Economic Growth
Lord Farmer Excerpts(1 month ago)
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Lord Farmer
That this House takes note of the conditions required for economic growth.
Lord Farmer (Con)
My Lords, I thank all noble Lords who have made time to prepare for and contribute to this important debate on taking note of the conditions required for economic growth. I pray that it will be helpful, constructive and stimulating, as we hold the Government to account for their major election pledge to bring about growth, presently at which they are struggling. I will focus today on mood, spirit, culture and the social underpinnings of market economies, often neglected subjects in growth discussions.
On 29 July, the Chancellor first said the new Government had
“inherited a projected overspend of £22 billion”,—[Official Report, Commons, 29/7/24; col. 1033.]
or a black hole, and so began the gloomfest, with warnings of a very difficult Budget and, probably unintentionally, the destructive talkdown of the economy. The cloud of employment rights soon appeared on the horizon, with much employer scratching of heads as to how these 28 reforms were going to deliver growth, given concerns, for example, that day-one rights could mean that they were stuck with an unsuitable hire.
Last quarter’s rise in unemployment is being blamed on the Budget’s further disincentives to hire with higher employer national insurance contributions and minimum wage levels producing an accelerator effect of pessimism. Business confidence is now at a very low ebb. One entrepreneurial farmer I was talking to recently, who has businessmen friends who were full of plans for new enterprises and the expansion of existing ones, said they had all cancelled these plans since the Budget and are hunkering down to survive.
Lifting the gloom is essential for growth. There needs to be reward for risk-taking and succour for the entrepreneurial spirit being deadened by an emphasis on rights. Responsibilities need to come back into fashion. We need a JFK moment: ask not what your company can do for you—ask what you can do for your company. Many employers shoulder significant risk. Their decisions make the difference between someone’s job being there or not, and they live daily with existential threats facing firms they have built up with their own money and effort.
Employment rights are obviously important, but employees also have responsibilities towards their employers, which should be pursued out of self-interest, if for no other reason. Securing rights, for example, to work from home or in a hybrid pattern should not be in the teeth of good business reasons for office-based staff to be working together in the office. In 1789, Pierre Victor Malouet warned France’s Estates-General:
“Take care when you tell man his rights. For you will transport him to the summit of a high mountain—from where you will show him an empire without limits”.
Rights are voracious.
JFK also said:
“One person can make a difference, and everyone should try”.
Call me nostalgic, but people used to work hard because of the need and inner drive to support their families. Arguably, they are now encouraged to vote for the party, no matter where on the political spectrum, that will do the best job of looking after their family for them. Of course the state has a role, but it should not smother or quench that provider instinct.
I welcome this Government’s efforts to stoke, not stifle, the spirit of adventure by shaking up environmental regulators and the Competition and Markets Authority. Many potential wealth-creators are snarled up in the sticky web of regulation for no reward and often at much cost. Even trying to open a bank account takes far too long. Regulation can sabotage the good intentions of policy. Of course we need a rules-based system, but when it becomes sclerotic and pathologised, it simply breeds despair.
My first City boss was always questioning whether one had the spirit of adventure. He was not counselling recklessness: risk needs to be analysed, and the risk-reward ratio needs to be calculated. The British Volksgeist, or national spirit, currently pervaded by gloom, needs to be freed from stultifying processes and reborn as a spirit of adventure. Alongside that, the world of ideas needs to be freed from the dictatorship of orthodoxy. A high percentage of the British elite inhabit a unipolar world where only one sort of ideas is considered—for example, on the issue of equality, diversity and inclusion.
Many in the British public are desperate for change. They are flirting with the idea of Farage and intrigued by the dominance of the disruptors in the United States, yet most mainstream news outlets recycle disdain for Trump and Musk and ignore the energy their ideas are pumping into the American Volksgeist. Americans have rediscovered that the buoyant animal spirits that need unleashing flourish in freedom.
Stimulating wealth creation requires encouraging people to take risks and act on out-of-the-box ideas. In this country, the hero is not the risk-taker but the reasonable man. George Bernard Shaw said:
“The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man”.
We will not see progress in this country when blandness is the ideal. Trailering the second Conservative debate later today, we are seeing it in the withdrawal of education options, by making the national curriculum compulsory across academies and forcing independent schools to close.
