Economic Growth

Viscount Chandos Excerpts

Thursday 23rd January 2025 Lords Chamber

[Viscount Chandos (Lab)]

My Lords, it is always a pleasure to follow the noble Lord, Lord Horam, even though it is nearly 40 years since I could describe him in parliamentary terms as a friend. I am very pleased to be able to speak in the important debate which the noble Lord, Lord Farmer, secured and introduced, making many interesting points. Early in his introduction, he said that gloom must be dispelled. I agree, but not at the expense of honesty and transparency. This Government inherited 22—no, I will not steal my noble friend the Minister’s best lines—at least 22 acute challenges, from the fiscal position to the state of the NHS to crumbling infrastructure, which cannot be papered over with the boosterish rhetoric so beloved by Prime Minister Johnson.

There has been near unanimity in the debate so far on the importance of achieving economic growth, but before I address the “how”, it is worth asking: growth at what price and with what constraints? President Obama recently named Growth: A Reckoning by Dr Daniel Susskind as one of his best books of 2024. I strongly recommend it, although I am afraid that will have less effect on its sales than the advocacy of the former President. Dr Susskind, a research professor in economics at King’s College London, surveys the history of growth—only material in the last two centuries and only an explicit primary objective of Governments for less than half of that—and looks at the challenge for maintaining the path of the past 200 years. Drawing on Equality and Efficiency: The Big Tradeoff, written by Arthur Okun in 1975, Dr Susskind creates a framework for considering a wider range of trade-offs than equality alone, with the environment first among those. The costs of trade-offs can be managed and mitigated—the falling cost of renewable energy is a prime example—but, in some cases, decisions have to be made to accept a reduction in realistic growth targets, in recognition of these trade-offs.

I suggest that the willingness to acknowledge, manage and mitigate those trade-offs lies at the heart of the differences between some of today’s speakers and the views of these Benches—and even further, looking across the Atlantic, with the Trump Administration’s, “Drill, baby, drill” on the one hand, and the UK and most other European governments on the other.

I will pick up on two points. Economic growth crucially requires stability, both economic and social, as the noble Lord, Lord Farmer, argued. That social stability cannot be achieved without the investment in public services to which this Government are committed, and which the Governments of the previous 14 years wilfully neglected.

Despite all the efforts of the Opposition to allege financial crisis—interest rates are higher than in the recent past, but in line with global trends—international confidence in the UK is at an all-time high. PwC’s annual survey of global business leaders, published this week, shows the UK as second only to the US as a preferred destination for investment, up three places since this Government took office.

Finally, I turn to the financing of innovation and start-ups, where I find myself unusually in less than complete agreement with my noble friend Lord Eatwell. In 2023, venture capital investment in the UK represented an identical percentage of GDP to that of the US—nearly twice that of France and nearly three times that of Germany. In the words of David Clark, the chief investment officer of investment advisers VenCap,

“In the UK, there is no shortage of capital for world-class founders. There is a shortage of world-class founders”.


Much of that investment may come from overseas, although that would require knowledge of each US venture capital fund’s limited-partnership investor base, given that UK pension funds, insurance companies and endowments are significant investors in them. For me, the proposed pension fund reforms and restructuring, which I fully support, are about improving the return of those funds for the benefit of their pensioners, rather than filling a capital gap which does not really exist.