Budget Resolutions and Economic Situation

Debate between Pat McFadden and Iain Wright

Monday 13th July 2015 Commons Chamber

[Mr Iain Wright (Hartlepool) (Lab)]

Productivity is the pressing economic challenge of this Parliament. Unless the country addresses productivity, especially the widening gap in output per hour between ourselves and our main competitors, wage levels and living standards will not rise, and our competitiveness and position as a leading economic nation will be severely under threat. It is welcome that the Chancellor himself has now acknowledged the issue. In his Mansion House speech on 10 June he said:

“Britain must address its poor productivity.

We don’t export enough; we don’t train enough; we don’t save enough; we don’t invest enough; we don’t manufacture enough; we certainly don’t build enough, and far too much of the economic activity in our nation is concentrated here in the centre of London.”

I hope to address all those points in my speech, and ask how the Budget will address them.

Today is the first day in debate on the Budget that the House is able to consider the Government’s productivity plan, which was published on Friday. It is curious that the plan was not published alongside other documents at the time of the Budget statement, as is the norm. That suggests either that the Government fancied another hit in the 24-hour news cycle 48 hours after the Budget or that the productivity plan was not ready for publication on Budget day, and that Whitehall was trawled in a desperate attempt to scrabble together some half-baked measures in order to publish something—anything—in the immediate aftermath of the Budget. Indeed, the plan is littered far too much with phrases such as “will be published shortly”, or

“the government will set out more details of these reforms in the autumn.”

That suggests that the productivity plan has not been thought through as much as the Government would have liked.

On the question of exporting enough, it is a huge concern that there was nothing in the Budget to help to increase the number of firms exporting, or to address the persistent structural trade deficit. The Red Book shows that that is getting worse: in 2014, exports grew by 0.5% but imports grew by 2.4%. The Office for Budget Responsibility forecast that net trade this year is going to be more of a drag on GDP growth than it predicted even in the March Budget. The Red Book predicts a widening gulf between growth in world trade and growth in UK exports in every year of this Parliament. This country is not taking advantage of the growing opportunities throughout the world, and the Government should be helping to address that.

The productivity plan states:

“The government will remodel its delivery on trade, exports, investment and prosperity”,

but it does not give much else in the way of explanation. I hope that the Business, Innovation and Skills Committee can play a role in helping to shape that aim to ensure the Government meet their targets of £1 trillion by 2020 and 100,000 more companies exporting—an important aim that I am very keen to see the Government achieve, but I fear that it is looking increasingly unlikely.

[Mr McFadden]

While my hon. Friend is on the subject of exports, can he tell us how he thinks withdrawal from the European Union would help our export drive?

[Mr Wright]

I pay tribute to my right hon. Friend who speaks eloquently on these matters. With regard to our largest trading partner, I certainly think that withdrawal would not be conducive to hitting our export targets. I hope that the Select Committee will look at the costs and benefits to British businesses of EU membership, which will be important in the run-up to any referendum.

On the matter of there being enough training, the apprenticeship levy is a welcome step, although businesses, training providers and learners need more clarity. The Red Book says that the levy will support all post-16 apprenticeships in England and that

“firms that are committed to training will be able to get back more than they put in.”

What will that mean in practice? Given that the apprenticeship levy will be confined to large firms, will small and medium-sized businesses—which often find it difficult to train apprentices on the grounds of size, capacity and uncertainty over the order book—also benefit from the “get more out than you put in” principle? What happens to excellent large companies that are already exemplary when it comes to apprenticeship training, such as Nissan—in my region—Rolls-Royce and Airbus? Will the levy apply to them? I think it will and, if so, will the levy be used to cascade skills through prime companies’ supply chains, so that entire sectors are as competitive and productive as possible?

I mentioned Airbus a moment ago. The Red Book states that the apprenticeship levy applies in England, so how will it take into account large companies such as Airbus, which has a multinational operation throughout the UK, including at Filton in England and Broughton in north Wales? Will the levy apply to trainees in Filton in the south-west of England and in Broughton in north Wales? In addition, how does the levy link in with existing post-16 provision of education, skills and training, particularly in relation to further education cuts, which undermine colleges’ capacity to provide the training that firms want? Does the Minister anticipate that the levy will offset in full the proposed cuts to further education provision?

On the matter of investing enough, I really want to praise the Government on the measure to make the annual investment allowance permanent and at least £200,000. This is a very welcome step to encourage more firms to invest, with certainty in the long term. Hopefully, it will do much to boost productivity. However, more could be done to encourage innovation, product design, development and manufacture here in the UK. I would therefore have liked to have seen consideration of the expansion of the R and D tax credit, too.

To make us more competitive and productive, it is essential that we have a modern infrastructure. The Red Book and the productivity plan both prioritise road building. There is also mention of airport capacity and broadband connectivity, but for an island nation there was a striking omission. UK ports handle about 95% of all UK import and export tonnage, and 75% of all trade by value. Our ports are vital to our export capability, yet I find it odd that there was no mention of them in the Chancellor’s statement. Will the Minister explain how ports will play a part in boosting productivity? What do the Government intend to do to ensure our ports are as competitive as our rivals’ ports across the continent?

I am keen to see this country at the forefront of innovation, business creation and growth, and for the Government to provide a framework for competitive and productive firms employing highly skilled and well-paid employees. Where the Government have done the right thing to help to achieve that, such as with the annual investment allowance, I will say so, but I am afraid the Budget does not do enough of what is needed to address our massive productivity challenge.