My Lords, I draw attention to my entry in the register of interests. It is a pleasure to follow the noble Baroness, Lady Pinnock, and those other distinguished Members of your Lordships’ House who have spoken. I warmly commend my noble friend the Minister on the lapidary way he opened the debate, making a persuasive case, which sometimes gets lost, that most of the fundamentals of the UK’s economy are in pretty decent shape.
I will focus particularly on the Government’s fiscal stance and where it is heading, but I note in passing the tendency in this debate, as is often the case in Budget debates—I do not go back quite as far as my noble friend Lord Wakeham; my first Budget debate was my noble friend Lord Lawson’s first in 1984—to lament the lack of fiscal discipline and to plead for more public spending. I share the concerns that the date at which fiscal balance will be struck has receded. Every year it seems as far away as it was the year before. We have to accept that if we want that date to come further forward we have to exercise real discipline over public spending.
I will focus on productivity, particularly in the public sector, which got less of an airing in the Budget than productivity in the private sector. The ONS tells us that in the years between 1997 and 2010 productivity in the public sector was essentially flat, while in the private services sector—the nearest analogue we can find—it rose by nearly 30%. During the coalition Government, with the strong support of Liberal Democrat Ministers in that Government—I worked very closely with Sir Danny Alexander during that time—we discovered that we could get more for less in the public sector. There were plenty who said at the outset that it was simply impossible; we showed you can. We saved cumulatively some £50 billion from the overhead running costs of central government during that time. If we had not done that, the national debt would have risen by that amount, or there would have been tax increases, or front-line services and programmes would have been cut by that amount. In the Autumn Statement of 2014, we published a document, signed off by George Osborne, Danny Alexander and me, which showed that, by 2020, one could essentially do the same again and double those efficiency savings from central government. However, there seems to have been a sad loss of focus on that objective since. I would be grateful for some reassurance from my noble friend the Minister that this is still a priority for the Government.
We achieved those savings by strong leadership from the centre of government, particularly with central authorities for those cross-cutting functions of government which receive far too little attention, either from the Civil Service or from politicians. Let me give a couple of examples. We persuaded a reluctant Treasury to put in place a full-time head of financial management for government. In any big complex organisation in the private sector, it would be automatic that such a post would exist, with finance directors in disparate parts of the organisation having a strong reporting line into that head of financial management. That has now been disbanded. The head of financial management for Her Majesty’s Government is now the finance director in the Ministry of Justice. He is a very talented individual, but he is looking after a budget of some £20 billion, and he cannot possibly give the leadership to financial management that it requires. The Government Digital Service, now copied in many places around the world, which saved vast amounts of money by putting services online, supported a burgeoning tech sector in this country and got the UK Government to the top of the UN’s ranking for digital government last year, seems largely to have been marginalised.
Two weeks ago in this House, we discussed the case of the chief executive of the Student Loans Company, who has been summarily dismissed having been brought in as a seasoned and robust operational leader to turn around that failing organisation. Productivity in the public sector will not improve if seasoned operational leaders brought in to turn around failing organisations in the public sector are driven out at the very moment when they are beginning to get to grips with its failings.
The other side of sound money is the need for the country to earn it before it is spent. I want to say a quick word about the industrial strategy. I am an old, unreconstructed Thatcherite, proud to have served in the Thatcher Government in the 1980s, when the whole idea of an industrial strategy was deeply unfashionable. I think that what we now see as an industrial strategy is a very different beast from what was regarded very poorly at that time. Then, the focus was on very large companies, often state owned, and on the companies themselves rather than on the sectors that could benefit from support. This time—and great credit is due to Vince Cable for the work he did in making the case for an industrial strategy in the coalition Government—the focus has been much more on the need to support the seeding, expansion and growth of smaller businesses, particularly through things such as the catapults, which were a feature of the coalition Government.
That requires a relentless focus on enterprise. Making that case should be an open door for the millennial generation. The young people of the generation of my children, in their 20s and early 30s, are much more likely than was my generation to be doing their own thing, to be starting something up—sometimes speculatively, sometimes developing something very serious indeed. The case for enterprise as the mainspring of economic growth, wealth and prosperity for all is more important today than it has ever been.
I echo the point made by my noble friend Lord Wakeham that when the Revenue takes the approach that it has sought to take towards the taxation of self-employed people, we need to be very careful. When I was Financial Secretary, the Inland Revenue, as it then was, had a rooted belief that people became self-employed only to pay less tax. The truth is that most people become self-employed because they want to make something happen and to have control of their destiny. They are taking a risk, which we as a society ought to be encouraging. I encourage my noble friend to take back from this debate to the Treasury that we want to see a sensible, risk-weighted approach to how we tax self-employed people.