Income Per Capita

Lord O'Neill of Gatley Excerpts

Tuesday 14th July 2015 Lords Chamber

[Lord Wigley]

To ask Her Majesty’s Government what steps they are taking to secure an increase in the level of income per capita.

[The Commercial Secretary to the Treasury (Lord O'Neill of Gatley) (Con)]

My Lords, to achieve meaningful and lasting growth in the level of income per capita and living standards we need a sustained pick up in productivity. Interestingly, the most recent data have shown a notable rise in productivity, admittedly from somewhat disappointing data beforehand. Of course, it should not necessarily be assumed that this is the start of a trend. This is why the Government have just published a productivity plan that sets out how we will achieve a step change in productivity.

[Lord Wigley (PC)]

Does the Minister accept that GDP per capita now is still lower than it was in the first quarter of 2008 and that the disparity between the level of income per head in London and in Wales or, indeed, in the north of England, remains very stubborn indeed? What plans do the Government have in the document he has just drawn to the attention of the House to close the disparity between London and the rest of these islands?

[Lord O'Neill of Gatley]

My Lords, I encourage every Member of this House to read all 82 pages of the document because it includes considerable detail to answer those questions. To be brief—I am aware from my recent appearances in this House that one has to be brief and not put Members to sleep—one of the most important measures related to previous Questions that I have been asked is that we have authorised an independent review into the accuracy of all UK economic statistics, which are highly relevant to this Question.

[Baroness Kramer (LD)]

My Lords, I am pleased that the Liberal Democrat plan to help to close the gender pay gap has been reannounced by the Government. Will the Minister join me in congratulating the former coalition Minister, Jo Swinson, who pushed through the relevant amendment on corporate disclosure? Will the Government now take steps to close the pay gap between older people and the under-25s, who will not be eligible for the new minimum living wage?

[Lord O'Neill of Gatley]

I would like to make reference to the presentation of the Budget and the policies included, which, I think I am right in saying, considered many ideas from many people in undertaking its commitments to raise the living standards of everyone in the UK.

[Lord Forsyth of Drumlean (Con)]

My Lords, does my noble friend agree that the way in which we can increase per capita income is by selling goods and services competitively across world markets, and that there is a limit to the good that Governments can do but almost no limit to the harm?

[Lord O'Neill of Gatley]

My Lords, while again I use this opportunity to encourage all Members to read our brilliant document, I shall also make reference to forces that I believe are important from my previous life on the topic of sustainable development and GDP per capita, one of which is indeed the performance of a country’s trade balance, particularly its export performance. That is something that our private sector needs to take the lead on. All that a Government should do is to make sure that it has the right environment to allow it to flourish.

[Lord Foulkes of Cumnock (Lab)]

My Lords, this is no laughing matter. Can the Minister explain to the House how the proposed changes in child tax credits will affect the per capita income of those involved?

[A noble Lord]

It is on page 64.

[Lord O'Neill of Gatley]

My Lords, I am very pleased to hear that one Member of the opposition Benches has read the productivity report in detail. On the specific question, as we showed in the Budget documents and in parts of the productivity document, we believe that when all the measures are looked at in total, eight out of 10 working households will be better off as a result of the personal allowance, the national living wage and the welfare changes announced collectively in the Budget.

[Lord Flight (Con)]

Does the Minister agree with Alistair Darling that the Government subsidising wages tends to depress wages and leads to overemployment, and thus poor productivity growth?

[Lord O'Neill of Gatley]

My Lords, I suggest that Alistair Darling has made many interesting contributions towards improving Britain’s economic performance and productivity performance, including that observation.

[Lord Davies of Oldham (Lab)]

My Lords, I take it that the Minister accepted the post because he intends to do good rather than harm to our productivity figures, in which we compare so badly to our leading competitors. However, how are the Government doing good when they dither over airport expansion, postpone rail electrification, have slippage on road programmes and generally fail to give the necessary government investment that would help on productivity? Even the construction industry is anticipating a drop in productivity this coming quarter. How on earth are we going to solve our chronic balance of payments problem while our productivity levels remain so low?

[Lord O'Neill of Gatley]

My Lords, I am still learning the practices here, and I am extremely tempted to give a very long answer to that very detailed question. I shall find the appropriate moment do so. Suffice it to say, at the risk of repeating myself, that I think I am right in saying that the very specific attention this document gives to all the factors that are important for productivity has never before been given, including virtually every single topic that the noble Lord mentioned.

[Lord Wrigglesworth (LD)]

My Lords, as the Minister has done so much work on this subject, can he tell the House which he thinks comes first: higher pay or higher productivity?

[Lord O'Neill of Gatley]

My Lords, there is considerable debate in leading academic circles about causation, as I am sure many Members of this House are aware. Historically the conventional belief has been that higher productivity will lead to higher wages. Due to the length of time during which this country and many others have shown signs of weak productivity and wages there is growing evidence, which has obviously influenced the choice of policy, that deliberately trying to raise wages for the less well off may result in a boost to productivity, as the ONS estimated in its independent analysis of this measure when it was announced last week.