The Government’s Productivity Plan

Chi Onwurah Excerpts

Tuesday 28th February 2017 Commons Chamber

[Chi Onwurah (Newcastle upon Tyne Central) (Lab)]

It is a real pleasure to speak in this debate and to follow so many excellent and well considered contributions. I must draw particular attention to the opening speech from my hon. Friend the Member for Hartlepool (Mr Wright), the Chair of the Business, Energy and Industrial Strategy Committee, who made almost all the points I intend to make but much more eloquently than I could ever hope to do. This is one occasion on which Newcastle will follow in Hartlepool’s train.

As many Members have said, productivity is a key subject. It is one of the most important challenges facing our economy, as the hon. Member for Warwick and Leamington (Chris White) emphasised. High productivity is correlated with high wages and high skill levels. If we want a high-wage, high-skill economy—as we on the Labour Benches certainly do—improving our productivity must be a key goal. However, under this Government our productivity has fallen consistently. We are now 30% behind Germany, the US and France—the widest gap since 1992. That was decades ago, when there was another Tory Government with a small majority. Since 2010, UK productivity has grown on average by just 0.4% a year. The OECD, the CBI, the Office for Budget Responsibility and the Bank of England have all expressed concern that continued low productivity growth is holding back our economy.

How can we improve our productivity? It is quite simple, in a way. We need to get more out of the same inputs, and that is about either people or technology. The economist Mariana Mazzucato has said that productivity comes from allowing people

“to work more efficiently, with state of the art training, technologically advanced machinery, an innovative division of labour, and harmonious capital-labour relations.”

First, let me discuss people. As the hon. Member for Horsham (Jeremy Quin) said—I entirely agree with him on this point—people are the key asset of our economy and businesses. However, this Government consider labour to be a commodity, and commodities are not productive. Imagine a worker sitting at her desk feeling disempowered, unvalued, and disfranchised. Of course her productivity will be lower. But empower her and give her a sense of agency and her productivity will rise. Skills are an essential part of empowering workers and improving their productivity, as emphasised by the hon. Members for Kirkcaldy and Cowdenbeath (Roger Mullin), for Derby North (Amanda Solloway), and for Aberdeen South (Callum McCaig).

However, the productivity plan that we are debating with the estimates committed nothing to skills other than a promise to fund Charlie Mayfield’s initiative to boost management skills to boost business—hardly an extensive investment. The BEIS Committee’s report criticised that lack of commitment and argued for a renewed focus on upskilling the workforce. Unfortunately, the Government do not seem to have taken that criticism on board. It has been 18 months since the productivity plan and six months since the BEIS Committee’s report, and last month’s industrial strategy Green Paper did not recognise the criticisms at all, simply promising £170 million for higher-level technical education when the Government have already cut the further education budget by 14% in real terms in the last financial year alone. That hardly remedies the inequality of esteem between further and higher education highlighted by the Committee, never mind going some way to deliver the high skills that we need to be competitive on the global scene.

In an era of technological change and when people are living and working longer, lifelong learning should be a key part of any Government strategy to upskill workers and improve national productivity. People no longer have one job for their entire career. We need to be able to upskill and respond to changing technological requirements. However, the productivity plan and the Green Paper—220 pages in total—contain only a smattering of references to adult learning and not one specific policy commitment.

The second significant factor in productivity is technology. There is both opportunity and threat in the technological transformation that we are undergoing. Analysis from the Centre for Economic Policy Research demonstrates that industrial robots and information technology can increase both wages and productivity. It also found that the increased use of robots raised countries’ average growth rates by about 0.4 percentage points between 1993 and 2007. It is clear that sustainable, long-term, smart growth requires significant investment in technology. The BEIS Committee report argued that

“if the Government is serious about productivity and competitiveness, it needs to commit to a total level of public and private R&D investment”

of 3% of GDP. Labour has committed to that target. Will the Government? In advance of the Budget, will the Minister say today that he is proud to commit to a 3% target?

As has been mentioned, output in Germany is 34% higher than in the UK. Germany’s R and D spend as a percentage of GDP has been at or near the 3% target for many years. In contrast, our spend has languished at barely half the 3% target. However, the productivity question is not just about the development of new technologies; we must ensure that businesses can use them and utilise the productivity benefits that they bring. That is crucial in sectors such as retail.

