National Productivity

Alison Thewliss Excerpts

Wednesday 22nd January 2020 Westminster Hall

[Alison Thewliss (Glasgow Central) (SNP)]

It is a pleasure to see you in the Chair, Mr Paisley, and I thank everybody who has come to contribute to today’s debate and try to resolve the productivity issue that is plaguing the UK economy. The hon. Member for Barnsley Central (Dan Jarvis) pointed out that there is a real need for investment in skills, research and development, creating a balanced economy and infrastructure, and also a need to tackle the deprivation that holds back so many people in so many communities from accessing and participating in the economy.

Since the Scottish National party came to power in Scotland, productivity there has grown three times faster than in the UK—a rate of 1% a year, compared with the UK average which, as the hon. Member for Barnsley Central said, is 0.3%. When we consider that we have done that against the backdrop of austerity, and more recently against the backdrop of Brexit, it is all the more impressive. We are doing things such as encouraging businesses to sign up to the Scottish business pledge. According to its website, 722 businesses have now signed up to that pledge, including firms of all different sizes, large and small, from multinationals such as Coca-Cola and Deloitte to The Good Spirits Co., which is a small shop in my Glasgow constituency. Hearts football club has also signed up to that pledge, so a range of different organisations have signed up to it.

The Minister will be interested to hear that the Scottish business pledge has three core elements: payment of a real living wage, not the Chancellor’s pretendy living wage but one that people can actually afford to live on; action on the gender pay gap; and no inappropriate use of zero-hours contracts within the companies that sign up. Once companies have met those three core pledges, they are encouraged to work towards further elements of the Scottish business pledge, including environmental impact, having a skilled and diverse workforce, workforce engagement, innovation, internationalisation, community and prompt payment, all of which are important to businesses of all sizes.

I encourage the Minister to look at that pledge; I believe it has been a hugely important factor in improving productivity rates in Scotland, because businesses are being asked to sign up to something that will make them, or encourage them to, act responsibly. That pledge also has a wider effect on the economy, as those businesses spread the good word and encourage more and more people, including those in their supply chains, to sign up to it. This is not just an issue of business growth, but of the wellbeing of employees, which has a huge impact on productivity and how people feel when they turn up to work in the morning. The Minister needs to look at that further as well.

The Scottish Government are taking other measures, such as the Scottish National Investment Bank legislation which, excitingly, passed unanimously in the Scottish Parliament yesterday. The Scottish National Investment Bank seeks to increase innovation, give support to small and medium-sized enterprises and build an inclusive, high-tech economy, which is incredibly important. We can see how investment banks such as KfW, which was set up post-war in Germany, have changed, worked for and invested in their economies; for example, KfW has changed housing so that investment in that sector works towards greener standards. There are real things that we can learn, and it seems bizarre that the UK Government at that time set up an investment bank in Germany but never thought to set one up for itself, when we could use it so much.

The hon. Member for Barnsley Central mentioned the importance of R&D. The Scottish Government have invested £37 million in R&D and have a target of doubling business investment by 2025, which should go some way to make sure that people are investing in the businesses, technology and infrastructure that they have, as well as in people. We have a green new deal that will harness the power of that Scottish National Investment Bank, including a £3 billion green investment portfolio and a green growth accelerator to attract green finance to Scotland and bring the inward investment that will help drive its economy. We in Scotland have also recognised the importance of inclusive growth, and have been recognised internationally for our approach to inclusive growth. If an economy leaves people behind, it cannot be a particularly good or productive economy, never mind a happy one.

The Scottish Government are reviewing measures to tackle historic disparity. It would be useful to hear whether the Minister has any further information about things like the shared prosperity fund, because European money has been absolutely crucial to addressing that historic disparity in a number of ways. In areas of Scotland where we have been working so hard over so many years to try to correct that post-industrial Thatcher legacy, European money has been crucial, not just for constructing buildings and other things, but putting money into training programmes, universities, colleges and infrastructure. During last week’s education debate, my hon. Friend the Member for Glasgow North West (Carol Monaghan) mentioned the importance of college education in Scotland. I have City of Glasgow College in my constituency, which now has two campuses in the city centre, and looks and feels like a beacon that will attract people to enter. It does not sit, up on Cathedral Street, with any less dignity than the University of Strathclyde, which neighbours it, and that is important for how people feel when they are accessing those education institutions.

