Economic Growth

Lord Moynihan of Chelsea Excerpts

Thursday 23rd January 2025 Lords Chamber

[Lord Moynihan of Chelsea (Con)]

My Lords, I declare my interests as on the register, and I also declare a particularly awkward conflict, which is that, as the noble Lord, Lord Hannan, referred to, recently I published two books on this very subject, economic growth. Every time that the Government announce another problematic economic policy, sales of my book go up, so I could, in this speech, be accused of standing here to promote my books. I apologise for that embarrassing conflict, which I can do little about, as long as the Government continue to have such dysfunctional policies.

Both sides of the House want GDP per capita growth. The Government want it to provide services and benefits to citizens, and Conservatives want the same, although they also want to put more money every year in people’s pockets, believing that that is a better way to promote individual happiness than through government expenditure.

The noble Lord, Lord Hannan, referred to how in the early 2000s our GDP per capita was near parity with the US. The economy was growing steadily under Blair, state expenditure was about a third of the economy, taxes were about a third of the economy, and regulation was reasonably moderate. The UK was generally acknowledged to have the best economy in Europe, provided by the Thatcher and Major Governments, which Blair and Brown gratefully inherited. Since 2007 GDP per capita has not gone up significantly, either here or, as several noble Lords have mentioned, in the social democrat countries of the EU.

GDP per capita has steadily increased in other countries. The US is now 40% higher than us, with much more cash in the pocket of the average worker in the United States as a result. Just go over there and see the difference. Policies pursued by both major parties in the UK since around 2005 are responsible for this—bigger and bigger government, higher taxes, metastasising regulation. Our new Conservative leader, Kemi Badenoch, has acknowledged in the other place that since 2007 we have mostly been no better than Gordon Brown was in the Labour Party. Realising our errors, we have changed, while in contrast the Labour Government have doubled down on a growth-destroying approach.

When your GDP per capita is low, you cannot afford to offer to your people all the things that you would like to. The more you spend, the more your economy stalls. The problem worsens year after year and we end up where we are: a large, intrusive state with too-high taxes, far too much regulation, no money and no growth. There is a new regulator each week, unpardonably targeting successful sectors whose growth will now fall away under the assault of fines, subventions, DEI, ESG and on and on. Employment this week is down. Of course—what did the Government expect? Yet the OBR and the IMF still mainly predict positive albeit anaemic growth. Regrettably, they still prioritise growth in overall GDP rather than in GDP per capita.

Anybody who is in touch with the economy, which sadly this Government seem not to be, knows that to assert that the economy is growing is nonsense. Right now the economy is either flat or shrinking, and—as my noble friends Lord Agnew and Lord Frost pointed out—with our population growing by some 0.75% per year, GDP per capita is therefore definitely shrinking. This means that in this country we have in our midst millions of personal recessions, with all the human unhappiness that this entails. The Chancellor has finally realised what a disaster the non-dom policy has been and, importantly, has said that growth will trump net zero. Will the Government now get rid of the centrally imposed heat pump diktat? Will they now reduce the growth-destroying green subsidies? Will they now allow further growth-promoting drilling in the North Sea?

How bad will it have to get before the Government realise that they are on precisely the wrong track? How bad will our economy be by the time a reversal in policy is forced—which it will be—on the Government?