Greg Hands
Main Page: Greg Hands (Conservative - Chelsea and Fulham)Department Debates - View all Greg Hands's debates with the HM Treasury
(9 years, 5 months ago)
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Chris Leslie (Nottingham East) (Lab/Co-op)
I beg to move,
That this House notes that UK economic productivity has been stagnating for several years with productivity growth the second worst of the G7 countries; recognises that supporting business to improve output efficiency and enhanced productivity is the best route to higher living standards and in turn is crucial for the health of the public finances; regrets that the Chancellor failed to address productivity in his March Budget speech; urges the Government to ask the Office for Budget Responsibility to report on the impact on productivity of the options likely to be considered in the forthcoming Spending Review; and believes that decisions on reducing public service expenditure must take into account their impact on productivity performance.
The productivity of our economy and of businesses, the workforce and the resources of our country is critical for our recovery and for our future prosperity. There should be a cross-party consensus that productivity is the key challenge facing Britain today, which is why I was very disappointed by the Chancellor’s attitude at Treasury questions yesterday and at his point-blank refusal to engage with this crucial debate in the House of Commons today. We have learned that when it comes to dealing with issues that he does not want to attend to, the Chancellor either blames someone else or sends someone else. In that growing tradition, I welcome the new Chief Secretary to the Treasury to his new role.
Greg Hands
Surely the hon. Gentleman must admit that, given that the Chancellor was here yesterday at Treasury questions, and able to answer questions on productivity, and that he was here again today as First Secretary for Prime Minister’s questions, and able to answer questions on productivity, he has been available in this House to answer questions.
Chris Leslie
I am sure the Chancellor is very much focused on being the Prime Minister in waiting. He is, of course, the eminent First Secretary of State, and I hope his junior Ministers occasionally manage to peek round his door and get the odd minute of his very busy time on these matters.
The mark of a Chancellor focused on our economic challenges would have been to engage a bit more thoughtfully in considering how best we can tackle Britain’s productivity problems, but he could not bring himself to mention productivity once during his 8,000-word Budget speech three months ago.
The Chief Secretary to the Treasury (Greg Hands)
I am delighted to respond to this debate on productivity, because it is absolutely central to our long-term plan to fix the economy. My ministerial colleagues at the Treasury have been candid about the scale of the productivity challenge, so in some ways I agree with a great deal of what the hon. Member for Nottingham East (Chris Leslie) has said, but this is a challenge that the UK has faced for decades, not “several years” as the motion suggests.
We have been very clear that increasing productivity is a key challenge in this Parliament for this Government: it will be a key focus of ours over the next five years. Indeed, the Chancellor noted as early as August 2010—very early on in the last Government—that our relatively low productivity was a drag to economic recovery, when he spoke at Bloomberg about the economy of the future.
The hon. Gentleman has said that productivity was not mentioned in the Budget, but I refer him to page 1—the very first page—of the Budget document.
Greg Hands
No, first of all I am going to tell the hon. Gentleman what it says:
“The deficit remains too high and productivity too low, there are still long-standing structural weaknesses in the economy, and the gap between the economic performance of London and the rest of the UK remains too wide.”
Chris Leslie
The key thing is the difference between the Budget document and the Budget speech. The Budget speech was more than an hour long, so why did the Chancellor not mention that very paragraph?
Greg Hands
Surely the most important thing is the delivery of the Budget, not just the speech. The delivery of the Budget was all about things such as digital communications infrastructure, housing, science, innovation, freezing fuel duty, doing something for the oil and gas regime, the sharing economy and backing business by launching a comprehensive review of business rates. The most important thing in government is what is delivered.
The Chancellor announced four weeks ago—way before the hon. Gentleman tabled a motion or wrote an article—that we will publish a productivity plan: a plan to make Britain work better. I will remind the hon. Gentleman of that speech, because he was there with various Labour leadership contenders, minus the hon. Member for Islington North (Jeremy Corbyn). Curiously, he seemed to have been missed off the CBI invitation list, but he may be up for an invitation in the future. The Chancellor said:
“Let me be clear”—
perhaps he was not clear enough for the hon. Member for Nottingham East—
“improving the productivity of our country is the route to raising standards of living for everyone in this country.”
