Economic and Taxation Policies: Jobs, Growth and Prosperity

Lord Elliott of Mickle Fell Excerpts

Thursday 13th November 2025 Lords Chamber

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[Lord Elliott of Mickle Fell]

That this House takes note of the impact of the Government’s economic and taxation policies on jobs, growth and prosperity.

[Lord Elliott of Mickle Fell (Con)]

My Lords, it is a privilege to lead today’s debate on the impact of the Government’s economic and taxation policies on jobs, growth and prosperity.

I begin by noting an absent friend. I am saddened that the coming Budget will be the first in 35 years that will take place without the thoughtful and perceptive comments of the late Lord Desai. Like the Minister, I studied at the London School of Economics in the 1990s and was taught by Lord Desai. I am sure he would have spoken in this debate, and I know the whole House will greatly miss his contribution.

At the heart of today’s debate is the quest for economic growth. Today’s growth figures are not encouraging, suggesting that the economy shrank by 0.1% in September and GDP per capita is flatlining—or possibly falling, since the figures are calculated using population estimates from three years ago, in 2022. In 2000, when the Minister was working as a special adviser in the Treasury and I was a humble researcher working for the noble Lord, Lord Kirkhope of Harrogate, economic growth was 3%, taxation was 33% of GDP, public spending was in surplus and we were paying down the national debt. Earlier this year, I asked Sir Tony Blair what he ascribed that economic miracle to. He was clear that it was down to the economic foundations laid down in the 1980s and his decision not to tinker with the fiscal plans laid out by the noble Lord, Lord Clarke of Nottingham.

The story since 2007 has not been so rosy. Our average real GDP growth has been 1.3% per annum, with average population growth of 0.7% a year. That equates to a measly rise in GDP per capita each year of just 0.6%, meaning that living standards have stagnated for many, with millions of personal recessions where people have become worse off year by year. In contrast, over the same period, the average American has gone from being 10% richer than the average Brit in 2007 to now being 40% richer.

Is there hope around the corner? I fear there is not. Recent world economic league table projections of GDP per capita by the Centre for Economics and Business Research paint a stark picture of where the UK is headed. In 2030 we will be poorer per capita than Lithuania, in 2034 we will be worse off than Poland, and in 2043 we will be poorer than Turkey. That is the path we are on, which is why today’s debate is so important.

Fundamentally, we agree on all sides of the House on the need for economic growth and boosting living standards and prosperity. Kick-starting economic growth is one of this Government’s five missions. The Prime Minister put wealth creation at the heart of his manifesto, and the Chancellor says that economic growth is the Government’s number one mission. However, it is clear that the Government lack a comprehensive plan. I agreed with what a senior Labour figure said in a podcast recently when they suggested that the Chancellor needs to use the Budget to present

“a growth plan for the long term, turning public services round and making them better … It’s got to be a plan which sticks, which lasts, which doesn’t unravel with the markets or in Parliament or with the public in 48 hours”.

Those are the words of a previous colleague of the Minister, Labour’s former shadow Chancellor, Ed Balls, speaking on his “Political Currency” podcast on 30 October. I agree with him, and I hope the Government address his challenge in the forthcoming Budget.

There is much I could say about a long-term plan for economic growth. Noble Lords interested in reading more about this might like to take a look at a new book I have written called Prosperity Through Growth, and I have placed a copy in the Library. The economic brains behind the book were my co-authors, Dr Arthur B Laffer and Doug McWilliams, and the geopolitical content came from my noble friend Lord Hintze, who sadly has a long-standing speaking engagement in Australia so has asked me to pass on his apologies.

For this debate, I will limit myself to three key elements of a growth plan where I believe there is mainstream agreement. These are abundant energy, abundant employment and abundant enterprise. I will take these in turn. Abundant energy is a prerequisite of economic growth, so we need the cost of energy to come down. The World Bank summarises the literature by saying:

“Affordable, accessible energy is at the heart of development, driving job creation, growth, and shared prosperity”.


