The Government’s Productivity Plan

Debate between Iain Wright and Peter Kyle

Tuesday 28th February 2017 Commons Chamber

[Mr Wright]

The hon. Gentleman is absolutely right. In terms of bang for our buck, the amount of great work that the universities sector carries out and the number of spin-out companies that higher education provides are a magnet, in contrast with the “stickiness”, for foreign direct investment. We have to make this country as attractive as possible to such investment. Just as I referred to London and the south-east pulling up our productivity, I dread to think what our productivity and investment levels might be if we did not have that foreign direct investment.

Despite the R and D spend of both Government and business, we have never spent the OECD average—far from it. In the past 35 years or so, we have spent 2% of GDP on R and D only once and that was in 1986. The long-term trend is around 1.6% or 1.7%, which is not good enough if we want living standards to be maintained or productivity to rise. Productivity weaknesses clearly need addressing, and the previous Government introduced the productivity plan. We welcomed the Government’s attention on this pressing matter, but the plan lacked focus and did not demonstrate how success would be judged. Rather than being a clear road map or strategy for how the UK would close the productivity gap, it disappointed by being a mere collection of existing policies, with nothing new, distinctive or game-changing. The plan had 15 areas covering all aspects of Government and business activity, incorporating skills, R and D, housing and transport. However, it had no meaningful metrics to evaluate its relative success or failure and no milestones to track progress.

Although the plan was a Treasury initiative, the old Department for Business, Innovation and Skills clearly had a role to play, but clear lines of communication and accountability were non-existent. BIS and Treasury Ministers told our Committee that the plan was monitored by civil servants, which seemed somewhat relaxed given that productivity was meant to be the Government’s most pressing economic challenge. They seemed to forget that they were members of a ministerial Sub-Committee. Productivity now seems so 2015.

[Peter Kyle (Hove) (Lab)]

My hon. Friend is giving a superb speech about the impact of productivity and the role of the Business, Energy and Industrial Strategy Committee, which he chairs and on which I proudly serve. Will he say a couple more words about the importance of the machinery of government in delivering a productivity plan? He just mentioned it, but it is shocking that Ministers came before our Committee and were totally unaware that their responsibility for the productivity plan was being scrutinised by a Cabinet Sub-Committee. The machinery of government and Departments, such as the Treasury, will play a crucial role in scrutinising the strategy and delivering for organisations on the frontline.

[Mr Wright]

One of the weaknesses of government—this is based not on the colour of Administrations but on the nature and culture of Whitehall—is that it is silo-based. The lack of co-ordination is clear. In the modern age, with pressing economic challenges, we need greater monitoring, scrutiny, supervision and co-ordination across the Government.

It would be interesting to hear about the current status of the productivity plan because, as I said, it seems so 2015. It was intensely fashionable, but only for around 12 months. The new buzz phrase is “industrial strategy.” The strategy contains 12 pillars, as opposed to the 15 areas of the productivity plan, so we are seeing some efficiency. I welcome the Government’s willingness to embrace the phrase as a potentially positive thing, but it exemplifies one of the problems that we face. Successive Governments have tended to announce something, to provide a new initiative or to undertake a review. Policy flits like a butterfly from one thing to the next, with little if any meaningful impact on the ground on firms’ productivity or our constituents’ living standards, which is to the detriment of long-term economic competitiveness.