National Debt: It’s Time for Tough Decisions (Economic Affairs Committee Report)

Lord Howell of Guildford Excerpts

Friday 25th April 2025 Lords Chamber

[Lord Howell of Guildford (Con)]

My Lords, like others, I congratulate my noble friend Lord Bridges on his ambition and boldness in leading the Economic Affairs Committee to study the proverbially complex and nebulous subject of trying to control and direct our borrowing and the growth of our national debt.

I confess that I do not set much store by fiscal targets at all, especially when they apparently are adjustable to suit any changing conditions. That does not give them a great value. They are certainly not the fountain of all goodness, whether one year, two year or five years. Shocks always happen, as my noble friends have already observed. In fact, we are in one now, and I just wish and pray that the authorities of the governing party, and indeed all parties, would listen to the warning we just had from my noble friend Lord Forsyth about the extreme seriousness and dangers of the potential financial anarchy ahead. The truth is that borrowing and annual requirements adding to the national debt are the outcome of many judgments, decisions, red lights, shocks, as I have already said, and opinions on the bond market in world-lending conditions.

I am also no fan of the OBR. I am sure it works hard, but it is no more right or wrong than the rest of us. In fact, it is often wrong. I see it as a fifth wheel, or a sixth wheel, on the whole coach of processes, filtering, establishing and trying to control the level of borrowing that is needed in the annual budgetary scene. Creating the OBR was only a quarter way to what we really should be doing with the machinery of central government, which is to have a proper central, strategic budgetary authority looking at the whole national picture and our resources to meet it, public and private, long-term and short-term, right under the Prime Minister at the centre of government. We have been arguing for that for years. We have not got it. Many other countries— America is the best example—separate these things out. Until we do that, we will have continual difficulties on understanding the whole picture.

I emphasise private because the state is obviously overwhelmed by every conceivable spending demand, as my noble friend Lord Bridges outlined, and there is much more to come. It is always short of money and always up against the limits of taxation and of borrowing and interest rates. The private sector has unlimited funds, by contrast, and it is absolutely ridiculous that we now have huge pension funds tucked away in trillions in this country, one of the biggest in proportion to our population, and yet they find themselves short of opportunities and the nation finds itself starved of the necessary investment it is crying out for on every side.

The real need is for new forms of collaboration between the public and private sector that do not blow up the public sector net debt and to find a new model that escapes from the outdated binary form of debate that has dominated thinking in the past. We tried the private finance initiative, the PFI, and it failed for various reasons, which there is not time to go into now. Missing in the report is the concentration on this crucial grey area between PSBR, government accounts and private money, which is in profusion. It is in not only the pension funds but in sovereign wealth funds, FDI and a thousand other resources as well.

Can the Minister reassure us that the brains in the Cabinet, his own party and the Treasury are looking at tough decisions in this area—not the tough decisions addressed in the report but those that require the highest priority—of how we mobilise the vast funds available in the private sector with such vast needs overwhelming the public sector? That is the key, and unless we can find the lock to put that key in, we will have much worse conditions ahead.