Economic Growth

Lord Fox Excerpts

Thursday 23rd January 2025 Lords Chamber

[Lord Fox (LD)]

My Lords, I join in the congratulations to the noble Lord, Lord Farmer, for securing this debate. It is the first time I have had the pleasure to follow the noble Lord, Lord Petitgas; I enjoyed his speech.

The noble Lord, Lord Desai, made clear that growth has been an issue for many Parliaments. I find the Conservative Party’s conscious collective amnesia, demonstrated by a number of speakers today, to be extremely cynical. They had their chance and, as the noble Lord, Lord Frost, ably demonstrated, the wreckage they left behind has had to be picked up by His Majesty’s Government now.

As we heard from the noble Lord, Lord Moynihan, parties of all colours—except green—seek to grow our economy. The differences appear when it comes to deciding how to distribute the spoils of any growth; sadly, that is not our problem today. Most people agree that the best strategy for us is to offer a beneficial, stable economy that supports existing business and attracts new ones. Of course, that is open to definition.

The current Government say that they are no different, and we hear a relatively familiar menu of mechanisms they say they will adopt to try to achieve growth: fiscal stability, investment, infrastructure, skills, devolution and planning reform, research and development, and net zero. But what will, and can, the Government actually do with this smorgasbord? Since the election, they have largely published analysis and launched consultations. What legislation we have seen to date has been skeletal, short on detail and long on granting powers for subsequent detailed laws. The Great British Energy Bill and the product regulation Bill are cases in point.

On 9 January, in answer to a question about growth from me, the Minister set out how he sees the Government’s record so far. He presented a shorter list: a modern industrial strategy, planning reform, pension reform and skills reform. I thought I would try to put this debate to some use and probe those four issues with the Minister.

The new council to steer the industrial strategy was launched just before the Christmas break. Under a chair from Microsoft, the 15 other members come from a cross-section that is hard to recognise as what we would call traditionally industrial. There is someone from Rolls-Royce, but there is no one from the chemicals, automotive or life sciences sectors, and no representatives from the smaller companies that make up the vital industrial supply chains. Although several trade unions have seats, which I agree with, I note that none of the major industrial trade associations do. Can the Minister explain how our largest industries and top exporters can be expected to be represented on this council when they are not there, and how the producers of half the UK’s GDP, which comes from SMEs, will be represented when they have no voice on that council?

To date, it is clear that the Government envision eight horizontal sectors encompassing a whole range of activities, some of which do not conform with the traditional definition of industrial. I assume automotive and aerospace—my old stomping grounds—are in the advanced manufacturing box, but where is our huge chemicals sector? Perhaps the Minister can flesh out this organogram today or in writing. When will we see what the plans are for these sectors, other than rolling over existing sector deals?

Planning reform invokes a rather simpler set of questions. When will the changes that the Government plan come into effect? For example, when will the first house be built on grey-belt land, and when will we see new local plans that include the grey belt? Until approvals start to happen, the effect of any planning changes on growth will be zero—perhaps less than zero, as investors sit back and wait to see what happens.

Unlike the noble Lord, Lord Davies, I am going to talk about pension reform. A cornerstone of the Government’s plans for growth clearly requires a significant change in behaviour by UK pension funds to invest far more heavily in UK assets—especially in illiquid and high-risk assets, notably upscaling small businesses and large infrastructure projects. How will the Government achieve this, given increasing warnings from the industry that it could reduce payouts to pensioners? Will they pressurise funds by applying a minimum threshold of investment in such assets? Will they mandate the consolidation of smaller funds and the pooling of local government pension schemes? If so, what is their assessment of the legal and administrative challenges and the implications of a reduced voice for pension holders? Finally, pensioners with small pots are least able to bear the risk. Will the Government put in place protection for such pensioners? Surely the most effective way to get more investment in UK assets is to increase the pipeline of attractive projects and tackle the problems of upscaling small businesses, in which the lack of lending, more often than the lack of capital investment, appears to be the major financial gap.

In truth, access to talent appears to be one of the biggest barriers for many businesses, so the Minister was absolutely right to list skills as a priority for action. The challenge of lifting the skills of some 31 million workers is huge and is not an overnight venture. It comes from accumulated effort and investment in schools, universities, colleges and institutes, not forgetting the role of the businesses themselves. But the Government’s challenge is this: if the construction of a new electricity transmission system gains planning permission, finds the necessary funding and lines up the necessary components, which have lead times measured in years, who will do the work? Who will build that transmission system, the new houses, and the infrastructure we need for growth?

Considering the complexity and the vital necessity of tackling skills, you would think it would be a good idea to set off on the journey straightaway. The vehicle the Government are trusting with this new task is a whole new organisation, Skills England, which

“will bring together central and local government, businesses, training providers and unions to meet the skills needs of the next decade across all regions”,

as the Government say. But once again I ask the question: when? Skills England plans to publish the findings from its first engagement sometime this year—soon, I hope. Will the work start then, or will there be further consultations before the work starts? There is huge inertia in the skills supply chain, so can the Minister give your Lordships’ House some sort of timeline—perhaps an idea when the first person who benefits from these government skills changes will hit the UK workforce?

To close, I will add one further issue that the Minister did not choose to mention. It picks up the point made by the noble Lord, Lord Agnew, about access to markets. Unlike the noble Baroness, Lady Lea, I believe there is no doubt that British manufacturing has suffered due to Brexit. If you talk to British manufacturing, that is what it tells you. It is welcome that the Government recognise the need to reset our relationship with the EU, but once again we are in the territory of what and when: what will that reset be, and when will we see it?

Noble Lords will have noted that, in a helpful contribution, the leader of the Liberal Democrats, Sir Ed Davey, called for the Government to negotiate a new deal with the EU, with the goal of forming a customs union by 2030 at the latest. There was a reciprocal intervention from the EU, which the Government slapped down at a moment’s notice. This is important and it would help: it would slash red tape and boost our trade with Europe by reducing the number of checks on goods, as businesses are finding in Northern Ireland, which, I remind noble Lords, is in a customs union with the European Union.

People are already struggling with the cost of living and are now worried about what a Trump presidency will mean for our economy. Forming a customs union with the EU would put us in a much stronger position to resist Trump’s bullying. It would be a win-win for our country. I look forward to the Minister’s detailed response.