Queen’s Speech

Lord Birt Excerpts

Thursday 4th June 2015 Lords Chamber

[Lord Birt (CB)]

My Lords, a new Government have a unique opportunity to set a clear strategic direction for the longer term and thus to achieve real, fundamental and enduring change, as Clement Attlee and Margaret Thatcher once did. 1 hope that this new Government will begin first by articulating a long-term plan for reducing our nation’s indebtedness. Earlier this year, the noble Lord, Lord Deighton, set out in a Written Answer the aggregate debt of the G7 countries in 2012, which was the last year for which comparable figures were at that point available. Aggregate debt is not just government debt but all debt; it includes private households as well as the finance and general business sectors.

The picture unveiled by the noble Lord, Lord Deighton, was truly gory, and the OECD’s updated figures for 2013 appear to show the same grim picture. Two countries stand out from the crowd: Japan and the UK. Japan is higher up the naughty step than we are, but the UK, by a wide margin, is far more indebted than other G7 countries, with total aggregated debt of seven times GDP—a truly shocking figure.

We appear suddenly to have a welcome, if belated, consensus that when the sun shone the last Government but one should have saved, not spent. This Government accept, I think, that when the global tsunami struck, private-sector debt was also too high and that as a country we were massively overexposed to debt in the financial sector, as the bank rescues all too dramatically illuminated.

In his Answer, the noble Lord, Lord Deighton, suggested that overall levels of private and commercial-sector debt should not threaten our financial stability, but he declined to set any explicit targets for the future. Would the Minister set out in her concluding remarks how we will know when we have reached the point of comfort as a nation for both sector and aggregate debt? We have in total 45% more debt than Germany. Would we, for instance, like to reduce down to current German levels, or even beyond? How long should we take to do that? What principles should guide us? Perhaps the Minister will say.

Our approach to bringing down the deficit, as we must, should also be strategic and not technical. On many occasions in my life, working in both the public and private sectors, I have had to drive or preside over spending reductions. In reducing public spending the focus should be not on capacity reductions but on maintaining desirable public outcomes more cost efficiently and by myriad means: promoting competition, ending duplication, improving processes, sharing services, harnessing technology and much more.

We should also be suspicious of the shallow, much repeated assertion that spending cuts must equal capacity cuts. In most areas of the economy, more can and is being done for less. I continue to see substantial evidence that that can be true in the public sector, too. But there is a problem to overcome if we are to achieve that goal. In my time in government, I saw how weak Whitehall was at analysing cost structures—I say this surrounded by a phalanx of former Permanent Secretaries to the Treasury. It was a world away from best private-sector practice, and I see no reason to believe that it is much better now. Not only the departments but the Treasury itself needs a more muscular value-for-money capability, and now is the time that it needs it most. If we focus just on cuts we will make a grievous error, for in healthy organisations you invest even as you cut. You prioritise, keeping within your means in the here and now, but at one and the same time you plan for the longer term.

As a nation we must be clear-sighted about our long-term priorities. With black clouds on every horizon, with the world a troubled and volatile place, the first responsibility of government is to design, to build and to maintain a security and defence capability that will meet our future needs. Next, we must improve the health of our economy, as well as safeguard our defence. We must identify why our national productivity has been lower than that of comparable countries for so long. For certain, as the noble Lord, Lord O’Neill, suggested in his punchy maiden speech, we must invest in the future skills our economy will need. We must accelerate spend on our road and rail infrastructure, on which we are by far the worst compared with our competitors, and we must end the shameful delay in creating appropriate national strategic airport capacity. Let us be alert to the pace at which much of Asia moves, and let us not be left badly behind.

Finally, a new Government must ask themselves what capabilities and accountabilities they need at the centre, not only to drive and to monitor a massive and unavoidable programme of change right across Whitehall but to improve our national planning. Who in government foresaw that our population would grow by 7.5% in 10 years, and in the middle of highly adverse economic circumstances? Who forecasted and planned for this? I suggest that no one did. We need at the centre of government a proper focus on long-term and integrated planning.

Now is the moment to begin to drive the UK, over the next five to 10 years, to a more harmonious and stable place—a UK with a more balanced, productive, less indebted economy, and with a more alert, agile and efficient state. This can be achieved, but only if we seize the moment and start now.