Economic and Taxation Policies: Jobs, Growth and Prosperity

Lord Petitgas Excerpts

Thursday 13th November 2025 Lords Chamber

[Lord Petitgas (Con)]

My Lords, I thank my noble friend Lord Elliott for securing this timely debate. I also admire the speed of speech of the noble Lord, Lord Bilimoria.

The economic path of our country is alarming. We are living beyond our means, taxing more and getting less, and stifling any incentive to work or invest. I will set out five compounding and depressing facts.

First, growth is weak, while the tax burden is the highest in peacetime. When taxes rise and growth stalls, the message to investors is clear: something is structurally wrong.

Secondly, core spending—welfare, pensions and health, mainly—consumes more than half of all tax revenue. It is growing way more quickly than the economy. This must be brought under control; otherwise, taxes will just keep on rising, as the noble Lord, Lord Young, rightly said.

Thirdly, labour participation has fallen. Around one in four working-age adults is not working and not seeking work. No modern economy can seriously prosper if participation falls while welfare spending rises. Compassion matters but work must pay, and those who can work, must work.

Fourthly, public debt is nearly 100% of GDP. That is two-thirds more than Germany’s. That interest alone consumes around 10% of tax revenues. Global markets have noticed: Britain now pays the highest borrowing costs in the G7, a third higher than France or Italy and two-thirds higher than Germany. Our higher cost of capital bears down on everything in this nation.

Fifthly, confidence, as we discussed, matters greatly. It is the engine of an economy and society, and it is at an all-time low. Business sentiment has been negative for most of the year. Surveys also show that many young Britons are considering working abroad. That is not just wealth leaving, it is talent. The next generation wants to go.

So there you have it. We are stuck. We are caught in the loop of higher spending, which leads to higher taxes, which lead to weaker incentives, which lead to lower growth, higher debt, higher borrowing costs and pressure for further tax rises.

We cannot break this loop by taxing a shrinking base more heavily; nor can we escape it in a single Budget. Britain has all it takes for a dynamic economy, and yet we behave like a high-intervention, high-friction and inefficient state, so enterprise slows and talent goes elsewhere. Indeed, we need a course correction, one that rewards people who work and invest here.

I suggest three ideas, and there are many others. First, like the noble Baroness, Lady Noakes, I think that we need to start a path toward lowering corporation tax. Even a modest step would show that Britain means business and wants investment, not capital flight.

Secondly, we should reward both enterprise and reinvestment in the UK. We should reduce capital gains for entrepreneurs—it was a measure that Gordon Brown had put in—and allow deferral when those gains are reinvested into UK companies. If you build here, you should benefit here. There, we would not need the capital controls that this mooted 20% exit tax would suggest, which would be a disaster for this country.

Thirdly, we should make work pay and expect work. Support must remain, but the system should encourage contribution, not dependency.

In summary, we have three crucial levers to make it very simple: the debt, the spending and the tax. It is correct to keep a lid on the debt. The noble Lord, Lord Young of Cookham, was eloquent on the tug of war between spending and tax, both of which are at an all-time high. If we want growth, we must reduce costs—this is like a company—free our productive forces and reward work and enterprise. Taxes cannot be the residual variable.