Growing the UK Economy

Statement

The following Statement was made in the House of Commons on Wednesday 29 January.

“With your permission, Mr Speaker, I would like to update the House on the Government’s work to unlock investment and secure economic growth. That is the No. 1 mission of this Government. Without growth, we cannot deliver on the priorities of the British people, cut NHS waiting lists, rebuild our schools or put more police on our streets. That is why the pursuit of growth is our first mission, putting our country on a new path towards a brighter future after 14 years of failure from the Conservatives. By helping businesses to invest and create wealth, we ensure they can provide jobs and opportunities that change lives, putting more pounds in people’s pockets and rejuvenating communities across the country.

We have seen progress on that already, with huge private sector investments into our country since this Government came into service, but now we must go faster and further. We must help businesses and places to achieve their potential. We do that by being an active and strategic state—one that works in true partnership with businesses, investors and local leaders to deliver for the British people in every corner of the country. That principle was at the heart of the Chancellor’s speech earlier today in Oxfordshire, where she announced the latest steps that the Government are taking to drive growth across the country. I am pleased to update the House on those announcements now.

The economic growth we are pursuing must reach into every town, city and community across the United Kingdom—inclusive growth for everyone, not just those at the top—because there is untapped talent and unrealised opportunity throughout the country and we cannot let that go to waste any longer. If we can raise the productivity of major cities like Manchester, Birmingham and Leeds just to the national average, we will deliver an extra £33 billion in economic output. So I can confirm that our plans for regional growth will be hardwired into the spending review, the infrastructure strategy, the industrial strategy and our approach to trade and investment.

We are already providing £200 million of funding to support the development of a new mass transit system in West Yorkshire, and at the Autumn Budget we secured improved connections between towns and cities from Manchester through to York. We are also developing our plans to further improve connectivity in the north and across the country through our 10-year infrastructure strategy, which will set out our long-term vision for social and economic infrastructure across the country.

Today we are progressing with the Wrexham and Flintshire investment zone, focusing on the area’s incredible strength in advanced manufacturing to leverage in £1 billion of private investment and create up to 6,000 new jobs. As the Chancellor announced at Davos last week, the Office for Investment will work hand in hand with local areas to develop opportunities for international inward investment, starting with the Liverpool city region and the North East combined authority, while the national wealth fund will build on its strength and combined authority engagement to build a pipeline of investable propositions with mayors, starting with strategic partnerships in the Glasgow city region, West Yorkshire, the West Midlands and Greater Manchester. Sticking with Manchester, we are giving our support to the Mayor of Greater Manchester’s plan for the redevelopment of Old Trafford, creating new housing, new commercial developments and a new stadium—but, I am advised to inform the House, not necessarily government-wide support for the team that play there.

I am pleased to update the House on our new approach to the Oxford-Cambridge growth corridor, a hugely exciting opportunity for the UK and the British economy. For centuries these two cities have been synonymous with inspiration, invention and innovation. Economic analysis suggests that with the right support the region could bring a GDP boost of £78 billion by 2035, yet time and again Governments have failed to capitalise on this remarkable area, most recently in 2021 when the last Government dropped their commitment to what they called the Ox-Cam arc project.

Through underinvestment, poor transport connections and a lack of affordable housing, the incredible growth potential of the area has been squandered as people and businesses have been forced to move and invest elsewhere. No longer: the noble Lord, Lord Vallance, will act as our champion for the growth corridor, utilising his impressive experience in life sciences, academia and government to unlock growth opportunities across the region and promote its potential to investors across the world. We will establish a new growth commission for Oxford, to recognise and capitalise on the growth potential of this historic city.

We already know, of course, that transportation is a huge factor in the success of the country. Heathrow is the UK’s only hub airport and our largest air freight hub by volume, connecting us to emerging markets around the world, opening up new opportunities for trade and investment. But its growth has been constrained for decades. Today we are announcing that the Government support and are inviting proposals for a third runway at Heathrow Airport, to be brought forward by the summer. This is an important infrastructure project expected to have positive growth impacts across the United Kingdom, and it has the backing of businesses and business groups including the CBI, the Federation of Small Businesses and British Chambers of Commerce as well as trade unions such as the GMB and Unite.

According to a recent study from Frontier Economics, a third runway could increase GDP by 0.43% over the next 25 years, with over half—60%—of that boost going to areas outside London and the south-east. It could create over 100,000 jobs in the local area and maintain Heathrow’s status both as a global passenger hub and as the UK’s largest air freight hub by volume.

