Economy: The Growth Plan 2022

Baroness Kramer Excerpts

Monday 10th October 2022 Lords Chamber

[Baroness Kramer (LD)]

My Lords, I have this vision of the noble Lord, Lord Dobbs, sitting beside fireless firesides.

Let me switch tone and say to the noble Baroness, Lady Neville-Rolfe, that I recognise and welcome her to her new role. I assume that she will speak frequently on Treasury issues, so we will have a great deal of very polite combat. I also very much welcome the noble Baroness, Lady Gohir. She said that she would look at everything through the lens of women’s lived experiences, and she did exactly that in this debate. I say to the right reverend Prelate the Bishop of Birmingham that it is a really sad farewell. He has always spoken for ordinary people, he did so again today, and we will sorely miss him.

The noble Lord, Lord Burns, summarised the subject of our debate. He said that the financial event

“has not gone down well”.

I do not just repeat that for its understatement, but I do say that this was not just an issue of communication and optics. I follow in the footsteps of my noble friend Lord Fox and quote Larry Summers, the former US Secretary of the Treasury, who summed up that event as

“misguided fiscal policy coupled with lack of central bank credibility coupled with toxic leverage creating positive feedback loops”—

only an American could say that—

“that led cumulatively to a disastrous outcome.”

A disastrous outcome is what we are living with and, frankly, that is something that I think no one in this House would have ever wished upon this country.

I concur with those in my party who look at the mini-Budget and say, “Keep a cap on energy prices but at the lower rate of last April; give longer protection to small businesses; keep the tax cuts that help ordinary people but scrap the rest and start again.” We need to remove not just the cancellation of the 45p rate but the reversal in corporation tax increases—I will talk a bit about that in a moment. The Government need to levy a much more rigorous windfall tax on oil and gas companies. I say to the noble Lord, Lord Forsyth, that, if he looks at the Lib Dem plan, he will see there the money that is needed to be able to fund significant parts of the support for ordinary people by going back much further, making the levy far more significant —not just a mere 25%—and taking away all the various opt-outs and concessions provided if oil companies go and invest in oil and gas.

I say to the Government that this not the time for ideology; we need an absolutely practical plan—I think of what the noble Lord, Lord Skidelsky, said. We need a plan that protects people and businesses and grows the economy and an OBR forecast that both informs that plan and informs all of us. It is not just the financial markets that are shaken, but ordinary people who suddenly realise that prices, including for food and energy, will remain cripplingly high. Liz Truss has said that benefits will rise far less than inflation—though I hope, like many people in this House such as the noble Baroness, Lady Stroud, the noble Lord, Lord Carlile, the right reverend Prelate the Bishop of Durham and many others, that that will be revisited, because, frankly, it is cruel. Interest rates and mortgage costs are rising sharply, and the Institute for Fiscal Studies has warned that stealth freezes in tax and benefit thresholds will take twice as much money from UK households as they stand to gain from the Government’s cuts to headline rates.

On public services, quite a number on the Conservative Benches—the noble Lord, Lord Howell, and others—talked about the importance of cutting public services, whether by function or overall. But these services are already struggling in the face of inflation, and I am very afraid that we will see cuts, particularly in the education sector, which would be an utter blow to any growth agenda.

The UK stands out from other G7 countries in the failure of our economy to recover to pre-Covid levels. That failure is owned by the Conservative Government and the Conservative Party—it cannot be blamed on Covid or Russia. When the Prime Minister speaks of an anti-growth coalition, and when I look back at what has been happening in this country, she is describing herself, the Tory party and their record. I stand on Benches, and I believe much of the Opposition stand on Benches, that are fundamentally and have always been pro-growth.

The last OBR numbers that we saw demonstrated a huge hit to the UK as an international trading nation. It is, as the noble Lord, Lord Inglewood, said, an inevitable consequence of hard Brexit. Even the most optimistic view of new global trade and plans for lax regulation across the board scarcely claw back a fraction of that trading loss. That issue must be fundamentally tackled.

