The Government’s Productivity Plan

Amanda Milling Excerpts

Tuesday 28th February 2017 Commons Chamber

[Amanda Milling (Cannock Chase) (Con)]

It is a real pleasure to follow my hon. Friend the Member for Horsham (Jeremy Quin), with whom I sat on the joint Committee inquiry, and so many colleagues from the Business, Energy and Industrial Committee including: the hon. Member for Edinburgh West (Michelle Thomson) who, as ever, demonstrated she is a strong voice for Scotland on the Committee; our excellent Chair; and my hon. Friends the Members for Derby North (Amanda Solloway) and for Warwick and Leamington (Chris White).

Many Members have mentioned that the Government’s focus on productivity is very welcome. While many economic indicators are good—we have debated the fall in unemployment this afternoon—productivity remains stubbornly poor, and the word “stubbornly” has been mentioned several times this afternoon. If we are to ensure a sustainable economic recovery—one that is resilient to potential economic challenges—we really do need to address the issue of productivity. Let us be honest: that is not something new, and it is an issue that successive Governments of all political parties have struggled to tackle.

The Government’s focus on improving our productivity was first introduced with the publication of the productivity plan back in 2015. As other members of the Committee have outlined, we conducted an inquiry into the plan, and I want to pick up on a number of the points and concerns the Committee raised. One was about the lack of real focus—more specifically, the lack of measurable objectives—in the plan, and I want to come back to that. There was also the lack of a real plan in terms of implementation, milestones and timeframes. To be honest, there was a sense that, in some ways, the plan was a bit of a basket of different policies, rather than necessarily a strategic plan for the future. Some of those issues are relevant when we look at the industrial strategy—the Green Paper on it was published earlier this year.

I think it is fair to say—I am looking to the Chairman of the Committee for a nod at this point—that the fact that the Government response provided some measurable objectives was welcome. The Committee did not necessarily agree with all of them, but we were pleased that there were some measurements and metrics in there.

As everybody has mentioned this afternoon, the focus on productivity has been central to the Government’s energy since the new Prime Minister took office. She has been very clear that she wants to create an economy that works for everyone. A key part of delivering that will be developing this new, modern industrial strategy, and, as I said, we saw the publication of the Green Paper in January. I want to pull out something that was in the Secretary of State’s introduction to the industrial strategy Green Paper:

“the Government is committed to a modern industrial strategy. Its objective is to improve living standards and economic growth by increasing productivity and driving growth across the whole country.”

In short, the industrial strategy has productivity at its heart.

I am sorry to repeat the same point, but many Members have already mentioned that our productivity is poor, and we underperform compared with international counterparts—we are equal fifth with Canada among the G7 countries. Our productivity is 18 percentage points below the average for the rest of the G7. However, there is also a significant disparity regionally, and the Chairman of the Committee made the same point. As the Chancellor said in January:

“The challenge before us is to work out how to spread across the economy the best practice in productivity…so that all regions, and all corners and sectors of our economy, can share in this productivity performance and thus deliver the higher real wages and living standards that that implies.”—[Official Report, 24 January 2017; Vol. 620, c. 236.]

It has already been mentioned that London has the highest productivity of any region or country in the UK—let us be honest, that is not necessarily surprising. The only other region above the UK average in 2014 was the south-east.

What was really worrying to me, as a Staffordshire MP, was the position of the west midlands. We are the worst-performing English region. The question I have been asking myself is, why are the west midlands performing so poorly relative to other regions? More specifically, what do we need to do to address that? My hon. Friends the Members for Derby North and for Warwick and Leamington talked about some of the excellent manufacturing businesses we have in the west midlands. We have Jaguar Land Rover, JCB, Toyota and Rolls-Royce to name just a few. Is the issue the make-up of our businesses, or is it, as my hon. Friend the Member for Halesowen and Rowley Regis (James Morris) mentioned, transport? The M6 is not a million miles from my constituency.

