Trade, Exports, Innovation and Productivity

Kelvin Hopkins Excerpts

Wednesday 13th January 2016 Commons Chamber

[Kelvin Hopkins (Luton North) (Lab)]

I appreciate what my hon. Friend is saying, but does he agree that a factor in low productivity growth is low wages? Companies will invest in capital investment if they have to pay high wages, and low wages and low productivity go hand in hand.

[Mr Bailey]

I certainly do agree with my hon. Friend. The Government’s original optimistic projections were based on totally unrealistic assessments of their ability to invest and export.

In the limited time available to me, I would like to mention some areas that the Government should look at in order to improve productivity. The three areas that are crucial to productivity are investment, skills and infrastructure. On investment, despite the Government’s best efforts to encourage banks to lend to small businesses, there is still a problem. Even projects such as Project Merlin have failed to address the scale of the needs of small businesses. The Government also need to look at the wider issue. We have heard a lot in this debate about long-termism. We have a financial services market that is geared to short-termism rather than to backing industry. When my own Committee looked into the Kay proposals for changing that situation, we detected no enthusiasm on the part of the Government to adopt them. One thing the Government could do to change this culture is to look at our financial services industry.

It is ironic that a Government wedded to a free-market capitalist economic model have had to resort to asking a communist state-interventionist country to provide the necessary investment for our energy infrastructure. On business support, we heard earlier about the closure of the Business Growth Service, which had been of enormous benefit to small businesses. Its closure is not only a great loss to small businesses; it also sends the wrong signal about the Government’s support and appreciation of them.

On the tax regime, I have heard a lot about corporation tax. Yes, it is part of the mix that is necessary to attract foreign direct investment, but in order to encourage investment by companies that are already here, we need to do something about business tax. We have an absurd position in this country wherein we offer tax breaks for capital investment but when a company invests in new capital, it finds that its business rates promptly go up as a result. There is obvious incoherence and inconsistency, and they are a major deterrent to the investment that is needed to drive up our productivity performance.

On skills, I recognise that the Government are anxious to promote apprenticeships. They are saying all the right things about boosting apprenticeships, but the reality is that in those areas where the shortage is greatest, such as engineering and manufacturing, and where there is the greatest dividend in terms of productivity and export potential, there is still an acute shortage in apprenticeship recruitment. That cannot be cured simply by putting apprentices on courses. It has to come from a change in culture in our education system that makes schools recognise the importance of getting young people into vocational education. That can be done by the Government ensuring that schools have to liaise with local businesses and have to measure where their students go in vocational training, as well measuring their exam results and university entrance. I say again that an incoherence in the Government’s performance is the cut in further education funding, as that is potentially the greatest provider of vocational education.

I am running out of time, so I will just quickly make a comment on infrastructure, which others have mentioned. Any regional economy will tell us that a lack of transport infrastructure is a major handicap for local businesses, and some 62% of businesses complain about this issue. Capital spending on infrastructure has been halved in the past five or six years, and that has to be addressed. The Government have not got this prioritised correctly.

Let me finish by saying that I have highlighted some of the issues we face, many of which need to be prioritised by Departments other than the Department for Business, Innovation and Skills. The cuts in BIS are a clear indication that this Government do not recognise the importance of an industrial strategy, and of having a Department that has the capacity to lead it and to make other Departments work towards the business priorities that are necessary and that are outlined by BIS.