Reforms this Government have introduced to speed up the planning system will ensure the delivery of the project and set it up for success. Once proposals have been received the Government will take forward a full assessment through the airport national policy statement to ensure that any scheme is delivered in line with our legal, environmental and climate obligations. We want the scheme to be value for money, and our clear expectation is that any surface transport costs associated with the project will be financed by private capital and should be sustainable and low-carbon. The Secretary of State for Transport will also set out planning decisions for further airport expansion at Gatwick and Luton shortly.

Crucially, I am pleased to announce that we are taking further steps in our transition to greener, cleaner aviation. At the start of the month, the sustainable aviation fuel mandate became law. Sustainable aviation fuel reduces carbon dioxide emissions compared with fossil jet fuel by around 70%. Today we are announcing an additional £63 million for the advanced fuels fund over the next year, and we have set out the details of how we will deliver a revenue certainty mechanism. Those measures will support investment and high-skill green jobs in plants across the United Kingdom, delivering sustainable aviation fuel here in the UK for UK consumption.

Transportation is equally important on a local level, and that is as true for the Oxford-Cambridge growth corridor as it is for anywhere else. This Government have confirmed that they will provide crucial funding for transport links, including upgrades to the A428 to reduce journey times between Milton Keynes, Bedford and Cambridge, as well as for East West Rail with new services between Oxford and Milton Keynes starting this year. We have already received submissions to the new towns taskforce to build new developments along the new railway. At Tempsford, we will accelerate delivery of a mainline station on the east coast main line so that travellers can get to London in under an hour and to Cambridge in under 30 minutes once East West Rail has been delivered.

We will ensure that the pioneering work that has long been a hallmark of the area will continue. We are today committing to a new AI growth zone in Culham. We welcome the University of Cambridge’s plan for a new flagship innovation hub in the centre of Cambridge, and a new Cambridge cancer research hospital will be delivered as part of wave one of the new hospital programme. Just yesterday, Moderna completed the build for its new vaccine production and research and development site in Harwell, while committing to invest £1 billion in the United Kingdom—proof that when we create the conditions for success, businesses can lead the way.

I am pleased to confirm for the House that the Environment Agency is lifting its objections to specific developments in Cambridge, so we will press on with plans to develop 4,500 additional homes, new schools and office, retail and lab spaces in and around Cambridge. In a further boost to the area, we have now agreed water resource management plans with water companies, unlocking £7.9 billion of investment in water resources over the next five years, including the new Fens reservoir serving Cambridge and the south-east strategic reservoir near Oxford.

This Government have come in with a purpose: to bring growth, and with it opportunity, to the country. In just six months, we have taken the tough decisions to make that possible. We are taking on the responsibility of a Government who deliver real change for people—no longer the hollow promises of the Conservative Party, but change delivered under this Labour Government, working with business and local leaders to drive the growth that will lift up this country. Now we must go further and faster so that the next generation and the generation after will have the opportunities they deserve, to ensure that Britain is strong and successful once again in a fast-changing world and so that everybody in this country can have the chance to succeed. Today’s announcements will help make that a reality and show how our plan for change will build a better Britain. I commend the Statement to the House”.