However, the liberation of market forces does not necessarily produce unending economic growth. A sustainably flourishing economy requires a stable social base. Towards the end of her time in office, Margaret Thatcher recognised that she needed to turn to social renewal after a decade-long focus on unleashing the markets and economic reform. The destruction of old industries had a devastating effect on the social fabric of the country, and family breakdown picked up speed on its already upward trend. The noble Lord, Lord King of Lothbury, the former Governor of the Bank of England, is adamant that stable families are the building blocks of a productive society, and ignoring that truth sowed seeds of destruction for future growth. Indeed, Tony Blair said in 1996 that a strong society
“cannot be morally neutral about the family”,
but now almost half of all children do not grow up with both parents.
Hyper-liberal individualism runs alongside purist free-market philosophy; hence many who espouse the latter are libertarian in their outlook. Yet, when social liberalism partners with economic liberalism, the inherent contradiction eventually brings the engine of growth to a shuddering halt. The social underpinnings of markets have been gnawed away. A real-world example is that coping with relationship breakdown made my employees less productive at work.
I once suggested to the Treasury that it should investigate the correlation between our low position on OECD league tables for both productivity and family stability and try to cost the loss of productivity that family breakdown brings. The Treasury spad that I spoke to was horrified at the prospect because, in his words, the cost would be far too high. In other words, the link with stable family life, with all its benefits to individuals and society, is well known but ignored by politicians running from an unpopular message.
Yet family instability undermines us economically in myriad ways. Adults who experience family breakdown as children are significantly more likely to have debt problems or to be on benefits. They are almost twice as likely to underachieve at school, experience mental issues such as alcoholism, be in trouble with the police or spend time in prison. One-quarter of prisoners have spent time in local authority care, and three-quarters of men in prison had an absent father. Future prosperity is sacrificed to liberal individualism.
Moreover, economic liberals’ demands for lower taxes and a smaller state will be forever thwarted when the demands on the public purse are so great, and that has much to do with the degradation of social and, particularly, family bonds. Family hubs are vital to remedying that. There are now around 950 family hubs in over 130 English local authorities, working closely with hundreds of children’s centres, building on the work of previous Labour and Conservative Governments. I declare my interest as a guarantor of FHN Holding, the not-for-profit owner of Family Hubs Network Ltd, in asking the Minister whether his Government will keep investing in family hubs in the spending review.
More broadly, David Halpern and Andy Haldane’s Social Capital 2025 says that strengthening wider networks and trust dramatically improves countries’ economic fortunes. In their words:
“The social bonds that tie us are the hidden wealth of nations”.
Strong social trust allows doing a deal on a handshake instead of through lawyers, sharply lowering transaction costs. A 10% increase in social trust increases relative economic productivity by 1.3% to 1.5%.
Social trust requires greater trust in our politics and requires politicians to tell the truth and be straight with the electorate. The leader of the Conservative Party recently admitted the futility of virtue-signalling announcements such as, “We will get to net zero by 2050”, without a credible plan. Labour has form here too. Building 1.5 million homes was hard enough when we did not have the manpower and other resources, and then the minimum wage and national insurance went up. When the Chancellor said her Budget did not increase tax on working people that was true only in a casuistic sense, and voters are sick of casuistry. Politicians should not underestimate the value of honesty. Facing up to things engenders respect. The public see through the deceit of talking down the economy when it was on the way up and misrepresenting Conservative spending plans. They simply say, “A plague on both your houses”.
Having been involved in markets for half a century, I have found money to be particularly honest. It is either there or it is not; you are either broke or you are not. In contrast, an ideology that says that net zero requires closing North Sea oilfields down will simply not work in the timeframes being driven through, not to mention that the solar panels we will rely on being made with Chinese slave labour.
Wealth creation is vital to support and lift those who need Churchill’s safety net of the welfare state, but many become entangled in that net if they are mentally or physically unwell. So, just as in the wider welfare population prior to universal credit, we need to cut welfare but, more than that, we also need to de-risk coming off welfare, especially where people are languishing on sickness benefits.
We also need to reduce the state by reducing the Civil Service. Productivity has gone up in the private sector but not the public sector, where the existential threat that many private sector companies face daily is non-existent.
To sum up my main points, poor growth has cultural as well as economic drivers. Will the Minister inform the House how the Government will banish gloom and blandness and encourage that spirit of adventure? How is he going to pep us all up? How will the Government emphasise responsibilities, not just rights, and rebuild a stable social fabric based on families and communities, where people provide, care for and trust each other? Will they admit that there is a pressing need for big ideas and people who think outside of the box? However uncomfortable they make us feel, we need disruptors who can discredit and destroy the dictatorship of orthodoxy. I beg to move.
