Economic Growth

Question

15:18:00

Asked by

To ask His Majesty’s Government what progress they have made on their economic growth mission, as set out in their Plan for Change (CP 1210).

My Lords, I beg leave to ask the Question standing in my name on the Order Paper, and I apologise to the House because I have only half a voice today.

My Lords, the Government’s plan for change set out three metrics for the economic growth mission: first, that we will aim for the highest growth in the G7—we are currently the fastest-growing economy in the G7; secondly, higher living standards in every part of the country—living standards are now forecast to grow more than four times faster than in the previous Parliament; and thirdly, rising GDP per capita. Whereas this fell in the previous Parliament, GDP per capita is now forecast to rise by 5.6% in this Parliament.

I thank the Minister for his reply. On GDP growth, I doubt the 0.7% increase in the first quarter will be replicated later in the year. There is an old expression: one swallow does not make a summer. I suspect that that will be the case. Moody’s rating agency recently said that the Chancellor’s £25 billion tax raid on employers last October has already dented confidence in the British economy and it will weigh on growth very heavily in 2025. In fact, I believe that these policies which came into effect—

Question!

I will get to my question in a second. I believe the policies that came into effect in April will affect the British economy like an earthquake. My question is this. I live in south Cornwall, in a small-harbour fishing village. We no longer have any fishing in that village. There is fishing in Mevagissey, Looe and Newlyn. Will the Minister explain to the House how he expects the fishing industry to grow over the next 13 years?

I am grateful to the noble Lord for eventually getting to his question, but I am sorry that he chose to talk down the economy in the way that he did. I remind him that, when this Government took office, the UK was ranked seventh out of seven G7 economies projected for 2025. We currently have the fastest-growing economy in the G7. He talked about a report; let me give him another report. When the IMF last week upgraded the UK’s growth forecasts, it said that the Government’s fiscal strategy was striking a good balance between supporting growth and safeguarding fiscal sustainability, that the growth mission focuses on the right areas to lift productivity, and that our spending plans are credible and growth-friendly—spending plans that his party opposes. His party has opposed every single measure that we have taken to grow the economy.

My Lords, is the Minister aware that earlier this afternoon I had the great pleasure of being in the Peers’ Gallery to hear a brilliant speech by the Chancellor of the Exchequer, which was followed by an awful diatribe from Mr Stride, or “Baby Steps” as he is now called? Does the Minister agree that he was not just talking down the economy like the noble Lord, Lord Booth; he was talking down Britain?

I very much agree with my noble friend on every word that he said. The spending review that we saw this afternoon from the Chancellor set out capital spending that increases growth by 1.4% in the long term. Every single penny of that capital spending has been opposed by the party opposite. The spending review set out a housing settlement—the biggest investment in a generation. It set out record levels of R&D spending, the biggest ever transport settlement, and a record commitment to skills investment. Every single penny of that spending was opposed by the party opposite. It can talk down Britain, but it opposes every single measure this Government are taking to increase growth in the economy.

My Lords, perhaps I might offer some Cross-Bench objectivity. Here it comes. The 0.7% growth rate in Q1 was encouraging, but the growth rate over the last three quarters, which covers this Government’s tenure, is just 0.8%. That is less than in both the eurozone and the US. Does the Minister agree that it is growth per capita that matters—not the forecast but the track record here and now? And how concerned is he that our economic growth rate continues to lag our population growth?

I am grateful to the noble Lord for his question. He did indeed show his characteristic objectivity. I will simply say that, where GDP per capita fell in the last Parliament, GDP per capita is forecast to rise by 5.6% over the course of this Parliament.

My Lords, I hope the Minister will agree that to achieve growth in the UK we need a liquid and effective investor market. Despite London Tech Week, Wise plans now to shift its listing from London to New York and on Monday Spectris, Alphawave and Oxford Ionics, all key creative tech companies, announced that they would be taken over by US investors. In 2024, UK equity funds suffered £9.6 billion in outflows when most other equity funds had huge inflows—a pattern that dates from Brexit. I understand that the Government plan to press the pension sector to invest in UK companies, but what other steps are they taking to restore those key investment flows that used to come from Europe into the UK and to counter the US’s use of tariffs to incentivise the takeover of British tech?

I am grateful to the noble Baroness for her question. She mentions the outflows. The outflows in 2024 were less than in any previous year over the last 14 years so, although they are not what we want to see, they are perhaps not as doom-laden as she might want to make out. The Chancellor set out extensive capital market reforms in her last Mansion House speech. She has another Mansion House speech due on 1 July, at which point we will also publish the financial services growth and competitiveness strategy. I hope that will help to answer some of the questions that the noble Baroness asks.

My Lords, the Government’s tax hikes last year are believed—by the Bank of England, no less—to have reversed the frankly anaemic growth we have seen in the last couple of months, and we shall see what happens in the coming months. Since growth is the Government’s stated economic priority, which I agree with, it is unfortunate that today’s Statement by the Chancellor does so little to improve the position—for example, by boosting productivity across the economy. How do the Government plan to improve the situation, particularly in the coming months?

My Lords, the noble Baroness says that growth was anaemic under this Government. As I said before, the UK was ranked seventh out of seven for projected 2025 growth when this Government took power but is now the fastest-growing economy in the G7. We all know what the Tory record on growth was; had the economy grown over their 14 years at the average of other OECD economies, it would have been £150 billion larger. The noble Baroness asked what was in the spending review to boost growth. I have already listed some of the measures: record investments in housing, R&D, transport and skills, more money to reduce inactivity, more money for childcare, access to finance and a record investment in nuclear. Every single penny of that her party opposes. She says she supports growth, but she does not support a single one of the measures to get it.

My Lords, do the Government not recognise that the most obvious thing they could do to improve our growth record would be to improve our trading relationship with Europe? What do the Government propose to do in that regard?

I agree with the noble Lord’s point, which is exactly why we have embarked on the EU reset and negotiated a new strategic partnership with the EU that is in the national interest. I completely agree that the EU is our closest partner and biggest market. In 2024, almost half the UK’s total trade was with the EU and around 94,500 UK businesses exported goods to the EU, which is why the EU reset is so important. We negotiated a defence pact with the European Union, and we negotiated an SPS agreement with it to make exports easier. We have moved closer to agreeing closer co-operation with the EU on energy and the ETS, and we have agreed that we will work towards establishing a balanced youth experience scheme with the EU. All these things will move us closer to our biggest and most important market.

My Lords, is it not the case that we inherited a bankrupt economy and low growth, and that we had no prospects in the UK until we had a Labour Government? Is it not going to take more than a couple of months to turn around the mess that the last Government left?

I completely agree with my noble friend.

On a constructive note, will the Minister give an undertaking to take an early opportunity to read the report that will be produced on Friday by the Financial Services Regulation Committee of this House, which sets out a clear agenda for how the regulators can help to establish growth in financial services, which should be a matter of consensus across the board? It certainly is a unanimous report by this House of the kind of quality that this House is famed for but which does not always result in immediate action by Governments.

I am very grateful to the noble Lord for his question. I absolutely will read the report as soon as it is published. I was lucky enough to serve on the Economic Affairs Committee when the noble Lord was its chair and I know he is now the chair of the committee producing this report, so I know it will be a report of incredible quality and I look forward to reading it. I know the Chancellor shares many of the committee’s objectives when it comes to financial services, and I hope the noble Lord will see much of that agenda laid out in her next Mansion House speech. I look forward to debating the report with him in this House in due course.