15:56:00

My Lords, the Government have told us that growth is their number one mission. That is the promise they have repeated again and again, and, given the difficult circumstances the country faces, that is sensible. That being the case, I am afraid that the Government’s statements—both that of the Chief Secretary to the Treasury to Parliament and the speech given by the Chancellor—do not measure up to the scale of what is required. Above all, we need a recognition that the first steps of this Government—spreading pessimism; rewarding recalcitrant unions with large pay increases without them being tied to productivity increases; increasing stifling regulation, particularly on employment and renting; and increasing taxes—are precisely what should be avoided. Instead, we need an optimistic mindset—seizing the issue, and shaking up those who are not contributing and could do more—and a determination to make real progress, not a flabby wish list with no indication of how it will be achieved in practice. Last week, Lloyds Bank announced 1,600 job cuts after the CBI warned of a “significant fall” in business activity in the private sector, and the normally robust supermarkets announced large job losses. This is before we start to feel the effects of the Government’s most burdensome measures, which come into force in April. Businesses are fearful, and consumers are showing caution in case they lose their jobs or face price rises that affect their families. That does not mean to say the Government’s proposals are not welcome, up to a point, if they contribute to stability and growth as we hope. The expansion of Heathrow seems to be central to the Government’s plans to “unlock further growth”, but this will take well over a decade to come to fruition and seems to be highly contentious in the Cabinet. Will the present proposal outlive the Chancellor? It seems doubtful. The Chancellor highlighted the importance of the life sciences sector and referenced AstraZeneca. It must have been embarrassing for the Government to hear of its decision not to go ahead with the much-needed new vaccine manufacturing plant in Speke—a £450 billion investment. I know that the value for money rules are not straightforward, but could matters not have been managed to secure a better outcome? Having studied the discussion in the other place, I would be interested to know more about how the growth package will help Northern Ireland and how the Office for Investment will provide a line of sight to opportunities across the country. We agree with the Chancellor that we must focus on removing barriers to growth, and that that means cutting regulation. It also means reversing the way in which the public sector has started to crowd out the more productive private sector since its necessary expansion to a wartime footing during Covid, yet the Government seem determined to do the opposite. Can the Minister explain what assessment the Government have made of the impact of their extra regulations on economic growth? I am particularly concerned about energy. History shows that cheap energy is vital to growth. Our businesses in the UK already have to cope with the highest energy prices in the developed world, and that is set to get only worse. That is terrible news for industries such as steel, cement and ceramics. I am sure the Government will come to regret their decision not to support the Rosebank field and the punitive tax on oil and gas, alongside the delays in nuclear rollout and grid connections. I would not want to be the Energy Minister when the lights start to go out. This is not a debate about welfare, but it is clear that more needs to be done to get people off welfare and into work as part of the growth mission. Perhaps I could end on some positives. I am glad to see the plans for new investment in reservoirs. Successive Governments have been slow to meet that need. The Thames Tideway tunnel has been an early success in the water area, on time and largely on budget, in an impressive partnership with the private sector. The Government are right to press ahead with more housing and to lift some of the regulatory constraints, although they should be doing more in the London area, where the pressure of population is worst. I am particularly pleased to see the new focus on building around railway stations, a recommendation of the Meeting Housing Demand report by the Lords Built Environment Committee, which I chaired at the time. How do the Government propose to report progress in this area?

My Lords, I thank the Minister for sharing the Statement. In a Janus-like switch from the gloomiest person in Whitehall, the Chancellor was all smiles last week. To cap that change in mood, she gave her much-heralded growth speech. The most notable feature, as far as I was concerned, was what was not in the speech. We all know that committing the UK to a genuinely closer and more efficient trading relationship with the EU would be the quickest and most effective way of driving growth. That is why the Liberal Democrats have suggested a customs union as the most significant route to growth. If the Government do not believe us, they should commission the Office for Budget Responsibility to analyse the impact that a customs union with the EU would have on the economy and public finances, and then we could discuss the numbers. Instead, the Statement was, in essence, a list of projects—some of them interesting, some of them less so. I believe they were intended to communicate as much a mood as actual projects. To cap the message was an exclamation mark: the announcement on Heathrow. I suppose the point of that was to suggest that the Chancellor and the PM were such growth ultras that they would even allow Heathrow an extra runway. Even though that is patently the wrong thing to do, seemingly the Chancellor was using Heathrow as a badge of her serious intent on growth. However, as we discussed just now in the previous Question, it is so far into the distance that it is growth window dressing. The numbers that are used are highly selective, and the estimated timings hopelessly defy reality when it comes to projects of that scale. I think it was the former Chancellor George Osborne who coined the phrase “shovel-ready”, implying that some projects could start immediately. This is rarely the case, so it would be good to get an idea of the start time for some of the projects that the Chancellor listed. For example, when will we get the announcements on Gatwick and Luton, and how shovel-ready are they? When does the Minister expect those expansions to have any effect on our economy? Similarly, the suggestions that talks may be reopened regarding Doncaster Sheffield Airport are welcome, but is that idea backed by any central government investment or is it just talks with cash-strapped local authorities? With such a heavy emphasis on air travel in the Statement, it was inevitable that, by way of some sort of offset, the Chancellor would talk about sustainable aviation fuel. Can the Minister tell your Lordships’ House the Treasury’s estimate for what the percentage and volume of SAF used for air travel departing the UK will be by 2030? How effective will its implementation be? Finally, on the Oxford-Cambridge growth corridor, I can understand how some would see this as a great idea, but how will the idea be made flesh? The noble Lord, Lord Vallance, is to be the champion, but what is he championing? Your Lordships will be aware that the journey between the two university sites passes through many local authorities. Each, I am sure, will have their own idea and vision of what this corridor would or could be. Will the ministerial champion have any powers to compel a joined-up plan? Will he have any money to cajole authorities to bend to his will, or is this corridor a possible railway link for some time in the future, with a few road works? Meanwhile, the bird has flown. As we just heard, AstraZeneca, Britain’s biggest public company, has pulled out of its proposed £450 million investment in a new vaccines plant, reportedly after “protracted discussions” with the Government. It is now no longer pursuing its plan for Speke. The implication is that the Government not only reduced the money on the table but did so very slowly. I do not want to hear from the Minister that the previous Government had not funded the offer. We know that they did not fund the offer; they funded virtually none of it. What I want to know is what thinking in the Treasury stopped the present Government funding this project? While having a Chancellor announcing airport expansions might make the odd headline, what delivers an effective message to future investors in this country is an announcement of the start-up of a project such as that. As a result of this failure, can the Minister tell your Lordships’ House that he now recognises that it is the job of politicians much more positively to drive negotiations such as those? It is politicians who have to step in and remove administrative barriers, and it is up to them to make projects like this happen.

