King’s Speech (4th Day)

Lord Howarth of Newport Excerpts

Monday 22nd July 2024 Lords Chamber

[Lord Howarth of Newport (Lab) [V]]

My Lords, there is both the need and the opportunity for the new Government to be radical. We have to address poor productivity, low growth, regional and social inequality, shocking levels of poverty, collapsing public services and environmental degradation. We are told that the fiscal vice is so tight that the Government cannot spend any more money but also that there is a wall of money waiting to be invested in the UK. The case is clear for public/private partnership. The Chancellor has allowed herself more scope to invest than her Conservative predecessor did. The markets will smile on programmes led by government to encourage investment to green our economy and in sectors in which the UK can be globally competitive. This should not mean the national wealth fund making speculative investments in DeLorean-like projects, or the taxpayers soaking up losses while private investors hog the profits. It should involve the Government insisting that partner businesses adhere to principles to which the Government are committed for the public good.

More difficult is to judge what early scope the Government have to improve public sector pay and the funding of public services. The test should be: will such spending strengthen the economy over a reasonable timescale? Will it be good or bad for our economy to stem the haemorrhage of teachers from our classrooms and clinicians from our hospitals? If our economic malaise derives in significant measure from policies of excessive austerity, how can the remedy be the perpetuation of austerity? How can it make sense to say that private spending on every consumer frippery is fine but public investment in services is ruinous? One set of fiscal rules has repeatedly given way to another. What matters is the Government’s fiscal credibility. The markets need to know that there are competent and robust people in charge, monitored by a rigorous, reconceived OBR. The Treasury must never be an easy touch, but its default must cease being to wither our economy by reflexive negativity.

The Government have a large majority, great good will in the country and internationally, and five years ahead of them. The Labour Party campaigned on the theme of change. The gracious Speech gives us the first indications of change that I hope to see. A country that does not invest in its young people dooms itself to failure. The policies that we have inherited—the abolition of Sure Start, the reduction of funding per pupil, the chaos of FE qualifications and the near bankrupting of universities, as well as the immiseration caused by the two-child benefit cap, the neglect of children in care and mental health services, and the defunding of the youth service and drug rehabilitation—could have been calculated to create generations of poor, alienated, unproductive young people and spiralling costs in social services, welfare, health, policing and criminal justice.

The transformation of productivity must embrace education and skills; renewed infrastructure; a functioning housing market to enable a functioning labour market; social security reforms to strengthen incentives to participate in the labour market; the mobilisation of pensions finance; the cutting away of bureaucratic and self-interested obstruction; and improved performance in the public sector, including the NHS.

Through a brave approach to tax reform, Ms Reeves could improve productivity, social justice and Exchequer revenues. I hope she commits to a tax system that is a system and is progressive and green. To pick out just a few plums, she could levy council tax on the current value of properties. She could align CGT and income tax rates and restrict tax relief on pension contributions to the basic rate. She must introduce a carbon tax on greenhouse gas emissions.

Finally, our duty is to bequeath to our children and grandchildren a sustainable economy, so the growth that we pursue must be radically different from the prodigal consumption of irreplaceable natural assets that has characterised GDP-focused growth in the era conditioned by the thinking of defunct economists such as Keynes and Hayek. Our priorities must now be to preserve our natural assets, invest in new environmental assets and pay realistically for the pollution that we cause. The impact on current patterns of consumption, and on some people’s amenity, will be painful, but the consequence for our society’s very survival of shirking this responsibility will quite shortly be far more painful.