Economic Growth

Lord Udny-Lister Excerpts

Thursday 23rd January 2025 Lords Chamber

[Lord Udny-Lister (Con)]

My Lords, I welcome this debate and add my voice to those thanking my noble friend Lord Farmer for securing it. Much has been said about the historical reasons why growth in the United Kingdom remains subdued and why, under the current Government, the future is looking increasingly bleak. The modest predictions for economic growth in 2025 should not be confused as an indicator that all is well.

Following the Autumn Budget, there has been nothing but stress and gloom for British business. The Government have created an environment in which ambition will be punished and innovation stifled. Come April, the increased national insurance contributions will hit SMEs the hardest and will have a devastating effect on the many small businesses which the Government should never forget are the backbone of the economy. This devastating policy, combined with the decision to increase the national living wage and to cut business rate relief, has delivered nothing more than the stagnation of our economy and an immense decline in business confidence—a decline that has been very much talked up by the Government.

These are hardly the conditions for sustainable, let alone progressive, economic growth. It has been widely reported this week that, since this Government came to power, one millionaire quits the UK every 45 minutes. That is an increase of nearly 160% in just six months. According to the Times this morning, it appears that the Government have realised the self-harm that has been done to non-dom status and will be looking at an amendment to the Finance Bill. I fully accept that my party has also been instrumental in the damaging of the non-dom regime that has taken place. However, I fear that the combination has already had a devastating effect. Unless the Government change course to stem the mass exodus of wealth and reset the confidence of business, we will continue to see a decline in the UK’s prospect for growth. At this point, I must make the very obvious point that capital, innovation and people are all very portable. People will move around the world as the need arises and will go where they get the best breaks and see the best opportunities. At the moment, we are not holding out the prospect of being a good opportunity for them.

I fear that, following the Budget, the Government are not hearing the concerns raised by SMEs, which warn that they about to be crushed under the weight of taxation and compliance demands, which, let us not forget, are also increasing. Prior to the Budget, the Growth Commission made various recommendations to the Chancellor, one of which was to reduce restrictions and costs on employers. Given the major concerns that have been raised by the Government doing the exact opposite of this, I would be keen to hear from the Financial Secretary to the Treasury how he thinks any of the policy announcements in the Budget, particularly the increase to national insurance contributions, will contribute to the growth of anything beyond the Treasury’s coffers.

The UK’s capacity to enhance infrastructure development and foster innovation has been hindered by persistently low levels of both public and private investment. These low levels have caused an investment deficit that restrains the economy’s potential for growth and competitiveness. Urgent action is needed to address this decline. It further concerns me that the UK continues to rank lower than many other OECD countries in terms of R&D spending as a percentage of GDP. I would welcome an update from the Minister on what the Government plan to do to drive R&D as a catalyst for growth over the next few years.

I turn very briefly to the topic of devolution, as I see the potential opportunity to unlock growth here. If the Government are able to move forward with English devolution, as per December’s White Paper, there is huge opportunity to unlock future growth. We have seen how, through his tenure as the Mayor of the West Midlands, Sir Andy Street was able to attract growth and encourage investment into the region. I also think back to my time at City Hall, where the ability of London to attract substantial foreign direct investment led to the success of high-profile regeneration and development projects—we have only to look across the river to Battersea Power Station. I therefore urge the Government to rapidly move forward and take on the opportunities that exist in local government.

I end by quickly saying that our ability to really improve and grow lies in our hands. As President Regan said, Governments don’t create economic growth—people do.