My Lords, I am grateful to the noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Fox, for their comments and questions. As noble Lords will know, and as the Chancellor reaffirmed in her speech last week, growth is the number one mission of this Government. Without growth, we cannot cut hospital waiting lists, put more police on the streets or improve the lives of working people. The noble Baroness, Lady Neville-Rolfe, spoke about our growth mission. As she knows, there was no bigger failure of the previous Government than their failure on growth. With their austerity, their disastrous Brexit deal and their Liz Truss mini-Budget, the combined effect was devastating. Had the economy grown by the average of other OECD countries over the past 14 years, it would be more than £150 billion larger today. We did not hear much humility for that record from the noble Baroness, and there has still been no apology for it to the British people. As the Chancellor said last week, low growth is not our destiny, but growth will not come without a fight. While this country has incredible potential, the structural problems in our economy run deep; the low growth of the past 14 years cannot be turned around overnight. The strategy that this Government have consistently set out is to grow the supply side of our economy, recognising that, first and foremost, it is businesses, investors and entrepreneurs that drive economic growth, alongside a Government who systematically remove the barriers that they face. Our strategy is based on three elements: stability, which is the basic condition for secure growth; reform, which makes it easier for businesses to trade, raise finance and build; and investment, the lifeblood of economic growth. On stability, the noble Baroness, Lady Neville-Rolfe, spoke about the Budget. It was this Government’s duty in October last year to fix the foundations of the economy and repair the £22 billion black hole in the public finances that we inherited. We have always been clear that there are costs to responsibility—the increase in employers’ national insurance contributions will have consequences for businesses and beyond—but the costs of irresponsibility would have been far greater. I think the noble Baroness knows that, which is why we have still heard no alternative put forward by the Conservative Party: no alternative for dealing with the challenges we face, no alternative for restoring economic stability and, therefore, no plan for driving economic growth. The noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Fox, both asked about AstraZeneca. Government funding must demonstrate value for the taxpayer; a change in the investment proposition by AstraZeneca led to a reduced government grant offer being put forward. We remain closely engaged, though, with AstraZeneca on work to develop our new industrial strategy and our thriving life sciences sector, which is worth £108 billion to the economy and provides more than 300,000 highly skilled jobs across the country. The noble Baroness, Lady Neville-Rolfe, asked about job figures. The OBR forecasts that, over the course of this Parliament, employment will rise and unemployment will fall. Our announcement last week about the third runway at Heathrow could create 100,000 new jobs. The investment zone that we announced in Wrexham and Flintshire with JCB and Airbus could create 6,000 new jobs and the investment by Prologis at East Midlands Airport 2,000 jobs. There are plenty of reasons to be optimistic about the ability of our economy to grow and to create jobs. The noble Baroness also spoke about business sentiment. In the Budget, we capped the rate of corporation tax and extended capital allowances for the duration of this Parliament. I hope that she will have seen the reaction of business leaders to the Chancellor’s speech last week. A business survey, which came out straight after the speech, suggested that two-thirds of businesses now feel more confident about our country’s growth prospects because of what the Chancellor announced. Rain Newton-Smith of the CBI said that businesses will welcome the Chancellor “grasping decisions that have sat on the desk of government for too long”, showing that the Government are serious about growth and prepared to take the tough decisions necessary. Shevaun Haviland of the BCC said that “these proposals can light the blue touchpaper to fire up the UK economy”, and Tina McKenzie of the FSB said: “The positive energy in today’s speech … has our backing”. The noble Baroness spoke about an optimistic mindset; I hope that she will respond by showing some of that same positive energy when it comes to the country’s and our economy’s prospects. The second element of our strategy is reform. The noble Baroness, Lady Neville-Rolfe, spoke about welfare reform. We published our Get