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UK Productivity

Volume 447: debated on Thursday 15 June 2006

The Budget report provided an assessment of all areas of the UK economy and UK competitiveness, including gross domestic product, productivity growth, labour market performance and economic stability.

I think that I thank the Minister for that non-answer. He was a special adviser in the Treasury when the Chancellor of the Exchequer made it one of his first priorities, back in 1997, to raise economic productivity. The Minister must know that his Government have singularly failed to do that, and that we have actually dropped down the economic competitiveness league. What is he going to do, through tax and regulation, to make the economy of this country a good deal better than it has been in the past nine years?

I thank the hon. Lady for her question and for being here to ask it. The fact is that since 1997, productivity has grown in every quarter under this Government, unlike under the previous Conservative Government, when it fell. This week’s edition of “Employment Outlook”, produced by the Organisation for Economic Co-operation and Development, tells us:

“Britain has scored the highest employment rate and the best combination of unemployment and inactivity rates in the G7 countries for the first time in 50 years.”

We have combined stability, strengthening productivity and record levels of employment. People will remember the difference between that record and the record of previous decades, when we suffered the deepest recession since the second world war and the longest recession since the second world war, when people suffered from negative equity and when we had high interest rates. People do not want to go back to those days.

One of the areas of concern for manufacturing in my constituency is the cost of energy. In the light of that, and given what has been stated about the next generation of nuclear power, what is the Treasury’s view?

My hon. Friend is right to point out that the high cost of energy in recent months has been an issue for British industry, and more generally for the economy. On Monday, the Governor of the Bank of England talked about the pressures on the economy as a result of the high oil prices around the world. An energy review, which will report in a few months time, will be a Government report and will set out exactly how we can have an energy policy that meets our climate change obligations and also delivers security and diversity of supply. That report will refer to the need for a range of measures and of sources of energy, but we will need to wait for the final details before we can comment on it.

Is the Minister aware that business and industry are more heavily taxed now than ever before? In 1997, the tax take was £80 billion; this year, it is £140 billion, due to corporation tax, national insurance tax and other taxation. On top of that, there a huge amount of regulation, some of which is emanating from the European Union. Is it any wonder that companies, including headquarters in the City of London, are thinking of relocating elsewhere?

As I said in a speech yesterday, the number of listings in the UK has been rising, rather than falling, in recent years. We have cut corporation tax from 33p to 30p. We have cut small business tax. We have also cut capital gains tax from 40p to 10p since 1997. However, the hon. Lady includes in her figures one tax that we did raise: a £5 billion windfall tax on the privatised utilities. The Conservatives opposed it, but it has helped to get down unemployment—particularly youth unemployment—in constituencies across the country. I would like her to support that tax rise, but I fear that she will not do so.