Autumn Statement 2023

Viscount Hanworth Excerpts

Wednesday 29th November 2023 Lords Chamber

[Viscount Hanworth (Lab)]

My Lords, I was deeply perplexed when I listened to the monarch’s speech at the opening of Parliament and, equally, to the budgetary speech of the Chancellor of the Exchequer. The question I ask is: to what extent do these speeches represent an attempt at bamboozling the public, and to what extent do they represent acts of self-deception on the part of the Government? I have not reached any firm conclusion.

The Chancellor’s recent Autumn Statement is full of doubtful claims about the success of the economy. We hear, for example, that under the Conservatives our technology sector has grown to become the third-largest in the world—that is, double the size of the German sector and three times that of France. This seems to be patently untrue, and one may wonder what statistics are being misused to support such a claim. The truth is that our manufacturing sector has sunk to a proportionate level that is way below the corresponding levels of those other economies. What, then, is the technology sector to which the Chancellor refers?

In appraising the Autumn Statement, it is clear that many of its provisions, which include significant reductions in taxes, are intended to enhance the electoral prospects of the Conservatives. However, given how dim these prospects seem to be, one wonders about the extent to which the provisions are intended to embarrass a succeeding Labour Government.

The Autumn Statement has the intention of reducing public expenditure in the early years of the succeeding Government. It severely restricts the financial leeway available to them unless they are prepared to increase taxes. A Labour Government would be intent on repairing the damage that Conservative Administrations have inflicted on public services. Damage has been done to the health service, care for the aged and the finances of local government. Our schools are in a state of physical disrepair, as are our prisons, which are severely overcrowded. Much else needs to be repaired, and public sector wages need to be restored in some measure. However, if the trajectory that has been defined in the Autumn Statement were followed, none of these repairs would be possible. There is also an urgent need to repair the physical infrastructure of the economy, which includes the transport and energy infrastructure. Our water supply and sewerage system also require urgent attention.

Beyond these needs, there are huge and looming costs associated with the transition to a green economy and the fulfilment of the programme to achieve net-zero carbon emissions. Government support is required both to sustain technological innovation and to assist in establishing the facilities that are available to a net-zero economy. So far, little has been forthcoming. An example of the shortfall has been in the failure to satisfy the requirements of the automobile industry in converting to the manufacture of electrically powered vehicles. A precondition for a successful transition is the existence of an adjacent industry for manufacturing lithium-ion batteries. The Government failed to avert the collapse of the Britishvolt project to establish a mega-factory for manufacturing batteries. The project faltered for want of sufficient investment from the private sector—this is at a time when foreign Governments are investing heavily to establish those facilities.

The derelictions of the Government can be attributed, in large measure, to the prevalence of a political philosophy that limits state interventions and proposes that our industrial infrastructure can be sustained by private capital and the initiatives of free enterprise. State interventions are necessary to achieve the transition of our energy sector. The programme to restore our nuclear power faltered because the Government failed to recognise that it could not be achieved by the private sector alone.

Their response has been to imagine that instead we can rely on so-called renewable sources of energy. But here, the intermittence of these resources necessitates a means of storing the energy. In order to accommodate lengthy and unpredictable periods when the sun is masked and the wind does not blow, there is a need for a large amount of long-term storage. It is doubtful whether effective incentives can be devised to encourage the private sector to make the necessary provisions, yet the Government and the Civil Service blithely assume that they can devise a commercial model which will allow them to avoid any direct participation in providing the energy storage.

I earnestly hope that an incoming Labour Government will not suffer from the same delusions. They must take an active role in repairing the damage and in fostering the technological transformation of our economy.

UK Economy: Growth, Inflation and Productivity

Viscount Hanworth Excerpts

Thursday 29th June 2023 Lords Chamber

[Viscount Hanworth (Lab)]

Britain has a lower rate of economic growth than—and its per capita income compares poorly with—many of its European neighbours and others further afield. Questions must be asked about the causes of these deficiencies and what can be done to overcome them. People of different political persuasions give quite different answers.

