King’s Speech (4th Day)

Lord O'Neill of Gatley Excerpts

Monday 22nd July 2024 Lords Chamber

[Lord O'Neill of Gatley (CB)]

My Lords, I add my welcome to the new Ministers and wish them very well and the best of luck in their important roles. I also congratulate the noble Lords, Lord Petitgas and Lord Vallance, on their maiden speeches. Occasionally, as we all suffer long hours into the night, one wonders how the tone of debate in this place can be raised, but I am sure we all agree that the noble Lord, Lord Vallance, in particular, brings an example. I refer to my roles on the register, chairing the Northern Powerhouse Partnership and Northern Gritstone and having been on the now Chancellor’s start-up review group.

As the Chancellor and her team know, I believe that a credible refinement of their adopted fiscal rule is necessary to deliver the public investment required to help boost productivity. What would deal specifically with the interesting conundrums that the noble Lords, Lord Fox and Lord Eatwell, raised—and shift the attention away from the inappropriate focus on just the OBR’s GDP forecasting, which is not its greatest strength—would be to go one step further and, along with a beefed-up infrastructure commission more closely aligned with the IPA, enforce them to independently and publicly verify those infrastructure projects that can be shown to have major positive multiplier effects on growth and, as a consequence, reduce long-term debt. I doubt that this would trouble financial markets—possibly the contrary. It is quite conceivable that, if executed with proper independent evidence, it might raise the equity returns in the UK along with the value of the pound.

Central to boosting growth—and with it national productivity—is to raise the performance of so many of our underperforming regions, as pointed out clearly by the noble Lord, Lord Monks. However, there may be evidence of some modest signs taking place in this trend. As the Northern Powerhouse Partnership showed in a brief paper recently, since 2004 the productivity gap between London and the rest of the country has narrowed a little, partly and perhaps surprisingly because of a weak London performance.

Also, crucially, one or two other places have performed relatively strongly within the overall disappointing context of the UK. One of those has been Greater Manchester, which has grown at three times the London average and twice the national average. It is almost definitely not a coincidence that Greater Manchester was the first place to want, desire and to get some devolution back in 2014. In this regard, I applaud the Government’s intentions to pursue devolution as seriously as they seem to imply.

A second issue, as covered to some degree by the noble Lord, Lord Vallance, relates to our universities and the commercialising of their research. Northern Gritstone is a reasonably new investment entity that invests in companies coming out of northern universities, anchored by Leeds, Manchester and Sheffield. Twenty-four investments have been made in its brief time, and the £40 million deployed by Gritstone was in the middle of a broader £300 million that was galvanised, which is multiple amounts more than those taking place before Gritstone came into existence. While this is pleasing, it is far from sufficient and much more is needed, as is the case around the country. Efforts by this Government to unlock more long-term capital to support these great ideas and start-ups coming from our wonderful universities should be commended, and these efforts need to be pursued vigorously as well as thoughtfully.

Finally, I will touch briefly on the issue of regional house price trends, which, in fact, have also shown that London has been underperforming many other places since 2015, having dropped back around 18% relative to their peak ratio in 2016. Something out there is happening which is making other locations more attractive. Serious efforts to boost the supply of housing are also therefore hugely welcomed because, if successful, this should add to the apparent reversal of this multi-decade trend, which, among other things of course, has been so damaging for social mobility in the UK. Therefore, some crucial long-term changes may have just started to begin to turn, and with the right policy momentum, like any forms of intervention, will be better if the trend has changed. I therefore strongly encourage the Government and both Houses to be truly focused on these issues. More serious economic devolution, more commercialisation of ideas from our great universities, more long-term capital deployments at early and growth ventures, and a bigger supply of housing could do wonders for our productivity and therefore our growth prospects.