I am sure the shadow Chancellor will recall that, because he was there.
It speaks volumes that the Treasury ministerial team announced in May by the Prime Minister includes Jim O’Neill, one of the most respected economists in the country and an authority on productivity. His input is more about deeds than words and it will be vital as we put in place the policies that will turbo-charge our economy.
Our productivity plan will build on the significant supply-side reforms we have put in place over the past five years. It will be wide-ranging and ambitious. It will look to the long term. It will help rebalance the economy and build the northern powerhouse. It will improve our infrastructure and reduce burdens on businesses; increase our support for childcare; ensure that many more affordable homes are built; expand apprenticeships and equip us with the skills we need for the 21st century; and make a bold next step in this country’s remarkable economic recovery.
Andrew Gwynne
Can the Chief Secretary confirm whether the success or otherwise of his productivity plan will be assessed by the Office for Budget Responsibility? Will it cut across all Government Departments to ensure that some of the regional imbalances that he has mentioned will be tackled across Government?
Greg Hands
The hon. Gentleman makes an important point. Of course the OBR looks at all Government proposals at the appropriate time, and I do not think that there will be any exception for this.
John Redwood
Does the Chief Secretary recall that Labour took into public ownership Network Rail, a crucial industry for our country, and that the previous Government commissioned the McNulty report, which discovered that that big organisation was way behind its continental comparators when it came to productivity and efficiency and that their system of managing it had fallen short? Is that something he can help remedy?
Greg Hands
I thank my right hon. Friend for that intervention. Infrastructure will be a key part of the productivity plan, so we must study which are the productive and which the less productive areas of our infrastructure.
Gareth Johnson (Dartford) (Con)
Productivity is vital for the British economy, and the way to achieve good productivity is by having a strong economy. Does the Chief Secretary agree that we need a pro-enterprise, low-taxation and low-regulation economy, as opposed to what the Labour party is proposing?
Greg Hands
My hon. Friend is quite right. Labour seems not to be learning the lessons of the general election five weeks ago. Encouraging enterprise and promoting sound public finances by dealing with the deficit are extremely important, so I entirely agree.
Andrew Bridgen
At least twice during his opening speech the shadow Chancellor said that we are now seeing highly skilled employees replaced by low-skilled employees. Does my right hon. Friend agree that the shadow Chancellor should not talk himself down like that?
Greg Hands
Yes, my hon. Friend is here, unlike half the shadow Treasury team who went into the election and were wiped out by either the Conservatives or the Scottish National party—and that includes the hon. Gentleman’s former leader.
Greg Hands
I shall give way shortly. I think I have awakened the hon. Gentleman’s interest with my reference to the SNP.
I thought that it would be helpful to start by setting out the productivity question in relation to the UK’s general economic competitiveness, setting the scene for the problems we face. Hon. Members will of course be aware that, thanks to our long-term economic plan, we can be proud of having the highest growth of the major advanced economies in 2014, and we are predicted to repeat that in 2015. We are highly competitive, and that is linked to productivity. We are ranked ninth of 144 countries globally for competitiveness, we enjoy the lowest corporation tax in the G7, and we are seen as being well governed, as we are in the top 20 of 102 countries on all eight factors of the World Justice Project’s Rule of Law index for 2015. London remains a world-leading international financial centre. British universities are by far the best in the world outside the US. For those who complain that we no longer make things, within two years we expect the UK to match its all-time car production record, which was set back in the 1970s. The city of Sunderland now produces more cars than the whole of Italy put together. We are extremely competitive.
George Kerevan (East Lothian) (SNP)
Is the Chief Secretary aware that the high productivity in British automotive products is an optical illusion because only 37% of the spend in the value chain relates to this country, whereas two thirds of it relates to the imported content of those cars, most of which comes from Europe—the Europe that you are trying to take us out of?
Greg Hands
It is a bit churlish to debate the precise details like that. The fact remains that car production in this country is extremely impressive. We should celebrate that throughout the UK, including in Scotland.
Greg Hands
Let me make a bit of progress.
