Productivity

Lord Henley Excerpts

Tuesday 7th November 2017 Lords Chamber

[Baroness Wheatcroft]

To ask Her Majesty’s Government, in the light of the publication of the report by the Industrial Strategy Commission on 1 November, what steps they are taking to improve the country’s productivity.

[The Parliamentary Under-Secretary of State, Department for Business, Energy and Industrial Strategy (Lord Henley) (Con)]

My Lords, our Green Paper, published earlier this year, sets out how the industrial strategy will aim to maximise the UK’s earning power and productivity as we exit the EU and beyond. We are already taking major action to deliver our industrial strategy, including a £23 billion national productivity investment fund to drive improved productivity across the country. The White Paper, which will set out the plan for full and long-term delivery, is due to be published later this year.

[Baroness Wheatcroft (Con)]

I thank my noble friend for his reply and I greet the commission’s report with enthusiasm. It suggests that there should be long-term investment in infrastructure, skills and education, but it takes a long time for those sorts of investments to improve productivity and, in the meantime, as we heard from the CBI yesterday, companies are holding back on investment because of concerns over Brexit. Will my noble friend tell me what predictions they are making for productivity in the short term as we go through the Brexit process?

[Lord Henley]

My Lords, we, too, welcome the Industrial Strategy Commission’s report. It is an independent inquiry, a joint initiative by the University of Manchester and the Sheffield Political Economy Research Institute, and as my noble friend will be aware, my right honourable friend the Secretary of State spoke at its launch. As I made clear in my original Answer, we will be publishing the industrial strategy later this year—I hope it will be by the end of this month—and if my noble friend will be patient, I think that when we produce that strategy she will see much there. As she will be aware, we have already made some fairly considerable announcements about investment: I mentioned the £23 billion national productivity investment fund which is there to drive improved productivity across the country, an area we certainly want to address.

[Lord Stevenson of Balmacara (Lab)]

My Lords, I welcome the noble Lord back to the Dispatch Box in what I think is his fifth role since 2010, which must be a record of some kind. I was glad to hear him welcome the final report of the Industrial Strategy Commission, which makes very interesting reading and covers very interesting areas. One of its key recommendations to the Government is that health and social care should be at the centre of the industrial strategy. That may sound counterintuitive, but it makes the point that using the Government’s purchasing power to promote innovation in that sector and to increase productivity would be a good thing. Does the noble Lord agree with that, and will it appear in the industrial strategy?

[Lord Henley]

Perhaps I may correct one of the noble Lord’s statistics: it is only my fourth department since 2010. It is important to get these things correct. I am glad that the noble Lord, like the Government, welcomes the report; we will certainly take note of it. As I said, we are waiting for the industrial strategy to come out later this month, and I am grateful that he makes it clear that there are matters other than government spending which are important here, particularly in dealing with questions of productivity. We want to make sure that all levers that are available to the Government can be made use of. He mentioned purchasing. We will certainly make that clear, and I hope that other departments will do their bit. He mentioned purchasing within the health service, but there are other things that the Government can do as well, in relation to deregulation and trade policy, as well as procurement, which he mentioned.

[Lord Fox (LD)]

My Lords, I, too, welcome the Minister back to the Dispatch Box. His immediate predecessor gave those of us who are impatient for the industrial strategy White Paper a preview a couple of weeks ago. In that preview he identified three particular strands that will address the productivity issue that this commission has highlighted so well. One of those was skills, and in that he particularly highlighted apprenticeships. I am sure that the Minister has not had much time yet, but he will have noticed that the latest statistics from the manufacturing organisation, the EEF, show a 61% fall in the number of registrations for apprenticeships in the last quarter. Does he agree that this is not just disappointing, it is awful? Can he explain what the Government are doing to improve their lamentable performance over the apprentice levy, which is causing this problem?

[Lord Henley]

My Lords, I am not going to go into detail now but I am grateful that the noble Lord went to the meeting that my predecessor held and listened there. I agree that the figures are disappointing but again, if he can be patient and wait for the launch of the industrial strategy he will see what we are doing and what we are bringing together from all parts of the Government in this area.

[Lord Howell of Guildford (Con)]

Does my noble friend agree that these productivity statistics can be a bit misleading? It has often been suggested that they fail to take full account of the impact of the digital revolution on production and economic activity. Does he also agree that the very high levels of employment that we are currently experiencing could in a sense be seen as a compensating asset in the overall low-productivity puzzle?

[Lord Henley]

My noble friend is right to stress that it is very difficult to measure productivity, but I think we all agree that our productivity levels are lower than those of a lot of other members of the G7 and that we want to do something about them. My noble friend is also right to say that there is the compensating factor—I am very grateful to him for underlining it—of record levels of employment in this country. We can be very proud of that.

[Lord Green of Deddington (CB)]

My Lords, among other matters, does the Minister consider that the availability of a virtually unlimited supply of hard-working and low-paid workers might be a disincentive to investment and therefore have some impact on productivity?

[Lord Henley]

Obviously the level of employees coming in from other countries has an influence on wages and employment in this country. The noble Lord is right to point that out.

[Lord Wallace of Saltaire (LD)]

My Lords, there is substantial evidence that a large number of companies are using the new apprentice levy to train people already employed, often in mid-executive positions, rather than going out and finding young people and training them up as new apprentices, which is what one understood the scheme was for. Are the Government going to look into that and do their best to persuade companies that they should be training young apprentices as the first priority?

[Lord Henley]

The noble Lord is right to point that out. It is anecdotal evidence at this stage, but it is something that we should certainly look at.