Our lack of control over wages in Scotland is a real challenge to productivity. I have already mentioned the Chancellor’s pretendy living wage; I am yet to hear a reasonable explanation as to why a 16-year-old starting in the same job and on the same day as a 25-year-old is worth over £4 less, which is all they are entitled to. The majority of people in those low-paid jobs will be women, and they will be in part-time work as well, which makes it very difficult for those women to bring more money in to support their family and to bring along the next generation. They will be struggling. As the hon. Member for Wirral South (Alison McGovern) said, it is crucial that we look at women as part of this productivity issue.

I attended the graduation ceremony at the Open University, which plays a huge role in enabling people who might not have been able to access more traditional forms of degree to obtain skills. At the end of the graduation ceremony, the participants in the room who were receiving their degrees were asked to put up their hands if they had children, had a disability, had caring responsibilities, or were working while they were doing their degree. Hands went up everywhere. I am pretty sure that no other graduation ceremony would look like that, so I ask the Minister to consider the importance of the Open University in ensuring that productivity is increased.

I also ask the Minister to review the mechanisms that are currently holding people back, particularly universal credit. Universal credit makes it incredibly difficult for people to change their job and improve their circumstances, because they are penalised when they try to do so. For example, the two-child limit traps working families who perhaps started off in life with three children, and were working quite well until something went wrong. It makes it incredibly difficult for them to get back on track when they cannot get enough money to feed their family; they end up in a trap that they cannot work their way out of. The childcare element of universal credit should be paid up front, rather than in arrears, because that is a barrier to families taking on work. It makes it very difficult for families to access employment when they have to pay those childcare fees themselves and claim them back. Other elements of universal credit, such as conditionality, sanctions, and the fact that if a woman is added as a second earner in a household it automatically has an impact on household benefits, also make it difficult for those families to improve their circumstances.

Other hon. Members have mentioned entrepreneurship, self-employment and skills shortages, all of which are important to addressing productivity. Looking ahead, all those things will be made worse by Brexit. I disagree with the hon. Member for Strangford (Jim Shannon); he always views things with great optimism, but I am afraid that I do not share his optimism about Brexit, because it will have an impact on investment and on skills. At the moment, skills shortages are filled by EU nationals’ being able to work and travel freely. I fear that the absence of those people, who are running businesses and are in our schools and our education system, will have a significant impact on our ability to improve the productivity of this country, and that impact will continue for many years to come.

Interestingly, the Chartered Management Institute sent a briefing to the debate. Its research, which is backed by the Bank of England, mentions

“a long tail of poorly managed and unproductive organisations”—

a real issue, which the Minister would do well to address. It gives a figure of 2.4 million “accidental and unskilled managers” and has worked on management apprenticeships to try to ensure that firms do not just put people into management roles without that support. An interesting aspect of the debate is to ask what more can be done to support those managers—those people who end up in positions of influence—and make sure they understand that their roles are important, that they are well supported, and that they can play an important and active role in their organisation to make it more productive.

In Scotland we look to the experience of the Scandinavian countries, which have happier and, by all definitions, more productive and equal societies. I look at them with envy, because they have the full set of economic powers that small independent countries can have and they do well for their people—not just for their economies—as a result. I imagine what Scotland, as an independent European nation, could do with the full set of economic levers to move towards being a more inclusive, fair and prosperous country for all our people. That is very much something to aspire to, but which we cannot fully reach at the moment in the UK.

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[The Exchequer Secretary to the Treasury (Mr Simon Clarke)]

I begin by echoing the thanks of all Members to the hon. and gallant Member for Barnsley Central (Dan Jarvis) for calling today’s debate on an issue that goes to the heart of so many of the issues facing our economy and our society. I congratulate him on his key role in progressing the devolution deal for South Yorkshire, which we all hope will help to unlock significant productivity benefits for the people of his region. I know he shares this Government’s view that devolution across the nations and regions of the United Kingdom can boost productivity across the country, and we look forward to working together to achieve that.