The high productivity that I have mentioned is very good, but we need to be equally honest about the areas where we can do better. We need to improve our literacy and numeracy skills, and our OECD position for intermediate skills needs to rise. To match the highest rate of female participation in the workforce in the G7, which is in Canada, or in the OECD, which is in Iceland, we would need over 500,000 or 2.5 million more women to enter the labour force respectively. Our gross value added growth is still too reliant on London and the south-east. We are not building enough housing, and our investment in roads and rail has not yet undone the effects of the decades in which we under-invested. All that means that our economy needs to find an extra gear.
We should view this debate in the context of the broad decreases in productivity growth across the OECD over the past few years. We are not unique in this regard. Other G7 countries, including Germany and Italy, have seen their measured productivity per worker fall since 2007. We have to accept that productivity is a major challenge, but it is not a new challenge—it has been around for decades. To meet that challenge, we must look calmly and seriously at the variety of factors that affect productivity, and put in place wide and ambitious long-term reforms.
Importantly—the hon. Member for Nottingham East needs to engage with this point—those reforms must not jeopardise other elements of our economic growth. That is the approach that the Government will take in our productivity plan, because productivity is not an end in itself, but a means to an end. It is all about prosperity. When we publish our productivity plan, I hope that the Labour party will see fit to support it, because we agree that improved productivity will be good for living standards across the country and help us to meet our fiscal commitments, which is a point that he raised.
Ian Blackford
What the Chief Secretary is saying does not meet the reality of what has been happening for the past seven years. Productivity in the UK has fallen and the Government have failed to deliver prosperity. The root of that has been the failure of macroeconomic policy. Your big idea was quantitative easing, with £375 billion of new assets being created, but none of that has fed through to bank lending. That is why we have not seen the underlying investment in our economy that is required. You need to address that and make sure that we see investment in infrastructure, industrial investment and a plan for growth, not some meaningless productivity, which is just hot air and words, but no reality.
Madam Deputy Speaker (Mrs Eleanor Laing)
Order. Several people this afternoon, not just the hon. Gentleman who has just spoken, have used the word “you”. When one uses the word “you” in this Chamber, it refers to the Chair. I have not done any of the things I have been accused of this afternoon. I do not want to pick on individual Members at this early stage of the Parliament, but please let us use the correct language.
Greg Hands
I dispute the premise of the hon. Gentleman’s question. Productivity in this country is rising, albeit at a relatively low level. We would like it to be higher. It has risen by 0.9% this year. The OBR’s projection is that productivity will increase by between 2.1% and 2.5% per annum in the coming years. We need it to increase by even more than that, but it is certainly not the case that productivity has collapsed over the past couple of years.
Greg Hands
Okay, I hear the hon. Gentleman.
To answer the point raised by hon. Member for Nottingham East about the OBR, the OBR already produces forecasts and commentary on productivity, and will continue to do so independently and impartially as it always has done.
Chris Leslie
We are looking for the right hon. Gentleman’s support in commissioning the OBR to look at the spending choices the Chancellor has before him. He will have to acknowledge that certain decisions on reducing public expenditure could have more of an adverse effect on productivity than others. We want to make sure that we have a proper analysis of the impact of those decisions. That would be a better, more sensible way to think about how we spend. It is not just a debate about how much we spend.
Greg Hands
The OBR remit is pretty clear on this kind of thing. Let me just say that I have listened to the hon. Gentleman a great deal in the past five years. Coming from a party that never set up the OBR, or any equivalent to it, he seems now to be rather over-fascinated in what its operations should be. He might have thought of some of those questions during the 13 years of the Labour Government.
The hon. Gentleman said that employment growth had been of poor quality. I would dispute that. I think we will find that in the five years since the first quarter of 2010, more than 60% of the increase in employment has been in high skilled occupations. Some 75% of the increase has been in full-time employment and, after the excellent results this week, wages growth now exceeds inflation for the eighth consecutive month.
