Autumn Budget 2024

Lord Eatwell Excerpts

Monday 11th November 2024 Lords Chamber

[Lord Eatwell (Lab)]

My Lords, the challenge faced by the Chancellor was to change the economy and to achieve a decent rate of equitable growth after 14 years of economic neglect and rising inequality. The black hole of Conservative economics is there for all to see: crumbling schools, the largest ever waiting list in the NHS, a wrecked criminal justice system, pothole-strewn roads, struggling local authorities and the lowest investment in the G7, with an economy on its knees from the neglect of the public sector and a Conservative Government with no clue as to how to nurture the private sector either.

To face up to this challenge, the Chancellor had to first begin to repair the damage, creating the foundations for the change necessary to achieve the growth that Britain needs—hence the expenditure to repair the health service, refund our education system and sustain public services, and the replacement of the Tory Spring Budget cuts in public sector investment with growth in public sector investment and increased research and development spending. It is noticeable that, in the criticism from the other side, there has not as yet been a single positive proposal as to what they would do instead.

The question then raised is: why the apparently limited impact on growth? After all, the OBR forecasts that growth will tail-off after a couple of years. There are two reasons for that. First, it must be remembered that it is far easier to follow the Conservative Party strategy of providing a short-term sugar rush by boosting consumption while neglecting investment. Secondly, investment is a relatively smaller proportion of GDP, hence it has a lesser impact, and the benefits of investment take time to realise. However, the really important point is that a successful growth strategy will involve major changes that would never be picked up by the OBR’s focus on tax and spend.

As the Chancellor argued in her Mais lecture, the dismal economic performance of the past 14 years derives from

“a failure to deliver the supply side reform needed to equip Britain to compete in a fast changing world”—

hence economic policy must

“begin with getting the institutional framework right”.

Getting the institutional framework right means ensuring that capital flows into new investment, whether in productive capacity, research and development or skills.

Is there anything more dispiriting than the strategies of Britain’s major banks, from which capital flows predominantly into mortgages, bidding up the prices of assets that already exist rather than creating new productive assets? Is there anything more dispiriting than the conclusion earlier this year of the Treasury Select Committee in another place that:

“Confidence amongst small and medium-sized enterprises … in accessing finance has fallen … This is accompanied by increasing de-banking … Unfair banking practices … may have further limited access and suppressed demand”?


This difficult small business environment is disincentivising risk-taking and innovation, and reducing growth. That is why the national wealth fund, incorporating a reinvigorated, proactive British Business Bank, is so important. Financial flows in Britain need to be redirected towards investment in new productive assets in the new industries of the future and in updating the everyday industries that shape our lives. Britain’s financial services industry must follow the wealth fund’s lead.

I offer one example of what can be done. Despite current financial difficulties, it is widely acknowledged that our universities are first-class centres of research. Some have created institutional mechanisms for translating that research into globally successful companies, but every one of our more than 160 universities should have a dynamic business advice and incubation unit, and should have access to the dedicated finance necessary to translate new ideas into new businesses. Those new businesses, like the universities, would then be spread throughout the country.

That is a job for the British Business Bank right now, but we cannot just rely on the public sector to take all the risks. The Chancellor has already indicated that reform of pension funds’ investment strategies is an immediate priority. Further reform of financial services is necessary. Funds must flow to new, real investment, not just to secondary markets. This Budget, by having the courage to identify honestly the true state of affairs and fix the foundations, indicates that the Government’s strategy of reform is on track to succeed.