Queen’s Speech

Lord Palumbo of Southwark Excerpts

Thursday 5th June 2014 Lords Chamber

[Lord Palumbo of Southwark (LD)]

My Lords, I am delighted to contribute to this debate on the Government’s programme for the coming year. The country’s financial position is, of course, central to this programme. Current UK Government debt is approaching 100% of GDP. Household debt is roughly the same. Financial sector debt is more than double this amount, due to the historically large size of our banking industry. Then there are off-balance-sheet issues such as private finance initiatives and unfunded pensions. I appreciate that it is a matter of opinion as to whether these should be included as liabilities of the state but if the country were to account like a business, they would be. These add perhaps another 200% of GDP to our debt. Economists differ as to our total debt amount but on any basis we must be approaching 500% of GDP, which makes Britain one of the most indebted countries in the world.

Over the past four years, the Government have made heroic efforts to combat the legacy of the 2008 financial crisis. While opinions might differ as to the wisdom and effect of quantitative easing and other stimulus programmes, the Government have steadied the financial ship. The problem is that despite the austerity narrative, public spending continues to rise and our debts continue to grow. Then there are a number of other issues thrown into the political mix such as Scottish independence, immigration and Europe, which perhaps distract from the key fiscal debate. Beyond this, it is a very difficult debate to have because it involves cutbacks to the way we live and, as your Lordships know, human beings are hard-wired to avoid pain. Who will vote for that and which politician will put pain centre stage in their manifesto?

There are many opinions on how to deal with our economic problems. I know that I am inexperienced in politics and your Lordships need no lessons in “a better way of doing things” from me. Alas, as a businessman, I have no other frame of reference. John Micklethwait and Adrian Wooldridge from the Economist recently published a book, The Fourth Revolution. In it they drew lessons from the Asian economic model, in particular from Singapore. These lessons provide some interesting ideas, including: a system for educating public administrators from an early age and paying them generously—in business terms, hiring the best; a more robust system for social welfare with higher contributions from individuals and businesses; more emphasis on self-reliance and, most of all, long-term business planning. I appreciate that Singapore operates under a different political system and that some of its methods would be difficult to apply in western democracies. However, the country’s success rather speaks for itself. We have also seen western countries such as Sweden adopt Singaporean-type methods, such as the tight fiscal rules which reduced Sweden’s debt from 70% to 37% of GDP in fewer than 20 years.

I understand that there is tremendous nuance in this area of debate. It is all too easy to sound off and there are no easy answers. However, we must plan for some bumps in the road ahead, such as when rates normalise or we have further political uncertainty. I sincerely hope and expect our recovery to gather pace but if it should falter, we may need to consider more stringent business methods with which to run our lives.