King’s Speech (4th Day)

Lord Livermore Excerpts

Monday 22nd July 2024 Lords Chamber

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

My Lords, I thank His Majesty for his gracious Speech and all noble Lords for their contributions today. It is the greatest honour and privilege to be closing the debate this evening. Growing up where I did, I was the only pupil in my school year to go to university and I never once imagined that I would be standing at this Dispatch Box in your Lordships’ House. I will never forget that, above all else, politics should be driven by a sense of service to our country, and I will always seek to work collaboratively with all noble Lords, aware at all times of how much there is to learn from the collective wisdom of this House.

I am grateful to all noble Lords for their warm words, and I thank them for their continued guidance and friendship. I pay tribute to the noble Baroness, Lady Vere, whom I have shadowed for the past year. We may rarely have agreed, but I always greatly admired her command of her brief and greatly enjoyed working with her. I am pleased that she is on the Front Bench this evening and that her expertise is still available to your Lordships’ House.

The noble Baroness will know what a huge privilege it is to work in the Treasury, a truly formidable institution. I am delighted to have returned there, some 17 years after I left. I am particularly proud to have returned under the leadership of the first-ever female Chancellor of the Exchequer, who after 800 years has broken one of the remaining glass ceilings in government. It is long overdue.

I join other noble Lords in welcoming the noble Lord, Lord Petitgas, to your Lordships’ House and congratulate him on his maiden speech. His business and investment experience will be particularly relevant to the new Government’s growth agenda, and I look forward to his contributions in many subsequent debates.

It is also an enormous privilege to welcome my noble friend Lord Vallance of Balham to your Lordships’ House and to have had the good fortune to be present on the Front Bench for his maiden speech today. There is no doubt that my noble friend’s detailed knowledge and strategic guidance was pivotal during the Covid pandemic, saving countless lives as a result. He brings a wealth of experience and expertise to this Chamber. I know that he is very grateful for all the kind words that have been expressed to him during today’s debate.

Our manifesto made it clear that sustained economic growth is the only route to improving the prosperity of our country, raising living standards and sustainably funding public services. That is why it is our central economic mission.

As my noble friend Lord Liddle observed, several noble Lords spoke in positive terms about the economic inheritance that this Government face, including the noble Lords, Lord Callanan and Lord Bridges of Headley, and the noble Baronesses, Lady Noakes and Lady Vere. On her first day in the Treasury, the Chancellor received new economic analysis from Treasury officials on the lost growth of the past 14 years. This analysis shows that, had the UK economy grown at the average rate of other OECD economies, it would now be over £140 billion larger. This could have brought in an additional £58 billion in tax revenues in the last year alone—money that could have revitalised our schools, hospitals and other public services.

Instead, as my noble friend Lord Wood of Anfield pointed out, public services have been pushed to breaking point. There is sewage in our rivers and our schools are crumbling. The national debt has more than doubled. Taxes are at a 70-year high, and, according to the OBR’s March forecast, this will be the first Parliament on record where living standards were lower at the end than at the beginning.

It is true to say that many of the crises which we faced during this time were global in origin, but other countries faced those same shocks. The reason we in the UK were hit harder than comparative countries can be explained only by the choices made here at home: austerity which choked off investment, a rushed and ill-conceived Brexit deal and the disastrous mini-Budget, which crashed the economy.

The general election was an opportunity for the British people finally to pass judgment on the economic record of the past 14 years, and they voted overwhelmingly for change. We have begun the work necessary to deliver on that mandate—to fix the foundations of the economy, rebuild Britain and make every part of our country better off.

Our approach to growth rests on three pillars: stability, investment and reform. I turn first to stability, which must begin with respect for our economic institutions. For much of our history the strength of our economic institutions has bestowed credibility in international markets and underpinned our economic success. Politicians who seek to undermine those strengths, as we saw in the last Parliament, play a dangerous game. Under this Government, the Bank of England’s Monetary Policy Committee will continue to have operational independence in the pursuit of its primary objective of price stability, with a 2% inflation target.

Some noble Lords, including the noble Lord, Lord Forsyth, and the noble Baroness, Lady Noakes, criticised the Government’s plans for the Office for Budget Responsibility. The OBR has been praised by the OECD as a

“model independent fiscal institution”.

