Economy: Growth

Lord Birt Excerpts

Thursday 31st March 2011 Lords Chamber

[Lord Birt]

My Lords, the UK economy in London and the south-east is measurably as productive as any in Europe, not just because of the City’s world-leading financial services—something that we threaten at our peril—but, just as importantly, because of the vibrancy of London’s creative and business service sectors. However, overall, UK productivity persistently lags behind our leading competitors, as many noble Lords have pointed out. What can the Government do about this? Economic value is not created by Governments but by individuals who have insight and ability, and access to capital to realise that insight. Yet many individuals and businesses in recent years have been experiencing something akin to a cataclysm. The economy has taken a veritable body blow. Thus Government can most help business by engendering a stable economic framework, something that Governments the world over, along with regulators and financial institutions, have all too conspicuously failed to do over the past few years. Learning and applying the lessons of this widespread policy failure is the first priority both globally and nationally, and none of us can be certain we are there yet, as the chastening news from Ireland today reminds us.

In the UK, we look increasingly to the global labour market for rare and valuable skills. Overall, our own education system focuses insufficiently on the need to arm individuals and to provide the UK economy with the skills needed at every level to power modern business. For decades, our high-level educational outcomes have lagged behind our competitors, and that needs to change. Moreover, overly rigid immigration rules will block the entry of vital skills and talent, and thus threaten our productivity even further. So too, amid the realities of the global economy which I daily live and breathe, will internationally uncompetitive tax regimes for individuals and corporations. High tax rates will not prompt an immediate exodus, but I have seen at the margin the impact they have, and it is adverse to our true national interests. I should declare my own interests as a director or shareholder of several companies operating both nationally and globally; these are listed in the register.

Other factors are reducing our productivity. The principles that underpin the UK’s planning regime are admirable, but the interminable length of many of our planning processes and the fact that there is no economic penalty for all those who can cause delay—often very considerable delay, and many of them from the public sector—is enormously value-destructive. Our economy is also handicapped by the worst transport infrastructure by far in the developed world. The individual who wrote in a recent business department paper that the UK has a “well developed infrastructure network” should be sent immediately to Holland, where I was last week, to compare, for instance, the superb Dutch road and airport infrastructure with the UK’s own. Perhaps the Chancellor, when next contemplating his admirable aims for promoting UK productivity might reflect, when travelling to his own constituency in the north-west on the M6, that it is Europe’s worst and most congested strategic route, and then remind himself of the trivial investment in current spending plans for improving our national road infrastructure.

In conclusion, if we are ever to bring productivity in the UK up to world standards, the Government will need to roll up their sleeves and focus on getting the big things right, on addressing the stubborn, difficult and often politically unappealing challenges that have long held back and still hold back the UK economy from fulfilling its true potential.