Economic Growth

Liam Fox Excerpts

Tuesday 14th November 2023 Commons Chamber

[Drew Hendry (Inverness, Nairn, Badenoch and Strathspey) (SNP)]

Thank you, Mr Deputy Speaker. I did not hold out much hope of enlightenment from this debate, and it is fair to say that I am underwhelmed. This is a truly zombie Government, so bereft of ideas and talent that they have scoured the sheds of Chipping Norton to find a former Prime Minister who, along with his Liberal Democrat coalition partners, set most of the economic woes on their way for Scotland and the other nations of the UK, and resurrected him into their Cabinet. What a signal; what a shambles.

It is to the shame of Westminster that the Government spend so much time reliving past failures, continuing to do the same thing over and over—culture war rhetoric, punishing the vulnerable, and ignoring the suffering of the most vulnerable and the poorest. One of the many former Prime Ministers of this failing Government—although, to be fair, an elected one—used to talk about those people “just about managing”. I have news for her and for this place: they ain’t just about managing any more. They are struggling. Many more each day are failing to get by. Food bills, energy bills, mortgages and rents are crushing them.

Given the misery that the Government have wrought through austerity, the infamous mini-Budget and everything else, they should have put the cost of living at the forefront of the King’s Speech. They should have listened to those struggling to pay their electricity bills, put food on the table and keep a roof over their heads. Instead of talking about tents, they should have been talking about rents. While they pound the slogans of division by saying “stop the boats”, I trust the public will ensure that all they do for this terrible Government is stop the votes. Of course, being accountable and elected is not an issue for this place. The Tories and Labour will always simply create another Lord to do their bidding if they need to do so.

In a time so obviously marked by escalating living costs, the No. 1 concern on the doorsteps of Scotland—and, I contest, the other nations of the UK—is the cost of living. The King’s Speech glaringly overlooked the need for policies to assist households grappling with food and energy costs, mortgages and rents. While the Scottish Government have made a concerted and targeted effort to shield Scots from the brunt of Westminster policies, the omnipresent shadow of these often cruel Westminster directives remains inescapable.

The King’s Speech starkly underscored the unreliability of Westminster Governments in serving Scotland’s interests, with both the Tories and Labour wedded to a low-growth, Brexit-anchored economy. Independence and a return to the European Union, where all partners are treated as equals, is the only viable path for the prosperity of Scotland. The Scottish Government, within their limited capacity, strive to cushion Scots from Westminster’s harshest policies, yet Scotland’s full potential remains constantly stifled under the UK’s policy regime—a theme I will return to shortly.

[Dr Liam Fox (North Somerset) (Con)]

On the hon. Gentleman’s logic, if Brexit is the impediment to growth, why is it that since pre-pandemic times Britain has grown faster than either France or Germany?

[Drew Hendry]

Tory Members keep peddling this line, but what they know, and what everybody else knows, is that they started from a lower base because they tanked the economy in the first place. They have to live up to that responsibility. They claim higher growth from a lower point of entry. [Interruption.] They can try to shout me down, but I will make progress.

The King’s Speech, which was alarmingly brief on tackling the cost of living crisis, was a missed opportunity to offer concrete measures for relief. It paid lip service to reducing inflation and easing living costs, but lacked substantive policy proposals. Labour, too, is offering little on the cost of living crisis. Where are the measures that could be taken now to help people in their homes? Completely absent. Of course, that is just part of Labour’s “don’t scare the Tory voters” approach to securing office. The UK’s economic stagnation, which is evidenced by recent data, underscores a systemic failure to foster growth, post financial crisis. There is nothing in the King’s Speech to help support people, our food and drink industry, or our tourism and hospitality sector. That is something the Chancellor will need to correct before next week.

In a UK battling—unlike what the Government claim—rampant destitution, the failure of the King’s Speech to prioritise poverty reduction is indefensible, with millions, including a shocking number of children, unable to meet their basic needs. The situation in the UK is dire. Scotland’s lower destitution rate is a testament to SNP policies such as the Scottish child payment, but there is no attempt to replicate that anywhere in this House or to suggest that we do so. The eradication of poverty remains a more distant prospect under the current Westminster regime. Labour’s stance, echoing Tory rhetoric and policies, leaves independence as Scotland’s only hope for a fair and dynamic economy.