Britain Working White Paper at the time of the Budget to begin to tackle the unacceptable levels of inactivity that we inherited. We will publish a further welfare reform Green Paper this spring to begin to correct some of the incentives in the system. The noble Lord, Lord Fox, asked about reform of our relationship with the EU. I know that he and I agree very much in our analysis of Brexit, and on the fact that the previous Government’s disastrous Brexit deal permanently reduced GDP by 4%, so we have to reset our relationship with the EU—our nearest and largest trading partner—to drive growth and support business. He will have seen that the Prime Minister is in Brussels today to meet European Union leaders for the first time since Brexit. The noble Baroness, Lady Neville-Rolfe, spoke about regulatory reform. We know that business has been held back by complex and unproductive regulation, which is a drag on investment and innovation. We have already issued new growth-focused remits for our financial services regulators and announced a new interim chair of the CMA. We will publish a final action plan in March to make regulation work better for our economy. On her question about a specific assessment, as she will know, the OBR sets out the economic consequences of all our policies. The third pillar of our growth strategy is investment. As noble Lords will know, at the international investment summit, we saw £63 billion of additional private sector investment committed to our economy. In the Budget, we announced an additional £100 billion of public sector investment, which the IMF has been clear is vital to unlocking high levels of growth. The noble Baroness, Lady Neville-Rolfe, asked about energy prices. I completely agree with her that that is one of the biggest contributions that we could make to our growth prospects. It is why the transition to clean energy is so important in driving those energy prices down. I am grateful for her support on our housing policy. We are seeing some encouraging signs in the British economy. The IMF has upgraded our growth prospects for 2025—the only G7 country outside the US to see this happen—which gives us the fastest growth of any major European economy this year. A global survey of CEOs by PwC has shown that Britain is now the second-most attractive country in the world for businesses looking to invest, the first time the UK has been in that position for 28 years. This is all welcome news, but we are, of course, not satisfied with the position we are in. We know that we need to go further and faster, which is why the Chancellor made the announcements that she did last week. Whether it is the third runway at Heathrow, the Oxford-Cambridge growth corridor—creating Europe’s Silicon Valley here in the UK—the new stadium at Old Trafford, investment in Teesside in sustainable aviation fuel, or reopening the airport in Doncaster, all of these things are the next steps of our ambitious plan to grow our economy and make working people better off. The noble Lord, Lord Fox, asked specifically about the Oxford-Cambridge growth corridor, and the role of my noble friend Lord Vallance. My noble friend absolutely is there to join up all the different bodies that exist. The noble Lord, Lord Fox, asked about the specific powers that my noble friend has. Obviously, the Government have many specific powers in this respect and it is my noble friend’s job to bring what is needed to the attention of the Deputy Prime Minister and the Chancellor so that they can use their considerable powers to do what is necessary to achieve the objectives that we have set out. The noble Lord, Lord Fox, asked a specific question about Heathrow and sustainable aviation fuel. I will have to write to him on that point if he does not mind. I disagree with him overall in respect of his position on Heathrow, as I think he would expect. I see it as absolutely central to our growth prospects. The noble Baroness, Lady Neville-Rolfe, and the noble Lord, Lord Fox, asked about the timescale of the third runway expansion. We have asked Heathrow to come forward with plans by the summer. We then want to grant a development consent order in this Parliament. We will have spades in the ground at Heathrow in this Parliament, not years and decades into the future. The noble Baroness, Lady Neville-Rolfe, also asked about Gatwick and Luton expansion. Decisions on those are both due to be made very shortly, but I cannot say more at this point about a specific timescale. She asked a question about Northern Ireland, about which I will also write to her if she does not mind. We are making progress towards our number one mission of economic growth but, of course, we are not satisfied. We must go further and faster, so that we can put Britain on a better path and deliver for the British people.

