sentence.

In any case, if the tax cuts are to be sustained, substantial cuts in government spending are on the way. The paradox is that this is the opposite of what is required for a credible growth plan.

October 16, 2022
Sal Brinton – 2022 Speech on the Growth Plan (Baroness Brinton)

The speech made by Sal Brinton, Baroness Brinton, in the House of Lords on 10 October 2022.

My Lords, I add my best wishes to the right reverend Prelate the Bishop of Birmingham as he leaves your Lordships’ House. He has always been thoughtful, often provoked us and made us think about what he has said, and I will miss his bluntness in some of our debates over recent years—it has been vital for all of us to hear, and I thank him for it. I also welcome the noble Baroness, Lady Gohir, to her place in the House and very much look forward to working with her in future.

“Growth, growth, growth” as an aim is not, as we have heard from many sides of your Lordships’ House this afternoon, in itself a bad thing. The problem is the growth plan, the mini-Budget and the reference by the Chancellor and the PM to trickle-down economics—whatever the noble Baroness, Lady Noakes, says, they have made it plain that is the policy they are following. That has not been proven to have worked and, as we have heard from many others, it has not worked elsewhere. It will certainly not work within the two years that we need it to do so.

Many of us have found the growth plan wanting and, most likely, unachievable. I shall focus in my brief contribution on the impact of the current situation, particularly in health and social care and how the plan does or does not address the growing crisis faced there. The OECD spend in the UK is 2.3 hospital beds per 100,000. In Germany, it is 12. The actual spend as a percentage of GDP is equally different. That, for many, explains why we have had problems in the NHS for years—not just since Covid but for much longer.

Those delays are becoming unimaginable. A friend in A&E last week said that a fellow patient reported that she had been waiting to be seen in A&E longer than she had queued to see Her late Majesty’s lying-in-state. This is now commonplace. The Health Service Journal highlighted just last week that increases in inflation will force the NHS drastically to scale back services unless there is extra funding. It could have to find £20 billion in efficiency savings over the next three years because of the increased cost of goods and services that it purchases. Already, two out of three integrated care systems, only introduced by the Government on 1 July, have fallen off-track on their financial plans. Common pressures reported include the impact of inflation and Covid costs that were not funded this year.

The mini-Budget recognises the vital role of the care sector, as does the Health Secretary’s plan for patients. However, there is no money, not least because the money from the levy has been removed. The crisis is there already. Staff cannot be recruited because they can get far more money in hospitality and retail.

Far worse than that, however, are the energy costs that the sector faces. One small care home discovered that its energy costs would go up by 600% from October this year. A six-month extension of help from the Government for part of it is unlikely to keep that business going. Earlier, in Questions, noble Lords commented on the problems that disabled people are facing with energy costs. Many of them have high energy costs, with only £150 offered when their bills are considerably higher.

The anti-growth coalition, to which the noble Baroness, Lady Noakes, referred, is a bizarre term. It reminds me of Humpty Dumpty, who said:

“When I use a word … it means just what I choose it to mean—neither more nor less.”

The PM’s definition of the anti-growth coalition now seems to include anybody, including people in her own party, who disagrees with her.

October 16, 2022
Sheila Noakes – 2022 Speech on the Growth Plan (Baroness Noakes)

The speech made by Sheila Noakes, Baroness Noakes, in the House of Lords on 10 October 2022.

My Lords, we have heard many speeches today from the anti-growth coalition, and doubtless there will be more. Noble Lords do not say that they are against growth, but they support the kind of policies that have failed to produce growth and are unlikely to allow the UK to escape from the deadly combination of slow growth, high inflation and high taxation. The Prime Minister is absolutely right to prioritise getting the UK growing again. She is also right to focus on bold supply-side measures and tax reductions. Those who set their faces against this need to explain how else the UK can achieve a paradigm shift. It will not be found in a magical green economy, as some noble Lords advocate. Net zero is costing money; it is not making money.

The Government’s supply-side plans, such as investment zones, are exciting, and I look forward to significant regulatory reforms which will allow small businesses to concentrate on growth rather than on bureaucracy. Thank goodness we are not shackled by the EU any more.

We also need lower tax rates, and this is nothing to do with the fantasy about trickle-down economics. It is about incentives. The right tax rates are the ones that encourage people to work, which encourage and support entrepreneurs and which attract overseas investors. That is the route to growth. Low rates are not synonymous with low tax yields, as previous Conservative Governments have shown.