Giving power to local people on the ground is undoubtedly the best way to make the most of every area’s unique strengths and to confront their unique challenges. That is why since 2014 the Treasury has led negotiations with several city regions across the country to strike landmark deals with eight places as part of a devolution revolution. The slogan might have changed, but the metro mayors are now delivering on local priorities. Tees Valley, where I live, is home to the South Tees Development Corporation, which is regenerating the former SSI site at Redcar. Manchester, the home of the hon. Member for Stalybridge and Hyde (Jonathan Reynolds), has a focus on trams. We are talking about Northern Powerhouse Rail connecting up the regions better. Liverpool has its rail networks, as the hon. Member for Wirral South (Alison McGovern) alluded to, which are key to driving the benefits that we all want. Our commitment to enabling local people, who know their areas best, to be the masters of their own economic destiny could not be stronger.

We saw further progress just last week, as South Yorkshire moved forward with its own deal that agreed £900 million of new Government funding over 30 years for investment in local priorities identified by the Mayor and his combined authority, not by Westminster. I will be travelling to Leeds next week to hold talks with West Yorkshire’s leaders on a mayoral devolution deal for Leeds city region. We are determined to build on Leeds city region’s strengths in digital, financial services and the creative sectors, as we level up and share the success of the opportunities ahead. We will put our money where our mouth is for the right agreement. I will go to Leeds next week in search of that deal.

We know that Britain is currently too centralised and that solving the productivity puzzle will need us to think differently. We cannot just sit in Whitehall, pull a lever and cross our fingers—I completely understand that. People want control over their lives to come up with their own plans and, crucially, to be able to put them into action more quickly than the machinery of central Government sometimes allows. We need to give them that. We are hugely committed to making devolution to Sheffield city region a success. We look forward to continuing to work closely with regional leaders to build an economy that works for everyone by improving connectivity, strengthening skills, supporting enterprise and innovation and promoting trade to ensure that the people of South Yorkshire benefit from the powers and investment envisaged in the deal.

Clearly, such issues transcend the borders of England. The hon. Member for Strangford (Jim Shannon) referred to Northern Ireland, and I am delighted that we have managed to get devolution back up and running at Stormont. It is crucial to ensuring that all parts of the community in Northern Ireland feel the benefits of renewed growth and renewed control over their own destiny. I very much look forward to picking up talks with the new Ministers there as part of our efforts to make sure that our policies and theirs work as closely as they can for our shared benefit.

In her powerful speech for the SNP, the hon. Member for Glasgow Central (Alison Thewliss) mentioned the UK shared prosperity fund. Obviously, we are determined to make sure that that is delivered correctly; we need to take the time to get that right. I confirm that we will be setting out our full plans at the comprehensive spending review later this year. That will be the moment when we start unveiling how that will work and give people the clarity that they need to make the investment decisions over the course of the years ahead, as we transition out of the European Union.

[Alison Thewliss]

The Minister says “correctly”. His definition and interpretation of that might be slightly different from mine. Will the Scottish Parliament and the Scottish Government have full control over the purse strings and decision making for the shared prosperity fund?

[Mr Clarke]

I am afraid the hon. Lady will have to wait for the publication of the consultation at the comprehensive spending review. The key point is that we want to make sure that this gives the Scottish Government meaningful control over key aspects of resources. She mentioned European funding in her remarks. The point I would submit is that that money was fundamentally UK money that was recycled back to this country, with conditions attached. We should be clear that we want to devolve control of that funding to the lowest possible level, and we will inevitably want to do so in a spirit of genuine concord with Holyrood.

The Government will set out further information about our plans here in an English devolution White Paper this year, which will outline our strategy to unleash the potential of our regions, level up powers and investment and give power to people and places across the country. Alongside that, we will publish a refreshed northern powerhouse strategy, building on the successes of the existing strategy in bringing together local leaders to address key barriers to productivity in the regions.

