Contribution
My Lords, I congratulate my noble friend Lord Bridges on securing this important debate and on his excellent opening speech.
The Prime Minister wants to “bring back hope”, but he blames Thatcherism and Blairite economics—which he once supported—for Britain’s problems. What is his solution? More state control and more regulation. He calls it “business-friendly socialism”, but how can an economy be business-friendly with more union power and less economic freedom? We have been here before. In the 1970s, the state controlled large parts of the economy, while trade unions wielded enormous power. I remember those days: rampant inflation, power cuts, rubbish piling up during strikes, disrupted transport and economic decline.
The Soviet Union offers an even starker lesson, with state-controlled production, prices and investment. Private enterprise was not allowed. The result was shortages, inefficiency and stagnation. The Soviet Union collapsed because central planning destroyed incentives, innovation and production. Governments cannot create prosperity by controlling the economy, yet the Prime Minister appears determined to take us back to an era in which the Government owned and trade unions ran the economy.
Here lies the first contradiction. The Prime Minister says that growth cannot be ordered from the top down, yet he advocates public ownership of essential services and wants to decide which sectors of the economy should be prioritised. History shows us that Governments are notoriously bad at picking winners. The second contradiction is fiscal. The Prime Minister embarks on his 10-year plan when the fiscal headroom has fallen to just £8 billion, welfare accounts for almost a quarter of government spending and the national debt is approaching £3 trillion. Yet he has already run up a potential bill of more than £50 billion while proposing further uncosted public ownership. Nationalising water alone could cost some £140 billion.
Where will the money come from? Will the Prime Minister break his pledge and Labour’s manifesto commitment not to raise taxes? The tax burden, as we have heard before, is already at a record high. Any further increases will discourage hiring, investment and entrepreneurship and accelerate capital flight. Some 27,300 high net worth individuals and 6,000 business owners have left Britain in the last two years, taking with them investment, ideas, jobs and tax revenues. There comes a point when higher taxes produce less growth and revenue by weakening incentives to work, save and invest. Policies that suppress growth do not protect the poor and vulnerable. Ultimately, they make the poor even poorer.
Will the Prime Minister borrow more? We already spend £110 billion a year servicing our debt—money that could be spent on education and defence. As my noble friend Lord Hannan has said:
“The markets are not interested in moral hazard or in justice. All they care about is whether they will get their money back”.
The bond markets are taking note. As we heard before, 10-year yields are at a record high—higher than under Liz Truss. Some economists warn that Britain could again find itself going cap in hand to the IMF for a bailout, as we did in the 1970s.
Rather than reverse Thatcherism, the Government should remember that her reforms reversed Labour’s economic decline and reduced our debt. With welfare spending continuing to rise as our population ages, we are passing an ever-larger bill to our children. This is the fundamental contradiction at the heart of the Prime Minister’s programme. He wants a bigger state when we can no longer afford the state we already have.
But the Prime Minister has an opportunity to build the pro-business, innovation-led economy he wants. The Chancellor’s recent call for more private investment, more profitable businesses and more wealthy founders is encouraging—but that requires less government, not more; lower taxes, not higher ones; and an economy that rewards enterprise rather than penalising it. Will the Government rein in spending, reform welfare and reverse the most damaging elements of his predecessor’s Employment Rights Act so that Britain can once again be a country where businesses want to start, grow and stay?