King’s Speech

Lord Hain Excerpts

Monday 13th November 2023 Lords Chamber

[Lord Hain (Lab)]

My Lords, it is always a pleasure to follow the noble Baroness, especially on climate change and environmental issues. In October, the Institute for Fiscal Studies summed up the UK’s prospects as “darkening” and the growth outlook as “poor”. IMF data shows that in the 14 years before the 2008 global financial crisis, most of which was under Labour, UK productivity rose at an average annual rate of well over 2%. However, in the 14 years following the financial crisis—and most of that was under the Tories—productivity only improved at a measly average annual rate of less than 0.5%.

The stand-out factor for this worsening economic performance is our pathetically poor rates of investment, both public and private. According to the IMF, between 2010 and 2022, UK investment as a share of GDP was the lowest in the G7, and UK savings were far below even that, leaving the UK highly dependent on foreign capital. A Resolution Foundation study in March 2023 found that Britain’s public investment is in the weakest third of OECD countries. Had Britain matched the average OECD rate of public investment over the past 20 years, it would have been a massive £500 billion higher. This long-term failure to invest in our healthcare, housing and transport services is the reason why Britain has fewer hospital beds per person than all bar one OECD economy, and why the British spend more time commuting to work than all bar two other OECD countries. That is a pathetic record.

Andy Haldane, former chief economist at the Bank of England and now the director of the Royal Society of Arts, has noted that as well as being too low, UK public investment levels are far too volatile—witness the Government’s HS2 shambles. The planned increase in public investment announced by the Boris Johnson Government in 2020 was later cut following the Liz Truss disastrous mini-Budget. Rishi Sunak’s Administration is now planning for public investment to fall as a share of GDP in each of the next four years, reversing most of the increases announced three years ago.

Resolution Foundation economists calculate that setting public investment at a stable 3% of GDP—about £75 billion—would boost UK economic growth by nearly 1% per year over five years and stay within the debt rules accepted by both Front Benches. The Government’s present plans, however, envisage public investment dropping from £74 billion this year to only £62 billion in four years’ time.

The independent National Infrastructure Commission agrees that decades of inadequate infrastructure investment have held UK productivity back, singling out public transport, home heating and insulation, and water networks as all being in urgent need of renewal. It recommends extra public investment of £30 billion per year, plus at least £40 billion per year from the private sector. More than an extra £30 billion per year of public investment might have been recommended, but for the restrictive remit set by George Osborne when he created the commission in 2015.

I am afraid that everywhere we find evidence of Tory economic failure, we also find George Osborne’s fingerprints. His austerity policy, continued under Philip Hammond, drastically curtailed UK economic growth, triggering a severe slowdown in the rate of increase in British productivity and a standstill in real household living standards. Over 80% of the Tory spending cuts fell on public sector budgets, equivalent today to slashing public spending by a colossal £180 billion—more than the total of NHS spending in England this year.

A decade of Tory austerity has inflicted huge self-harm on Britain’s public services, with the Institute for Government finding eight of nine public services performing worse now than before Covid. Hospitals and courts stand out, with waiting lists for hospital treatment at 10 million and a backlog of nearly 90,000 court cases. The Government’s spending plans mean that however bad the plight facing Britain today, the outlook after 2025 is even worse—unless, of course, Britain is saved by a Labour Government, which we all should hope for.