The Prime Minister is also right about refusing to look at economic policy through the lens of redistribution. That is an obsession based on the politics of envy, and it does nothing to encourage growth. It is not a coincidence that Labour Governments, with their focus on redistribution, make the kind of policy choices that leave an economic mess when they are pushed out of government.

There is no moral high ground in redistribution. Of course we have a moral duty to support those in need, but the best route to that is a successful economy. On the flip side, it is morally wrong to impoverish everyone by holding back people with potential for success.

I have made many speeches in your Lordships’ House regretting various debt-to-GDP percentages well below the ones now likely, and I stand by the need to get our debt down, but these are not ordinary times, and the key driver of the changes since the last Budget is the huge energy support package, which I am sure that all noble Lords support. We are not an international outlier, with our debt-to-GDP ratio among the bottom of the G7 range. I am, however, glad that my right honourable friend the Chancellor is bringing forward his medium-term fiscal plan to the end of this month. I am sure he will show the doubters that we remain the party of responsible public finances.

Before finishing, I should like to say a few words about the Bank of England, which has let the country down. The Monetary Policy Committee kept monetary conditions too loose for too long and failed correctly to identify recent inflationary trends. Its interest-rate policy created a housing market built on high house prices and unrealistically low interest rates. That policy also sheltered zombie businesses from economic reality. Its Financial Stability Committee, aided and abetted by the Pensions Regulator, failed to spot that pension funds have pursued liability-driven investment strategies which presented a risk to financial stability, and taxpayers have had to stand behind the Bank’s support actions. I fully support Bank of England independence from the Executive, but that independence has to be underpinned by strong and effective accountability, and that is something that Parliament, especially your Lordships’ House, must work on.

October 16, 2022
Bryn Davies – 2022 Speech on the Growth Plan (Baron Davies of Brixton)

The speech made by Bryn Davies, Baron Davies of Brixton, in the House of Lords on 10 October 2022.

My Lords, I start by reminding the noble Lord, Lord Bridges, that his Government were in power for the 10 years he referred to and some of the guilt must attach to him and his colleagues.

I want to ask about two of the specific proposals in the so-called plan for growth; first, on the change to the IR35 freelance rules. I find this proposal to give up on the effective enforcement of tax rules both extraordinary and wrong. The reopening of opportunities for employees to exploit tax rules does nothing for growth—the purported purpose of these proposals—let alone levelling up. It also severely undermines the wider integrity of the tax system. It should be understood that the Government are actively making mugs of the majority of independent contractors, who follow the rules and pay the tax that is due. I recognise that the whole treatment of freelance workers is a mess and needs to be sorted out, particularly the issue of employment rights. I note the conclusions of the Finance Bill Sub-Committee from two years ago but it should be understood that the Chancellor’s proposal here falls far short of the comprehensive approach that was proposed by the sub-committee.

It is particularly extraordinary that the Chancellor should make such a proposal now, when, inevitably, on the one hand we have no idea of the eventual cost, because it depends on individual actions, while on the other we know that the Treasury has set a figure of £6 billion for the cost of this change over the next four years. That is an extra £6 billion that will have to be borrowed to pay people who are seeking to avoid paying the tax that is due. Therefore, my first question to the Minister is: why do the Government think that this reversal of policy is justified on its own terms, let alone at the current time?

Secondly, I want to ask the Minister about the announcement of the change in the pensions regulatory charge cap. This is particularly relevant following the events of the last few days that arose directly from the investment policies of private sector pension funds. The Bank of England has stressed the significance of the problems that the whole system faced, so I ask the Minister: is this really the time to make these changes, which are intended to have the effect of reducing the liquidity of these private sector pension schemes? Does he understand that the crisis was a crisis of liquidity and not about solvency? This measure is aimed at further reducing the liquidity of these schemes. Therefore, before proceeding with these proposals, we need, at least, a far better understanding of what went wrong following the Budget and the impact that it had on the investments of pension schemes.

October 16, 2022
George Bridges – 2022 Speech on the Growth Plan (Baron Bridges of Headley)

The speech made by George Bridges, Baron Bridges of Headley, in the House of Lords on 10 October 2022.

My Lords, I start by congratulating my noble friend Lady Neville-Rolfe on her appointment. It is great to see her back on the Front Bench. I also congratulate the noble Baroness, Lady Gohir, on her excellent maiden speech. It is wonderful to see her here. I regret very much that we heard the valedictory speech of the right reverend Prelate the Bishop of Birmingham. We shall all miss him.

