Economic and Taxation Policies: Jobs, Growth and Prosperity

Lord Frost Excerpts

Thursday 13th November 2025 Lords Chamber

[Lord Frost (Non-Afl)]

My Lords, I declare an interest as the incoming director-general of the Institute of Economic Affairs. My proposition today is that we are living through a great refusal when what we need, as this morning’s growth figures show, is a great reversal. In Dante’s “Divine Comedy”, the shade of Pope Celestine V stands on the threshold of hell, judged for his great refusal: his rejection of the burden of the office of Pope. This country stands in a similarly precarious position, because this current Government—indeed, successive Governments—have refused to face up to their burdens and their duties: the difficult but necessary actions to get the economy back on the right track. They have refused to use the regulatory freedom that came with Brexit to deregulate and get markets going again, and now we are paying the price for all this.

We know what brings prosperity to a country: low taxation, property rights, no confiscation of wealth, rewarding of effort, welfare that supports the needy but only the needy, and well-functioning markets with minimum regulation. Sadly, since the 2008 crash, the direction of travel has been in quite the opposite direction. Changing this will not be easy. Indeed, I fear that we are instead seeing something that is very common in human nature: when confronted with something you do not want to change, you find intellectual justifications for why it does not need to change.

A new conventional wisdom has therefore emerged: the belief that those fundamental nostrums that I have just set out are somehow outdated and that the modern way to run the economy is different. Its believers, who are heavily represented in the current Government and in the public sector economic establishment—but not only there—think that high tax and spending are not in themselves bad; that growth can come from more public sector so-called investment, financed by tax or borrowing and a state-run industrial policy; and that these things never squeeze out private sector activity in any way. They think that distributional questions are the most important ones, and that dynamism in an economy is a bad thing because it increases inequality. They think that prices and markets do not have a signalling function but are essentially arbitrary and can be safely manipulated for wider social goals, and much more of the same sort of thing.

Of course. this is how the economy has actually been run—or, rather, run into the ground—for most of this century. That is why GDP per head has gone up by a miserable 0.5% a year over most of this period. It is why taxes are up eight percentage points from the early years of the Blair Government, now at 37% of GDP. It is why spending has gone up 12 to 13 percentage points, now at 45% of GDP—and no doubt later this month all those figures are going to be a couple of percentage points higher still.

We have reached the end of the road for this economic programme. We do not need more of it. What we now need is a great reversal, the renunciation of big-state economics, the undoing and the unwinding of most economic policy measures that have been taken this century: labour market controls, price controls, wage setting by government and judicial fiat, the disastrous net-zero policy, the pensions triple lock, heedless welfare spending and, of course, tax. We need a 10-year programme to get tax, spending and regulation safely back down to those early Blair-era numbers. If we do not do that, we will face another great refusal: the refusal of the markets to finance us and the refusal of our people to stay in the country and be taxed to deliver them.

There is no point in doing things that are popular but do not solve the country’s problems. I would like to hear from the Government that they understand that, and that they need to face up to this as a country and change our ways soon.