If I may reflect the noble Lord, Lord Londesborough, here, productivity has barely improved for a decade. It is not hard to see why. The Government have underfunded education and skills at all levels, despite a lot of fine talk and endless ideological tinkering. Business investment has declined sharply from already low levels despite some of the lowest corporation tax rates in the developed world. I say to people like the noble Lords, Lord Forsyth and Lord Bridges, and the noble Baroness, Lady Noakes, that for 10 years we have had incredibly low corporate tax rates and, every single day of that 10 years, they have failed to generate growth. It is time to recognise when a policy has failed and not to make it the central lynchpin of a so-called growth agenda. We need a policy that works, not one that simply meets a soundbite test.

With the weak pound, we may well see more foreign money coming to the UK, but it will not be money to build our businesses; it will be the asset strippers and the vultures, and they are already circling. Goldman Sachs has openly said that it is hunting for cut-price assets from UK pension funds to take advantage of the liquidity pressures—and it is the respectable end, frankly, of the vulture industry. The AIM, which is always a good canary in the mine for business investment, has slumped to a 13-year low.

The Government have completely failed to reshape the financial sector to support patient capital—the noble Lord, Lord O’Neill, addressed a lot of this—and to provide scale-up funding. Without that, frankly, we lose most of the benefits of innovation. The plan now to remove the cap on bankers’ bonuses, and much of the deregulation in upcoming Bills, is designed to let risk rip once again, rewarding the chancers, the price fixers and the churners, abetted by a regulatory system with no backbone. I forget who said this in the debate, but somebody cited 2008 and asked, “Have we really learned nothing?”

Infrastructure expansion is constantly on again, off again. We do not so much have a planning problem; it is the lack of competent government leadership, which blows hot and cold on public projects and encourages private developers to put forward insultingly inappropriate development plans. That is why local communities object to them. Thirty-storey high-rises; intensive development; a disregard to public amenities: no wonder we have public opposition and delays. That is where reform is needed.

We have a shortage of working-age population on an exceptional scale. Let me quote the Public Services Committee this July:

“ONS statistics show that the number of people of pensionable age will grow by 28% between 2020-45, while the number of working age people will grow by just 5%.”


Various people discussed our labour market, problems not addressed at all by this Budget. Frankly, on those grounds alone, the Government’s immigration policy is utterly senseless.

As for the idea that the net-zero target is anti-growth, that displays, as the noble Baronesses, Lady Hayman and Lady Walmsley, said, a complete failure to understand the dynamics of sustainability. Let me quote the IMF:

“If the right measures are implemented immediately and phased in gradually over the next eight years, the costs will remain manageable and are dwarfed by the innumerable costs of inaction.”


Germany by 2025 is expected to have 11.3% of the world’s electric vehicle battery manufacturing capacity. We, who think of ourselves as a car-building country, will have only 0.8%. France is now investing on a far greater scale than we are in carbon capture and storage. Which countries do this Government think will dominate the future and reap the economic rewards of sustainability? Reform the energy market—it needs it—but this Government’s focus on increasing oil and gas exploration and fracking will either force us to abandon that target or load this country in the future with billions in stranded assets that ordinary people will have to pay for, a point made by my noble friend Lady Sheehan.

We have to deal with the public debt, which will not evaporate—I pick up the point made by the noble Lord, Lord Bridges—because the Treasury has been issuing index-linked gilts to the point that they are now something like 25% of public debt. I listened to people trying to compare us with the United States, but that has both the dollar and a domestic market of 350 million people. The EU has a domestic market of 450 million people. Both have a base of stability which we do not enjoy. The need for the Bank of England to declare its willingness to buy £65 billion in gilts to stabilise the market a week ago underscores how vulnerable we are. The noble Lord, Lord Davies, raised an important point: we should be very careful as we change the rules on pension funds, because seeing them invest in illiquid assets will create its own series of risks. My noble friend Lady Bowles once again warned us how blinkered we can be to risk because of the way we structure accounting standards.

There has been so much mismanagement for so many years, driven by ideology, rather than facing up to the real world. My party and I have, in many speeches, tried to draw the attention of the Government to the economic growth crisis and every time—noble Lords can go back and look in Hansard—we have been summarily dismissed. We have no choice now but to get this right. Ideology needs to be set aside and competence needs to replace it.