We are at last waking up from the make-believe world we have lived in for a decade or so. As my noble friend Lord Forsyth said, it is a world where we became deluded into thinking that cheap money would last for ever and that inflation was safely behind bars. Far from being transitory, as we were confidently told, inflation is now running amok, seeping into the pores of our economy.

As the noble Lord, Lord Burns, said, the Bank has questions to answer. For example, why did it take so long to kick the addiction to QE, raise rates and send an unequivocal, clear message that it will do whatever it takes, however painful, to keep prices down? It also needs to clarify how its current £65 billion bond-buying programme has nothing to do with monetary policy, as it claims, even though it seems to be using QE to do so.

That is the first delusion that has fallen. The second has been called out by the Prime Minister. She is entirely, 100% right to say that high taxes risk snuffing out growth and enterprise. The problem is that we—this and successive Governments—have been putting taxes up: in just two years, Boris Johnson raised taxes by more than Gordon Brown did in 10.

So this Prime Minister has my full support in calling time on higher taxes, not just corporation tax but also the dreaded IR35. But—and there is a “but”—taxes are high because spending is high, and it is getting higher still. Here we are only just beginning to wake up to reality. Before the energy package was announced, Mr Sunak said his last Budget increased total departmental spending over this Parliament by £150 billion. That is the largest increase this century.

That is the backdrop to this debate. As we look ahead, if we want to lower taxes, as I do; if you believe that you cannot borrow your way to growth, as I do; and if you want to bring inflation down, as I do, we must all be very honest about spending. If we are not, we risk taking a gamble we cannot afford. Thanks to our living in this make-believe world for so long, borrowing is already high and risks rising higher thanks to the soaring cost of servicing our debt.

Let me give one fact on why this is such a risk. We have the highest proportion of index-linked debt in the G7. It is 25%, which is five times what it is in Germany. Add to that the risk of rising rates and it is not surprising that the OBR forecasts that this year debt interest costs might hit a record high of £83 billion. That is getting on for double what we spend on defence—and it was forecast in March, before the impact of the last few weeks. An average RPI rate of 15% next year would boost borrowing costs to almost £130 billion, and that does not include the cost of rising rates.

So, when my noble friend stands up, I would like him to assure us unequivocally that if we are going to proceed with tax cuts, which I would love to see, a coherent plan will be published on 31 October that sets out how our finances will be put on a sustainable, stable footing. I would also like him to assure us that we will not try to borrow our way to growth, as that is part of the make-believe world I hope we have left behind.

October 16, 2022
Libby Lane – 2022 Speech on the Growth Plan (Lord Bishop of Derby)

The speech made by Libby Lane, the Lord Bishop of Derby, in the House of Lords on 10 October 2022.

My Lords, it is a pleasure to join other noble Lords in congratulating the noble Baroness, Lady Gohir, on her maiden speech, which was delivered with such authority and clarity on matters that are close to my heart as well. I look forward to working with her in the years ahead. It is also a real privilege to pay tribute to my right reverend friend who gave his final reflection from these Benches. I am indebted to him as he has been not only an excellent Convenor of the Lords Spiritual but someone whose example has greatly influenced my ministry over many years.

I declare an interest as vice-chair of the Children’s Society. This afternoon, I want to give voice to the unheard voices that it works with and advocates for, as we take note of the economy and the Government’s growth plan. Last month, the Children’s Society published the 2022 Good Childhood Report, which records that 85% of parents and carers, despite welcome packages of support, are worried about the increase in the cost of living as it affects their ability to care for their children.

I too am concerned about the direct impact of economic policy on children. To ask the lowest-income families to cope with even less seems unthinkable. At a time when so many families are already struggling to put food on the table, a real-terms cut to their income would be catastrophic. Some 4.3 million children in the UK are growing up in poverty and the Children’s Society calculates that not uprating benefits would add another 200,000 to that number.

According to a coalition of national children’s charities, one of the most direct ways of supporting the most vulnerable children would be by increasing child benefit. A £10 increase would help but, given the rate of inflation, an increase of £20 to £25 would be more realistic. On behalf of those charities, I ask the Minister whether His Majesty’s Government might reconsider their position on those benefits to directly support the welfare of children. Jesus, our scripture tells us, put a child at the heart of the kingdom of God and I urge us to do the same in our United Kingdom.

