Economic and Taxation Policies: Jobs, Growth and Prosperity

Lord Lemos Excerpts

Thursday 13th November 2025 Lords Chamber

[Lord Saatchi (Con)]

My Lords, if you want a bigger slice of cake, the best thing to do is bake a bigger cake, then everyone gets a bigger slice. That, as my noble friend Lord Elliott knows very well, is how Mrs Thatcher tried to give a whole generation of young people, including me, the hope of a better life. Her famous bigger cake was economic growth—the only way you could have confidence in the country’s future and your own. Instead, we now have the exact opposite: a general feeling of disillusionment.

Recognising the national mood, the Prime Minister recently asked his officials for an uplifting plan to stimulate economic growth. It has yet to see the light of day. The reason for postponement is said to be “lack of content”. I went to the fount of economic wisdom, the London School of Economics, and very bravely asked a roomful of economics professors whether any of them had a brilliant idea for how to get economic growth in Britain. Their response? They laughed; it would take a complete change in the entire culture of the society—inconceivable, unimaginable, impossible.

Well, whisper it, but maybe the professors are wrong about what is possible and what is not, because there is one proven way to change the culture of a society; it is called the law. Smoking bans, seat belts, abortion, capital punishment, slavery, homosexuality, contraception—I can go on. We all remember, with warm approval, Lord Denning, Britain’s most senior judge, who said:

“Be you never so high, the law is above you”.


We all like that idea; it means a lot to us.

I will take a moment to describe, just for the sake of the argument, what it would be like if one was to file a lawsuit against the Government—the people v the UK Government. That has a good ring to it, does it not? The Government would be the defendant. We would of course be very humble about such a lawsuit and concentrate only on tax, because current tax law is an ungainly camel, designed by a committee that has been in standing session for 200 years.

This is how such an indictment of the UK Government might look. There are five counts here. Count one is conspiracy to enslave United Kingdom citizens and make them unnecessarily dependent on the state. Count two is conspiracy to force United Kingdom nationals to claim benefits to pay higher taxes. Count three is solicitation of multiple tax revenues by stealth. Count four is the attempt to obstruct, interfere with, impair, impede and defeat the right of United Kingdom nationals to independence. Count five is conspiracy to provide material support and resources to mesmerise and anaesthetise United Kingdom citizens.

How would such a case end? I suggest, just for the sake of the story, that on the morning of the trial the Attorney-General of the United Kingdom would come out on to the top of the steps of the Royal Courts of Justice and say something like this: “Without any admission of liability or wrongdoing on the Government’s part, today the British Government have withdrawn their objection to this case. We have reached an out-of-court settlement with the claimant. This will avoid the expenditure of court time and taxpayer money in prolonged litigation”.

In front of the astonished crowd, the Attorney-General would then continue: “The Government agree to bring forward legislation at the earliest opportunity to ensure the following: millions of British people living below the official poverty line no longer pay income tax; a massive saving in the administrative cost of collecting tax or distributing benefits; a huge change in the attitude of millions of British citizens who thought it was pointless to go out to work because benefits produce more after-tax income than working; a dramatic fall in immigration as the army of young unemployed British people is motivated to get a job; total clarity about tax; the share of people’s income tax used only to pay interest on Government debt, now 30%, is to published every year; and the effect of a frozen tax threshold will be subject to full disclosure”. Finally, the Attorney-General would say, “Economics will become a compulsory subject in the national curriculum”.

Is such dramatic action necessary? Surely we can keep muddling through, can we not? Well, maybe not, because maybe this time democracy is not working. Yes, we can and do change the Government every few years from one political party to another. That is true, but nothing much seems to change, does it? It is same old story over and again. The King himself recently showed firm, decisive leadership—

[Lord in Waiting/Government Whip (Lord Lemos) (Lab)]

Can I ask the noble Lord to bring things to a close?

[Lord Saatchi (Con)]

Perhaps we need something similar to end our economic problem—someone to take away the stale pudding now on our plate and bring us a lovely, big, freshly baked cake.

[Lord Howell of Guildford (Con)]

My Lords, it is always a pleasure to follow my noble friend Lord Saatchi, who has considerable wisdom in these affairs. The Government’s multiple dilemmas over their economic and budgetary policies are well known; they have been widely aired in the press, and many media experts and economists have declared them to be completely insoluble. One way, they say, is blocked politically, and other ways are blocked by the simple facts of arithmetic and life. There are limits to the amount of tax you can squeeze out of an economy, especially one that is not growing much, and if you borrow more, bondholders will want to be paid more interest. Incidentally, that never happened in the distant past. More recently, monetary policy and fiscal policy have become inextricably intertwined, so there appears no way out.

However, looking at Germany, for example, which has been in roughly the same situation as us, I wonder whether this whole messy scene may not be based on some false assumptions. Germany faces the same sorts of dilemmas as we do, having inevitably planned too much spending at the Covid time and when the price of gas suddenly erupted four years ago, as well as on welfare, meeting the immigration wave and now defence. So what did Germany do? It arranged to borrow another €1 trillion—that is about £900 billion—to pay for the endless and extra spending demands upon the country. Germany is doing this without blowing up its fiscal rules, which are just as tight as ours—in fact, unlike ours, in Germany they are constitutionally embedded. How on earth is Germany doing what is causing us so much difficulty?

The answer is: by building on a reputation of past iron fiscal prudence and the lessons of the 20th century, which, of course, destroyed Germany; by having a reasonably clear forward strategy and national direction on how it is going to use the extra money, which is mostly for defence and infrastructure, although there is an argument going on in Berlin about exactly how it is to be allocated; by having a political system of machinery capable of driving Germany’s plans through, all with the right mix of private enterprise resources within a government framework of determination and initiatives to meet public needs and purposes with both public and private resources; and by methods that do not swell what we used to call the PSBR, which is now called the public sector net cash requirement.

Here at home, we know that considerably greater funds could be raised through smart new ways of public and private co-operation in building and financing capital projects in areas such as health and the NHS, military projects, new development aid through World Bank bonds, and building new nuclear power stations, which can be done without a huge burden on government finances. All these would deliver what is needed in a modern society. I have heard of NHS chiefs who are seeking permission to raise billions from combining with private finance but who are being blocked by Treasury rules. It is the old story.

All in all, a picture builds up of a potentially greatly reduced burden on the public purse, borrowing, interest rates and taxpayers. That is not ideology; it is a matter of proven experience all over the world, even in the giant autocracies. Here, the intention of fiscal balance is okay, but the root trouble is the absence of smart thinking about how to combine public needs with private co-operation and resources.

Indeed, the Government have relied on their own propaganda by blaming the consequences of everything—Covid, Russia’s illegal assault on Ukraine, the lot—on their predecessors. That is political fun, but it is based on a completely false proposition and the assumption that everything would come right when Labour was elected, which, of course, has not happened. When Labour swept in, we were promised stability, but since then we have had endless instability.

Now the Prime Minister has spoken to the Health Secretary, so I am sure that everything is going to be all right, and the bond market will no doubt be very pleased to hear the news. All we can do is wish for a more honest stance before a hurricane of wishful thinking and wrong-headed policy brings our non-growth economy to a complete halt.

[Lord Lemos (Lab)]

I remind noble Lords of the advisory speaking limit of four minutes.