Latest news with #HouseofLordsEconomicAffairsCommittee
Yahoo
a day ago
- Business
- Yahoo
Britain's debt is a threat to national security
Our sky high debt is a threat to our national security. This year, the cost of servicing our debt will be almost double what we are spending on defence. And in today's turbulent world, the fiscal buffer to cushion us from shocks is paper thin. The smallest tap could shatter our economic credibility. The Prime Minister has made defence and security the organising principle of his government. Given that, putting our debt on a downward path should be his government's priority. It isn't. Debt will be higher at the end of the Parliament than today. And with global government debt already around $100 trillion, and Donald Trump about to increase that by a further $2.4 trillion, who will buy our debt – and at what price? Last year, the cross-party House of Lords Economic Affairs Committee raised a red flag that UK debt risks becoming unsustainable unless tough decisions are taken in this Parliament. We set out a choice: taxes would have to rise, or the state would have to do less. Being cross-party, we did not opine on which option was best. The Government has taken tough decisions – but in my mind the wrong ones. Taxes are rising to record highs. The Chancellor said last year that her strategy would deliver growth, and that she would not come back for more tax. But the growth forecast has been halved, and further tax hikes are on the cards. Meanwhile, pressure to spend more on defence is going to increase. At the upcoming Nato summit, nations are likely to be asked to commit to spending 5 per cent of GDP on defence – double Labour's current commitment. So what is to be done? We need to confront the other option: the state should do less. The Government rightly says that the relentless rise in welfare spending is 'unsustainable'. Spending on disability and incapacity benefits alone is more than on defence. But having announced that action would be taken to curb the growth in the welfare budget, the Prime Minister is now blinking in the face of opposition. The Government – and the nation – cannot afford ministers losing their nerve to keep a lid on spending. The bond vigilantes have saddled up and are on the prowl. Nor can the Chancellor tax her way out of the debt quagmire: to do so would risk us entering into a doom loop of ever lower growth and ever higher debt. If defence and security is the organising principle of government, the Chancellor must set out a credible plan to stop debt's relentless rise and bring it down from today's giddying heights. Not doing so risks economic catastrophe – and our national security. Lord Bridges of Headley is a former Government minister; he was Chairman of the House of Lords Economic Affairs Committee between January 2022 and January 2025 Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Yahoo
29-03-2025
- Business
- Yahoo
Who will say ‘we can't go on like this'? We need leadership on our disastrous economic state
Put aside the figures, forecasts and projections in this week's Spring Statement. They all confirm one thing: the United Kingdom is living beyond its means. Spending is too high, growth too low. The risk is growing that we will become overwhelmed by our debt. The last time our country faced such high levels of debt was after World War Two. The baby boom, the peace dividend and the steady spread of free trade all boosted growth, helping us to manage and gradually reduce debt. Now these trends have been thrown into reverse. Demographic change means a smaller workforce will have to support a growing, elderly population. Defence needs investment – as does decarbonisation, part of the green transition. There's dependency – the large number of people whom the state supports via benefits. And then there is debt itself – the servicing of which is going to swallow up £100 billion a year for years to come. Addressing all these Ds is made more difficult by another one: democracy. Governments need political consent to act. And action will be painful. Last year the cross party House of Lords Economic Affairs Committee highlighted this in a report on UK debt. Being cross party, its conclusions were balanced to reflect members' deeply held political views. One conclusion merits quoting in full: 'If we wish to maintain the level and quality of public services and benefits that we have come to expect, we face a choice: taxes will need to rise or the state will need to do less.' The report adds: 'Addressing this will demand clarity as to the responsibilities and the role of the individual versus that of the state. Muddling through is not an option. If this choice is ducked in this Parliament, the UK risks being on a path to unsustainable debt'. Since then, Rachel Reeves has made tough decisions – but the wrong ones: higher taxes have suffocated growth. And now she is muddling through. Although the benefits system is going to be changed, during this Parliament welfare spending is forecast to grow by £60 billion to £373 billion. Taxes look set to rise again, hitting growth further, making it even tougher to service our debt. Labour is testing its tax and spend philosophy to destruction – and sadly the UK will be collateral damage. So what of the alternative? The state will need to do less. This entails far more than efficiency drives in Whitehall or cutting quangos. It would mean the social contract would need to be revised and revamped, redrawing the line between the responsibilities of the state and the individual. As things stand there appears to be no public appetite for this. So there are two ways out. The first is that a politician truly breaks the omertà and tells the truth about the state we are in. After all, the refusal to confront the reality that the Government is living beyond its means has led to today's predicament. Only by being honest about that can we build a credible plan to address today's challenges – all those Ds. Doing so requires courage, conviction and a plan that answers the fundamental question: what should the state do in the 21st century? By leading the debate and building a consensus around the need for change, a future government could win democratic legitimacy for the action that is required. The second is that we continue as we are: muddling along, slowly but surely being sucked ever further into the doom loop of still higher taxes, more spending cuts, worse public services – and lower growth. Change will come, but it will not be led by politicians, but forced on them by 'events'. Instead of having a plan to address the challenges we face in a coherent way, we will continue to tinker here, patch there. No doubt Sir Humphrey would try to deter Jim Hacker from speaking the truth, using those killer words 'courageous, minister'. It is. But consider the alternative: to know that we cannot continue like this; to wait and watch as the red ink rises; and to hope that when people agree 'we can't go on like this', they will put their faith in you. 'Fingers crossed and hope for the best' is not a strategy. Kemi Badenoch showed her mettle with some plain speaking about net zero. She now needs to do the same on the economy. Lord Bridges of Headley is a former Government minister; he was Chairman of the House of Lords Economic Affairs Committee between January 2022 and January 2025. Broaden your horizons with award-winning British journalism. Try The Telegraph free for 1 month with unlimited access to our award-winning website, exclusive app, money-saving offers and more.
