Economy: Productivity

Lord Haskel Excerpts

Thursday 28th June 2018 Lords Chamber

Asked by

[Lord Haskel]

To ask Her Majesty’s Government what assessment they have made of the conclusion reached by the Economic Statistics Centre of Excellence in their paper Below the Aggregate: A Sectoral Account of the UK Productivity Puzzle, published in May, that some of the UK’s largest and most internationally competitive companies account for the biggest reduction in UK productivity growth.

[The Minister of State, Department for International Development (Lord Bates) (Con)]

My Lords, the Economic Statistics Centre of Excellence paper is an important addition to the evidence base, highlighting sectors where recent productivity slow-down has occurred. However, it remains unclear why this slow-down has occurred, why other sectors did not make stronger contributions to productivity growth before the crisis or to what extent this explains our long-standing productivity weakness.

[Lord Haskel (Lab)]

Does the Minister agree that this report, plus the further research from the Bank of England, indicates that our slow productivity growth is less due to the long tail of zombie companies but reflects the weaknesses of the business model applied by some of our biggest and best known companies—a model that incorporates share buybacks, high short-term bonus culture, and lower corporation tax and tax allowances that do not encourage investment. Will the Minister dust off the industrial strategy and review it so that these lessons can be learned?

[Lord Bates]

I assure the noble Lord that there is no dust on the Government’s industrial strategy. In fact, we have invested some £31 billion in a productivity investment fund for exactly that type of challenge. Moreover, we are conducting a further business productivity review, which is open to submissions along the lines that the noble Lord has referenced until 6 July. He will be aware, as a keen student of this area and indeed very experienced in it, that there has long been a UK productivity puzzle—that is why the centre titled the paper in that way—and it has existed since the 1950s and the 1960s. It has been suggested that, at a sectoral level, productivity gains are easier to make in the manufacturing sector than in the service sector and we have traditionally been a service area. We are far from complacent on this and are making progress on a whole range of issues to ensure that we improve our performance in the future.