King’s Speech (4th Day)

Lord Bridges of Headley Excerpts

Monday 22nd July 2024 Lords Chamber

[Lord Bridges of Headley (Con)]

My Lords, it gives me great pleasure to welcome the noble Lord, Lord Vallance, who I am delighted to see on the Benches opposite—I welcome talent to this House—and my good noble friend Lord Petitgas. My noble friend and I have two things in common: we both worked in a profession that is only marginally more trusted than politics—that is, banking—and we both worked in No. 10 before elections. In my case it was in 1997; in his it was this year. In both cases not everything went according to plan. I remember former Prime Minister John Major being sent early in that election campaign to visit a Formula 1 factory, where he was placed in a car with no wheels on it. My noble friend will have singed in his mind that visit to the Titanic shipyard. He failed to mention that, as well as having a stellar career in banking, he is also a member of the Légion d’honneur. Now a Peer as well, he is the living embodiment of the entente cordiale. Cut him down the middle and he is absolutely red, white and blue. I am sure I am not alone in welcoming him to this House and looking forward to hearing many more excellent interventions like the one he has just made.

I remind the House of my interests as a shareholder of and an adviser to Banco Santander. I pay tribute to and congratulate the Labour Party on its win and wish it well for the future. Like everyone, I want to see economic growth. As my noble friend and other noble Lords have said, the question is how we get it.

Before I turn to the Government’s plan, let us look at the inheritance, which a number of Peers have spoken about. As my noble friends Lady Noakes and Lord Petitgas said, we must not talk things down. Inflation is at 2%, unemployment is at 4% and the economy is outstripping other G7 countries so far this year. That said, we also need to be very honest. Productivity growth is lethargic—others have mentioned this—economic inactivity has soared, so too has immigration, and taxes and debt are very high.

Looking ahead, according to the IMF today, GDP growth would need to be around 2.6% every fiscal year from 2025-26 for the Government to stabilise public debt by 2028-29 without extra tax rises or spending cuts. Obviously, one reason why taxes and debt have risen is thanks to the double whammy of Covid and then Ukraine, but there are other reasons that we need to be honest about, and I will highlight three.

First, for years we have seen the slow but steady spread of a mindset that the state is the solution to all our problems. This was turbocharged by quantitative easing, which my noble friend Lord Forsyth mentioned, giving the impression not just that Governments can act in the face of adversity but that they should.

Secondly, and related, we have seen a growth in the regulatory state. Good, simple, robust regulation is the bedrock of a competitive economy, as others have mentioned, but at the moment that balance is going wrong. We are sleepwalking into a regulated world where businesses are deterred from taking reasonable risks, and without risk there is no reward, little progress and low growth.

Thirdly, there is the failure to improve productivity, which others have mentioned. I want to cite one reason why this matters, which is how productivity is related to debt sustainability. Professor David Miles, a member of the OBR’s Budget Responsibility Committee, told the Economic Affairs Committee earlier this year that

“if productivity growth is barely positive over the next five years debt would be around £200 billion higher, some 7% of GDP, than the OBR central forecast of November 2023”.

This is the context of the gracious Speech—a Speech that contains rays of hope, such as reform of planning, but in my mind these are overshadowed by the growing dark clouds of the fiscal challenges we face. They are debt, defence and the need to rearm, demographics with an ageing population, and decarbonisation and the green transition. These challenges—the Ds—have been sitting in plain sight for several years. We have known for ages that difficult choices lie ahead and—I hate to say it—just like the previous Government, Labour has been silent about what it will do. Will it increase taxes or cut spending? If taxes on working people are not to rise and wealth creation is really going to be rewarded, what is going to give? To govern is to choose—we know this—so do we prioritise rearming our nation or decarbonising it? Above all, do we encourage people to take more responsibility for their lives when faced with these challenges or do we look to the state to do more? It is the age-old choice: trust the people or trust the state?

The gracious Speech, with its commitments for more regulation and intervention, gave me just a glimpse and a whiff of the Government’s instinct. It is to trust the state, not the people. I do not think we should exaggerate this. It is not as if we are going to be on the road to serfdom, but my fear is that the growth we are likely to see will be growth in spending and tax, regulation and the state. If that is right, I cannot see how the Government’s approach will achieve their laudable aim of the UK having the highest sustained economic growth in the G7. So, while I wish this Labour Government well, I have a nagging concern that their plan will not put a brake on the spread of today’s big state malaise, which I see as holding Britain back. My fear is that the reverse is the case. To coin a phrase that the Government used about their gracious Speech, the brakes are off.