Fortifying the Fiscal Framework (Economic Affairs Committee Report)

Lord Howell of Guildford Excerpts

Tuesday 3rd November 2026 Grand Committee

[Lord Howell of Guildford (Con)]

My Lords, this is an extremely interesting subject. I thoroughly enjoyed the opening comments from the noble Lord, Lord Liddle, without necessarily endorsing every single one of his points; nevertheless, that is the way to start a good debate on this subject.

When we debate this subject, as we did in the Chamber the other day, it is a little difficult to suppress the feeling that we are attacking it from the wrong end. I am told that our total national debt is just about to pass, or has just passed, £3 trillion. That is a milestone; it is almost too big a number to write on a single piece of paper. Of course, that prospect also includes the very expensive debt interest bill, which is coming in now and will be coming in for years to come—it should be falling, but it is not.

I think it was the 18th-century philosopher Adam Ferguson who said that a nation that burdened with high debt is on the path to decline. He was a bit premature, because things did not quite work out that way in the succeeding century, but that is the possibility if we saddle ourselves with this kind of debt interest. Never mind whether it is inhibiting or encouraging growth, or even what it is doing to inflation: if that is one of the huge bills that is intruding on our national payments and government payments every year—it is, at present, and it is getting bigger all the time—we are in deep trouble.

To say that the Budget, such as the one we have just had, is “steady as she goes” and has not worried the bond markets is not enough. Where she is going is down, so it is “steady as she sinks”. That is what this do-nothing Budget, which fails to begin on the path and halts this fantastic growth, is doing. There is no opportunity for just ignoring the whole thing, like the MMT—modern monetary theory—movement in America, which says that the whole thing is just a myth. That is not right. There are appalling prospects unless we get some sort of grip.

In the country as a whole, there is a feeling that our full productive capacity is not being exploited. The economists have come up with a lot of numbers, a sort of a new fiscal prison. As Keynes faced in the 1930s and 1940s, there is a need for a balanced budget. He pointed out that, if you depart from that prison, there are possibilities of escape to higher living standards and a better-balanced life for the citizens of this country. We are in the same sort of position now. I was wondering why everyone was flocking to this play in the West End about Keynes’s life; it is absolutely full and impossible to get seats. Perhaps the answer is that they are looking for a new Keynes, or what Keynes would have to say in the face of this apparent imprisonment, which seems to bar us from breaking out and realising our full potential.

When it comes to what we do about this, there are only three broad sets of approaches worth considering—three unburdening strategies. The first is doing nothing very much, which is roughly what we are doing now, and hoping that inflation and growth, if there is any, will lift us out of debt through time. We hope that the OBR will nobly reduce its two forecasts a year, plus a single fiscal event, whatever that is meant to be, but we will not actually do anything to affect policy.

The second strategy, which is related, is to talk about cuts—yes, cuts—and a new war on efficiency, the sort of language we had in the last century under every Government from Ted Heath onwards, and promise to have a review next year. I cannot quite see the point of this review next year. For 50 years, we have been reviewing the possibilities on the efficiency side and indeed of transferring whole functions out of the public sector altogether. I have filing cabinets full of suggestions and proposals worked out in enormous detail. There is no need for another review. In the 1970s, we marshalled the 20 ablest brains in the nation to work out how to challenge waste and redefine objectives in every department. They worked very hard; we chose them very carefully. I have to say that, after 18 months, every single one that we brought into government left, because they found a complete wall of obstruction to everything they wanted to do. We had a pamphlet, “A New Style of Government”, which outlined this; it is all ready and sitting there unused.

In my last 30 seconds, I have to say something about transferring functions, because that is the only way that this can be done. The only possible way to reduce the rate of growth of this colossal figure is by reducing functions, which will in turn reduce the number of civil servants—as we did, from 800,000 to 500,000, in the 1970s and 1980s—and the functions of government, as we did on the industrial side. There now has to be a list of new things. I have in my hand a list that anybody can put together, with about £100 billion that could be taken off tomorrow morning. You do not need any reviews at all. It can be done by determined people. It can be done even with parties in the House of Commons that disagree with everything. Some things can happen automatically. I do not have time to read out this list now, but if anyone would like it, I would happily give it to them. It is all around the corner. Reviews can wait for another day. We can act now if we are serious about curbing the enormous growth of this enormous burden.