Prime Minister Liz Truss and her close colleagues had answers to these questions. They proposed that our low rate of growth was attributable to the laziness of the British workers and a lack of sufficient incentives to activate managers and entrepreneurs. In their opinion, the economy was entrammelled by bureaucracy and burdened by a Civil Service and a public sector that were required to be drastically reduced. These aspersions paid little attention to economic reality. The programme of tax cutting and job cutting met with an adverse reaction from financial markets, and Truss was expelled from office.

An indication of the unreality and carelessness of Truss’s programme was her proposal to cut £11 billion in Whitehall waste, to be accompanied by reductions in the salaries of public servants not working in the metropolis. It was quickly revealed that the entire annual salary bill of the Civil Service amounts to some £8 billion. That is significantly less than the size of the proposed cuts. It seemed that there had been an error of categories. Truss was mistaking the size of the public sector for the size of the Civil Service. The idea that the economy is entrammelled in bureaucracy and regulation that needs to be swept away is an enduring, atavistic notion of the Conservative Party that continues to inspire its policies.

The proponents of Brexit assert that we have been suffering from an oppression of regulation imposed by the EU. The falsity of that opinion has been demonstrated during our consideration of the Retained EU Law (Revocation and Reform) Bill. The complaints of bureaucracy tend to be loudest when bureaucratic agencies are understaffed and when, as a result, they are forced to make decisions in a summary and inflexible way. Some of the loudest complaints nowadays are aimed at local authorities, which lack sufficient resources and manpower adequately to fulfil their many bureaucratic functions.

An explanation for Britain’s low economic growth is easy to come by: there is little in the economy on which to base that growth. Britain’s industrial sector, which is where one would expect to find the growth, has been severely diminished; nowadays it accounts for a bare 10% of our gross domestic product. What may not be so evident to many observers is that the hypertrophy of our financial sector has been both an accompaniment to and a cause of our industrial decline. The financial sector has been mediating the sale of our national infrastructure and of our industrial assets to foreign owners. That has maintained demand for the pound and inflated its value, and the overvalue of the pound has made Britain’s exports uncompetitive while lowering the costs of imports. That has been a major cause of our industrial decline.

Among the dogmas that have prejudiced our economic prospects is the belief, which has been central to Conservative economic policy, that the private sector must be relied on to undertake investments that maintain our industrial infrastructure. According to this doctrine, the Government should minimise their involvement and any initiatives that the Government might propose should be assessed on strictly commercial criteria.

The dogma has been maintained in the face of undeniable evidence to the contrary. It has been responsible for a failure to develop our energy infrastructure and for the collapse of the crucial programme for nuclear power, which cannot be sustained by private finance. An industrial transformation is required in order to staunch the global emissions of carbon dioxide. The British Government have been prominent in declaring the need for that transformation but have failed to take the necessary actions. Our targets for the electrification of road transport have been the most ambitious among the European nations, but our support for our automotive industry has been the very weakest. We have failed to promote the manufacture of batteries and hydrogen fuel cells, and the inevitable consequence will be the loss of our automotive industry.

An industrial transformation aimed at achieving net-zero carbon emissions requires strategic economic planning organised by central government. It requires a major expansion of the supply of carbon-neutral energy, which is bound to come preponderantly from nuclear energy. The experience of the present Government indicates that we cannot expect the necessary investment to come from the private sector.

As in the immediate post-war era, we must look to the Government to provide the necessary finance via taxation and government borrowing from the financial sector. Indeed, the taxes should be imposed on those who can afford to pay them, including the large corporations, which have proved adept at avoiding taxation while reaping exorbitant profits. In the absence of major government initiatives to support the necessary industrial transformation, our economic decline will continue. The consequence will be widespread economic and social misery, which may be accompanied by increasing political instability. Further opportunities will be created for populist movements proposing spurious panaceas, such as we have witnessed in the Brexit movement.