Economic Growth

Lord Farmer Excerpts

Thursday 23rd January 2025 Lords Chamber

Moved by

[Lord Farmer]

That this House takes note of the conditions required for economic growth.

[Lord Farmer (Con)]

My Lords, I thank all noble Lords who have made time to prepare for and contribute to this important debate on taking note of the conditions required for economic growth. I pray that it will be helpful, constructive and stimulating, as we hold the Government to account for their major election pledge to bring about growth, presently at which they are struggling. I will focus today on mood, spirit, culture and the social underpinnings of market economies, often neglected subjects in growth discussions.

On 29 July, the Chancellor first said the new Government had

“inherited a projected overspend of £22 billion”,—[Official Report, Commons, 29/7/24; col. 1033.]

or a black hole, and so began the gloomfest, with warnings of a very difficult Budget and, probably unintentionally, the destructive talkdown of the economy. The cloud of employment rights soon appeared on the horizon, with much employer scratching of heads as to how these 28 reforms were going to deliver growth, given concerns, for example, that day-one rights could mean that they were stuck with an unsuitable hire.

Last quarter’s rise in unemployment is being blamed on the Budget’s further disincentives to hire with higher employer national insurance contributions and minimum wage levels producing an accelerator effect of pessimism. Business confidence is now at a very low ebb. One entrepreneurial farmer I was talking to recently, who has businessmen friends who were full of plans for new enterprises and the expansion of existing ones, said they had all cancelled these plans since the Budget and are hunkering down to survive.

Lifting the gloom is essential for growth. There needs to be reward for risk-taking and succour for the entrepreneurial spirit being deadened by an emphasis on rights. Responsibilities need to come back into fashion. We need a JFK moment: ask not what your company can do for you—ask what you can do for your company. Many employers shoulder significant risk. Their decisions make the difference between someone’s job being there or not, and they live daily with existential threats facing firms they have built up with their own money and effort.

Employment rights are obviously important, but employees also have responsibilities towards their employers, which should be pursued out of self-interest, if for no other reason. Securing rights, for example, to work from home or in a hybrid pattern should not be in the teeth of good business reasons for office-based staff to be working together in the office. In 1789, Pierre Victor Malouet warned France’s Estates-General:

“Take care when you tell man his rights. For you will transport him to the summit of a high mountain—from where you will show him an empire without limits”.


Rights are voracious.

JFK also said:

“One person can make a difference, and everyone should try”.


Call me nostalgic, but people used to work hard because of the need and inner drive to support their families. Arguably, they are now encouraged to vote for the party, no matter where on the political spectrum, that will do the best job of looking after their family for them. Of course the state has a role, but it should not smother or quench that provider instinct.

I welcome this Government’s efforts to stoke, not stifle, the spirit of adventure by shaking up environmental regulators and the Competition and Markets Authority. Many potential wealth-creators are snarled up in the sticky web of regulation for no reward and often at much cost. Even trying to open a bank account takes far too long. Regulation can sabotage the good intentions of policy. Of course we need a rules-based system, but when it becomes sclerotic and pathologised, it simply breeds despair.

My first City boss was always questioning whether one had the spirit of adventure. He was not counselling recklessness: risk needs to be analysed, and the risk-reward ratio needs to be calculated. The British Volksgeist, or national spirit, currently pervaded by gloom, needs to be freed from stultifying processes and reborn as a spirit of adventure. Alongside that, the world of ideas needs to be freed from the dictatorship of orthodoxy. A high percentage of the British elite inhabit a unipolar world where only one sort of ideas is considered—for example, on the issue of equality, diversity and inclusion.

Many in the British public are desperate for change. They are flirting with the idea of Farage and intrigued by the dominance of the disruptors in the United States, yet most mainstream news outlets recycle disdain for Trump and Musk and ignore the energy their ideas are pumping into the American Volksgeist. Americans have rediscovered that the buoyant animal spirits that need unleashing flourish in freedom.

Stimulating wealth creation requires encouraging people to take risks and act on out-of-the-box ideas. In this country, the hero is not the risk-taker but the reasonable man. George Bernard Shaw said:

“The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man”.


We will not see progress in this country when blandness is the ideal. Trailering the second Conservative debate later today, we are seeing it in the withdrawal of education options, by making the national curriculum compulsory across academies and forcing independent schools to close.

However, the liberation of market forces does not necessarily produce unending economic growth. A sustainably flourishing economy requires a stable social base. Towards the end of her time in office, Margaret Thatcher recognised that she needed to turn to social renewal after a decade-long focus on unleashing the markets and economic reform. The destruction of old industries had a devastating effect on the social fabric of the country, and family breakdown picked up speed on its already upward trend. The noble Lord, Lord King of Lothbury, the former Governor of the Bank of England, is adamant that stable families are the building blocks of a productive society, and ignoring that truth sowed seeds of destruction for future growth. Indeed, Tony Blair said in 1996 that a strong society

“cannot be morally neutral about the family”,

but now almost half of all children do not grow up with both parents.

