King’s Speech (4th Day)

Lord Gadhia Excerpts

Monday 22nd July 2024 Lords Chamber

[Lord Gadhia (Non-Afl)]

My Lords, I note my interests as a board member of the Bank of England and the housebuilder Taylor Wimpey, but I speak in a personal capacity.

Over the weekend, I read an article that began:

“Moments of change usher in moments of hope”.


That certainly feels like the zeitgeist surrounding the new Government and King’s Speech. Cynics will no doubt presage the triumph of hope over experience, so it is encouraging to see the incoming Administration making a sure-footed start, following through on promised non-legislative reforms—notably making changes to the planning framework and unwinding many of the previous Government’s own goals on local housing plans and targets. Indeed, planning reform to boost housebuilding and infrastructure should rightly form a crucial component of the growth agenda, especially given the domestic multiplier effects, while also recognising that they can provide only one aspect of the Government’s central mission to accelerate economic growth and promote wealth creation.

Tackling the fundamentals of economic productivity is a topic that attracts many and varied viewpoints, as today’s large speakers’ list and contributions testify to. So here are my few pennies’ worth. First, you cannot legislate for growth. That may be axiomatic, but legislators are often like people who possess a hammer and view everything as a nail. That said, strengthening the OBR is helpful insurance against the type of behaviour we saw in the ill-fated mini-Budget of October 2022, and it should, I hope, capture a credibility discount from holders of UK government debt—instead of the so-called moron premium we witnessed at the time.

With respect to audit and governance reforms, the creation of a new accounting regulator is both welcome and overdue, but I caution against piling on new statutory governance requirements. Instead, the replacement body for the Financial Reporting Council should be allowed to reform the UK’s corporate governance and stewardship codes—it has already started this, in consultation with the relevant stakeholders—with a firm eye on our global competitiveness as an investment destination.

This leads on to the second set of observations. We know that UK investment has lagged behind our OECD competitors for decades. The previous Government tackled both the supply and demand sides of this equation but found it painfully slow to shift the dial. Full expensing of capital expenditure, now permanent, should produce positive results over time. The Treasury should ensure that qualifying assets are defined broadly enough to include the types of intangible investments that are necessary for a predominantly services-based economy in an increasingly AI-driven world. In parallel, shifting the economy-wide asset allocation to higher-return investments should also make a difference, but this requires pension and insurance reforms to be followed through and risk appetite to change. The national wealth fund adds another well-intentioned initiative but is still a pea-shooter compared with the scale of investment required.

So what should we do? Therein lies part of the problem. It is easy to bemoan the absence of radical reforms, but a period of “boring” is good for investment —even more so given the political instability across many parts of the world, including our nearest neighbours in Europe. Apart from hygiene measures, including reinstatement of the Industrial Strategy Council and implementation of the Harrington Review of Foreign Direct Investment, we need a period of predictability, certainty and consistency. These are the three most important words to help restore investor confidence. That is what the noble Lord, Lord Petitgas, attempted during his brief time at No. 10, and I congratulate him warmly on his excellent maiden speech. His newly appointed successor, Varun Chandra, is extremely well placed to continue this.

Finally, it has become fashionable to comment on the challenging economic inheritance, no doubt borrowing from George Osborne’s playbook after the 2010 election. The current reality is more mixed and nuanced. Yes, the spending pressures are significant, especially on health and defence, plus there are higher expectations for public sector pay and welfare benefits. But many economic indicators are also starting to turn. In addition, the fiscal drag from freezing tax thresholds will do a lot of the heavy lifting on raising tax revenues—so, come the autumn, the Chancellor may well have more wind in her sails than she is willing to admit right now. Let us hope that luck and wisdom remain on her side, because the alternative options for raising taxes, given the manifesto lock on income tax, national insurance and VAT, all look very unappealing, and could damage incentives for wealth creation and risk choking off growth before it has properly begun.

In warmly welcoming the noble Lord, Lord Vallance, I urge him and the noble Lord, Lord Livermore, to take away three words from today’s debate: predictability, certainty and consistency.