Productivity

James Cartlidge Excerpts

Wednesday 17th June 2015 Commons Chamber

[Kevin Hollinrake (Thirsk and Malton) (Con)]

I am grateful for the opportunity to speak in this important debate. It is also a pleasure to speak after the excellent maiden speeches we heard from the hon. Member for Sheffield, Brightside and Hillsborough (Harry Harpham) and my hon. Friend the Member for Hertsmere (Oliver Dowden).

It is important to look at productivity in the context of the overall economy. Productivity is not a means to an end, but an end itself. We must look at the reasons we have difficulties with productivity. We must avoid short-term thinking, let the positive effects of the past five years take hold and take a long-term approach to making progress on the issue. The overall economy is doing well; employment is up by 2 million since 2010, and in 2014 ours was the fastest growing major economy. On 8 June the CBI said that we should expect

“solid, steady and sustainable growth”

with rising incomes. Business investment is making a strong contribution to growth. It is important that we do not damage what we have already achieved. We need to look at the facts behind the data, including the fact that oil and financial services are skewing the figures on overall economic and productivity gains.

The key determinants of productivity are competition, regulation, investment and education. In my experience, the best way to drive productivity, efficiency and innovation is by encouraging competition. When a business person is faced with stiff new competition, time and again they raise their game, work harder and motivate their staff. Some 70,000 new private sector businesses were created in the previous Parliament, creating 2.3 million jobs. The Government are doing what they do best: setting the stage and letting business get on with creating the jobs.

On regulation, there is now less red tape in this country than there was five years ago. In 2010 we had the second highest level of red tape in the G7, but we now have the lowest. Some 50% of businesses want the Government to focus on reducing regulations. Labour introduced six new regulations every day. We must have a Government who understand business. This Government want to cut the costs of red tape by £10 billion over this Parliament.

We need to encourage investment. We must invest in human capital, have better links with schools and universities and move over time towards the living wage. Tax credits are an employment subsidy, and subsidies create complacency and inertia. We need a long and stable tax regime. Capital allowances must be consistent, because businesses need a long-term understanding.

[James Cartlidge (South Suffolk) (Con)]

My hon. Friend makes a brilliant point about tax credits. As a small business owner, I was shocked to receive a call from one of my staff saying that they did not want the pay rise I had just emailed them about because they would lose so much in tax credits. Is this not a crazy dependency culture that is holding back productivity?

[Kevin Hollinrake]

Absolutely. We need to move towards a living wage over time. Rushing to a living wage too quickly might put jobs under pressure, but I believe that we should move towards a living wage over time and in consultation with business.

We need low and consistent corporation tax, which is what the Government are delivering. Governments should do less, not more, and the tax regime should be the same not only in one year’s time, but in 10 years’ time. Of course we need investment in infrastructure, such as roads, railways and broadband. That is particularly important for those in the hardest-to-reach areas, because rural businesses want a level playing field with those in urban areas. The VAT threshold of £82,000 is prohibitive, because businesses that want to invest but do not want to go over the threshold do not take on new employees and do not invest in new technology for fear of losing a significant amount of their profits.

In conclusion, statistics are important, but they are no substitute for judgment. Our judgment, and the judgment of the people of Britain, is that things are getting better. This is certainly the most business-friendly Government I have ever known. They have done the right things to give businesses the chance to start, grow, prosper and produce more.