We will strengthen it for a very real reason, so that there can never again be a repeat of the disastrous mini-Budget which crashed the economy and increased average mortgage payments by some £300 a month. The new Budget responsibility Bill will deliver on the promised fiscal lock. This will ensure that every fiscal event making significant changes to taxation or spending will be subject to an independent assessment by the OBR.

In answer to my noble friend Lord Eatwell on how the fiscal rules will treat various spending scenarios, if he does not mind I will write to him to ensure that I address his questions correctly.

The noble Lord, Lord O’Neill of Gatley, proposed a revised fiscal rule. I agree with him that we cannot continue with the short-termist approach that disregards the importance of public investment, but neither can we ignore the pressing need to rebuild the UK’s public finances. We must maintain an iron grip on the public finances; if we do not, as we saw in the last Parliament, it is families that are forced to pick up the bill. The manifesto commitments that this Government were elected on must be kept to. They include robust fiscal rules, and we will keep to our commitments on tax, with no increase in national insurance or in the basic, higher or additional rates of income tax or VAT. Corporation tax will be capped at its current rate for the duration of the Parliament. If our international competitiveness is threatened, we will act.

On spending, the Chancellor has instructed Treasury officials to provide an assessment of the state of the spending inheritance, and she will present this to Parliament before the Summer Recess. My noble friend Lord Layard asked about the Green Book being used in the spending review, and the answer to that is yes.

The noble Baroness, Lady Bowles, raised the question of investment trusts. The investment trust sector plays a significant role in the UK economy, making up over 30% of the FTSE 250, including infrastructure projects and renewables that can help support the Government’s growth agenda. I continue to believe that the noble Baroness makes a persuasive case for action, and the Government will carefully consider all options available to address the issues she raises. I will be happy to meet her to discuss her Private Member’s Bill in further detail. I am grateful to my noble friend Lady Thornton for saying I can write to her, which I will.

In answer to the suggestion from the noble Lord, Lord Lee of Trafford, regarding NatWest shares, I am afraid I cannot comment on the approach to specific sales of the shareholding, which is commercially and market sensitive. I am grateful for the support of my noble friends Lady Drake, Lord Wood of Anfield and Lord Drayson for their support for the pensions Bill launched by the Chancellor, which was also discussed by the noble Lord, Lord Morse. In addition, the pension schemes Bill will support more than 15 million people who save in private sector pension schemes get better outcomes from their pension assets and support the Government’s mission to deliver growth.

I now turn to how we will unlock private investment in the infrastructure that our economy desperately needs. Britain today is the only G7 country with investment below 20% of GDP, which holds back productivity, as observed by the noble Lords, Lord Bridges of Headley and Lord Birt, and hinders us in the competition for the industries of the future. I agree with the noble Lord, Lord Sherbourne of Didsbury, that it is not in the Government’s gift alone to reinvigorate these faltering levels of investment; the lifeblood of economic growth is business investment. The right reverend Prelate the Bishop of Newcastle spoke of partnership, and I agree with her. A strategic state does have a crucial role to play in partnership with the private sector. That partnership will be embodied, as my noble friends Lord McNicol of West Kilbride and Lord Chandos said, in a modern industrial strategy and a new national wealth fund. A modern industrial strategy—which, to reassure the noble Baroness, Lady Bonham-Carter, and the noble Lord, Lord Berkeley of Knighton, will include the creative industries—enables us to work with businesses to identify those areas where Britain enjoys, or has the potential to develop, comparative advantage, but where there are currently market failures or other barriers that hold back investment.

The noble Lord, Lord Mair, spoke in favour of an industrial strategy council, which we will establish to ensure that industrial strategy policy is informed by a broad and high-quality evidence base and a diverse range of perspectives. To respond in part to the question from the noble Lord, Lord Kakkar, last week the Health Secretary committed to supporting the Government’s growth mission by making the UK a life sciences and medical tech powerhouse. To respond to the noble Lord, Lord Wigley, the Government are committed to securing a competitive and sustainable future for the UK steel industry, and will remain in talks with Tata Steel.