Our energy is immensely expensive compared to our competitors. Wholesale energy costs in the UK are double costs in most European countries, and almost half of each bill is down to policy costs. The Government know that mainstream opinion is shifting on this issue. The Prime Minister acknowledged at the COP 30 summit that “consensus is gone” on climate change policy. Sir Tony Blair told us for Prosperity Through Growth that net zero should be delayed, as other countries are not following our lead. Even previous major advocates from outside politics seem to be responding to changed circumstances. Bill Gates remarked in October that for the “vast majority” of people, climate change

“will not be the only or even the biggest threat to their lives and welfare. The biggest problems are poverty and disease, just as they always have been”.

Other senior figures in the Labour movement have also expressed scepticism about pursuing net zero by 2050. The noble Lord, Lord Glasman, will be giving a lecture the week after next on “Why it’s good to be warm: energy as a common good”. Sharon Graham, general secretary of Unite, has suggested that the Energy Secretary has been “completely irresponsible” in his approach to energy security and jobs in the oil and gas sector. I agree with her, and believe the Prime Minister also agrees, as he tried to move Ed Miliband in September’s reshuffle. I wish him better luck next time, because it is essential for economic growth that we focus on lower energy bills rather than net zero alone.

A second essential element for accelerated growth is abundant employment. The importance of jobs and work is something I speak about regularly in your Lordships’ House. I continue to commend the Government for their ambition to bring the employment rate up from 75% to 80%. Since they have been elected, they have succeeded in increasing the employment rate by 0.3%, putting them on track to hit their target in 2048. At the same time, unemployment is up from 4.2% to 5%. The number of universal credit claimants who have no requirement to work is up from 2.9 million in October 2024 to 4 million in October 2025, a 39% rise in the space of a year. The number of job vacancies is down from 870,000 to 723,000. The number of new jobs which need to be created by the private sector to achieve 80% employment is now 1.4 million rather than 1.2 million. Crucially, the Employment Rights Bill reduces job creation, which is why the Treasury is rightly trying to water it down.

A Tony Blair Institute report last week said that day-one rights risk

“eroding business confidence to hire”.

The Resolution Foundation argues that day-one rights offer

“little obvious gain to workers”

and have

“the potential to inhibit hiring”.

Even the Prime Minister’s chief economic adviser, the noble Baroness, Lady Shafik, expressed significant concerns about the Bill, saying,

“if you’ve got a lot of people on benefits who you are hoping to get into the labour market … then you need to give employers some flexibility to take risks on those people”.

It is time to make employing people more flexible and affordable for businesses and bring about abundant employment. This is not solely about economic growth, it is about giving people their first step on the employment ladder; no jobs, no ladders of opportunity.

The final factor we need for economic growth is abundant enterprise, and taxation is a crucial driver of that. In 1998, Gordon Brown introduced taper relief for capital gains tax. This scheme incentivised long-term investment and had no lifetime limit on holding assets, with a long-term CGT rate of just 10%. Today the picture is very different. From next April, the rate will be 18% up to £1 million and 24% beyond that. We need to acknowledge the impact that these and other changes to incentives have on our economy. As we see the rise of remote working, the mobility of people must be a key consideration when making any tax changes. This is already happening, with 16,500 high net worth individuals, many of them entrepreneurs and investors, expected to leave the UK in this year alone. It includes former Members of your Lordships’ House: the Minister’s former colleague in Downing Street, Lord Carter of Barnes, recently left the UK to go to Dubai.

On another podcast recently, a senior Labour figure suggested that the Chancellor undid the damage done by the changes to the non-dom rules and moved to an Italian-style system for taxing wealthy individuals.

“What they should think about doing is a kind of flat tax deal, because that’s what the Italians have done. They’re basically saying, ‘Look, you come here, you pay €300,000 a year and you keep the rest of it because we want you to be here’. I think Labour could get away with that, saying half a million and that’s all you pay”.


I do not often agree with what I hear on “The Rest is Politics”, but on this issue I think Alastair Campbell is spot on. We need to change the incentives to attract more entrepreneurs to the UK rather than drive them away. We need to ensure that young entrepreneurs set up their businesses here rather than go overseas.

