King’s Speech (4th Day)

Lord Wood of Anfield Excerpts

Monday 22nd July 2024 Lords Chamber

[Lord Wood of Anfield (Lab)]

My Lords, I congratulate my noble friends Lord Vallance and Lord Livermore on their appointments. Like many, I have been a fan of the rigour and communication skills of my noble friend Lord Vallance from afar and look forward to having him as a colleague in the House. I am also delighted to see my noble friend Lord Livermore appointed as the new Financial Secretary, having worked with him for many years at the Treasury, where we were advisers to Gordon Brown. He has wide experience, possesses excellent judgment and, most importantly, knows what it is like to work for a demanding Chancellor.

We all know that the state of the UK economy is among the biggest challenges facing the new Government. Next year, Britain is forecast by the OECD to be the poorest-performing G7 country for growth. Real wages are only just back to their 2008 level. Borrowing continues to come in higher than OBR predictions. Productivity remains very poor in international comparison. Meanwhile, taxes are at their highest since 1948 and our public services are creaking under the strain of years of austerity. I know that I am biased, but it is refreshing to see a Labour Government looking at not just the short-term but the long-term root causes of our economic poor performance, as many noble Lords have said—the myriad of problems on the supply side of the economy that hold back growth, productivity and wages.

I particularly want to applaud three proposals in the gracious Speech. The first is the planning and infrastructure Bill. Measures to reduce costs of compulsory purchase orders, reduce timeframes, streamline processes, modernise planning committees and increase local authority capacity all have the potential to make a big difference if co-ordinated properly. The second is the employment rights proposals. Contrary to other noble Lords, I think that they will help to ensure that the burden of economic adjustment in our country is no longer borne to an unfair degree by the least powerful and most vulnerable. The third is the banking resolution Bill, which will allow the FSCS to recover the funds provided to bail out the failing small bank by charging levies on the banking sector, similar to the current arrangements for funding depositor payouts in insolvency.

I want to mention two things in slightly more detail. First, I welcome the national wealth fund and the determination for a new approach to investment in green industry infrastructure and SME funding. It is good to see that the British Business Bank and UK Infrastructure Bank will be aligned under a new national wealth fund. I have a question for the Minister about it. The national wealth fund taskforce, which was commissioned by the then shadow Chancellor, Rachel Reeves, and reported to her as Chancellor, said that the money in the fund should not be allocated in grants but should be used to target riskier investments. Will that be the approach of the new national wealth fund?

In connection with my noble friend Lord Vaux’s point about the UK Infrastructure Bank, the bank did valuable work but it was criticised, including by the Public Accounts Committee, for reinventing the wheel for funding projects that already draw private capital. It will be interesting to hear what lessons the new national wealth fund will learn from the conservatism of that funding approach.

Secondly, on the pension proposals, many in this House have much more significant knowledge on this than I do, but we all know about the problems in the connection between UK pension funds and investment in the real economy of the UK. The average defined benefit allocation to UK equities has fallen from over 50% in the 1990s to less than 2% in 2022. Schroders data says that there are close to 27,000 defined contribution schemes in the UK—25,500 of which are micro schemes of fewer than 12 members. Therefore, the issue of scale and consolidation clearly is crucial, but I hope that the review and the legislation that comes out of it, which I welcome very strongly, will look at how the regulation of the pension fund industry connects to investment—levels and types—and whether other financial incentives might be appropriate to encourage more investment in UK equities and UK corporate bonds.

Lastly, I will return to a point that my noble friend Lord Liddle raised. It is so refreshing to see a Government putting partnership with the private sector at the heart of their policies. We have seen it in the last three weeks, and we saw it in opposition. Partnership is important not just for the legitimacy of policies, or because the private sector will ultimately be the determining factor in the success of a lot of government policies, but because in partnership we can shape the risk scenario that will be so important for encouraging more long-term investment.

Best wishes to my noble friends Lord Vallance and Lord Livermore. We look forward to what will come down the pipe in the next few years.