I am going now to make a bit of progress, because I am conscious that we have one or two maiden speeches coming up and a highly subscribed debate. Let us look at what we did in the previous Parliament. In 2010, the priority clearly for the Prime Minister and the Chancellor was to put in place a jobs-based recovery. We all know the result: 1,000 jobs created every day, with three quarters of them full time. The employment rate is now at its highest on record at 73.5% and around the highest level on record at 31.1 million. We make no apology for prioritising job growth in the past five years. It is the best way to make people’s lives better, as the nearly 12,000 people who found employment in the shadow Chancellor’s constituency will surely agree.
At the same time, we put in place important supply side measures to improve our national productivity. We increased average public and private infrastructure investment to about £47 billion a year between 2011 and 2014, which is more than a sixth higher than it was in the previous Parliament. We have completed 15 major schemes on the strategic road network, worth £3.4 billion, with a further 17 schemes, worth £2.5 billion, under way. We have completed more than 2,650 infrastructure projects and extended access to superfast broadband to more than 2.5 million more premises. We have accelerated the academies programme, with more than 4,600 academies now opened, and we have set the path for high-speed rail to unleash the full potential of our northern cities. We have protected the science budget in cash terms and set out a long-term capital commitment on the science budget as well, ensuring that it will rise in line with inflation for the duration of the Parliament.
Peter Kyle (Hove) (Lab)
Does the Chief Secretary recognise that in constituencies such as mine 90% of all businesses employ fewer than eight people? The skills and productivity challenge we have is on the softer, entrepreneurial side. He mentions the skills challenge and the setting up of academies. Does he acknowledge that we need to invest more in the soft, communication and entrepreneurial skills that young people need in an economy such as mine?
Greg Hands
I welcome the hon. Gentleman to this place and thank him for his intervention. I do not necessarily disagree with anything he says. Equally, I am sure that he would welcome what has been done in Hove in the past five years. Unemployment has fallen by, I think, almost 1,200 in his constituency—a 53% fall in joblessness. We will consider what he proposes, but he must recognise what has been delivered for his constituency.
We have raised the annual budget of Innovate UK, the core innovation support mechanism for businesses in the UK, from £360 million in 2011 to more than £500 million in 2015-16. I am sure the hon. Gentleman will also be delighted to learn that we have put a premium on apprenticeships, of which more than 2.2 million have been created, and that we have pledged to deliver 3 million this Parliament.
As I said, productivity began to rise last year, although we are still below our pre-crisis peak. We agree on the extent of the problem. The OBR expects productivity to pick up in 2015 and to grow at a reasonable rate afterwards in every year of the forecast period, which is good news for businesses and individuals and has undoubtedly contributed to our economic recovery.
I want to say a few words about the next five years, because, although a lot has been done, now is the time to redouble our efforts. My right hon. Friend the Chancellor told the CBI last month that we had a once-in-a-generation opportunity to find an extra gear for the British economy. Our productivity plan will set out how we will do that, and I will not, and cannot be expected to, pre-empt that plan. Let me remind hon. Members, however, of our manifesto commitments to boost productivity. We said we would invest in infrastructure, on which previous Governments failed to take the decisions that other countries did, meaning we fell behind in the ’90s and in the time of the last Labour Government.
Can you imagine, Madam Deputy Speaker, that in 2010 we did not even have a national infrastructure plan? I appreciate that the hon. Member for Nottingham East was not here between 2005 and 2010, having lost his seat in Shipley, but he was a Minister for part of the time Labour was in government, so he could have raised some of these points when he was sitting around the table. We have caught up a lot since, but our historical stop-start approach has meant that our physical infrastructure is not nearly as good as it should be. Now is our opportunity to fix that.
Greg Hands
No, I am going to make a bit more progress.
We will invest more than £100 billion in infrastructure over the next Parliament, including more than £70 billion in transport alone, of which £15 billion will be spent on our roads.
Greg Hands
I will come back to the hon. Gentleman in a moment.
We are investing in broadband and home building, with a commitment to build 200,000 starter homes to be sold at a 20% discount exclusively to first-time buyers under the age of 40.
Greg Hands
I give way to my hon. Friend the Member for Weaver Vale (Graham Evans) and welcome him back to the House after his fantastic election result last month.
