King’s Speech (4th Day)

Lord Layard Excerpts

Monday 22nd July 2024 Lords Chamber

[Lord Layard (Lab)]

My Lords, how wonderful that we have two such excellent new Ministers. We are talking about growth, and growth depends on only two things: productivity and employment.

Higher productivity depends hugely, of course, on higher skills. Higher skills are not only more productive in themselves, but they also raise the return to physical capital and therefore they then induce more investment. But our record on skills outside universities is a disgrace. For young people under 25, we have 40% fewer apprentice starts now than in 2010. There is massive excess demand for apprenticeship places. In the Government’s matching scheme, there are three times more applicants than there are places available.

The gracious Speech talked of reforming the apprenticeship levy. That is good, but much more is needed. We should be guaranteeing offers of an apprenticeship to every qualified applicant, as we legislated for in 2009 before it was then repealed a year later. That is something we could achieve by the end of this Parliament, and it would be one of the most valuable investments the Government could make.

At the London School of Economics, we have been estimating the value for money across a whole range of policies. For the apprenticeship guarantee, we estimate a ratio of public benefit to net Exchequer cost of 13:1. This compares, for example, with only 3:1 for the typical road-building scheme, and under 2:1 for the lower Thames crossing we were discussing earlier today. So I would like to ask the Minister: what are the plans for implementing the apprenticeship guarantee, which was already hinted at in the Government’s election manifesto?

Turning to employment, we now have over 2 million people not seeking work and living on disability benefits. At least half are suffering from mental health problems for which there are effective treatments. We must tackle mental health problems both in childhood, as the gracious Speech quite rightly said, but also in adulthood. Most adults with mental health problems are simply not receiving the effective talking therapies that NICE recommends. For those with anxiety disorders or depression, NHS talking therapies provides treatment for 13% of all people with these conditions, and the service pays for itself because so many patients go back to work, pay taxes and cease getting benefits. That is good for those with anxiety or depression, but there is no such service for the 1 million or so people suffering from addiction to alcohol, drugs and gambling or from personality disorders. NICE also recommends psychological therapy for all these conditions, but it is simply not provided. A new service for these conditions would increase employment by tens of thousands. In that way it would, again, pay for itself. It should be there in the next NHS plan. Can the Minister ensure that the Treasury supports this idea?

I have given two examples of concrete policies that are good for growth, but of course the real test of a policy is what it does for the well-being of the people and for the public finances. The best policies are those which give the most well-being per net cost to the Exchequer. When we come to the spending review, every policy should be evaluated that way in terms of the well-being benefits it provides relative to the net cost to the Government. The key test should be this benefit-cost ratio. It is not a new idea, but until recently it has been honoured more in the breach than in the observance. One reason for this is that the benefits that were included in benefit-cost calculations were too focused on just income, which is why Ministers typically then had to make their case for their policy in words, not in terms of the benefit-cost ratios. But now, with the help of well-being science, we can estimate a comprehensive measure of the benefits of most policies. The Treasury Green Book now strongly encourages this approach, but it has not been followed in practice.

Can the Minister confirm that when we come to the next crucial spending review, Ministers in all departments will be required to use the Green Book approach to make their case that way, and to do it for current as well as capital expenditure? For it is often as cost effective, or more cost effective, to invest in people as in things.