The Government’s Productivity Plan

Dan Poulter 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?

--- Later in debate ---

[Robert Jenrick (Newark) (Con)]

It is a pleasure to speak in this debate. I congratulate the Chair of the Business, Energy and Industrial Strategy Committee and its other members, most of whom are here, on their success in pursuing tenaciously Philip Green. I have heard during the course of the debate that he is making a payment equivalent to four of his super-yachts, and that will be on the way as soon as possible. That shows that tenacious and persistent Select Committee questioning can yield results.

I do not intend to speak for long, having spoken in at least two similar debates on this topic over the past year or two. During that time, as a result of a management change, productivity plans have become industrial strategies, but I hope that most of the salient points will remain from the previous approach. The first point I want to make is one that my right hon. Friend the Member for Wokingham (John Redwood) and I made earlier: that we have to proceed with some caution before we are too blasé about the incredible job creation record of this Government and their predecessor. In my constituency, unemployment is now about 0.5%. The average wage in my town remains pretty low, at about £22,000 or £23,000 a year. Like other right hon. and hon. Members, I would like to see wages rise and none of my constituents stuck in poorly paid, low-skilled jobs. I want everyone to have not just the dignity and security of a job but the fulfilment of a career path to better-paid, better-skilled employment. However, we have to be careful before wishing away these jobs. One piece in this country’s productivity puzzle that is perfectly explicable is the fact that we have had extremely high levels of employment while some of our competitors have not. I am sure that none of us in this House would wish to replicate the levels of employment in countries in continental Europe such as France, Spain and Italy.

Immigration has certainly played a part in this. In my constituency, the fact of very high levels of migrants coming into my community has led to very little pressure on wages. Local employers I have met, particularly in the low-skilled or even unskilled areas of food production, agriculture and the care sector, have seen no demand on them to increase wages in the past five years or even more. That will of course change with Brexit. It will be a major challenge to my local economy, as to the whole country, to maintain this level of employment in those circumstances. Having said that, we obviously all share the objective of becoming a country in which people are not just employed, but well paid.

[Dr Poulter]

My hon. Friend makes some good points about productivity challenges and those of stagnating and low wages in certain sectors. I caution him, however, on the care sector, because workers from the EU and from further overseas fill those jobs. The care sector faces huge challenges in finding enough people to do that work, be they from overseas or from Britain, and, in the long term, the issue of wages is not going to be solved by Brexit.

[Robert Jenrick]

I apologise if I chose my words poorly, but the point that I was trying to make is that we need to exercise great caution, because two things have had an effect. The first is that high levels of immigration have meant that wages have been supressed, but as we leave the European Union we also need to ensure that people continue to do those jobs, whether they be in the care sector or, indeed, in the food production industry in my constituency. There is a challenge ahead for the Government not only to maintain employment levels, but to ensure that there is a better-paid workforce.

Secondly, as has already been said, a major contributor to our loss of, or stagnating, productivity in recent years has been the decline in the financial services sector since the financial crash of 2008. That has happened not just in London, but across the country, including Edinburgh in Scotland, Manchester and my own city of Nottingham, where the related company Experian is based. There are fewer jobs and less productivity. Nobody is a friend of investment bankers, but they are highly productive members of the economy and we need to be careful about how we accommodate the financial services sector post-Brexit. Personally, I am fairly optimistic about the future, given that those investment bankers and lawyers to whom I have spoken will not follow the entreaties of Mr Macron and move to France, with its sclerotic, socialist economy, any time soon.

We need to be careful, however, about how we proceed in tackling the productivity gap. I am particularly cautious about spending more money and getting the country into further debt. The national debt, of course, is £1.8 trillion and it is increasing at a rate of £5,000 per second. Levels of austerity have been grossly overstated: public spending has fallen by only 5% or 6% in real terms since 2010. Although it has fallen as a percentage of GDP, it remains a major problem, and I am particularly concerned that fewer and fewer right hon. and hon. Members even mention the debt and the deficit as part of our national dialogue. That needs to change, because the greatest threat to our economy and productivity is the debt we are leaving to future generations.