Lord Howell of Guildford (Con)

My Lords, I congratulate my noble friend Lord Bridges on bringing forward this debate—he probably had to do a bit of pushing and shoving—and for his crystal-clear demonstration, which will be hard to challenge, that with our national debt interest we are on a path to unsustainability and no one has a clear idea what to do about it, including the present Chancellor. Fair enough, this is not new, as the noble Lords, Lord Hill and Lord Burns, with their enormous experience, have said. This is an old problem which has its seeds in the past. I can go back further than the late 1970s to 1970, when we talked about a new style of Government and Ted Heath slightly unexpectedly became Prime Minister. We urged that we should start unravelling the almost entirely socialised public sector inherited from the war years and begin to regain some balance between private enterprise and the market economy on the one hand and the necessary government framework of laws, guidance and support on the other. As I say, it is not new, and anyone who says it is all the fault either of the present Government or the past Government makes an interesting comment but it is completely irrelevant to what on earth we do about it now. I declare my interests, given that energy is often at the root of all these problems. I am a chairman of the Windsor Energy Group and I advise Crystol Energy, both without pay. I also advise the Kuwait Investment Office, which is an enormous sovereign wealth fund that longs to invest, as do others, in the British economy but finds great difficulty in doing so and has vastly reduced its commitment in the British economy rather as the pension fund has been vastly reduced. When I was young, pension funds with their surpluses put 60% of their money in the British economy and mostly in British equities. Now the figure is 3.8%. What on earth has gone wrong? No wonder there is a shortage of resources for investment if our main investors, at home and overseas, are quietly packing their bags and going elsewhere. I will put four points on the question the noble Lord, Lord Hill, has rightly raised: what to do about it. The roots are deep and the problems will require an enormous change of attitude in the digital age, which will be difficult for a lot of people to face, including a lot of politicians. First, around the world there are a lot of methods of merging or matching private finance and enterprise with public and state frameworks for basic needs—in particular, longer-term public infrastructure projects which simply cannot be delivered without a Government pump-priming and underpinning but for which there is no state cash left. There is no money. There is no more room to borrow, or if there is, the borrowing cost of interest cancels out what one was trying to borrow. And there is no room to tax, because if you tax beyond a certain point, as we know from Arthur Laffer and many others—although there are exceptions to this—you end up with less revenue, not more. So, the ceiling is being bumped against and there is no way out of that. Secondly, these new methods that I mentioned, which we invented here under the name of PFI 25 or 30 years ago and which are now called PPP, are being developed and used in several countries. They are not just experiments or hopes for the future, but what is actually going on at the moment. We dropped the idea back in 2018, but a whole range of countries, which I will come to if I have time, are adopting varieties of this method of harnessing private enterprise to public needs. Compatibility between state and private investment can be reached through risk analysis, insurance developments and careful phasing of projects. The whole resources of private enterprise can be brought in, easing the bond markets’ tensions, worries and consequent increases in interest rates for lending us their money. There are opportunities opening, certainly not for any more bogus financial headroom and that sort of thing but definitely for carrying forward some of the projects we need, from potholes to power stations, without burdening the bond markets or government accounting. These are being followed in a number of countries. Finally, these are immensely powerful new insights that I hope we can pursue and share, aside from the politics. We on this side think that the wrong Government are in office and that they are bound always to bow to the state. That is a statement of fact and raises all sorts of other issues. There is no point in bemoaning it. At this time, we have a role in opposition to try to state some constructive ideas. If the Government borrow them, that is fine—at least we are making progress. I hope that we can unlock a great deal of progress. A lot of this lies in the great energy transition and providing 24/7 reliable, affordable clean energy in the quantities that are going to be needed if we can ever get growth going. The experts planning our energy future have persistently underestimated the amount of clean, green energy we will need and the amount of investment we will need to achieve that—certainly for our modern growing economy and, even more certainly, to cover the enormous requirements of the data centres we will need to keep up with the world, which are very thirsty indeed. At present, our plans are proving totally inadequate for meeting their needs. The nations moving this way are the Netherlands, Ireland, France, Germany, Norway, Sweden, Finland, Canada, Australia, South Africa and some provinces and states in Canada and Australia. The province of Ontario is launching a huge new nuclear programme that is much quicker than ours, much more efficient and much more reliable, with the help of the Japanese and without going to its Government. There are many other examples, some of which might well bring down the cost of borrowing, which for this country is too much and too expensive, and we must call a halt. There is a third way of a sort. It does not let the Government or politicians off the hook, but we should realise that the private enterprise pattern for public expenditure of this kind is vital for the projects of the future and is attainable if we think clearly and wisely about it.