Telegraph
29-03-2025
- Business
- Telegraph
Who will say ‘we can't go on like this'? We need leadership on our disastrous economic state
Put aside the figures, forecasts and projections in this week's Spring Statement. They all confirm one thing: the United Kingdom is living beyond its means. Spending is too high, growth too low. The risk is growing that we will become overwhelmed by our debt. The last time our country faced such high levels of debt was after World War Two. The baby boom, the peace dividend and the steady spread of free trade all boosted growth, helping us to manage and gradually reduce debt. Now these trends have been thrown into reverse. Demographic change means a smaller workforce will have to support a growing, elderly population. Defence needs investment – as does decarbonisation, part of the green transition. There's dependency – the large number of people whom the state supports via benefits. And then there is debt itself – the servicing of which is going to swallow up £100 billion a year for years to come. Addressing all these Ds is made more difficult by another one: democracy. Governments need political consent to act. And action will be painful. Last year the cross party House of Lords Economic Affairs Committee highlighted this in a report on UK debt. Being cross party, its conclusions were balanced to reflect members' deeply held political views. One conclusion merits quoting in full: 'If we wish to maintain the level and quality of public services and benefits that we have come to expect, we face a choice: taxes will need to rise or the state will need to do less.' The report adds: 'Addressing this will demand clarity as to the responsibilities and the role of the individual versus that of the state. Muddling through is not an option. If this choice is ducked in this Parliament, the UK risks being on a path to unsustainable debt'. Since then, Rachel Reeves has made tough decisions – but the wrong ones: higher taxes have suffocated growth. And now she is muddling through. Although the benefits system is going to be changed, during this Parliament welfare spending is forecast to grow by £60 billion to £373 billion. Taxes look set to rise again, hitting growth further, making it even tougher to service our debt. Labour is testing its tax and spend philosophy to destruction – and sadly the UK will be collateral damage. So what of the alternative? The state will need to do less. This entails far more than efficiency drives in Whitehall or cutting quangos. It would mean the social contract would need to be revised and revamped, redrawing the line between the responsibilities of the state and the individual. As things stand there appears to be no public appetite for this. So there are two ways out. The first is that a politician truly breaks the omertà and tells the truth about the state we are in. After all, the refusal to confront the reality that the Government is living beyond its means has led to today's predicament. Only by being honest about that can we build a credible plan to address today's challenges – all those Ds. Doing so requires courage, conviction and a plan that answers the fundamental question: what should the state do in the 21st century? By leading the debate and building a consensus around the need for change, a future government could win democratic legitimacy for the action that is required. The second is that we continue as we are: muddling along, slowly but surely being sucked ever further into the doom loop of still higher taxes, more spending cuts, worse public services – and lower growth. Change will come, but it will not be led by politicians, but forced on them by 'events'. Instead of having a plan to address the challenges we face in a coherent way, we will continue to tinker here, patch there. No doubt Sir Humphrey would try to deter Jim Hacker from speaking the truth, using those killer words 'courageous, minister'. It is. But consider the alternative: to know that we cannot continue like this; to wait and watch as the red ink rises; and to hope that when people agree 'we can't go on like this', they will put their faith in you. 'Fingers crossed and hope for the best' is not a strategy. Kemi Badenoch showed her mettle with some plain speaking about net zero. She now needs to do the same on the economy. Lord Bridges of Headley is a former Government minister; he was Chairman of the House of Lords Economic Affairs Committee between January 2022 and January 2025.
