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Economy: Productivity

Volume 778: debated on Wednesday 8 February 2017


Asked by

To ask Her Majesty’s Government what measures they are taking to improve productivity in the United Kingdom economy.

My Lords, through our modern industrial strategy we are taking steps to increase productivity and drive growth across the whole country. We will support key strengths, including science and research, and invest in technical training and infrastructure, which will sustain productivity over the long term.

My Lords, we are now in our seventh year of productivity famine—of being the worst in the G7 and uncompetitive with our European Union partners, soon to be our competitors, against whom we flounder in our productivity rates. When will the Government rebalance the economy, as promised by the former Chancellor, by investing in people and their skills, and infrastructure in the regions, so that we can return to productivity, along with dealing with the balance of payments deficit, and return to the years of plenty?

The noble Lord raises an interesting point. Since, I think, 2010, our economy has grown by 12%, which is the highest in the G7, yet our productivity growth over that period has been low, as the noble Lord said. The reasons for that are broad and manifold, but he puts his finger on it when he says that, in part, it is to do with a lack of investment in key infrastructure and technical skills. Both those things are absolutely centre stage in our new industrial strategy.

My Lords, will the Minister acknowledge that one of the best ways of increasing productivity is to invest in higher education and research and development innovation? Would he also agree that we underinvest as a percentage of GDP in our higher education, compared with the OECD EU average, and way under America, and yet have the best universities in the world? When it comes to R&D innovation, we invest 1.7% of GDP compared with 2.8% in the United States and Germany. We would have to invest an extra £20 billion a year just to catch up with them.

The noble Lord makes a good point. The fact is that the productivity of our investment in research in British universities is incredibly high and the output of our top universities is fantastically high by any world standards. He will know as well as I do that we are now committed to raising an extra £2 billion a year in research by 2021, which is a very significant increase. He is also right that even after that increase we are still not investing as much on a per capita basis or on a percentage of GDP basis as some of our biggest competitors—Germany and the US, for example. So we are making good progress but the job is not yet done.

Will the Minister say what we are doing to enhance the social status of professional engineers, and can he write to me and say how many professional engineers have received an honour for engineering, as opposed to financial services?

My noble friend raises the profound point that culturally in this country we have tended to encourage people more in the humanities than we have in engineering and STEM subjects. Perhaps the country is being run by too many people who have done PPE at Oxford and too few who did engineering at Cambridge—but there we are. On the honours given to people with a background in engineering, I will look into that and write to my noble friend.

My Lords, one factor that influences productivity is issues of health, particularly mental health. Something like nearly three out of 10 employees are reporting some sort of mental health problem each year, which analysts believe is costing employers something like £30 billion a year. Will the Minister tell the House what the Government are doing to support employers in encouraging high levels of well-being and what is being done to lessen the stigma of mental ill health—in particular, encouraging employees to access mental health services that are already available to them?

The right reverend Prelate makes an important point. Not only is mental ill health a disaster for people individually, it also affects the productivity of the whole workforce. It is hard to answer the question because companies vary so much. There are some great employers who do an excellent job of looking after the well-being of their employees, and there are some who, as we know, do a rotten job. I would like to take away the question the right reverend Prelate asked and write to him in more detail.

My Lords, business investment in training is vital to improved productivity. We know that the apprenticeship levy was designed to help in that, yet the Government have missed the January deadline for setting up the online service and the IFS says that it is going to give poor value for money. How is business going to benefit when it is having to cope with this mismanagement of the apprenticeship levy by the Government?

My Lords, the apprenticeship levy is designed to produce another 3 million apprentices over the next four or five years, which will mark a transformation in the number of apprentices we have in this country. The noble Lord referred to the online service. I shall have to investigate that and write to him.

My Lords, sadly, this country has an appalling trade deficit in agricultural and food products, yet agriculture and food argument not included in the industrial strategy at all. Further, our exports of food and other agricultural products have been flatlining for the past 10 years. If we leave the European Union, which is one of the biggest export markets for agricultural and food products this country has, how are we going to make up for the loss of trade which that implies if agriculture and food are not included in our industrial strategy for the future? Before the noble Lord says it, I know that Defra is going to produce its own strategy—but should this not be a prominent part of our national strategy for industrial development?

My Lords, agriculture and food production will be a prominent part of our strategy going forward because they are hugely important to the economy. When we discuss our industrial strategy we sometimes focus too narrowly on manufacturing, which now accounts for only 10% of all employment in the economy. We are not going to get the step change in productivity across the whole economy if we do not have a strategy that includes services as well as agriculture.