As Bishop of Derby, I am pleased to recognise that Derby is an international centre for skilled engineering and high-tech industry which has brought to the area many highly paid and secure jobs. Some in Derby and Derbyshire will likely benefit from much of the Government’s plan for growth. However, we also face some of the starkest indices of inequality in the country.

I finish with words from Psalm 41:

“Blessed are those who consider the poor and needy; the Lord will deliver them in time of trouble.”

I trust that as we take note of the economy and the Government’s growth plan we will prioritise those who are at the margins of our society to reduce further inequality, especially as it impacts our nation’s most vulnerable children.

October 16, 2022
Richard Denison – 2022 Speech on the Growth Plan (Lord Londesborough)

The speech made by Richard Denison, Lord Londesborough, in the House of Lords on 10 October 2022.

My Lords, first, I congratulate my noble friend Lady Gohir on her passionate and eloquent maiden speech. We look forward to hearing much more from her from the Cross Benches.

As we have heard, the Prime Minister’s economic strategy is, “Growth, growth, growth”. This has unfortunate echoes of her predecessor who, just five months ago, trumpeted the slogan, “Jobs, jobs, jobs”, at a time of record unfilled vacancies. Single repetitive word slogans often suggest oversimplified approaches, with wilful disregard for the consequences. Indeed, the Chancellor appears to have grabbed the helm of a vessel without consulting the crew on the weather or sea conditions and slammed down the throttle with the fuel tank on reserve and oil lights flashing. I will not prolong the nautical metaphor, but you get my drift.

Sustained economic growth requires a qualitative, not quantitative, approach, especially in a period of high inflation and supply side shortages—not least our shrinking workforce. We have economic inactivity levels not seen anywhere else in Europe, while our productivity remains in the doldrums. These are the issues that need to be addressed, and they will not be solved by tax cuts and escalating debt. If you think you can buy growth this way, the markets will find you out—indeed, they already have. Growth needs to be sustainable, balanced and, I suggest, broadly distributed. Achieving 2.5% is far from ideal if only 10% of the population benefit.

Let us reflect for a moment on the impacts of the proposed tax cuts, especially amid a cost of living crisis. Do we give a £20,000 tax break to one person—let us say a mid-ranking City lawyer earning £500,000 a year—or a £1,000 tax break to 20 people earning the median average salary of £26,000? The cost to the Treasury is the same but I argue, as an entrepreneur and business investor, that the impact on growth will be much more significant if you reward at the margins. I do not have time to preach the theory of marginal utility but I urge the Ministers to brief both No. 10 and No. 11 on its relevance in relation to taxation and growth.

So how do we engineer real economic growth? I have two suggestions. First, we now have a very competitive exchange rate, close to record lows against the US dollar. Remember what happened back in 1992 when we exited the ERM: sterling lost 20% of its value —a gift from the markets—and our economy grew by 3% per annum over the rest of the decade, fuelled by a boom in exports. I ask the Minister: what are the new Government’s plans to seize this opportunity?

Secondly, we must address the UK’s anaemic productivity, which in terms of output per hour still lags both France and the US by some 15%. This is where our political system serves us very poorly. We need to stick to targeted, long-term measures to spur productivity, addressing education and skills, and the chronic underinvestment in both the public and private sectors. Would the Government consider setting up a productivity task force, or at least an advisory board, that includes those at the cutting edge of the private sector, who build businesses, create jobs, balance the books, count the beans and have first-hand experience of what drives productivity, and indeed growth?

October 16, 2022
Julie Smith – 2022 Speech on the Growth Plan (Baroness Smith of Newnham)

The speech made by Julie Smith, Baroness Smith of Newnham, in the House of Lords on 10 October 2022.

My Lords, I have not been watching British politics and economics for quite the 60 years that the noble Baroness, Lady Blackstone, referred to. My first memory of the British economy was during the three-day week in the early 1970s and its periodic blackouts. My father and I visited my great-uncle, who had a corner shop; I would have been about three or four, but even then I can remember him talking about the difficulties of getting in produce, as supermarkets found it so much easier to undercut. There were changes in the economy then that were not necessarily attractive; they were not necessarily times we would want to go back to. The 1970s were probably the worst time for the British economy that I and many others remember.

When we voted for Brexit, despite the Project Fear perhaps put out by some, I did not expect that we would indeed end up in a period where there would be threats of blackouts and growth would be slipping back as much as it is.

Lord Forsyth of Drumlean (Con)

It has nothing to do with Brexit.

Baroness Smith of Newnham (LD)

The noble Lord says from a sedentary position that it has nothing to do with Brexit—

Baroness Jones of Moulsecoomb (GP)

Of course it does.