Lord Farmer (Con)
My Lords, I thank all noble Lords who contributed today. It was a robust debate and it was full of good ideas, stimulating and constructive. I thank the Minister for addressing many of the questions and giving details. I am saddened by the political point-scoring, because we have problem of growth and we need a coherent plan, as my noble friend Lord Horam, said, for growth. I intended—and as I said at the beginning, I prayed—that this debate would produce some ideas that would be a help to the Government. I hope that the Government will take this debate, study it and take the ideas from it, and that it may help them in producing a coherent plan for growth.
I thank everybody for their work and preparation. This has been an important debate. We have a growth problem and we need a growth plan. I beg to move.
National Insurance: Charity Sector
Lord Farmer Excerpts(1 month, 2 weeks ago)
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Lord Farmer (Con)
My Lords, the state contracts out important family services work in prisons to charities, as they are more trusted by families and by the prisoners they are visiting. However, these contracts are so skimpily financed that increased, unbudgeted NI costs will likely mean many charities are forced to hand them back to the Government. Will additional funds be made available to bridge that shortfall so that agreed work can be delivered without risking charities’ financial integrity?
Baroness Twycross (Lab)
The noble Lord gives a powerful example of the valuable work that charities undertake. It is hugely difficult for this Government to find ways of filling the £22 billion black hole. The Charities Minister has met representatives and we are keen to work with and hear from individual charities where they have concerns, so if the noble Lord has specific examples that he would like to share with me, I ask him to get in touch.
Civil Servants: Compulsory Office Attendance
Lord Farmer Excerpts(1 month, 2 weeks ago)
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Lord Farmer
To ask His Majesty’s Government whether they intend to change requirements for civil servants to work in government offices following a vote for possible strike action over compulsory office attendance at the Land Registry.
Lord Farmer (Con)
My Lords, the issue of the amount of time civil servants are required to work in their offices rather than in their own homes has been raised several times in Oral and Written Questions, and there will be a Select Committee on home-based working starting shortly. I understand that this is going to be based here and not in people’s homes. This is a welcome opportunity to have a longer debate in advance of that. It is a very important issue for the country, as we try to pull together after a tumultuous period, especially during the pandemic, when many social norms were turned on their heads. The norm that people had separate work and home spheres was completely inverted. There were, of course, exceptions to this norm, but there were also reasons why it was a norm.
To set this debate in the broader context of requirements on the Civil Service, the last Government mandated civil servants to work together in offices 60% of the time. Phrased as an “expectation”, it had flexibility built in, so that many exceptions could be made—for example, on the grounds of disability or childcare responsibilities. The Cabinet Office said that department leaders would listen to staff and make adaptions where required to ensure that the policy meets business needs. This was part of the Civil Service People Plan, which points out that the
“programme of modernisation is no end in itself. It is about delivering to every part of our country and every family, and doing so better, more effectively and efficiently”.
The current government focus, as stated by the noble Lord, Lord Livermore, is on fundamental reform of our public services to drive greater efficiency and productivity. They renewed their commitment to the 60% office attendance mandate on 24 October 2024, doing so with reference to a wide range of studies showing the benefits of hybrid working.
However, Land Registry employees in the Public and Commercial Services Union will strike indefinitely from 21 January over their managers’ application of this mandate, refusing to cover for colleagues or to take on anything they deem to be beyond their job description. The PCS cited concerns about reduced work flexibility, extended working days due to commuting, financial impact, well-being, and impacts on disabled workers and carers. Limits to flexibility and the time, money and energy spent on commuting are all costs of employment that were normal before the pandemic catalysed the mass movement out of the workplace and into the home.
As an employer, I have first-hand experience of how hard it is to assess performance when people are working from home. Major changes to stamp duty are coming in April this year, which the Land Registry will have to administer, yet commentators in the FT have described the Land Registry’s current inefficiency, with some registrations now taking 12 to 24 months, and its service levels are already far below what any private sector business would deem to be acceptable.
The PCS general secretary, Fran Heathcote, said that imposing mandated targets on office attendance
“doesn’t increase productivity and is unpopular with staff”.
How can she be so certain? I am sure that others here will talk about the benefits of home working. However, assessments of its impact on productivity are inconclusive, and the Government are very clear on the benefits of collaborative face-to-face working, particularly in the Civil Service. Jamie Dimon, the CEO of JP Morgan, whose shareholders require him to run an efficient business, announced on Tuesday that all staff will be required to work in the office five days a week, as
“staff work better together in-person”.
Dimon has been critical of the US Federal Government’s lax expectations of their officials in this area.
The taxpayers of this country are the shareholders of the Civil Service, and we require the Government to run it effectively. In 2019, the TUC described home-based working as a “win-win-win” that
“can boost productivity … But too many employers are clinging to tradition, or don’t trust their staff enough to encourage homeworking. They need to catch up”.