Many other people within the Labour Party also agree with this sentiment. Sir Tony Blair acknowledged when speaking to us for our book that taxes are immensely high by historic standards and even suggested that a 40% top rate of income tax was probably too high in today’s highly mobile world. The noble Lord, Lord Mendelsohn, expressed it perfectly in a recent report for Onward:

“A small group of wealthy individuals pay a significant proportion of the tax we rely upon. I do not agree with some colleagues that we should wave goodbye to the wealthy; we should be doing whatever we can to welcome them back, and new investors, entrepreneurs, and high spenders to our shores”.


He is right. If we are to have abundant enterprise, a key element of any serious growth plan, the Treasury needs to start attracting people back to the UK.

Last week we heard the Chancellor, Rachel Reeves, say that she is willing to take “tough but necessary” choices and do the right thing. This is welcome. But raising income tax, chasing limited liability partnerships away from the UK and letting the welfare bill continue to escalate are not the right tough choices. Instead, the Chancellor should look at the policy options I have highlighted today, which are supported by mainstream opinion, including respected voices in the Labour Party.

In his closing statement, will the Minister respond to Ed Balls and outline what the Government’s long-term economic plan is? On energy, does the Minister agree with Bill Gates, Unite and the noble Lord, Lord Glasman, that we should focus more on jobs and poverty and less on net zero by 2050? On employment, does the Minister agree with the Resolution Foundation, the Tony Blair Institute and the noble Baroness, Lady Shafik, that the Employment Rights Bill will make it less likely that businesses take on riskier hires? On enterprise, does the Minister agree with Alastair Campbell, Sir Tony Blair and the noble Lord, Lord Mendelsohn—and Lord Carter of Barnes, for that matter—that that we need to do more to attract entrepreneurs and investors to come to the UK, rather than chase them away?

This month’s Budget will have a critical impact on our economic standing in 20 years’ time. Will we maintain our position, will we perhaps even improve it, or will we fall behind Turkey? Britain’s decline is not inevitable. The path to prosperity is open to us. It is time to take it. It is time to make Britain rich again. I beg to move.

--- Later in debate ---

[Lord Elliott of Mickle Fell (Con)]

My Lords, I will be brief. I thank the Library for its excellent briefing note, and all noble Lords for their thoughtful contributions. It has been a superb and stimulating debate; we should consider making it an annual fixture in the Lords calendar.

There are lots of points I would love to pick up on, not least on welfare, the notion of an exit tax, even capital controls, but I get the sense from the House that the thing noble Lords would like to hear from me most on is perhaps Brexit. It was mentioned by the Minister, the noble Lord, Lord Eatwell, and the noble Baroness, Lady Kramer.

There was a lot of talk about the OBR report. I have read that report and it is based on projections brought together before the referendum, before we knew what sort of deal it would be from the EU. It is actually a very old report. Since 2016, it is worth noting that UK economic growth, although less than expected, has been higher than most western European countries. UK trade—

[Lord Livermore (Lab)]

It is just worth noting that the OBR updated those forecasts in 2024 and 2025 and maintained its view that it will reduce GDP by four percentage points.

[Lord Elliott of Mickle Fell (Con)]

It is also worth noting that UK trade with the EU is now higher than it was in 2019, as is UK trade with the rest of the world. The referendum was over nine and a half years ago and we left the EU five and a half years ago. I think it is time to take responsibility for what is going on now with economic growth. The Government should be commended for some measures which have increased economic growth, such as the post-Brexit trade deals—not possible without Brexit—with the US, the Gulf states and India.

I liked the intellectual honesty of saying that we should rejoin the customs union and think the Government should be more intellectually honest if they talk about Brexit. It is worth noting, though, that were we to rejoin the EU, what would the annual membership fee now be? Perhaps £22 billion a year—that would be another £22 billion to think about. I hope the Government consider some of the proposals put forward in the Budget and I beg to move.

Motion agreed.