Autumn Statement

Lord Haskel Excerpts

Thursday 4th December 2014 Lords Chamber

[Lord Haskel (Lab)]

My Lords, I, too, was disappointed that in the Chancellor’s Statement we heard hardly anything about productivity. In fact, more has been said in this House than in the other place—and it needs to be said. In the past six years output per hour in this country has fallen by 3%. In the US it rose by 7.6%. In Germany, France and Italy it also rose. I assume that the Government’s view is that weak productivity is the price worth paying for the kind of labour market they have created.

I put it to the Minister that productivity determines our standard of living—our standard of living has always risen as productivity has risen. By neglecting this, the Autumn Statement is condemning us to yet more stagnation in our standard of living. Are the Government just hoping for the best? Are they hoping that as demand strengthens so our productivity performance will improve? I put it to the Minister that this is a gamble the Government should not be taking. Instead, the Government should be taking action because the benefits of rising productivity—equally shared between employer and employee—benefit us all, including the Government.

During an Oral Question on welfare on 24 November, I asked the Minister how much would be saved in housing benefit paid to those in work if their productivity went up by 1% and was equally shared between employer and employee. The Minister did not have a number, but he thought it was a good idea. A couple of days later I received a letter from a professor of economics with a calculation. The answer is £210 million—a nice contribution and it could even pay the bedroom tax.

The Government’s policy of subsidising low pay to encourage employment has certainly helped raise the number of people in work in the short term, but it has downgraded the quality of jobs. Surely, this is one reason why our productivity has been stagnant: most of the jobs created since this Government came to power have been part- time or in the self-employed sector. Many of these jobs are in an expanding service economy that has lacked the strong investment and skills needed to raise productivity.

The noble Viscount, Lord Younger, spoke of the rise in GDP, but GDP considers investment and consumption to be the same. It does not differentiate between money spent on research or new equipment and money spent on going on holiday or getting your hair cut. Indeed, GDP also includes value-destroying expenditure, like pollution or traffic jams: it does little for productivity. The living wage movement has given a number of examples where higher pay has actually bred higher productivity. The Low Pay Commission has said that raising the minimum wage, alongside improved training, could even help raise the UK’s productivity.

Yesterday, the Minister referred to productivity rather indirectly, through infrastructure and lower taxes; he even asked for suggestions. My noble friend Lord Adonis has spoken of skills, and there he was absolutely right. I would be happy to oblige further, but I see that my time is nearly up, so it will have to be on another occasion. Perhaps the Minister thinks that getting business to raise its game and be more productive is anti-business or interference. It is not: it is pro-business and pro a business community that wants to raise its game, improve its performance and improve its engineering and technology. We have to ensure that rising productivity results in rising real wages for all, not just for the top earners. This Autumn Statement is a missed opportunity to change our focus from short-term rises in GDP fuelled by low-paid jobs—subsidised by the taxpayer and yet more credit—to lifting our ambition to raising the standard of living of us all through productivity. This is where the next Government—a Labour Government—will have to turn their attention.