My Lords, it is a pleasure to follow the noble Lord, Lord McNally, and his hymn of love to his native city. As a Liverpudlian, I fondly recall visiting Blackpool routinely as a child and less fondly watching Stanley Matthews give us a display of how to play football in the second football match I saw as a child.
In 2008, the UK economy suffered a body blow. At long last, we are beginning to recover, but our bounce back has been slower than other leading economies. Moreover, it will be 2018 before we are again, as a nation, in fiscal balance. Our debt levels are now, and will remain for some time, among the highest in the world. It will be a generation before they return to prior levels, always assuming that we will have responsible Governments in the future willing to work to that goal. All parties standing at the next election will, I hope, set out their plans for returning our national debt to historical and defensible levels.
Our lengthy recession has had manifold adverse consequences, as we are all aware. Many individuals and businesses have moved backwards in their fortunes. Responsible savers are paid minuscule rates of interest, well below the rate of inflation, yet still pay tax on the proceeds—punished twice over for their prudence. Even the best-run economies were affected by the global recession, but the UK’s difficulties were intensified: first, by a large financial sector, parts of which, as we all know, were infected by an ingrained culture of risk-taking and greed, making casino bets with their clients’ money; and, secondly, by a failure of government correctly to forecast tax revenues and tailor the level of public spending accordingly. On the one hand, regulation of the finance sector failed us; and on the other, the institutions of government proved inadequate to the task of managing our public finances. Changing the culture and behaviour of a
whole industry is not a trivial task, but let us cross our fingers that the new financial regulation reforms will work.
The OBR is a welcome new institutional fixture of manifest independence and integrity. Alongside an independent Bank of England—another welcome reform of recent times—the OBR, if it is retained and respected by future Governments, should prevent political hopefulness and opportunism once again tipping over into recklessness. Yet one fatal imbalance in our economy has not been addressed: for 40 or 50 years, like a badly run business, the UK has consumed too much and invested too little.
Public investment in the UK as a share of GDP is consistently below that of other countries. Unsurprisingly, there is a clear correlation between countries with excellent infrastructure and national competitiveness. The UK lags behind the rest of the world, as once we led it, in creating modern infrastructure and—surprise, surprise—our national productivity trails our competitors too. We know that we allowed our Victorian water and sewerage infrastructure to decay, that we were slow off the blocks with broadband, that we have procrastinated over power generation for the past two decades, and that we have by far the most congested roads and underinvested road and rail infrastructure of any major country. The cold statistics speak for themselves, but each of us can make brutal comparisons whenever we travel to competitor countries. It is shameful but characteristic that we did not long ago resolve how to deal with chronic undercapacity at Heathrow, one of the UK’s most prized strategic assets.
Last year’s Treasury document, Investing in Britain’s Future, was a list of directionally sound projects, but it was neither a vision nor a plan for modernising our creaking, crumbling, unfit-for-purpose national infrastructure within the span of a generation. I greatly respect the record of the noble Lord, Lord Deighton, and I do not for a moment doubt his good intentions, so I will look keenly at the plan he outlined earlier to see how far it goes towards meeting those long-term goals. As a nation, we need to resolve to set aside 3.5% of GDP annually for investment, which is the long-term OECD average. We have been so far below 3.5% for so long—we are currently at something like 1% to 2%—that we probably need to spend 4% to 5% of GDP on our infrastructure for at least 20 years simply to catch up with other nations.
We also need some formal mechanism to embed a long-term commitment on investment into our budgeting, and perhaps in her concluding remarks the Minister will tell us what share of GDP the newly announced infrastructure plan implies over the next five to 10 years. For decades, Governments of all kinds have promised investment but have then short-sightedly cut it at the first sign of economic reverse, most recently vouchsafing in late 2008 that capital spend would be protected—I quote the Treasury of the time—“to support the long-term productivity and competitiveness of the UK economy”, only to see the capital budget savaged, cut by almost half, in the period from 2009 to 2011.
We should continue the process of remedying the long-standing weaknesses in the governance of our economy and, alongside the OBR and an independent central bank, create a new institution of some kind
that will depoliticise long-term infrastructure investment. Projects, as we know, can take decades to gestate, plan and deliver. We need an organisation that will bring together the main political parties in order to forge and stand behind a consensus about our national infrastructure. HS2 and the skilful cross-party work of the noble Lord, Lord Adonis, offer us some hope that this might be achieved. Let us complete an institutional framework that will stabilise our economy, improve our productivity and end the catastrophic dislocations that have plagued us on and off for half a century, and which have substantially reduced our economic performance as a nation and prevented this creative and enterprising country from achieving its full potential.
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