UK Economy: Growth, Inflation and Productivity

Baroness O'Grady of Upper Holloway Excerpts

Thursday 29th June 2023 Lords Chamber

[Baroness O'Grady of Upper Holloway (Lab)]

My Lords, I declare my interests as set out in the register.

I have three questions for the Minister. First, why does the UK have the highest inflation in the G7? Ministers cannot explain that away with the war in Ukraine and Covid recovery; many other countries face exactly the same challenges but Britain has been much more exposed to high costs of imported energy, and there are domestic policy failings that help to explain it. Secondly, why is investment and growth in the UK so low and our balance of trade so poor? Thirdly, why are real wages still no better than they were before the financial crisis? According to the ILO, only Italy, Japan, Mexico and the UK have real pay below 2008 levels.

The UK economy is not working for working people. From austerity cuts to public services that left us so poorly prepared for the pandemic to Liz Truss’s mini-Budget that caused maximum damage, the Government, as my noble friend Lord Eatwell said, keep making the wrong policy choices. At the start of the pandemic, when the TUC proposed a furlough scheme, the then Chancellor grabbed the idea, but when the TUC then called for a national recovery council, involving business and unions as well as Ministers, to plan and prepare for reconstruction after the pandemic, the same Minister said no. Many had hoped that the Government would build on people’s sacrifice and solidarity throughout Covid to create a stronger society and a fairer economy—surely we could not go back to business as usual. However, it now seems that the Government have given up on growth, on an industrial strategy and on the aspirations of the working people of Britain.

We have an economy that rewards wealth, not work. Of the 15 million people in the UK in poverty, more than half have a job. In contrast, TUC analysis shows that since the global financial crisis financial wealth has more than doubled and shareholder payouts are rising three times faster than nominal pay. Think about what that inequality means for demand in an economy that is now dominated by the service sector. Working families cannot afford to spend on the high street and the growing ranks of the super-rich do not. As economist Matthew Klein put it:

“You can only throw so many million-dollar birthday parties”.


Our economy does well only when working people do well. Without demand, we cannot grow our economy. Without growth, we cannot repair our public services. Without investment in health, skills and education, productivity suffers. We have to break this doom loop. It is high time that we had a plan for economic security and sustainable growth. AI alone offers the potential of multibillion-pound productivity benefits that if shared fairly—I recognise it is a big if—could turbocharge our economy. An ambitious green industrial strategy with a practical job transition plan would cut carbon and help the parts of the country that need it most.

We desperately need investment in apprenticeships, skills, affordable homes and public services. Instead of making it harder for workers to defend themselves against real pay cuts by attacking their trade unions, let us have a plan to get living standards rising again. Let us be honest about the economic price of a hard Brexit. We need to roll up our sleeves and improve the trade deal that matters most to our economy, the one with our nearest and most important trading partner, the EU. Britain has many strengths that can lift us up the G7 league, not least the ingenuity and talent of our workforce. There is hope in the future, but we need a Government that will make the right policy choices and put the people of this country first.