Public Sector Productivity

Lord Teverson Excerpts

Wednesday 9th October 2024 Lords Chamber

[Lord Teverson (LD)]

My Lords, I congratulate the noble Baroness on getting this debate because it is an important subject, as she said, and one that affects all services and the way that the state works for individuals, although I have to say that her speech sounded a bit like a post-mortem on Tory government for the past nine years. Never mind—we will leave that aside for the moment.

I was a corporate economist in the transport and freight sector, but it did not need that level of economist —more like GCSE and A-level—to understand that one of the most important areas for productivity is consistent investment. I will concentrate on that. As we know, the United Kingdom has one of the lowest rates of investment in the economy as a whole in the G7. In fact, I think it was bottom of that league for 27 of the past 30 years. When we come to public investment it is slightly better in that, in the past couple of years, Germany and Italy have been worse than us, but we still have a very bad track record there indeed.

One of the areas that particularly struck me when I prepared for this debate was the rollercoaster nature of public sector investment. The reason is that investment, which should be long term, as it is for us as individuals in our household expenditure, is decided by the Treasury year to year, effectively, so we have these big swings. In 1988-99 public investment was almost zero, in 2020 it got up to 3.5%, and currently it is about 1.6% of GDP. Those ups and downs were because of short-term decision-making. We can see some of those examples. I worked for a short period in a public corporation. It was small enough that it was not affected by Treasury decisions, but other nationalised industries at that time could not predict their own investment to meet their corporate planning because of week-to-week and year-to-year Treasury decisions.

We have seen some of that in the public investment in HS2. Good or bad, the fact that we are now left with a high-speed railway going from north London to Birmingham is clearly not good public investment. In school buildings and hospitals we have seen high maintenance costs because we have not regularly invested in time-expired buildings. Indeed, in public housing, which has more or less stopped since the Thatcher Government, we again are in a situation where we have a negative effect downstream on family life, schooling, health and all those areas because of a lack of public investment. As I understand them at the moment, through the work of the Institute for Fiscal Studies, under the plans public investment will go down by 7% per annum over the next five years—unless the Minister would like to tell us at the conclusion of this debate that the fiscal rules are going to change, and how they will change.

I have little more to say except that, as I said, there seems to me, from my GCSE economics, to be a simple solution here. We should have consistent levels of public investment, year-to-year, so that the economy can move forward and the private sector can understand what the Government will invest and what they will do, and then crowd in private investment as well. We need, through our planning, to make sure that we have the skills and the capacity to actually meet those investment areas. We need to decouple the Office for Budget Responsibility from investment decisions. Clearly, we also have to make sure that we critique public investment very strongly and invest in the right areas. Lastly, I am one of those people who reads the National Infrastructure Commission report quite regularly, and I see absolute sanity in that report. I would like to see a much closer relationship between government and that commission, to make sure that investment is right and moves forward effectively over a longer time period.