Trade, Exports, Innovation and Productivity

James Cartlidge Excerpts

Wednesday 13th January 2016 Commons Chamber

[Stewart Hosie]

Indeed it does. The quotes from businesses when it was announced were extremely clear. They are happy to seek bank funding and to use their own resources, but when they are undertaking what may be slightly risky innovation and R and D, they have an expectation of a little help from Government. If that is a grant, the work can proceed and the thinking can go ahead. If it is a loan that requires to be repaid, that might just tip the balance in favour of the risk being too great, which will drive down innovation even further.

The reason innovation is so vital, particularly in manufacturing—and why it is so important to encourage it—is that as it has fallen as a share of R and D investment over the past 20 years, manufacturing exports, jobs and output have also fallen. One can see the speed and length of that decline. Manufacturing has gone from making up 30% of the economy in the 1970s to less than 10% today; from accounting for more than 20% of all jobs in the 1980s to only 8% today; and from making up a quarter of all business investment in the 1990s to barely 15% today.

We see the reduction in global export market share in the OBR’s most recent fiscal forecast, in which it falls throughout the forecast period to the end of this Parliament. What is more worrying is that the figures in the November forecast were marked down in every single year from those in the July forecast. Everything is going in the wrong direction. The complacency from the Government and the limited plan they have are simply no longer enough. That is why we need an unrelenting focus on innovation in manufacturing in relation to trade and exports.

[James Cartlidge (South Suffolk) (Con)]

I welcome this debate and the hon. Gentleman’s focus on rebalancing the economy, which is undoubtedly a huge issue. However, when we talk about rebalancing the economy, we have to remember that because the recession in 2008 was a financial recession, it was inevitably followed by monetary policy hitting the floor, perpetuating higher house prices and all those other things we wanted to avoid, but which were an economic necessity. That being so, does he regret the role his party played in advising Royal Bank of Scotland to purchase ABN AMRO, which ushered in the huge financial crash and brought down our financial giant?

[Stewart Hosie]

There is a historical disconnect here. The fight over ABN AMRO was between the board of RBS and the board of Barclays. One of them called it wrong and one of them got lucky. I suspect that my input and that of my right hon. and hon. Friends had precisely no bearing whatsoever on Mr Goodwin’s decision to persuade his board to buy ABN AMRO. The suggestion is quite extraordinary.

I have said that we need an unrelenting focus on innovation in manufacturing in relation to trade and exports. Although manufacturing has suffered the largest falls, it still accounts for 44% of all UK exports because the deficit in trading goods is so large. Any Government who are serious about rebalancing the economy and correcting the trade deficit in goods must have a laser-like focus on encouraging innovation in manufacturing, as well as on supporting existing exporting businesses.

This debate is about more than innovation, manufacturing and exports; it is about boosting productivity. That is vital because—this is undisputed—both Scotland and the UK sit only towards the top of the third quartile of advanced countries by GDP per hour worked. We are below many smaller European countries and, importantly, below major competitors such as the US, Germany, France and even Italy. I am pleased that Scottish output is now 4% higher than pre-crisis levels. That is a good thing, but clearly there is substantially more to be done, not least because UK productivity growth is at 1.3% a year, which is barely half the level of the 2% pre-crisis rate.

Scotland has an economic plan based on four principles to boost productivity: investment in education and infrastructure; internationalisation and encouraging exports; innovation, which, as we have discussed, is essential; and—in many ways the most important aspect—inclusive growth. The latter point is vital because we know from the numbers—we have all seen them—that the UK lost 9% of GDP growth between 1990 and 2010 because of rising inequality. We are concerned that that mistake is being repeated by this Government, with their arbitrary surplus fiscal rule, which is requiring them to cut far more than is necessary to run a balanced economy and denuding them of the resources that are needed to tackle inequality and maximise economic growth.