16:16:00

My Lords, does the noble Lord not agree that, because we had a debate on growth very recently, and because the question has been raised again, what we really need is an expert committee—perhaps your Lordships’ Economic Affairs Committee—to inquire into why we have not had growth for the last 15 years and why all the policies that were tried by the last Government failed completely? If we learn from our experience, it might be more helpful than having frequent debates in your Lordships’ House.

I am grateful to the noble Lord for his question. Obviously, it is not for me to suggest what inquiries the Economic Affairs Committee should conduct. If it were to conduct such an inquiry, I would certainly read its report with interest, and I think we would see that the record of the previous Government on the economy was nothing short of catastrophic—whether it was their austerity, which took demand out of the economy at exactly the wrong moment; their disastrous Brexit deal, which has reduced GDP by some 4%; or their disastrous Liz Truss mini-Budget. All of these things have done long-term deep-seated damage to the economy, which will take time to turn around, but I believe we are starting to turn that around and we will continue to do so.

My Lords, given the passenger forecast for a third runway of a doubling of passenger numbers at Heathrow, I was told that domestic passengers would come from all the regional airports because the airlines would cease to fly direct international flights from regional airports, including both Birmingham and Manchester, and instead feed to Heathrow. I was told that the international passengers would be almost exclusively transfer passengers—one of the reasons for arguing that not a lot of additional transport is needed into London. I understand why all of that works to create profits for the airport, but I find it very hard to see how that creates any growth. Can the Minister please explain how, particularly, that damage to the regions will help with regional growth and, frankly, how transfer passengers contribute significantly to overall growth?

I am grateful to the noble Baroness for her question. This is, I think, probably one of the few issues that we disagree on. Obviously, she is asking me to comment on what she was told several years ago, and I cannot necessarily comment on what she was told then. She is describing, I think, the concept of a hub airport, which is why Heathrow is such a specific proposition, and will lead to significant amounts of growth in our economy, not least because of freight. The amount of freight that Heathrow conducts, the increase in trade, and the new emerging markets that an expanded Heathrow will connect us to, will directly lead to increases in growth in this country. That is an incredibly valuable thing. The noble Baroness spoke about regional growth and regional airports. I would simply point her to the enthusiastic response from regional airports. They have come out very strongly in support of an expanded Heathrow, because they know it will lead to expansion for them and growth and jobs in their areas. We know that, in terms of the economic benefits of the expansion of Heathrow, 60% of those benefits will be outside London and the south-east. So I genuinely disagree with the noble Baroness when she says that it is negative for the regions; I think this is a very positive point for regional growth.

My Lords, I remind noble Lords of my registered interests relating to Cambridge and Oxford. I welcome what the Government are saying in their focus on the Oxford to Cambridge growth corridor, and the appointment of the noble Lord, Lord Vallance. But the establishment of an Oxford growth commission needs to run in parallel with the existing work of the Cambridge Growth Company. Can the Minister tell us more about how the Oxford growth company can catch up in terms of the existing leadership team, budget and local political relationships that the Cambridge Growth Company has now established?

I am very grateful to the noble Lord. As he stood up, I was reminded that he contacted me last week on this point and I owe him a response. I apologise to him for not having got back to him quickly enough. What he said dovetails perfectly with what the Chancellor said in her speech. Clearly, the Cambridge Growth Company has been very successful under the leadership of Peter Freeman. We have now set up a growth commission for Oxford to review the barriers to growth that are holding the city back from reaching its full potential. At the moment, that is a specific team within MHCLG, but it has the potential to grow into something similar to what is happening in Cambridge. I do not think we would see any problem in that happening and developing in that way. What the noble Lord, Lord Vallance, is doing is complementary to that in terms of joining it up. The whole point of the growth corridor is that we do not see it as two separate cities doing their own thing but instead join them up and see the benefits. People talk about it being Europe’s equivalent of Silicon Valley. All the business reaction post the announcement has been incredibly positive in terms of what it can do and the benefits that it can achieve in attracting businesses into the area. The big problem businesses have is a lack of affordable housing and fast transport to move people about within that region. We are looking to address both of those things. I think we will be very supportive of what the noble Lord says about Oxford.

My Lords, I welcome the Chancellor’s speech and the positive statement of intent that it conveys. I put it to my noble friend that one key ingredient is investment in science and technology. I draw the Minister’s attention to one example. We know that we have strengths in the life sciences. A recent report by your Lordships’ Science and Technology Committee, of which I am a member, on engineering biology, indicated an enormous new range of potential growth opportunities. When the Minister and his noble friend Lord Vallance come to consider what to do, I hope that special attention will be paid to reports of that kind, because that is the future.

I 100% agree with everything that my noble friend said. Innovation is one of the seven pillars of the growth strategy. R&D and innovation are absolutely vital when it comes to growth. He will know that life sciences are one of the eight sectors we have selected as part of the industrial strategy, because of the huge competitive advantage we potentially hold in that area. I held a round table last week with representatives of the life sciences sector. They have some incredibly exciting proposals to bring forward. They will be captured when it comes to the life sciences sector plan that we will bring forward as part of the industrial strategy before the spring.