--- Later in debate ---

[Dr Liam Fox (North Somerset) (Con)]

I also welcome my hon. Friend the Member for Sevenoaks (Laura Trott) to her new post. Her promotion is richly deserved.

One thing on which I am sure we can all agree in this House is the need to create non-inflationary growth in this country. The question is how we go about it and, to some extent, how we define it. I say to my hon. Friend that gross domestic product, as a measure of growth, is becoming an increasingly less relevant index in our economy because, although economic growth has been low across the western economies, balance sheets and net worth have tripled; there is a dislocation there.

GDP needs to take domestic unpaid labour, such as child or elderly care, into account. It excludes a huge proportion of what happens online, as well as intangibles such as intellectual property, and is much less suited to a service economy than to a manufacturing economy. It also has the perverse incentive of making us want to encourage immigration, rather than discourage it. When we have the wrong analysis, we are likely to have the wrong targets and, ultimately, the wrong policy. That needs to change. We need to concentrate on wealth creation, which happens when we take unique IP from any of us and turn it into a good or service that does not currently exist, or into a better good or service than exists today.

We have a problem that, in a capitalist economy, we cannot get that sort of wealth creation if there is not sufficient access to capital. One problem in the UK is that 85% of company scale-ups here are done with bank lending and 15% are done with private equity, whereas it is 80:20 in the other direction in the United States. We need to have deeper and wider access to private equity and venture capital in this country if we are to maximise the benefits of our hugely creative and innovative population, and if we are to stop the IP leakage, especially to the United States.

We also need to create more wealth by improving our share of global trade, by which I mean the share of global markets that are expanding fastest, and not our obsession with the European Union. The latest Institute of Economic Affairs report shows that trade continued to grow between 2016 and the conclusion of the Brexit transition in 2020, indicating that Brexit had no main effect on trade. UK goods exports rose by 13.5% to EU countries and by 14.3% to non-EU countries between 2019 and 2022, so we need to put that issue behind us and instead focus on the world’s growing markets. The Office for Budget Responsibility forecast said that Brexit barriers would result in a 15% drop in trade volumes, contributing to a 4% lower GDP in the long run, and that is already clearly wrong. I ask those on the Government Front Bench to request from the OBR a much more updated and realistic assessment of where our trade sits at the present time.

Contrary to what many people will perceive, and certainly to what the Labour party will tend to suggest, 82.5% of all the jobs in this country are in the private sector and only 17.5% are in the public sector. From listening to our media and politicians, we would often think this was 50:50. Some 61% of those private sector jobs are in small and medium-sized enterprises. I know that if we are able to cut taxes, many of my colleagues will want to see personal taxes cut, but our priority should be to cut taxes for small businesses, because they are the ones that create prosperity and employment. They are the mainstay of our economy. In particular, I would like to see more Government action on late payment, particularly by local authorities; this is taxpayers’ money that should be getting through to SMEs on time, and the fact that it is not is a scandal. I would also like to see the retail, hospitality and leisure business rates discount extended to give many of the companies struggling in that sector the help they require.

We also need to look at other elements, including the broadband infrastructure in our country. Constituencies like mine still contain places with no broadband. It is ridiculous that we are putting public money into the programme and yet leaving parts of our economy without any of the advantages they require to participate fully in our economy. We were told that we would get that broadband at the end of 2022 and then we were told it would be in spring 2023. It was then to be October 2023, and now we have no idea when we will get it. I say to the Minister that the Treasury needs to give a kick up the proverbial to other Departments to make sure they are carrying out the promises that the Government made at the last election to stop some of the limitations in the rural economy and to get that infrastructure in place.

Finally, I want to say a quick word about the Bank of England. It has operational independence, but where is the accountability? We were told that inflation would be transitory and that there were external influences involved. I looked at the letters between the Governor of the Bank of England and the Chancellor, and not once did they mention monetary stability or the fact that we had had an expansion of our money supply for far too long, at far too great a level. These are not rounding errors. If we get extra inflation created by monetary expansion that is too fast, it will affect the poorest in our society and the balance of our public finances, and it will cost taxpayers money. I have no problem with the Bank of England having operational independence, but what I want to know is: when it gets it wrong, who is it accountable to? Ultimately, it is the taxpayers and the people of this country who pay the bill, not those who are well paid in the Bank of England.