King’s Speech

Baroness Penn Excerpts

Thursday 14th May 2026 Lords Chamber

[Baroness Penn (Con)]

My Lords, following the noble Baroness, Lady O’Grady, I too want to focus on the theme from yesterday’s gracious Speech as being one of security—defence security, energy security and economic security. I will resist the temptation to make a joke about job security, particularly as I believe the Health Secretary has just resigned.

That theme was the right one. In today’s volatile world, we are too insecure as a nation and people feel too insecure in their day-to-day lives. However, as is becoming more apparent day by day, the Government’s rhetoric is not borne out in reality. To start with the cornerstone of our national security, defence, the Government commissioned the serious and widely welcomed strategic defence review. The review concluded nearly a year ago but remains largely unimplemented. I am sure we will hear shortly the views of the noble Lord, Lord Robertson, on that. We have no defence investment plan and in the gracious Speech there was no defence readiness Bill. It is no good talking of the largest sustained increase in defence spending since the Cold War if Ministers are not prepared to take the decisions needed on how it is spent. The claim rings even more hollow as defence spending is due to fall next year. That is the cornerstone of the Government’s agenda, and there is nothing to show for it.

If the national security implications of our changed world have been explored through the strategic defence review, the economic implications for the UK of a changing world economic order remain underexplored and underprovided for in government policy. There have been moments when the Chancellor has attempted to do this, such as securonomics and the two Mais Lectures, but it has come on and off the agenda as priorities change with each new focus group. As is too often the case with this Government, there remains a set of vague, often contradictory intentions, unwilling to make the serious trade-offs needed to meet the new reality. For example, on energy security, the measures to implement the results of the Fingleton review are welcome, but the pace of decision-making and implementation has been painfully slow.

More broadly, in a world in which we have had two energy shocks in under five years, and with projected energy demand for AI, quantum and other technologies due to soar, the Government have failed to look again at the trade-offs between security, cost and decarbonisation—because there are trade-offs. I strongly believe that renewables will be a big part of our domestic energy security and that investment in green technology has the ability to drive growth and jobs. However, it is also true that, when it comes to the Government’s clean power target, focusing on getting to 95% clean power, instead of the around 90% that we were already on track to deliver, over a five-year period, has significant additional marginal costs. Pursuing the last mile of decarbonisation may have the perverse effect of failing to incentivise people to power their homes and cars with electricity as we drive up its cost. At a time when people and businesses are struggling with their bills, the Government are not being straight with them about the decisions that they are taking that drive those bills up even further.

The Government have been equally unable to make the trade-offs needed on spending. Instead of investing in growing our economy and using the proceeds of higher growth and productivity to boost spending, as was outlined in the manifesto, the Government have raised taxes in the most damaging way to growth so as to increase welfare spending before any of that growth or productivity has materialised. Even this Government have realised that the public and the economy are unlikely to tolerate further tax rises. However, we have a set of commitments and demands that must be met, including increasing defence spending to 3% then 3.5% of GDP—the short-term trick of switching ODA to defence cannot be repeated—and meeting the growing demands of our health service and an ageing population. These pressures must, at least in part, be met from savings in spending elsewhere, but the gracious Speech contained not a single proposal for where such savings might come from. There was no sign of welfare reform measures, which the Government continue to claim are necessary but fail to take action on.

Given the demands placed on us in a more insecure world, and given that we are at record levels of taxation, tax reform must now come on to the agenda. If we want to avoid further damaging tax rises, we need to find a way to raise the same revenue, if not more, from a more efficient, more growth-friendly tax system. Instead, we have had a national insurance tax change designed in the worst possible way to discourage work, and the gap between the tax treatment of employment versus self-employment or other income continues to grow. We continue to have a tax system, as the noble Lord, Lord Burns, said, that discourages mobility and investment, and that creates perverse incentives and cliff edges along the way. Perhaps the Government will reflect on the gap between their election promise—and continued claim—that they will not raise taxes on working people and the reality of their decisions as something that may have contributed to the lack of trust in the Government displayed at the ballot box last week.

I turn last to growth and the Government’s regulating for growth Bill, which some might call a contradiction in terms, although I am inclined to be more generous. We will have to wait to see the detail, but, on first impressions, although well intentioned it looks like it will struggle to have an impact. Instead of fundamentally revisiting whether the regulatory architecture that we have built over the last 20 years makes sense in today’s economy, it makes a few tweaks here and a few there. Again, it refuses to engage in the trade-offs that might be involved in some of this decision-making. We need to take a step back and look not just at the individual merits of each piece of regulation but at their cumulative effect. The half-measures, the lack of pace and the lack of vision that this represents sum up the Government’s approach.

If growth is the number one priority, you have to go further and faster on planning and on artificial intelligence. If growth is the number one priority, you do not make the labour market more rigid at the exact time you need more flexibility. You need a Government who are willing to take decisions and change the process for implementing those decisions so that it does not take years to get anything done. To quote a different part of the former Home Office Minister’s resignation letter to that quoted by my noble friend Lady Finn, this Government are

“the definition of incremental change. Nothing bold about it”.

For the Government to deliver on our national security, our energy security and our economic security, they need a strategy that faces up to the new realities in which we live, and that recognises that the open and globalised rules-based order that was the foundation of our previous growth and productivity has fundamentally changed. That means we need to look fundamentally at how we support business at home and how we engage abroad. I do not intend to focus on our relationship with the EU—many others in this debate will cover that ground—and personally I am pragmatic about the opportunities and potential costs of a closer relationship with Europe. But in this new world, we need a new approach and—here I agree with the noble Lord, Lord Alderdice—an approach that engages with the world as it is, not as we wish it would be or as we once thought it was.

The Government speak the language of a new global economic order while governing in the paradigm of an old one. That is perhaps best summed up by the response to last week’s local elections being the appointment of Gordon Brown as the special reviewer on global finance. This country cannot afford a Government who are unwilling or unable to take the decisions needed to meet the challenge before us. Something has to give, and I expect that we will find out in the coming days and weeks just what that is.