As the hon. Member for Islwyn (Chris Evans) said, productivity is not a concept that always commands headlines, but it goes to the heart of national prosperity. It is the best way to boost wages, improve living standards and enhance economic growth across the country, regionally as well as nationally. We are working hard to build a stronger and fairer economy—dealing with the deficit, helping people into work and cutting taxes for businesses and families. There are 3.7 million more people in work, and the hon. Member for Wirral South alluded to the record rate of women in employment, which is worth highlighting. More than 60% of the increase is in regions outside London and the south-east, but we need to go further and we need to be candid about the extent of the productivity challenge we face. Productivity growth slowed globally in the aftermath of 2008, but the slowdown has been particularly acute here. The Government are committed to tackling that challenge as we enter a new decade in which we are less under the shadow of the financial crisis and the impact on our public finances.

The key will be an ambitious programme of investment. Infrastructure is a key driver of productivity—it is not sufficient in itself, but it is an absolute good. It links people to jobs and products to markets and supports supply chains, encouraging domestic and international trade. It affects daily life: speeding up internet connectivity means less time staring at blank screens; improving roads and trains, which the hon. Member for Stalybridge and Hyde rightly mentioned, means less time stuck waiting to get to work and more time to play; decarbonisation means cleaner air for us all to breathe and more efficient energy. When the national infrastructure strategy is published alongside the Budget on 11 March, that will be a core moment in this piece. We will set out further details of our plan to invest £100 billion to transform our infrastructure and achieve a real step change. The strategy will set out our long-term ambitions across all areas of economic infrastructure, including transport, local growth, decarbonisation, digital infra-structure, and infrastructure finance and delivery.

Alongside that investment in our physical capital, it is essential to focus on and improve our human capital, as the hon. Member for Wirral South, whom I had the pleasure of serving alongside on the Treasury Committee, rightly said. I know that from my constituency. The hon. Member for Barnsley East (Stephanie Peacock) is right to say that talent is evenly spread across this country, but opportunity is not. We know that, which is why our recent manifesto pledged a national skills fund—I was briefed on it yesterday, and it is exciting, bold and visionary. We all know that it needs to happen, because there has been profound personal, human dislocation as part of our transition from one era of industrialisation to a new one. That has had uneven consequences across England, let alone across the UK. We will seek to give a leg up to people looking to get onto the career ladder, support those wanting to switch careers, and support growth by ensuring firms can get access to the skills they need.

The hon. Member for Stalybridge and Hyde referred to Be the Business. I had the pleasure of meeting it last week, and it is hugely impressive. I heard first-hand from several of the entrepreneurs it has helped about how targeted interventions and upskilling have helped them to be better business leaders. We need more of that to create a culture of entrepreneurship, which, as the hon. Member for Islwyn said, is not always common in all parts of the United Kingdom.

Increasing our productivity also means innovating. The hon. Member for Barnsley Central referred to the AMRC in Sheffield. That is precisely the kind of thing that we want to see more of. That is why we are committed to meeting our target of raising investment in research and development to 2.4% of GDP by 2027, ensuring that the UK remains at the cutting edge of science and technology. One of the great frustrations of recent decades is that the UK has so often come up with brilliant ideas but has not had the opportunity to build them out at scale. That needs to change. If we do that correctly, there is so much good that we can unlock and economic potential that we can unleash. We are increasing public spending on science and innovation by an additional £7 billion by 2021-22, which marks the biggest increase in 40 years.

The point that the hon. Member for Wirral South made about human capital, and in particular women, was well made, and I take it to heart. It is something I have been talking to my officials about. The Government are seized of the cost of childcare and the need to resolve fundamentally the problem we face with social care, which has so many spillover consequences for our health service and our economy, and we will be coming forward with proposals. Particularly on the social care piece, we genuinely welcome constructive engagement with the Opposition as we try to build a settlement that has lasting legitimacy. We want to do it right for successive generations, which will doubtless encompass Governments of both colours.

On female entrepreneurship, my predecessor—the current Secretary of State for Housing, Communities and Local Government—and I are working with Alison Rose to develop the Investing in Women code, which will help to pioneer work. We are looking to increase lending to female entrepreneurs to increase the possibilities. Clearly, if someone cannot even make the time to work because of competing priorities, that constrains them. I genuinely take the hon. Lady’s point to heart, and I will continue to work on it with officials.