Spring Budget 2024

Lord Eatwell Excerpts

Monday 18th March 2024 Lords Chamber

[Lord Eatwell (Lab)]

My Lords, debating the Budget Statement carries a great temptation to focus on the short term—on immediate tax and spend decisions—but today we can avoid often misleading short-term analysis and make an informed assessment of Conservative economic policy, relying on the fairly accurate data of the past 14 years. No forecasting is necessary; the facts will do.

The crucial fact with respect to the growth performance of the economy is growth per capita—not the number used by the noble Baroness, which is, as we know, growth driven by the highest level of immigration into this country in modern times. Since 2008—that is, prior to the global financial crisis—UK income per capita has grown at less than one-fifth of 1% per year, one of the worst long-term performances since the war and one of the worst in the G7. Consequently, average real household disposable income after taxes and benefits is lower today than it was 16 years ago, and that is the worst economic performance since the war. Today, following year after year of Tory-led economic failure, we have a no-growth, high-tax, high-debt economy, a crumbling public realm, with education underfunded and an NHS in near collapse.

Of course, there were worldwide economic shocks to navigate—the global financial crisis, the pandemic, the war in Ukraine—but much of Britain’s economic misery was self-inflicted. Consider the following. In the first half of 2010, the UK economy was on the road to recovery from the impact of the financial crisis. In the months before the May election, the economy was growing at a rate approaching 3% per annum. Conservative austerity killed that growth stone dead. The five years of austerity resulted in higher unemployment and lower investment, both public and private. The UK did not recover pre-2008 levels of income until 2015. Germany recovered it four years earlier.

Austerity was defined by an assault on the public sector. For a decade, real spending per capita on health actually fell, and it has still barely recovered. Real education spending per pupil fell by 8%. The police force, the justice system and defence have been criminally underfunded. Then there is the attack on local government: 14 years of swimming pools closed, libraries closed, youth services cut and local skills initiatives cut. The Conservative Party has hollowed out the facilities and institutions that define communities. For so many, they have destroyed hope.

Then came Brexit. In the Economic and Fiscal Outlook, the OBR has taken the opportunity of newly available data to confirm its view that the impact of Brexit is a permanent 4% reduction in GDP. That translates into lost government revenue this year alone of £42 billion. In an attempt to manage the disruption of Brexit, the Conservatives launched an industrial strategy in 2017, complete with glossy brochures setting out 180 diverse policy measures and commitments. In 2018, they created an independent Industrial Strategy Council, chaired by Andy Haldane, to offer evaluation and advice. Unfortunately Haldane’s rather chilly evaluation was too much for the Government. In 2021, the then Secretary of State for Business and Industrial Strategy told the other place that he was abolishing the council, arguing:

“I have read the industrial strategy comprehensively, and it was a pudding without a theme … I am very pleased to announce to the House that we are morphing and changing the industrial strategy into the plan for growth”.—[Official Report, Commons, 8/3/21; col. 678.]


Thus spake Kwasi Kwarteng. A year later, his plan for growth inflicted devastating damage on the British economy. Now, we have Jeremy Hunt’s plan, as echoed by the noble Baroness. The foundation stone is set out in the Budget speech:

“Conservatives look around the world at economies in North America and Asia and notice that countries with lower taxes generally have higher growth”.—[Official Report, Commons, 6/3/24; col. 848.]


Unfortunately, years of academic and policy research have demonstrated quite conclusively that the proposition is simply false. For example, a week after the Budget, the free market Institute of Economic Affairs—close supporters of the Conservative Party—commented,

“tax cuts do not generate sustained higher rates of economic growth … when we compare growth rates averaged over long time frames between different countries there is little correlation, negative or positive, with tax burdens or marginal rates”.

Yet Jeremy Hunt clings on to “Truss-Kwarteng lite”, even citing the Laffer curve—a reference that eliminates any suggestion his thinking is serious.

Commentators across the political spectrum agree that the next Government will inherit from today’s Conservatives a uniquely dire economic situation. If the new Government should be Labour, it is argued that the economic fundamentals are so bad that Labour will be forced to abandon all its economic and social goals. Fortunately, that prediction is incorrect.

Economic history tells us that beginning from the worst can lead to the best. Four policy ingredients are required: a Government with a comprehensive commitment to long-term investment; a vision of the commercial demands of the future and the technologies to meet them; a private sector corporate structure geared to long-term investment; and a financial system that funnels resources to long-term investors. A better characterisation of Keir Starmer’s missions for Britain will be difficult to find: a commitment to the rebuilding of material and human capital; a focus on the inevitable demands for new green technologies as the world faces up to the costs of climate change; legal reforms to stimulate the private sector; and a new national wealth fund to channel investment that fulfils long-term goals.

However, let us go back to this scorched-earth Budget. The past 14 years suggest that the Conservative Party should join “Economics Anonymous”. The party should admit its horrible errors, identify their origin in defective ideology, and rethink its way back to economic sanity. A decade or so in quiet opposition is required.