The implication is that remote working was previously underused and that we are now in a brave new world of greater efficiency. Frankly, the TUC needs to catch up on the realities of human nature. The companies that I have managed and started have taught me that the sentiments expressed by the TUC are rather naive. It is not necessarily clinging to tradition to want to have the team work together, united in the aim of furthering the business and building relationships through interaction. Moreover, trust must be earned; it comes with a good track record. Accountability must be learned and observed. If you can see no evidence that work is happening, how can you know that it is taking place? Furthering the business is existentially important when its survival is at stake.
Flourishing businesses are indispensable for employees’ economic well-being and require employers to take a risk, often working long hours themselves. My experience is that home working has been a brake on creativity and productivity. The IFS warns that people might, in fact, now be working too much from home and undervaluing the benefits of in-person work. It says that externalities—the bigger picture—need factoring in, but the employee looks only narrowly at the costs and benefits of their actions. Externalities include the effects of a personal decision to home-work on everyone else in the office and their productivity. More people in the office can better facilitate collaboration and creativity, such as with a quick five-minute chat to resolve issues instead of a diarised Teams meeting.
Importantly, the costs and benefits of home working are spread very unevenly across each firm’s workforce. Older and more experienced workers may just want to get their heads down and finish early. Their pre-pandemic work-based social networks have kept going, reducing the benefits of going into the office. Often having bigger homes, they can work in separate spaces from the families that they spend time with after work. However, psychological impacts on younger, newer workers are likely underestimated. Working in their bedrooms, struggling with loneliness and flailing around with little help and social support, they need informal chats and to observe first hand those with greater experience. Much is better caught than taught.
Older and more senior workers who insist on home working for personal convenience are often pulling up the ladder that they were able to climb. Since the Budget, there has been a cloud of gloom over business, given ever-increasing levels of taxation and constantly mounting pressures on employers. These include ever-increasing rights of employees. If many rights are given on day 1, when people have not shown that they can even do the job, this will deter hiring. Entrepreneurialism is being dampened and the spirit of adventure required to start and drive a company and create wealth is evaporating. Many companies are fast reaching the limits of sustainability in such a hostile environment and urgently need their staff to do the work that they are paid to do in the most productive way possible.
We are still in the wash of the pandemic, so in this nationally vital area of employment it is time to evaluate what is good, what is bad, what is right and what is wrong. Frankly, it cannot just be what the unions and employees want. The home working norm, which emerged in very abnormal circumstances that now no longer exist, has been sustained. Why? Will the Government confirm that working from home and even hybrid working will not be treated as a right? The employer should be able to require what is needed for delivery. Will the Government confirm that they do not intend to reduce the Civil Service office attendance mandate? They should, as employers and stewards of our taxes, act on the bigger picture, the externalities mentioned by the IFS, and enable other employers to do the same.
Whitehall: Prioritising Performance
Lord Farmer Excerpts(5 months, 2 weeks ago)
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Lord Farmer
To ask His Majesty’s Government what assessment they have made of the report, Making the grade: Prioritising performance in Whitehall, published by Reform on 1 May; and what steps they are taking in response.
The Parliamentary Under-Secretary of State, Department for Culture, Media and Sport (Baroness Twycross) (Lab)
His Majesty’s Government remain committed to attracting and retaining the most talented people to build a highly skilled and capable Civil Service. The recommendations contained within the Reform report are detailed and wide-ranging. Time is being taken to consider carefully all the recommendations. A number of activities are under way to continuously improve how talent recruitment and performance are managed.
Lord Farmer (Con)
My Lords, I thank the Minister for that encouraging reply. Reform emphasises the need for greater cognitive diversity in the Civil Service and a clear route for public service-minded and exceptionally talented applicants without a specific role to apply for. Will the Government set up a mid-career fast stream to bring in high-flyers experienced in other ways of working to help break the groupthink? Similarly, using “behaviours” in success profiles favours internal candidates, so will the Government scrap this and assess instead on skills and experience?
Baroness Twycross (Lab)
Success profiles provide a common framework for recruiters to assess the key attributes for roles, including skills and experience. Behaviours are not compulsory. The Government People Group is due to review the content and application of, and support for, success profiles in 2025 as part of continuing work to improve the quality and openness of recruitment. The Government are reviewing the options for a mid-career scheme as workforce demands in the next spending review are established. Many roles are open to external recruitment at all grades, with talent schemes such as the Future Leaders Scheme available to support rapid progression through to more senior levels. Regarding diversity of thinking, currently around 10% of those on the Future Leaders Scheme declare as neurodiverse.