Hyper-liberal individualism runs alongside purist free-market philosophy; hence many who espouse the latter are libertarian in their outlook. Yet, when social liberalism partners with economic liberalism, the inherent contradiction eventually brings the engine of growth to a shuddering halt. The social underpinnings of markets have been gnawed away. A real-world example is that coping with relationship breakdown made my employees less productive at work.

I once suggested to the Treasury that it should investigate the correlation between our low position on OECD league tables for both productivity and family stability and try to cost the loss of productivity that family breakdown brings. The Treasury spad that I spoke to was horrified at the prospect because, in his words, the cost would be far too high. In other words, the link with stable family life, with all its benefits to individuals and society, is well known but ignored by politicians running from an unpopular message.

Yet family instability undermines us economically in myriad ways. Adults who experience family breakdown as children are significantly more likely to have debt problems or to be on benefits. They are almost twice as likely to underachieve at school, experience mental issues such as alcoholism, be in trouble with the police or spend time in prison. One-quarter of prisoners have spent time in local authority care, and three-quarters of men in prison had an absent father. Future prosperity is sacrificed to liberal individualism.

Moreover, economic liberals’ demands for lower taxes and a smaller state will be forever thwarted when the demands on the public purse are so great, and that has much to do with the degradation of social and, particularly, family bonds. Family hubs are vital to remedying that. There are now around 950 family hubs in over 130 English local authorities, working closely with hundreds of children’s centres, building on the work of previous Labour and Conservative Governments. I declare my interest as a guarantor of FHN Holding, the not-for-profit owner of Family Hubs Network Ltd, in asking the Minister whether his Government will keep investing in family hubs in the spending review.

More broadly, David Halpern and Andy Haldane’s Social Capital 2025 says that strengthening wider networks and trust dramatically improves countries’ economic fortunes. In their words:

“The social bonds that tie us are the hidden wealth of nations”.


Strong social trust allows doing a deal on a handshake instead of through lawyers, sharply lowering transaction costs. A 10% increase in social trust increases relative economic productivity by 1.3% to 1.5%.

Social trust requires greater trust in our politics and requires politicians to tell the truth and be straight with the electorate. The leader of the Conservative Party recently admitted the futility of virtue-signalling announcements such as, “We will get to net zero by 2050”, without a credible plan. Labour has form here too. Building 1.5 million homes was hard enough when we did not have the manpower and other resources, and then the minimum wage and national insurance went up. When the Chancellor said her Budget did not increase tax on working people that was true only in a casuistic sense, and voters are sick of casuistry. Politicians should not underestimate the value of honesty. Facing up to things engenders respect. The public see through the deceit of talking down the economy when it was on the way up and misrepresenting Conservative spending plans. They simply say, “A plague on both your houses”.

Having been involved in markets for half a century, I have found money to be particularly honest. It is either there or it is not; you are either broke or you are not. In contrast, an ideology that says that net zero requires closing North Sea oilfields down will simply not work in the timeframes being driven through, not to mention that the solar panels we will rely on being made with Chinese slave labour.

Wealth creation is vital to support and lift those who need Churchill’s safety net of the welfare state, but many become entangled in that net if they are mentally or physically unwell. So, just as in the wider welfare population prior to universal credit, we need to cut welfare but, more than that, we also need to de-risk coming off welfare, especially where people are languishing on sickness benefits.

We also need to reduce the state by reducing the Civil Service. Productivity has gone up in the private sector but not the public sector, where the existential threat that many private sector companies face daily is non-existent.

To sum up my main points, poor growth has cultural as well as economic drivers. Will the Minister inform the House how the Government will banish gloom and blandness and encourage that spirit of adventure? How is he going to pep us all up? How will the Government emphasise responsibilities, not just rights, and rebuild a stable social fabric based on families and communities, where people provide, care for and trust each other? Will they admit that there is a pressing need for big ideas and people who think outside of the box? However uncomfortable they make us feel, we need disruptors who can discredit and destroy the dictatorship of orthodoxy. I beg to move.

--- Later in debate ---

[Lord Farmer (Con)]

My Lords, I thank all noble Lords who contributed today. It was a robust debate and it was full of good ideas, stimulating and constructive. I thank the Minister for addressing many of the questions and giving details. I am saddened by the political point-scoring, because we have problem of growth and we need a coherent plan, as my noble friend Lord Horam, said, for growth. I intended—and as I said at the beginning, I prayed—that this debate would produce some ideas that would be a help to the Government. I hope that the Government will take this debate, study it and take the ideas from it, and that it may help them in producing a coherent plan for growth.

I thank everybody for their work and preparation. This has been an important debate. We have a growth problem and we need a growth plan. I beg to move.

Motion agreed.