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

Lord Tugendhat Excerpts

Friday 25th April 2025 Lords Chamber

[Lord Tugendhat (Con)]

My Lords, as a former member of the Economic Affairs Committee, I add my congratulations to my noble friend Lord Bridges and to the other members of the committee for the outstanding report that they have produced. It is a privilege to follow the noble Lord, Lord King, whose time at the Bank of England I remember clearly, when I was operating in the private sector under his general supervision.

I take as my starting point paragraph 138 of the report:

“If we wish to improve the level and quality of services, and continue the current provision of benefits, taxes will need to rise”.


It goes on to say that clarity is required on the role of the individual versus the state. We certainly need a good deal of clarity on the part of the state because, as everybody knows and everybody has said, the world has changed out of all recognition since the Government made their pre-election pledges. Indeed, it has changed a good deal since the report was published—President Trump’s activities have seen to that—and the result is plain for all to see. On the one hand, the Government are going to have to spend more, and on the other it will be more difficult to grow the economy.

So what does that mean if debt is to be kept on a sustainable path? Are we to believe that, in order to stick within the Chancellor’s rules, defence expenditure will not increase as it must and as the Government have promised it will? Or are we to believe that there will be further benefit cuts? Sooner or later, taxes will have to rise. The longer it takes the Government to grasp the nettle, the worse it will look and the more the national debt will become unsustainable. Instead of reacting decisively to changing circumstances as they unfolded, as the Prime Minister has done on the international stage, the Government have delayed facing up to reality. In so doing, they are repeating a doom loop of the Attlee and Wilson Governments.

In making that comparison, I am indebted to a recent Substack by Peter Kellner, the former president of YouGov, in which he argues that, by failing to devalue the pound in 1946 when circumstances demanded it and going on to fight a rearguard action until 1949, the Attlee Government condemned the country to needless pain and themselves to a great political defeat—likewise with the Wilson Government, which many in this House will remember, not devaluing in 1964 and holding out until forced to do so in 1967. Both those Governments got left behind as the world around them changed, and the same is happening to this Government in respect of the national debt and the subjects covered by this report.

Now is indeed the time for tough decisions, as the title of the report suggests, and not just to prevent the national debt from becoming unsustainable. The needs of our armed services and our public services require it. The Government must grasp the nettle.