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Economy: Productivity

Volume 771: debated on Tuesday 12 April 2016


Asked by

To ask Her Majesty’s Government what plans they have to improve the productivity of the United Kingdom economy in the light of the figures published by the Office for National Statistics on 7 April.

My Lords, productivity growth represents a serious challenge for all advanced economies, and the UK is no exception. The Government last year published our productivity plan, Fixing the Foundations. In last month’s Budget, we went further—for example, announcing additional reductions in corporation tax to incentivise investment, and giving the green light to infrastructure projects such as Crossrail 2 and High Speed 3.

Indeed, my Lords. Given that productivity levels in the UK are lower than when the previous Labour Government were in office, and given that in the G7 only Japan stands worse than us, would it not be a good idea if, with some enthusiasm and gusto, the Government actually pursued their plan of fixing the foundations and building homes, rebalancing the economy and taking timely decisions about our transport infrastructure? Indeed, can they apply the enthusiasm with which they quarrel among themselves about Europe to addressing the real problems of the United Kingdom?

My Lords, I am bursting with enthusiasm and full of energy to get things done. I cannot claim that this Government will not encounter some of the problems that previous Governments down the ages have encountered when implementing their plans, but I refer the noble Lord to chart 2.B in the National Infrastructure Delivery Plan, published a fortnight ago, which shows that, of the 602 projects that the plan sets out and are in the pipeline, 61% are in construction, 50% will have been completed by 2020-21 and a further 49% will by that point be either under construction or part of an active programme. So we are full of enthusiasm, full of energy and we are getting going.

Will my noble friend explain to the noble Lord, Lord Harrison, that the Office for National Statistics figures which so worry him may not tell the full story by any means, because they take too little account of the huge output of data and information in the digital age, which now generates more economic value than the whole of global goods trade?

My noble friend makes an extremely good point. Sir Charles Bean recently completed a review of the UK’s economic statistics, and one of his findings was, as my noble friend said, that if the digital economy had been properly taken into account, economic growth would have been one-third to two-thirds of a percentage point higher over the past decade, with similar implications for productivity. However, I stress that that would not explain the UK’s recent poor performance in comparison with other countries, nor why productivity has worsened since the financial crisis, so we are not complacent.

My Lords, the UK’s poor performance on productivity will surely never improve until we get in place the infrastructure—housing, broadband, power and transport—that we need. Will the Government give up or curb their obsession with the budget surplus, borrow at the current zero-coupon rate available to them, stop faffing around with expensive and reluctant private sector and sovereign fund investors, and actually get spades in the ground on the major projects—Hinkley Point being one example—that are at present all suffering delays?

My Lords, we are getting going and cracking on with things. I dispute what the noble Baroness says about having a choice between ditching the projected surplus that my right honourable friend the Chancellor has set out and achieving what we are setting out. They are not mutually exclusive. For example, noble Lords might be interested to know that we have committed to the biggest investment in transport infrastructure in generations, increasing spending by 50% to £61 billion in this Parliament.

My Lords, the Minister cannot get away with those glib replies. Where has he been for the last six years? The fact is that our productivity levels are back to those of the recession year of 2008. Most of the projects that he mentions have been started in the past year or so. What about those projects which were meant to commence from 2010 onwards, which have in fact achieved very little? Does he accept that we will get nowhere until we successfully address the issue of training? Even the construction industry, which is clearly important to the development of economic growth and jobs, complains that it cannot get work people of sufficient skills to do the tasks it wants them to do.

My Lords, I apologise if I sound glib, but I am certainly not complacent. I quite agree that there is a lot of work to be done. That is why, for example, on the point about construction skills, we are launching the apprenticeship levy to fund more high-quality apprenticeships. On top of that, we are protecting the core schools budget; we have removed the HE student numbers cap; and we have cut corporation tax to 18%. I could go on and on—there are lots of things. This is not glib; this is work in progress, but we are not complacent.

My Lords, the Minister will be aware that the latest figures for High Speed 2 put the overall cost at £80 billion. It will be 16 years before it begins to run at all, and then it will run at a loss. Meanwhile, in this country 90% of our economic activity is conducted by road. Would not it be more sensible—taking up the point made by the noble Lord, Lord Harrison—to divert these enormous sums into something that would give more immediate productivity gains, have a less ambitious target and put that money into millions of small, economically beneficial and productivity beneficial developments that could be done through rail and road improvements?

I hear what the noble Lord says about HS2, but I would not say that these were mutually exclusive. As I have said, the UK will invest more than £100 billion in infrastructure over this Parliament. My noble friend wishes to see more investment in roads. The £15 billion of investment in the roads investment strategy will include resurfacing more than 80% of the strategic road network and delivering more than 1,300 miles of additional lanes. As I say, these are not mutually exclusive.

When the Minister replied to my noble friend Lord Harrison, he produced a long list of good intentions, but none of them has actually come into effect. In a subsequent answer, he went on to tell us about a number of measures that the Government have taken. Having taken all those measures, we now have the appalling productivity statement from our own department dealing with national statistics. I am not going to accuse the Minister of being complacent, but he really has to get a better story to tell.

I hear what the noble Lord says, but I think that we do have a good story to tell. I draw his attention to the national infrastructure plan that was published, which sets out very clearly what the Government are doing and how we are delivering it.