My Lords, the history of direct support for industrial investment is not a happy one, with much money wasted and few jobs created. Can the Financial Secretary confirm that the Treasury will continue to take a rigorous approach to assessing support for inward investment, based on the best value for money principles?

Yes, I can, and I am happy to say that I cut my teeth in the Treasury when the noble Lord was Permanent Secretary to the Treasury, and I learnt a lot from him. I very much agree with his view of the Treasury’s role within Whitehall.

My Lords, I remind the House of my interests as an adviser to AtkinsRéalis. I was also the Secretary of State who introduced the last Government’s Airports National Policy Statement. The Minister has just said that he expects spades in the ground by the end of this Parliament. We are probably 12 to 18 months away from the new planning legislation so, for now, the Government have to go through an ANPS process. There are then likely to be judicial reviews, albeit curtailed as the Government intend, and then a DCO process. I asked the Transport Minister this afternoon whether he expected to be able to short-cut that process; he said he did not yet know and would not know until he saw detailed proposals from Heathrow in the summer. How can the Minister, and indeed the Chancellor, say they will get spades in the ground by the end of this Parliament? Those who have been through it before know that, unless the process changes, there is no possibility of that happening.

I was lucky enough to be in the House for the noble Lord’s question to my noble friend the Transport Minister, and I obviously agree with what my noble friend said to him. In terms of timescales, the Government have asked Heathrow to come forward with its proposal by the summer of this year, and we have said that we want to confirm planning consent by 2028. That is obviously an accelerated process, but we are determined to do everything it takes to accelerate it. I am confident that there will be spades in the ground at Heathrow within this Parliament. The third runway is part of a wider programme of expansion of Heathrow, including various terminal expansions, so without question there will be spades in the ground at Heathrow. However, we also want to see spades in the ground for the runway within this Parliament.

My Lords, as is predictable, the Minister trotted out the usual thing about the black hole of £22 billion. On the other hand, the Government are looking at departmental budgets, which by most people’s reckoning are completely bloated, and looking for savings. What are the chances of those savings well exceeding £22 billion?

I am very grateful to the noble Lord for raising the £22 billion—he knows it is one of my favourite topics, and I am always very happy to talk about it. It was obviously one of the most shocking features of our inheritance from the previous Government that they had £22 billion of commitments that they did not fund and sought to conceal from various government bodies. That is deeply shocking and should not be taken lightly. The noble Lord has said to me previously that the Government’s budgets are bloated; most government departments would dispute that, after decades of austerity under the party opposite. We know that public services are stretched extremely thin. I have asked him before for his examples of that bloating, and what savings he would propose. I would be more than happy to discuss any potential savings that he has in mind, but I think they are unlikely to reach the level that he describes.

My Lords, can the Minister reassure both me and the House that the Government and the Treasury understand that growth in the economy is about investing not just in capital projects but in people? We have seen an underinvestment in skills for the last 15 years. Are we going to see another few years when the skills element of growth is not given a priority? We are going to be debating it later in the week; I would like to know whether it features highly in the Treasury’s considerations.

It does absolutely, and I agree with everything the noble Lord said. Investment in people is one of the key pillars of the Government’s growth strategy, and skills falls under that, so it is a top priority. I talked about how the Chancellor’s strategy is to improve the supply side of the economy and, obviously, skills are a key feature of that and of our ability to grow the economy. When it comes to all the various infrastructure projects we are talking about, we know that we are going to need the skilled labour to achieve them. I am happy to reassure him that it is central to our thinking.

My Lords, the Statement says a lot about spades in the ground; it does not say very much about the UK’s woeful productivity challenge. Is the Minister aware that Gareth Davies, the head of the NAO, has said that our public services cost too much and simply cannot deliver? Beyond the skills shortages, what is the Treasury doing to address the level of public spending that we have reached, which has gone from 33% to 36% in the last five years?

I am grateful to the noble Baroness for her question. I completely agree with her, which is why the Government have set a 2% productivity target for all government departments as part of the spending review. We have been very clear that, clearly, in a constrained fiscal environment, productivity and reform will be central to delivering better public services. In an environment where the noble Baroness opposite and I do not agree on very much, this is definitely an area where we agree, in terms of the importance of driving productivity not just in the private sector but in the public sector too. Please let me reassure the noble Baroness that this is absolutely top of mind as we consider the spending review decisions that we have to take.

