UK-China Economic and Financial Dialogue

Baroness Neville-Rolfe Excerpts

Tuesday 14th January 2025 Lords Chamber

[Baroness Neville-Rolfe (Con)]

My Lords, I thank the Minister for repeating the Statement. Instead of focusing only on the economic difficulties, I thought I would start by welcoming the improvement in the terms of our exports to China, which helps, in a small way, to redress the huge imbalance in trade that we have with China. The Chancellor has announced £600 million-worth of opportunities secured in Beijing. She states that barriers that restrict our exports to China in the agricultural sector—that would be pork and poultry, vaccines and fertilisers—will be lifted in an attempt to boost trade. I recall exporting chickens’ feet to China when I worked in the food industry. Will the Minister explain what exactly the real change is here?

Similarly, on financial services, can the Minister explain the improvements apparently being made? The green bond is welcome—I remember helping to launch other green bonds at the Stock Exchange—but can we have more chapter and verse on the other financial services gains? I mean gains to UK plc as opposed just to China—concrete changes that are not just warm words from bankers and legal firms, who obviously find the market difficult. We need to know more about the tangible benefits that the Minister outlined.

More broadly, of course, we are very concerned about the deterioration in the economic position back here at home in terms of debt, interest, rates of inflation and economic growth. In the Chancellor’s absence, the value of the pound plummeted and government borrowing costs rose to a 27-year high.

Let us consider growth. The Government inherited the fastest-growing economy in the G7, yet growth is now non-existent, and that means less money for public services. The Government are rightly exploring some obvious opportunities for growth: planning reform, the use of AI and improvement in skills. However, the fact is that businesses are vital to growth, and they have been dealt a triple whammy of costs.

The recent Budget broke election promises, introduced significant tax hikes and has been detrimental to British businesses and business confidence more broadly. Frankly, confidence is tanking, as many surveys and announcements show. This, combined with an increase in borrowing by an extra £30 billion a year, has inevitably caused international markets to question the future of the UK economy.

Instead of looking forward, there is much talk on the Benches opposite about the mythical black hole, but much of this is of the Government’s own making: over £8 billion on a public energy company, over £7 billion on a National Wealth Fund and nearly £10 billion of taxpayers’ money on public sector pay settlements without—this is so important—any requirement for a productivity return, at the very moment when it is right to extract one.

While many on the Government Benches may point to an international trend of rising borrowing costs, it should be noted that the gap between our bond yields and those of similar economies is growing. We now find ourselves in a position in which the UK’s long-term borrowing costs have risen to the highest level in nearly 30 years, and the pound has been at a 14-month low.

Can the Minister tell the House how the Government intend to address and restore stability in international markets? The increase in our borrowing costs is believed to have added roughly £12 billion to the UK’s annual spending in debt interest; that is 100 times what the Chancellor claims she accrued from her trip to Beijing. This £12 billion could have covered the costs of the winter fuel payment cut for eight and a half years or funded 300,000 nurses. According to the OBR forecast, two-thirds of the money raised from the Government’s jobs tax will have to be used to finance additional debt interest. As a consequence of the Chancellor’s policies, borrowing by the final year of the forecast will be doubled.

I repeat the question I posed to the Minister earlier today and encourage him to be more forthcoming. Will the Government do a U-turn on the spending increases that the Chancellor promised in the Budget? Will they borrow more or will they increase taxes further? One of these will have to give if the OBR’s update in March determines that the Chancellor is in breach of her own fiscal rules.

I am afraid that it is working people who will pay the price of the unfortunate decisions made by this Government in their Budget.

[Baroness Kramer (LD)]

My Lords, we must not allow anxiety about America under Trump and Musk, particularly on tariffs and climate change, to drive us into an unhealthy economic relationship with China. China is, of course, an economic powerhouse and our fourth-biggest trading partner, and there is more trade to be had, especially in financial services, to benefit both parties—but China is a very mixed blessing. It remains a cyber threat. Without greater transparency and safeguards, it is a potential threat to the integrity of our national security. It does not challenge the Russian invasion of Ukraine. It does not share our commitment to human rights and to democracy in Taiwan and Hong Kong. The imprisonment of Jimmy Lai is both a tragedy and a warning that our values are not respected. We on these Benches wish that the Chancellor had held firm and refused to go to China unless Jimmy Lai is released. China is a country that exploits weakness.

In light of these concerns, will the Government strengthen foreign direct investment screening and cyber defences, including increased data transparency requirements? Will they cease research co-operation on technology with China, its companies and researchers if adequate reciprocity and transparency cannot be achieved? Will they enact Magnitsky legislation to hold Hong Kong and Chinese officials responsible following gross breaches of human rights in Hong Kong and Xinjiang province? Given the recent discovery of Chinese spying across several senior levels of the British establishment, do the Government agree that China should be placed in the enhanced tier for the foreign influence registration scheme?

--- Later in debate ---

[Lord Livermore (Lab)]

I commend the noble Earl for his efforts to try to portray the previous Government’s record on the economy as some kind of success, whereas everyone listening both in the Chamber and outside knows that it was 14 years of total catastrophe. He mentioned inflation as if 33 months in a row above the Government’s target was something to be proud of, when we know that it hurt family finances dramatically over that time. He tried to say that the previous Government did well on growth, when we know that growth was one of their biggest failures. They took investment out of the economy at a vital moment with their austerity programme. They reduced GDP by 4% as a result of their Brexit deal, and then the Liz Truss mini-Budget crashed the economy, sending mortgage rates soaring by £300 a month, for which ordinary working people are still paying the price. I really reject the fundamental basis of the noble Earl’s question. He asked about timing. He knows very well that it is very difficult to turn around 14 years of failure. We cannot do that in six months, but we are determined to do it and will do whatever it takes to turn around the British economy.

[Baroness Neville-Rolfe (Con)]

I am not sure I am supposed to speak, but I would just say that there was also something called Covid and an energy crisis and Ukraine. It would be good if the Minister sometimes mentioned those as well as some of the other factors.

[Lord Livermore (Lab)]

I know the noble Baroness is desperate to find any scapegoat or excuse for her party’s total failure on the economy. Of course, there are international factors at play, but perhaps she could tell us why the UK was worse affected than any other country in the G7 and any other European country as a result of those things. It is because their austerity and their Brexit left this country more exposed and we therefore suffered far worse than any other country.