Baroness Smith of Newnham (LD)

I thank the noble Baroness. There was a suggestion by those who were arguing against Brexit that it would have catastrophic economic consequences. We will never know fully what the implications of Brexit would have been had it not been for the Covid pandemic and a whole range of other issues, but it is absolutely clear that we are in an economic situation that was unforeseen five years ago and which very clearly started at the time of Covid and was exacerbated by the war in Ukraine.

Had I not been heckled from a sedentary position, I was going to say that today a miracle has happened—I agreed with the noble Lord, Lord Lilley. Before the Whips in my party get too worried, I say that it is over something with which I hope perhaps all Members in your Lordships’ House can agree: that we should not want a Government to fail. It must be of considerable interest to us all, as citizens of the United Kingdom and Members of your Lordships’ House, that our country should be respected globally and that our economy should be as strong as possible. I therefore do not seek to talk down the Government, however much I might like to see them defeated at the next election.

The noble Lord, Lord Eatwell, raised the question of whether the Prime Minister had too many Ps in her PPE. I was more concerned that she had missed Politics 101: as Prime Minister, there are certain people you want to have in your Cabinet, so do not kick to the Back Benches those people who do not agree with you. The Prime Minister might like to rethink that a little bit. But did she really learn the lessons in Oxford PPE that some of the rest of us did? There seem to have been so many decisions in the last four weeks that are not about strengthening the economy; some of them stand to weaken the economy.

The noble Lord, Lord Forsyth, is right that cheap money is no longer available, but those decisions that the Chancellor put forward two and a half weeks ago led to a set of consequences that is going to increase borrowing. Can the noble Lord, Lord Callanan, in his response tell the House what calculations the Government have made around the impact on the economy and our borrowing of the Government’s mini-Budget; the amount of borrowing the Government are having to do; the intervention of the Bank of England; and the long-term consequences this will have on young people and their mortgages, and on those who are repaying their student loans? The youngest are among those who are going to suffer most from many of these changes.

Cutting energy prices is right. Borrowing for tax cuts most certainly was not.

October 16, 2022
Tessa Blackstone – 2022 Speech on the Growth Plan (Baroness Blackstone)

The speech made by Tessa Blackstone, Baroness Blackstone, in the House of Lords on 10 October 2022.

My Lords, in the 60 years I have spent either participating in or observing British politics, I have never seen such a shocking failure in government policy-making as last month’s mini-Budget. What is particularly shameful is that it was a self-inflicted failure—what the former Governor of the Bank of England described, using a tennis analogy, as “unforced errors”. It showed an inability to make sensible economic judgments and an irresponsible lack of proper consideration to what the likely outcome would be for the markets of enormous unfunded tax cuts, with no indication of how they would be paid for in the medium and longer term. It is said that hedge fund managers have described the Chancellor as “a useful idiot”. Useful to them perhaps, but what about the rest of us?

There are a number of lessons that the Prime Minister and the Chancellor might learn from the mini-Budget fiasco. Above all, they must stop trashing the system which is set up to advise them. Doing so is arrogant as well as ill advised. They need to understand the likely consequences of their actions from good advice. They should not sack a competent Treasury Permanent Secretary with particular expertise in the way the market works on their first day in office. They should not sideline the Office for Budget Responsibility, citing the dubious excuse that there was no time for it to respond. They should consider the views of the Bank of England on maintaining financial stability, for which it is responsible, before taking actions which threaten that very stability.

They should also demonstrate greater political nous. To propose cutting the top rate of tax for high earners against a backdrop of a cost of living crisis which will damage the lives of medium and, especially, low-income families, beggars belief. Not surprisingly, it led to a rapid, embarrassing U-turn. It has also led electors to believe that this is a Government on the side of the rich and not the poor. Did they not also think through the possible risk of higher interest rates as a consequence of their Budget? Quite apart from the damage to investment, a hike in interest rates would have big implications for the mortgage market. I am sure many Members of your Lordships’ House will feel great sympathy, as I do, for young people who have worked hard to save, found a property they want to buy and, at a stroke, have been told the mortgage that they had been promised has been cancelled.

As an aside, it is particularly galling to hear the Prime Minister say in interviews that the increase in interest rates is a decision of the “independent Bank of England” when it is obvious that her policies forced the Bank of England to act quickly and raise rates to prevent further damage to our financial system.