My Lords, the key lesson from the last 14 years is that sustained economic growth cannot be secured without improving the purchasing power of the bottom 50% of the population. The two-child benefit cap, the winter fuel payment cut for pensioners below the poverty line and a freeze on personal allowances are just some of the impediments. Can the Minister say when these policies will be reversed and when steps will be taken to secure equitable distribution of income and wealth because, without money, people simply cannot buy products and services?

Although I disagree with my noble friend on some specifics that he raises, I think we all agree that it is right that we have a goal to raise living standards in every part of the UK by the end of this Parliament, which is why that is central to our Plan for Change targets when it comes to the economy. We have already provided stability to the economy, enabling the Bank of England to make two interest rate cuts; we have protected working people by keeping our promises on tax at the Budget; we have frozen fuel duty; and we have increased the minimum wage, and we are now seeing wages starting to rise. All those things are beneficial in terms of living standards. My noble friend will appreciate, though, that we have to grow the economy before we can start distributing the benefits of that growth.

My Lords, to return to the Minister’s remarks about innovation, how would he justify to the innovators and risk-takers who are starting up businesses and trying to scale up in the UK the day-one employment rights in the Employment Rights Bill? I refer him to another Select Committee report, published today, about scaling up AI in creative tech businesses and the barriers that they face. These, too, are priority areas for growth that the Government have highlighted.

I am grateful to the noble Baroness for her question. I know that this is an area in which she is particularly expert—far more expert, I am sure, than I am. I will say a couple of things. First, I completely agree: it is often said to me that the UK is a very good place to start a business and a less good place to scale up a business. I think that has to be central to our thinking when it comes to economic growth and growing those small businesses. When it comes to entrepreneurs and those who we want to take greater risks in our economy, one of the most important things we can do is ensure economic stability, because the more stable the economy is, the more willing people are to take the risks that we want them to take. She asks about employment rights. All the evidence now suggests that, the more secure a workforce is, the more productive it is. We were talking about productivity before and, on secure rights for workers, workers who are more economically secure are going to be more productive workers in the economy.

My Lords, the Minister acknowledged the importance of resetting relations with the EU. I understand the importance of sticking to the golden rules his party has laid down about not rejoining the single market or the EU customs union, but does he acknowledge that it is really important to improve those trading relations as quickly as possible? Therefore, will the Government not just discuss but pursue wholeheartedly joining the pan-Euro-Mediterranean convention?

I agree with the noble Baroness’s analysis, and we are absolutely dedicated to resetting our relationship with the EU, which is clearly our biggest trading partner. Following their meeting in Brussels in October, the Prime Minister and the President of the Commission agreed to strengthen the relationship between the UK and the EU, and last month at a Eurogroup meeting of EU Finance Ministers, the first to be attended by a UK Chancellor since Brexit, the Chancellor set out the need for a closer UK-EU economic relationship based on trust, mutual respect and pragmatism. The Chancellor has also said that she is absolutely willing to consider the customs partnership that the noble Baroness refers to. The noble Baroness is also right about speed: we recognise that delivering new agreements will take time, but we are ambitious, we have clear priorities and we want to move forward at pace.

My Lords, I am glad the Minister found something else to agree with my noble friend Lady Neville-Rolfe on: the importance of affordable energy for growth. Can the Minister therefore clarify whether the Government endorse the more than doubling of the carbon price in the next five years, which is needed to achieve and deliver another of the Government’s missions—that of clean power by 2030—as set out in the National Energy System Operator report?

I am grateful to the noble Baroness for that question. I will leave it to my right honourable friend the Secretary of State for DESNZ to bring forward the Government’s response in that area.

My Lords, Martin Wolf, the chief economics commentator for the Financial Times, this morning noted how trend growth across a wide range of global North countries continues to be at historic lows, reflecting real-world conditions such as increasing dependency ratios, and geopolitical and climate shocks. Mr Wolf said that “the government could focus on redistribution instead” of growth. Does the Minister agree with Mr Wolf that something such as a wealth tax could be a way to immediately address child poverty, ill health among working-age people, the housing crisis and the low spending power among the lowest 50% of the population by income that the noble Lord, Lord Sikka, alluded to?

I am grateful to the noble Baroness for her question, but I do not understand the contention at the heart of it. She talks about redistribution, but what is the growth she wants to redistribute if she does not believe in growth? She talks about a wealth tax, but what wealth is it that she wants to tax? She does not believe wealth should be created.