Productivity

Shabana Mahmood Excerpts

Wednesday 17th June 2015 Commons Chamber

[Shabana Mahmood (Birmingham, Ladywood) (Lab)]

It is a pleasure to close this debate on behalf of the Opposition and to support our motion. We have had a good debate with some thoughtful speeches. I particularly want to mention the speeches of my hon. Friends the Members for Hartlepool (Mr Wright), for Newcastle upon Tyne Central (Chi Onwurah), for Croydon North (Mr Reed), for Sefton Central (Bill Esterson) and for Bristol West (Thangam Debbonaire). May I also congratulate the hon. Members who made their maiden speeches today? I am talking about the hon. Member for Hertsmere (Oliver Dowden)—or indeed for Albert Square—and my hon. Friend the Member for Sheffield, Brightside and Hillsborough (Harry Harpham), who made a moving tribute to his predecessor, David Blunkett, and to his constituency. May I welcome them both to this House, and I wish them well as they use the power of their voices to speak on behalf of their constituents and pursue the causes that matter to them?

One such cause and central issue of the day, on which I hope there is consensus in the House, is productivity and the impact of productivity on the performance of our economy. Productivity is the central economic challenge facing the Government and I believe that getting it right is vital if we are to achieve higher living standards, sustained GDP growth and effective deficit reduction.

We must seek to maximise output from the efforts of working people. If workers can produce more, their employers can pay more, tax revenues can be more buoyant, and GDP growth stronger and more sustainable. In short, if we get this right, everyone is a winner. Governments can make choices to pull the levers at their disposal when it comes to the national minimum wage or indeed the living wage, but when it comes to wider wage growth across the rest of the economy and for those on middle incomes, higher productivity is the way forward, as the CBI and indeed the Bank of England have also emphasised.

We should all agree in this House that GDP growth that is driven just by increasing the number of people in work and how many hours they work will not make people better off. As a nation, rather than settling for the current state of things, we should aspire to have more for us all, to be better and to be stronger. We should have a broader vision and ambition for everyone in our country, especially those who are currently stuck in low-paid work.

What has been happening to productivity on this Government’s watch? Seven years on from the global financial crisis—some Tories appear to have forgotten that there was a global financial crisis before Labour left power—productivity is still 1.7% below the pre-crisis peak. Between 2010 and 2014, productivity has grown by an average of just 0.4% a year. In quarter 4 of 2014, productivity growth fell by 0.2% compared with the previous quarter, and productivity growth was also negative in 2013 and 2012, at minus 0.3% and minus 1.2% respectively. UK output per hour is now 17 percentage points below the G7 average and 31 percentage points below that of the United States of America.

The Office for Budget Responsibility says that productivity growth is the

“most important and uncertain part”

of its economic forecast. The Office for National Statistics says that the stagnation of productivity is “unprecedented”. The Bank of England says that this is one of its main concerns about the nature of the recovery going forward.

One response to this productivity puzzle would be to think that this is just how things are—that this is a necessary and inevitable consequence of a changing world—but it does not have to be this way, and we should not settle for things being this way. Despite the post-election pronouncements about a soon-to-be-announced so-called productivity plan, the Tories’ inaction and ineffectiveness on this issue over their previous five years in government suggests that they have been content to settle for things exactly as they are. How else can the Chancellor explain his complete failure even to mention productivity during his March Budget speech, or his failure to prioritise productivity growth over the previous five years? But he and his team can listen today and start to put things right as they look ahead to the July Budget. The Chancellor has choices to make ahead of the first fiscal event of this Parliament, and he should make choices that will boost productivity.

The Chancellor could focus on skills and innovation. We have heard today that jobs growth has been disproportionately focused on lower-skilled work since mid-2013, and we have a persistent trend of insecurity in the labour market and, inevitably, weak wage growth too. The Government are wrong to sit back and watch that happen, because our labour market is changing and the jobs of tomorrow will look very different from the jobs of 20 years ago. Our future workforce is also changing; it is ageing, there are more women and there are increasing numbers of people with high-level qualifications. The Opposition believe that, with so much talent to harness, public spending should focus on enhancing investment, skills and innovation. The Tories have failed thus far to provide any real solutions or strategies to build the productive, high-skilled, high-wage workforce that this country needs, and this must urgently change.

On infrastructure, frankly Labour has already done the heavy lifting with the report that we commissioned from Sir John Armitt, whose proposal, accepted in full by us, for a national infrastructure commission is one that the current Government should also adopt. Indeed, we have even prepared the draft legislation. With all the work done, and given that it is in the national interest, Ministers can have that one for free and they should go ahead and do it.

The Chancellor should also listen to us and allow the OBR to publish an assessment of how the likely options for the spending review due later this year would impact on productivity. I know that we have asked him several times to allow the OBR to do a number of things, such as auditing party general election manifestos or preparing reports to inform the EU referendum debate. Unfortunately, the Chancellor has never taken the opportunity to listen to us before. However, it is important that we have a wider understanding of the big and difficult choices that will be made on public spending, and frankly, he should not run away or hide from having some light shed on the consequences of the different choices open to him, or indeed the scrutiny that will come once he has made his choices.

With no clear plan to boost productivity over the past five years, no significant drive for the skills that are needed for good high-wage jobs, no national infrastructure commission and no long-term funding framework for science, and only now plans for a plan in July, the Chancellor is coming late to this particular party. But if he is going to show up—and today’s no-show does not inspire confidence—he needs to make it count. His party colleagues could help him on his way by voting for our motion.