National Debt: It’s Time for Tough Decisions (Economic Affairs Committee Report)

Baroness Kramer Excerpts

Friday 25th April 2025 Lords Chamber

[Baroness Kramer (LD)]

My Lords, first I congratulate the noble Lord, Lord Bridges, and the committee on taking on such a significant but challenging issue. I have great respect for the committee. I am one of its more distant alumni, if you like, but my years as a member were not just enjoyable but a brilliant opportunity to learn. I say to those who manage the parliamentary diary that bringing this debate seven months after the publication of the report, with four minutes for some of the most expert Back-Benchers we have, is simply not wise.

We are holding this debate in the age of Trump, when chaotic tariff wars have become a reality and the IMF has seriously downgraded growth forecasts for the UK and across the globe. The committee warned that we need sustainable debt which allows a contingency for unknown unknowns, of which Trump must be pretty much the worst possible, but I hope the committee acknowledges that this takes years to build. It is not within the capacity of a new Government, in less than a year in office, especially when handed a scorched earth by the last Government.

I also dispute the committee’s list of the shocks that have undermined our economy. Yes, it lists the financial crisis, Covid, Russia’s war in Ukraine, extended use of QE, but there is no acknowledgement in the report of Brexit. To ignore Brexit is in effect to get into a car and try to find your way forward while wearing a complete blindfold. A 4% scarring by Brexit, year in and year out, is the difference between a resilient UK and a struggling UK, and we have to recognise that.

I have a final disagreement. I am with those who believe that investment should be treated differently from day-to-day spending when we set debt targets if we are ever to tackle the short-term mindset that keeps undermining our economic future. I see this as essential for the growth agenda and for revival across all the regions of the UK, but I think we all acknowledge that, even without Trump and the reversal of globalisation that now seems under way, the UK faces very difficult economic headwinds. We have collapsed public services. We just listened to the noble Baroness, Lady Grey-Thompson, and I think everybody recognises that she speaks the truth. We have inadequate infrastructure and housing right across the country, an ageing population—others have spoken about the demographic challenge we face—but also economic inactivity. As the noble Lord, Lord Browne, says, we have inadequate defence spending in a very unstable world. We have low business investment, low productivity, high public debt and high taxes. Climate change, just like AI, is both an opportunity and a risk, depending on whether we drive to be a leader to seize the benefits and turn these into opportunities, or hang back and just bear the cost. I call for us to be a leader; indeed, green industries are currently a key growth area and one of our few areas of real success, which one would not know from listening to this debate.

I find it fascinating that, when I read the reports this week of the appalling figures from the ONS on soaring public debt and declining business activity, when I read the analysis and the follow-up, the focus falls on our failure and loss of exports. This is where I suggest we should concentrate our efforts. I believe that the Government need to move rapidly towards an EU customs union: we have to drive vigorously to revive our whole export profile. It has to be backed by a coherent, ambitious industrial strategy. I know that that is due soon, but it will be critical and it genuinely needs to tackle the full range of issues that are necessary for growth. Frankly, I think we should be taking full advantage of the brain drain from America. Growth was not the topic of this report, but the report says that this is where we should be focusing our conversations now. The noble Baroness, Lady Cash, talked about the young people who are our future: I can think of so many levers that would forward small business, scale-ups, new opportunities, and that is where we should be concentrating, rather than getting trapped in this current analysis.

Let me explain in part why. I do not think the report intends it, but it could easily be read as calling for us to focus on creating a new fiscal framework now. It is not the fiscal framework I would have chosen. If we were debating this back in September, when the report was published, I would have been talking about the Lib Dem manifesto at the last general election, which, whether you liked it or hated it, was certainly recognised as being fully costed. It would have been a very different kind of debate with a different focus. Now, I am looking at the world and saying that, at this time of absolute turmoil, when we do not even know that announcements that have been made today will change the growth profile to benefit it, disarm it or disadvantage it even more, when we face such a level of complete chaos, I hope that the Government will not feel that they have to jump forward and make immediate change, because, quite frankly, if the businesses that I talk to hear that there is going to be a dramatic change in the fiscal framework, they will basically be resorting to tranquillisers and therapy. There is a real need now for some measure of calm and stability; it is difficult, but the Government absolutely have to provide it.

The report says that we should not just muddle through, and that would be my normal instinct—do not muddle, seize the occasion and start making new decisions—but, at this point in time, I honestly have to say that muddling through until this chaos settles might actually start to look like success.