Autumn Budget 2024

Lord O'Neill of Gatley Excerpts

Monday 11th November 2024 Lords Chamber

[Lord O'Neill of Gatley (CB)]

My Lords, no pressure there then.

Let me first say, in contrast to the noble Lord, Lord Lamont, how pleased I am to see the Government shifting their rules to deliberately allow for greater public investment spending as a share of GDP. As a vocal advocate of such a move, I think it is highly welcome. Keeping it at 2.6% is a vast improvement over what otherwise would have been a further decline to 1.7%. In my view, there should now be an ambition to get towards 3.5%—closer to that of our developed country peers, most of which, unsurprisingly, have considerably higher productivity.

Whether the specific choice of PSNFL—“persnuffle” as it became known—or, more easily on the tongue, “net financial debt”, is the right new specific debt target is of secondary importance. In principle, it should allow for more ambitious public spending in terms of rewarding investments than the previous, quite stupid, rule.

Secondly—and here I have a bit more sympathy with aspects of what the noble Lord, Lord Lamont, said—what is more important, and in my view key, is not only the ambition but the mentality behind such investments and, in my judgment, the proper, credible guardrails to ensure that projects that come forward have independent, credible and transparent validation. In principle, I welcome the enhanced role for the new NISTA and the National Audit Office and also, presumably, more specifics so that the OBR can give more detailed macroanalysis of any such benefits. These institutions’ real skill sets used in this way will be much more fruitfully put to use.

Thirdly—and perhaps where the markets had somewhat of a brief wobble—it is important that the Government use these guardrails about what investments they choose to make.

Fourthly, I hope that the 10-year infrastructure plan that the Chancellor announced is to be presented in the spring will have gone through this new set of guardrails. I hope it will include projects that are much more likely to encourage the OBR to raise its forecast of the trend rate of growth of the economy. I can think of reasonably obvious ones—again in contrast to the noble Lord, Lord Lamont—such as early years education and preventive healthcare, including obesity, as well as more traditional things, my favourite being Northern Powerhouse Rail. However, it is not for me but for NISTA and the NAO to give their transparent and objective assessments of these benefits and then for the OBR to demonstrate the consequences for long-term growth, welfare and, of course, debt.

On a separate topic, fifthly and finally, and in contrast to widespread belief, of course the increase in employers’ national insurance will have its consequences for the labour markets along with the increase in the minimum wage. In my view, if this plays a role in encouraging companies to invest more in capital and to focus on higher-skilled labour, it might end up having more useful benefits for productivity and real wages than I hear across the widespread commentary.

We live in a very interesting time in the world and financial markets, yet again, especially with the US bond market watching what the returning President Trump is really going to do. This background will mean that our markets will reward credible, transparent, growth-boosting investments but will be less kind otherwise.