The Chancellor has already held a meeting of the national wealth fund task force to establish the fund, and the national wealth fund Bill will put it on a permanent statutory footing, supported by an injection of £7.3 billion of capital. The new national wealth fund will work alongside business to unlock billions of pounds in private sector investment in the industries of the future. In answer to the noble Lord, Lord Fox, the fund will bring together the UK’s currently fragmented landscape of public finance institutions, including the UK Infrastructure Bank, which, to reassure the noble Lord, Lord Vaux of Harrowden, is already achieving a 3:1 ratio, crowding in additional investment. I say to the noble Baroness, Lady Noakes, that it will continue to operate according to the additionality principle. This will deliver the greater clarity and certainty that firms need to invest. Further details will be set out ahead of the Government’s Global Investment Summit later in the year.

My noble friend Lord Wood of Anfield asked about the risk appetite of the national wealth fund. The UK Infrastructure Bank already engages in concessional activity, and we will keep under review whether it requires any additional levers to support the national wealth fund’s objectives. I completely agree with my noble friend Lord Drayson’s focus on scale-up capital and that we need as a country to improve in this area.

The Great British Energy Bill further supports the Government’s growth mission. It delivers on our manifesto commitment to establish a clean power company designed to boost energy security, decarbonise the power sector by 2030 and create new skilled jobs. I agree strongly with the speeches of my noble friends Lady Young of Old Scone and Lord Grantchester on these points.

We have also immediately honoured our manifesto commitment to end the ban on new onshore wind in England. In answer to the question from the noble Lord, Lord Wigley, I say that the Secretary of State for Energy and Net Zero has said he will examine the current plans for SMRs and set out more detail in due course.

Alongside investment must come reform. I will start with the planning system, the single greatest obstacle to our economic success. Our planning system is a barrier to opportunity, to growth and to home ownership. It leaves far too many important projects tied up in years of red tape before shovels ever get into the ground.

On our first full day in the Treasury, the Chancellor announced immediate action to begin to fix the planning system and help deliver our mission to kick-start economic growth. The planning and infrastructure Bill is part of a once-in-a-generation overhaul of our planning system to deliver 1.5 million extra homes and the high-quality infrastructure fundamental to our ambitions for decarbonisation and—as mentioned by my noble friend Lord Stansgate—growth. To grow our economy, we cannot rely on just a few pockets of the country to drive growth and productivity. I agree with the noble Lords, Lord Heseltine and Lord Monks, that too many areas have been held back because decisions are taken in Westminster, rather than by local leaders who understand local ambitions and strengths. We must push power out of Westminster and empower local leaders to deliver for their communities, through local growth plans and the English devolution Bill.

I agree with the noble Lord, Lord Birt, that our skills system also needs reform; it is one of the most persistent policy failures in the UK. We must invest in our education system to build the workforce of the future. My noble friend Lord Layard spoke passionately about his proposal for an apprenticeship guarantee, which I can assure him will definitely receive further and careful consideration. As a first step, we will replace the apprenticeship levy with a new growth and skills levy.

The current skills system is not delivering the STEM and engineering skills our country needs to strengthen the whole skills system. The Skills England Bill will bring forward a comprehensive strategy for post-16 education to ensure that we can address skills shortages, support economic growth and deliver our industrial strategy. In answer to the noble Lord, Lord Fox, I say that it will start work immediately on an assessment of skills needs.

However, addressing the skills gap is a necessary but not sufficient requirement for economic success. As my noble friend Lady O’Grady of Upper Holloway said, and I say in answer to the noble Lord, Lord Frost, there is now a wealth of evidence that greater in-work security, better pay and more autonomy in the workplace have substantial economic benefits. A more secure and productive workforce is good for business and for working people, because each depends on the success of the other.

This understanding lies at the heart of the employment rights Bill, which the Government will introduce within the first 100 days of coming to power. It will introduce a new deal for working people to ban exploitative practices and enhance employment rights. The plan to make work pay commits to delivering a genuine living wage, ending exploitative zero-hours contracts, ending fire and rehire, and introducing basic rights from day one. We will continue to work closely with business as we deliver and implement these policies. In answer to the noble Lord, Lord Elliott, I say that we remain committed to our manifesto’s long-term ambition of an 80% employment rate.

The plan to make work pay, alongside reforms to the welfare system, will help to reduce the huge levels of economic inactivity inherited from the last Government—mentioned by my noble friend Lord Layard, the noble Lords, Lord Birt and Lord Wigley, and the noble Baroness, Lady Blackwood of North Oxford—with 700,000 more people economically inactive since the pandemic. I agree with the noble Lords, Lord Holmes of Richmond, Lord Touhig and Lord Shinkwin, on the disability employment gap.

