Economic Growth: Public Spending

Lord Leigh of Hurley Excerpts

Wednesday 12th February 2025 Lords Chamber

Asked by

[Lord Leigh of Hurley]

To ask His Majesty’s Government what assessment they have made of the effect on economic growth of the Chancellor of the Exchequer’s comments before the Budget on the “public spending inheritance” and of the consequent rise in employer National Insurance contributions.

[The Financial Secretary to the Treasury (Lord Livermore) (Lab)]

My Lords, it was this Government’s duty in the Budget last year to fix the foundations of the economy and repair the £22 billion black hole in the public finances. We have always been clear that there are costs to responsibility; the increase in employers’ national insurance contributions will have consequences for businesses and beyond, but the costs of irresponsibility for the economy and working people would have been far greater. We are, of course, not satisfied with the growth rate. That is why we are going further and faster on economic growth, including through the measures announced in the Chancellor’s recent growth speech.

[Lord Leigh of Hurley (Con)]

My Lords, it seems the Government have no real idea of the damage the Chancellor has caused to the economy with her negativity and the ideological jobs tax. Perhaps they will listen to the CBI, which reports that expectations in the private sector are now the lowest in over two years, and private sector activity fell again in the three months to January. The Recruitment and Employment Confederation survey points to the most widespread weakening in demand for staff since the height of Covid in August 2020. The CEO said, somewhat damningly, that government actions are acting as “brakes on progress”. When will the Minister acknowledge that the Budget for growth and stability has produced the diametrically opposite result? If the Government are ideologically driven to extract cash from the private sector, there are much more business-efficient and tax-friendly ways of so doing.

[Lord Livermore (Lab)]

I am grateful to the noble Lord for his question, but his contention seems to be that we were wrong to be honest about the challenges in the public finances, and should instead have maintained the previous Government’s cover-up. He seems to be saying that we were wrong to deal with those challenges, and should instead have maintained the £22 billion black hole in the public finances. Let me be clear: those are exactly the two ingredients—hiding from scrutiny and hiding from reality—at the heart of the Liz Truss mini-Budget, and we saw how that ended. If that is the noble Lord’s recommendation, I fundamentally disagree with him. We were right to restore honesty and transparency to the public finances, and we were right to repair them, which is why we took the difficult decisions that we did.