Economic Growth

Lord Desai Excerpts

Thursday 23rd January 2025 Lords Chamber

[Lord Desai (CB)]

My Lords, we have not had any economic growth in the UK for about 15 years. The last time that we had growth was during the years of new Labour, between 1997 and 2008. Then there was the financial crash in 2008 and, between then and 2024, our growth rate—so called—has been around 1%, maybe 1.5%. As a statistician of some age, I do not think that a growth rate of 1% is significantly different from 0%, so we more or less have not had any growth for 15 years.

That was the time when the Conservative Party was in power. I do not blame them, but we basically had no growth. They tried personal income tax cuts, investment incentives and so on, but we had no growth. One question to ask ourselves, therefore, is whether growth is actually demanded by the citizens. The Conservatives obviously got re-elected without any growth. There was a lot of immigration and everybody was complaining about it, but nobody was complaining about the lack of growth.

We have a paradox here in that a stagnant economy for 15 years can sustain a single party rule—with five Prime Ministers, but that does not matter. The key is in what the noble Lord, Lord Bridges, chairman of your Lordships’ Economic Affairs Committee, recently pointed out: our labour force is reluctant to work. People either want to work from home, to work four days a week or to say that they are mentally incapable of working and they would rather have benefits. I do not criticise that. As an economist I believe in individual choice, and individuals have a choice to work or not work, or to work as much as they want to. If there are benefits for not working, why should you work? I was lucky in that I had a job I actually liked, but most jobs are not very likeable.

The paradox is that we do not actually have a keen labour force willing to get out there and work. People, especially after Covid, have decided that they have got to a level of income at which they are not unhappy and can basically manage. If they need a little bit of welfare benefits, what is wrong with that? It is a paradox we have to face about the nature of the British economy. Economics is ultimately all about consumer satisfaction. If the consumer is satisfied with their current level of income and does not really want to get out there and work harder, why should we make him work harder? Why should we torture him to make him work harder? It is all right for us leadership class: we are the leaders, and we care about capital markets. We worked very hard for Brexit because Brexit was going to be the great key to our eternal growth, but that did not work.

The question to ask is: does anybody want growth in this country? My argument is that that is in doubt, and the doubt comes from something called the happiness index. This was adopted by the noble Lord, Lord Cameron, when he was Prime Minister, as one of the numbers he wanted to look at. There is very little fluctuation in the happiness index. It goes from 0 to 10 and people are more or less happy: the happiness index has been between 6.8 and 7.5. People are moderately happy and I think we should let them be happy, forget about growth and get back to our work, which is to talk about everything in the world.