Economic Growth

Lord Horam Excerpts

Thursday 23rd January 2025 Lords Chamber

[Lord Horam (Con)]

I am delighted that my noble friend Lord Swire finished on an optimistic note. I share his optimism—this is a great country in which it is very good to do business. I know this because I started an economic consultancy many years ago, which still flourishes.

One of the great advantages of this country, which my noble friend did not mention, is the ubiquity of the English language. Bismarck said that the most important fact of the 19th century was that America elected to speak English rather than German. Heaven knows what would have happened if they elected to speak German; it was a narrow call, but they speak English. We should not underestimate our natural advantages.

None the less, we are struggling, and have been for some time, as the noble Lord, Lord Desai, said. The responsibility of a Government in these circumstances, particularly a new one with a large majority, is to bring forward a coherent plan for economic growth and to push it with all the strength, effectiveness and vigour that Trump is showing at the moment. Nothing less will do if we are to overcome the problems we have.

In that respect, I will point out a couple of things that the Government are doing wrong. First, they said in their campaign that they would concentrate on housebuilding as a force for economic growth. We need more housebuilding, as we all know, for good social reasons, but to make it a main factor in economic growth is not a good idea. It is very difficult to ramp up the building industry just like that, and it is only 8% of our GDP. Surely we should concentrate on the 80% of our GDP that is the service sector, which is huge.

It is about not only our normal professional services in finance, law, insurance and so forth but the creative industries. For example, in Shepperton and Pinewood we now have studios equivalent in size to the whole of Hollywood. We are that sort of creative force in the world. I welcome the Government’s response to the recent report on AI. Trump says that he will put £500 billion behind AI and supercomputers. We certainly cannot match that, but we ought not to be cancelling the Edinburgh supercomputer, as we did recently. We should be putting more money into supercomputing, as something of the future.

Secondly, I agree with the noble Lord, Lord Tunnicliffe, that skills are essential. We must give more status to those who are skilled. We have a wonderful pathway for people to go to university, but, over 30 years, and through numerous different Governments, we have not developed a similar pathway for people who are not academic. We need to do that. We are now seeing examples of how we are desperately short of people of that calibre to make the economy grow.

In a speech the other day on the national insurance increases, the noble Lord, Lord Blackwell, made the point that we have low productivity. That is almost exclusively in the public sector. Private sector productivity has been growing by an average of 2.9% a year for the last 20-odd years. In the public sector it has been going down by 0.3% for the last 20 years. Those are ONS figures—the ONS is subject to some criticism at the moment, but I am relying on its figures. The Government recognise this problem, and I think the Chief Secretary to the Treasury has said that they intend to improve productivity in the public sector by about 5%, if they can. That will not work. They need to bring into the public sector some private expertise of the McKinsey kind. You will not get the public sector to reduce its workforce without some input and experience from the private sector. The Government ought to add that to their agenda. I repeat that we need a coherent, clear plan for economic growth. We have not yet got it.