Graham Evans
I am grateful to my right hon. Friend. Will he remind the House of the previous Labour Government’s record over 13 years? In 1997, 20% of GDP was from manufacturing, but by 2010 that had dropped to less than 10%.
Greg Hands
My hon. Friend is right that the previous Labour Government had a dreadful record on manufacturing, and that is one of the key challenges—this reads through to productivity—facing us this Parliament.
Greg Hands
I have allowed the shadow Chancellor quite a bit of time already, so I will give way to the Member for Washington.
Tom Blenkinsop
I am the Member for Middlesbrough South and East Cleveland. I welcome the Minister to his new role. Of course, in the past five years, under the coalition Government, manufacturing shrank by 1%. In terms of productivity, the north-east is probably the lead region in the country, mainly because of its chemical and pharmaceutical sectors, but they have seen the largest slump over the past five years, due mainly to the lack of investment. Does he agree that one problem is that the Government imposed the unilateral carbon floor price tax on energy-intensive industries, and did not the Chancellor promise to bring in a compensation mechanism? Will he speak about that, because it would not pre-empt the Chancellor’s emergency Budget in July?
Greg Hands
I thank the hon. Gentleman for that series of questions, but his use of statistics was highly selective. I am sure he will join me in celebrating the fact that the two regions in which employment is rising the fastest are the north-west and the north-east. Of all regions, the north-east leads the way in export growth. I am sure he will also join me in welcoming the fall of 1,518 in unemployment in his constituency under the last Government—again, just shy of a 50% fall.
Chris Leslie
I thank the Member for Fulham for giving way. Would he be so good as to look at the point he was making on transport infrastructure? I asked about the Davies commission on airport capacity, which he knows is an issue affecting Britain’s productivity as a whole. Will he give us an assurance that the Government will make a swift decision when presented with the final conclusions of the commission’s report, and not kick it into the long grass until the end of the year or beyond?
Greg Hands
The position is unchanged. It is as set out in our manifesto. We await the publication of the Davies report, and we will act accordingly. However, we recognise that airport capacity is an issue, which is why we commissioned the report in the first place.
Greg Hands
I am going to make some more progress, because I know that others wish to speak.
Marcus Fysh
I thank my right hon. Friend.
The A358 runs from my constituency up to the M5 and all the new jobs that will come on stream at Hinkley Point. Before the election, the Labour party planned to cancel the dualling of the road. Will my right hon. Friend confirm that that will not happen under this Government?
Greg Hands
I congratulate my hon. Friend on his amazing election result. It was a fantastic achievement. Indeed, I think that he unseated one of my predecessors as Chief Secretary.
Of course we are still committed to delivering the A358. I believe that the Labour party produced only two proposals for reducing the deficit during the election campaign, both of which were highly misguided, including the proposal for cuts in the A358 programme.
It is, in many ways, a vindication of what we have achieved since 2010 that we are debating the issue of productivity today. Over the last five years—[Interruption.] The hon. Member for Nottingham East says that he has been raising the issue. I have gone through all the speeches—well, not all of then, because I could not find them all, but most of them—that he made when he was leading the “Gordon Brown for leader” campaign in 2007. I have also gone through the speeches that he made when he was backing Ed Balls in 2010. I must say that I found scant reference to the word “productivity”.
Chi Onwurah (Newcastle upon Tyne Central) (Lab)
Will the Minister give way?
Greg Hands
No. I am going to finish now.
As I was saying, it is, in so many ways, a vindication of our record of the last five years that we are debating the issue of productivity. Many of us will remember our debates—led by the hon. Member for Nottingham East—on mass unemployment, the cost of living crisis, and “too far, too fast”. In all those respects, the hon. Gentleman’s approach turned out to be absolutely wrong. We now have financial stability, unemployment is down to historic lows, and living standards this year are predicted to grow at their fastest rate since 2001. All that is thanks to the tough decisions that we have made.
We now have a great opportunity to step things up a gear, and to solve a challenge that has been a drag on the United Kingdom’s economy for decades. The wind is blowing in the right direction. We have a falling deficit, a growing economy, an historic mandate, and a firm resolve to tackle this issue, along with the right team to do it. That is how we deliver for the people of the United Kingdom, and that is what this Government will do.