Economic and Taxation Policies: Jobs, Growth and Prosperity

Lord Bridges of Headley Excerpts

Thursday 13th November 2025 Lords Chamber

[Lord Bridges of Headley (Con)]

My Lords, I start by congratulating my noble friend Lord Elliott on securing this debate, his excellent book and all the work he has been doing on jobs. I also congratulate a number of noble Lords who have spoken, especially my noble friend Lady Noakes for her remarks—which I entirely agree with—and my noble friends Lord Young and Lord Harper, who I will return to in a moment.

When thinking about this debate, I happened to read again the lecture that the then shadow Chancellor, now Chancellor, gave at the Mais lecture last year, in which she promised a “fundamental course correction” for the British economy. As the noble Viscount, Lord Chandos, has just said, it is now 379 days since the Chancellor gave her first Budget. So how is this fundamental course correction going? There is, as I am sure we have all read and seen, a growing sense of instability fuelled by speculation, a lack of confidence in the future, and more people worrying about keeping their jobs—and that is just among members of the Cabinet. Out in the country, it is far worse. The Chancellor herself has said that the UK economy feels “stuck”, and today’s growth figures confirm that.

So why are we in this sorry predicament? My noble friends Lord Elliott and Lady Noakes made a number of points as to why this might be, and I will not repeat them in the time I have. At the top of my list is a point that my noble friend Lord Young made: the Chancellor has lost control of spending. Rather than take the right, but tough, decisions to slow down the spiralling cost of welfare—not even to stop its rise—the Chancellor backed down when Labour MPs said no. She did so despite the fact that, as my noble friend Lord Young said, the Prime Minister says the current system is unsustainable. Spending overall has overshot forecasts by over 4% since the spring of 2024. Adding to the pain is the impact of the misguided £25 billion tax rise on employers—referred to by my noble friend Lady Noakes—that is stoking unemployment and making inflation stickier.

The reason the Chancellor may have to raise income tax for the first time in 50 years—50 years—breaking Labour’s promises, is her “fundamental course correction”. But, as my noble friend Lord Harper just said, the Government refuse to accept any blame or any fault for the situation we are in. As he said, they are blaming everyone but themselves. Everyone knows this is nonsense. Last autumn, the Economic Affairs Committee, of which I was then chair, published a report warning that the Government must rebuild the nation’s fiscal buffer, given the global volatility and risks we face. The Chancellor’s reply assured the committee:

“The Budget took the necessary difficult decisions to put the public finances on a sustainable path—setting realistic plans”—


realistic plans—

“for public spending while raising revenue—to create the conditions for growth”.

She clearly thought she had done enough to rebuild our fiscal defences. She said she had built a fiscal buffer, but, in reality, it has turned out to be a wafer.

A tragedy is therefore unfolding in front of us. With an enormous majority, this Government have the ability to take tough decisions to reform our public services and cut welfare, but they have ducked those tough decisions. The Prime Minister and the Chancellor mouth the right sentiments about growth, stability and security, but their actions undermine those aspirations. What do we see 379 days after their cataclysmic Budget? The fundamental course correction the Chancellor has given us is taking us deeper into the mire. There is insecurity, instability and stagnation—the reverse of everything they promised. The fear is that it will require things to get even worse for the Prime Minister, the Chancellor and the noble Lord to do what they promised last year and give us the fundamental course correction this country really badly needs.

--- Later in debate ---

[Lord Livermore (Lab)]

I do not think I have misrepresented the situation in any way, shape or form. The OBR forecast that around two-fifths of the 4% impact had already occurred by the time the EU-UK Trade and Cooperation Agreement came into force and that GDP will be 2.7% lower by 2025, with the remaining reduction occurring by 2030, meaning the economy will be over £100 billion smaller than it otherwise would have been.

As I was saying, we have also heard from some of the most enthusiastic acolytes of Liz Truss about how to grow the economy, despite the Liz Truss mini-Budget crashing the economy and sending mortgage rates spiralling. I think we have long since abandoned any hope of an apology to the British people from the party opposite for its record on the economy over 14 years, but what is still shocking is its inability to show even the slightest hint of self-awareness for the damage it did to the British economy over the past 14 years or any awareness that that damage continues to scar our economy today, as my noble friend Lord Davies of Brixton clearly set out.

The reality of that record over 14 years is stark, as my noble friend Lord Liddle said. First, there was austerity, mentioned by my noble friend Lady O’Grady of Upper Holloway, which took demand out of the economy at exactly the wrong moment and cut investment, undermining the economy’s ability to grow, and left us ill-prepared for the future. Then a disastrous and tragically misjudged Brexit deal—interestingly, not mentioned by the noble Lord, Lord Elliott, in his opening speech—imposed new trade barriers equivalent to a 13% increase in tariffs for manufacturing and a 20% increase in tariffs for services, reducing total trade intensity by 15%. As a result, as I have said, the economy will be over £100 billion smaller by 2030.

The combined effect of these costly mistakes was devastating. Had the UK economy grown by the average of other OECD countries over those 14 years, it would be more than £150 billion larger today. The previous Parliament was the worst ever for living standards. Inflation hit 11.1% and was above target for 33 months in a row. The noble Baroness, Lady Noakes, mentioned business investment. She may recall that, under her Government, the UK had the lowest private investment levels in the whole of the G7, productivity growth entirely stalled and output per worker grew more slowly than in nearly every other G7 country.

These policy errors, chronic instability and low levels of investment have left deep scars on the British economy, as my noble friend Lord Eatwell set out. As mentioned by the noble Lord, Lord Harper, alongside the forthcoming Budget, the Office for Budget Responsibility will set out the conclusions of its review into the supply side of the UK economy. I will not pre-empt those conclusions today, but the OBR may downgrade the historic assessment of the UK’s productivity and may conclude that the productivity performance we inherited from the previous Government was even weaker than previously thought.

[Lord Bridges of Headley (Con)]

Can the Minister clarify that his argument is that the Government have made no policy errors regarding their economic management over the last year?

[Lord Livermore (Lab)]

I am only five minutes into my speech; let us hear my whole speech before we conclude on that.

The OBR’s productivity assessment will be a look in the rear-view mirror, but the past mistakes of the previous Government do not need to determine our country’s future. While the record of the past 14 years may be even worse than previously realised, it underlines the importance of delivering higher and more sustainable economic growth, which has been the defining mission of this Government since we entered office. The noble Lords, Lord Elliott, Lord Harper and Lord Bridges, and the noble Baronesses, Lady Noakes and Lady Neville-Rolfe, mentioned today’s growth figures. While they are, of course, lower than any of us would want to see, they confirm that the UK was the fastest growing economy in the G7 in the first half of this year and show just how much more there is to do.

We will move further and faster with our growth strategy, set out clearly many times and built on the three pillars of ensuring economic and fiscal stability, reforming the economy and increasing investment. It is welcome that the IMF has said that this strategy focuses on the right areas to increase productivity. This strategy recognises that growth comes not from government but from businesses and investors and that there is a role for a strategic state, not to step back and let businesses fend for themselves, but to act in partnership with business by systematically removing the barriers to growth that it faces.

The first pillar, stability, is the foundation all else is built on. That began with the Government’s first Budget last October. The noble Lords, Lord Harper, Lord Swire and Lord Leigh of Hurley, could not help but mention the £22 billion black hole in the public finances we inherited, which the previous Government sought to conceal from the OBR, but once again—