The plan to make work pay also forms a major plank of our child poverty strategy. The last Labour Government reduced child poverty by 600,000, while it increased by 700,000 over the past 14 years, so tackling child poverty is a major priority for this Government. The Secretaries of State for Work and Pensions and for Education will co-chair a new ministerial task force to drive cross-government action on child poverty, starting with developing an ambitious new strategy in line with the Government’s opportunity mission, for which I welcome the support of the noble Baroness, Lady Benjamin. This will include delivering the measures in our manifesto to support children and families, including free breakfast clubs in every primary school, expanding childcare, stronger protection for families who rent privately, and action to reduce fuel poverty. Alongside this, we will review universal credit so that it makes work pay and tackles poverty.

To answer a very specific question from the noble Lord, Lord Palmer of Childs Hill, I am told there are no plans to digitise the NCC1 form. He and the noble Lords, Lord Wigley and Lord Sikka, and the noble Baronesses, Lady Benjamin and Lady Kramer, asked about ending the two-child limit, which was not in our manifesto. As I have said, we will develop an ambitious child poverty strategy, but we will also adhere to the manifesto this Government were elected on, line 1 of which says:

“Every commitment a Labour government makes will be based on sound money and economic stability. This is a non-negotiable principle”.


The manifesto commitments we made will be delivered on, and we will not make promises we cannot afford or keep.

I welcome the contribution of the noble Baroness, Lady Kidron, and her determination to make children’s online safety a priority. I am pleased she has welcomed the Government’s commitment so far. There is clearly more to be done to make children safe, and my noble friend Lady Jones has said that she will be happy to meet the cross-party Lords tech team to follow this up.

The gracious Speech also set out reforms to the rail sector, contained in two railway Bills, one of which establishes Great British Railways. The noble Lord, Lord Sikka, asked about those companies whose contracts do not expire in the next five years. Their contracts have clauses that can be triggered so that they expire in that timeframe. In answer to the noble Lord, Lord Fox, the Government are not reversing the decision to cancel the second phase of HS2, but we are committed to addressing key transport connectivity issues across the country that are constraining our growth ambitions. To answer the noble Lord, Lord Bradshaw, individual projects will be considered through the spending review, with a particular emphasis given to those that drive growth. In answer to the right reverend Prelate the Bishop of Leeds, the Government are committed to improving rail connectivity across the north. Electrification and infrastructure modernisation will provide environmental benefits and support economic growth and job creation. Key to this will be completing delivery of ongoing major rail programmes—notably the trans-Pennine route upgrade.

A reset is also needed in our trading relationships, as many noble Lords spoke about this evening. The rushed and ill-conceived Brexit deal has created trade barriers equivalent to a 13% increase in tariffs for our manufacturing sector, and a 21% increase in tariffs for our services sector, as mentioned by the noble Lord, Lord Inglewood. As a result, the OBR has found that long-run GDP is expected to be 4% lower. The European Union is one of our strongest and closest partners and the Government are committed to resetting our relationship—to strengthen ties, reinforce our steadfast commitment to security, and tackle barriers to trade.

In answer to the noble Baroness, Lady Stowell of Beeston, we will work closely with the EU but proceed in a different way from it on AI. In answer to the noble Lord, Lord Holmes of Richmond, the Government will pursue highly targeted legislation to protect innovation. We must, though, tackle the red tape currently holding our exporters back. The noble Lord, Lord Kakkar, asked about visas. We will begin by pursuing our manifesto commitments on a new veterinary agreement, an agreement on touring visas and the mutual recognition of professional qualifications.

The gracious Speech begins the work necessary to deliver on our mandate to fix the foundations of our economy, to rebuild Britain, and to make every part of our country better off. Our approach is founded on the pillars of stability, investment and reform: stability, so we never again see a repeat of the disastrous mini-Budget and the damage it did to family finances; investment, through partnership between a strategic state and enterprising business; and reform, to confront and overcome the barriers to success that have, for too long, held our country back.

We are under no illusions about the scale of the challenge we face. We know it cannot be turned around overnight. There is much more to do, many more tough decisions to be taken, but the work towards a decade of national renewal has begun.

Debate adjourned until tomorrow.