[Richard Fuller]

The hon. Lady has talked a lot about the targets for how much we invest in R and D, but does she appreciate that there are other points of view that say that it is about the way we account for our R and D investment? If we look at the type of investments that we make in the UK, we see that the comparison between us and other countries is much more favourable. It is not just about the quantum of our investments but about the returns on those investments.

[Chi Onwurah]

I agree with the hon. Gentleman that it is not only about what we invest but about the returns and where those returns go. For example, it is about how the public sector ensures that it reaps those returns.

We can use statistics in many different ways, and I will not attempt a battle of statistics here, but I hope the hon. Gentleman is not arguing that the UK is leading the world. However we account for it, the UK is not leading the world in investment in technology, science and R and D, which is where our future lies. We need greater investment in that. [Interruption.] I am not sure what the Minister is saying from a sedentary position, but I hope to be enlightened at some point.

Again, the Government’s industrial strategy has absolutely nothing to say about ensuring that sectors such as retail can take up technology. The Government chose to cherry-pick certain favoured sectors for backroom deals and failed to address the root cause of our productivity crisis, leaving the majority of British workers out in the cold.

Skills and technology are key to improving productivity, but we also need a strategic vision, which is notably absent from the Government’s productivity plan. As the hon. Member for Cannock Chase (Amanda Milling) highlighted, we need a plan and a strategy. When the Government’s industrial strategy came out, we saw that it had plenty of pillars but no vision. Adding the 10 pillars of the industrial strategy to the two pillars of the productivity plan results in 12 pillars and no vision. The Government are building pillars on hot air.

[Mr Stewart Jackson (Peterborough) (Con)]

As the hon. Lady has represented a north-east seat for seven years, surely she understands that part of the problem is over-reliance and overdependence on financial services, construction and Government expenditure, which are concentrated in the greater south-east. Her Government did next to nothing about that when in power.

[Chi Onwurah]

The hon. Gentleman fails to recognise the work of the regional development agencies, which his Government abolished and which contributed significantly to changing the industrial landscape. He appears to be arguing against the financial sector, the construction sector and Government spending, and we do need to diversify, but the Government can aid that process. He fails to recognise the role that an intelligent, smart Government can play in supporting smart, sustainable economic growth. So long as Government Members fail to recognise that, we will not see smart growth in this country.

[Mr Jackson]

I am a fair-minded and generous person, so I will agree that it was more successful in the north-east than in other regions, but several academic studies have found that, in the period up to 2010, the inequalities both between and within regions were not ameliorated in any respect by the regional strategy of the Labour Government.

[Chi Onwurah]

It is interesting that the hon. Gentleman likes to concentrate on the record of the last Labour Government, which was more than seven years ago, instead of looking at the record of this Government, of the institutions that they have or have not put in place and of their success or absolute lack of success either in addressing regional imbalances or in addressing the debt. They have succeeded in increasing national debt, while also not generating any smart, long-term growth. I would be reluctant to get up to praise that record.

Despite the Prime Minister’s rhetoric about a “new, active role” for the state in the economy, the average level of public investment in this Parliament is set to be 1.9% of GDP, which is lower than the level during the coalition’s austerity agenda and barely half of what it was under Labour. This Government are, in effect, reducing private sector investment and public sector investment at the same time, taking away the lifeblood that our economy needs. Austerity did not deliver smart growth, and austerity in all but name will not do so either. The Labour party has committed to investing £250 billion in capital expenditure over 10 years, as well as committing to a national investment bank and regional development banks. I ask the Minister to say how he will be able to change our productivity and deliver on smart growth without those things.

In conclusion, our country’s productivity problem will not solve itself. We need sustained, long-term investment in skills and technology. That will not be forthcoming unless the Government have a clear, strategic vision for the future. We need to mobilise both public and private actors, crowding in investment to boost skills and innovation, and tackle the root causes of our productivity crisis. Only by doing that can we create the high-wage, high-skill, high-productivity economy that this Government say they want, that the British people deserve and that only a Labour Government can deliver.