[Dr Daniel Poulter (Central Suffolk and North Ipswich) (Con)]

My hon. Friend makes a good point about transport connectivity, but does she agree that as well as road connectivity, rail and freight rail connectivity are particularly important? The Felixstowe to Nuneaton freight rail link is essential to ensure that freight and goods can get out through Felixstowe port, and improvements to the line are essential if we are to deliver the improved productivity in her region that she talks about.

[Amanda Milling]

I am grateful for my hon. Friend’s intervention, and some Members might hope that I do not start to talk about rail in too much detail, because I have spoken about it a lot in the House. My hon. Friend makes an incredibly important point, and one of the issues with the west coast main line is capacity in terms of not only passenger trains but freight trains. That is a key part of the transport infrastructure piece we need to look at. This is about road and rail, among other things.

One question I want to ask the Minister is: what is being done to look at the drivers of this regional disparity so that the different regions can understand what they need to do to address it?

[George Kerevan]

On that point, there is perhaps a third reason why manufacturing areas such as hers find it difficult to compete with European levels of productivity, which is that we have a very small equity market for medium-scale industrial firms. They have to rely on bank financing, which is very inefficient. In the United States and Germany, firms can get equity funding, and it is much easier for medium-sized manufacturers to expand.

[Amanda Milling]

The hon. Gentleman makes an interesting point, and it is one that the Select Committee explored in relation to access to finance. There is an over-reliance on bank lending. There is a plethora of ways in which we can finance small businesses, but people do not necessarily look at all the options available to them.

Let me go back to the point about the regions. In the context of devolution, we have combined authorities and local authorities, and in my area we have the midlands engine. I would be interested to hear what support the Government will give those different bodies to try to improve productivity in their areas.

Another point I want to pick up on is that it is very evident in the productivity plan and the industrial strategy that they require cross-Whitehall buy-in, and a number of Whitehall Departments are involved. Before I go into detail on that, let me say that the productivity plan was really led by the Treasury, while the industrial strategy is largely led by the Department for Business, Energy and Industrial Strategy. That raises a couple of questions. To what extent does the Treasury have input into the design of the industrial strategy? What is the relationship between the productivity plan and the industrial strategy? Is the industrial strategy the successor of the productivity plan? If not, how will the two work together, and who will manage them, given that they came from different Departments in the first instance? We have talked about transport, skills, and digital infrastructure. In looking to deliver the industrial strategy, we need many Departments to be fully bought into that. For instance, during this Parliament there has been a real focus on various Departments owning exports and taking a degree of responsibility for that area. It is welcome news that the Prime Minister chairs the Economy and Industrial Strategy Committee and the Secretary of State for Business, Energy and Industrial Strategy serves on a lot of Sub-Cabinet Committees. What are the Government doing to ensure that the industrial strategy is truly embedded into each of the Departments and that they take responsibility and are accountable for its delivery, thereby in turn improving our productivity?

I want to make a point about measuring success. My hon. Friend the Member for Warwick and Leamington touched on this. It goes back to my original point about the productivity plan. We had concerns as a Committee that the productivity plan was lacking in measurable metrics and delivery timeframes. During the course of our inquiry, it was really noticeable that if we asked people how they defined “industrial strategy”, we got a whole wide range of answers. We need to be very clear about what it is, but also how it is going to be measured so that we can assess whether we are succeeding or otherwise. As we all know, it takes time to see whether we are improving our productivity, so I would also be interested to understand what is being done in the short term to assess our progress on that.

I think we all welcome the focus on productivity. A number of Members have talked about the balance between productivity and employment rates. We need to try to tackle this ongoing issue that we have faced for decades. As a west midlands MP, I think we really do need to look at how we can rebalance and improve our productivity in the regions. I do not want to see the west midlands at the bottom of the English areas in this regard. I welcome the industrial strategy because it looks to have productivity at its heart, but we need to have a commitment to it across Government. We need to look at how it works at a regional level, and to have clear metrics.