The noble Lords, Lord Newby and Lord Macpherson of Earl’s Court, and my noble friends Lady Smith and Lord Eatwell have all challenged the Government’s flawed economic ideology about how growth can be achieved. They have pointed out the past failure of trickle-down policies, especially in the context of high inflation, and the need to restore economic credibility. I hope that the Minister will say in responding why greater priority has not been given to innovation, as mentioned by my noble friend Lord Eatwell, to improving skills, which no one has mentioned, and to creating better infrastructure, as referred to by my noble friend Lord Liddle. All these are likely to be far more valuable in achieving growth than unfunded tax cuts.

Growth is of course a highly desirable goal, but I ask the Government and the Prime Minister in particular to refrain from further slurs against the Labour Party for being anti-growth. That is nonsense. The issue between us is not whether we want growth but how to achieve it. Lastly, following what the noble Baroness, Lady Hayman, said, I ask the Government, in thinking about growth, to give further thought to the economic rewards and cost-saving potential of the green economy.

October 16, 2022
Peter Lilley – 2022 Speech on the Growth Plan (Baron Lilley)

The speech made by Peter Lilley, Baron Lilley, in the House of Lords on 10 October 2022.

My Lords, it is a pleasure to follow the right reverend Prelate the Bishop of Durham; I will take his biblical injunctions to heart. I hope that he will take to heart my observation that there is no free market economist who believes in anything called “trickle-down economics”; that is a fantasy of his imagination.

My noble friend Lord Lamont reminded me that I should perhaps begin with a declaration of interest: as a former Treasury Minister I am a registered bean counter and member of the Treasury orthodoxy, which may be why I voted for Rishi Sunak in the leadership election. However, I passionately want the Prime Minister and Chancellor to succeed, not just because I believe in their central objective; I also wanted Tony Blair and Gordon Brown to succeed, because I want our country to succeed. I am therefore rather upset by the relish that some have shown for the brief adverse market reaction to the Budget. After all, it was brief, which suggests that it was as much about misunderstanding as about the substance. Sterling is back to the level against the euro that it was before the announcement. The dollar has been equally strong against both the pound and the euro—and many other currencies—which has nothing to do with the Budget statement.

Surely we can all agree that the Government’s priority is right. Growth is crucial. Growth, not redistribution, is the only sustainable way to increase living standards and finance improved services. If I may, I will use my four minutes to make a few reflections based on the experience of the 1980s.

First, the impact of the deregulatory measures that we introduced then was in fact greater than we anticipated. Britain moved from being the slowest-growing major economy in Europe to the fastest. But this improvement was slower in emerging than we hoped, and reflected the cumulative effect of a whole range of often small changes. It is therefore very unlikely that the benefits of changes that this Government rightly propose will be felt before the next election. But that is no reason for giving up. The electorate is collectively far more intelligent than many cynics assume. They re-elected the Thatcher Government twice before much of the benefits of their reforms had materialised, because they gave the Government credit for tackling what were manifestly important issues.

Secondly, in the 1980s we tackled many, although not all, of the big regulatory problems, such as scrapping exchange controls, ending the vestiges of a prices and incomes policy which gave the Government control of every single price, wage and dividend in the country, and privatising large swathes of nationalised industries. But that does not mean there is nothing left to do. We could not then tackle the issues covered by the EU’s laws and regulations. Now, thanks to Brexit, we can, so this Government are right to turn their attention to these.

Thirdly, one area we did not tackle, which was at least partly within the scope of domestic law, was planning. There, in my experience, speeding up decision-making, so you know whether you can or cannot do something, is as important as liberalising it, and may be less contentious.

Fourthly, we tend to forget one significant feature that the UK had in the 1980s, which was the development of North Sea oil, which simultaneously strengthened the balance of payments and generated huge tax revenues. The Government are absolutely right to license more North Sea acreage, but the only energy sources which can come on stream speedily are onshore gas and onshore wind. We must face up to the anti-growth coalition, which agitated against shale gas with arguments which, frankly, make anti-vaxxers look positively scientific. More than a million wells have been fracked in the United States without a single building falling down as a result of the micro-seismic events which follow, and without anyone being poisoned by contaminated aquifers, and gas produced domestically emits far less CO2 than importing LNG. If anyone needs to apologise for our present shortage of secure, affordable energy, it is those who objected to nuclear because it would not come on stream until 2021, to quote Nick Clegg, and who supported frankly scaremongering arguments to stop us exploiting such shale reserves as we have.

October 16, 2022