Queen’s Speech — House of Lords, 2015-06-04
Topic: Macroeconomics
Simon Haskel (Labour, Centre-left): My Lords, as a fellow Mancunian, I welcome the Minister to the House and congratulate him on his maiden speech Yes, the election and its surprises are behind us, but our economic problems remain. My noble friend Lord Mendelsohn reminded us of them. We all know the answer, which many noble Lords have given: productivity. Yes, raising productivity is the main determinant of our standard of living, so why has it not happened? Could it be that productivity contains so many different ingredients, spread across so many government departments, that it is just too difficult to bring it all together? However, that is what leaders do. Yes, progress is often incremental, but sometimes it happens when leaders bring different elements together so that the whole is greater than the sum of the parts. That is true of productivity. The irony is that many of the elements required to raise productivity are already here, waiting to be harnessed by leadership What are those ingredients? The Minister listed some. We have an excellent science base in our universities and research organisations. Nurtured and supported in an age of productivity, it will become even better. We know that government spending on science pays, and it is a good example of investment crowding in. The noble Lord, Lord King, spoke of that. We have in place Innovate UK—the old Technology Strategy Board—which the noble Lord, Lord Newby, mentioned. I declare an interest as a past honorary president of its Materials Knowledge Transfer Network, and so I know the excellent work it does. In an age of productivity, there would be more nurture and more support for those organisations Another ingredient is skills. The gracious Speech promised us 3 million more apprenticeships. However, in an age of productivity the number would be less important than the standard; vocational education would be given the same priority as other sectors, instead of being the poor relation. The numbers are important as regards raising the number of firms offering good apprenticeships. The age of productivity in the digital 21st century requires digital skills and education. What has to be done is laid out in your Lordships’ own ad hoc committee report on digital skills Steps towards the age of productivity have already been taken in finance. We have an embryo industrial bank and the Business Growth Fund, and once our priorities change to productivity instead of austerity, new areas of finance will present themselves. Although sometimes misdirected, the City’s contribution, too, is important in an age of productivity. The UK would have much to lose by its decline—and much to gain from directing its ingenuity towards productivity. The noble Lord, Lord Reid, queried the data, and I agree. Much production is hidden in intangible production, but we raised that with the Minister’s predecessor on many occasions In an age of productivity, a national infrastructure commission would address our chronic underinvestment, as mentioned by the noble Lord, Lord Birt, and tax incentives would encourage productive investment over rent-seeking investment, as the noble Baroness, Lady Kramer, mentioned. The Minister spoke of cutting red tape. By the three internationally accepted measures we are among the most lightly regulated OECD countries. In an age of productivity, sensible regulation is important. Other attitudes, too, have to change: we need longer-term business leadership where productivity growth replaces financial engineering, as the noble Lord, Lord Reid, said. I put it to the Minister that the means of achieving this ambition of raising productivity is all around us. It needs to be harnessed The Minister is new, but your Lordships have heard this from me many times. However on this occasion I have an important ally: the Governor of the Bank of England. In the quarterly Inflation Report published this May, the Bank draws our attention to the fact that productivity has hardly moved in the last seven years; the Minister gave us the numbers. It speaks of the disproportionate number of low-skilled and low-paid jobs that require little investment. The point is that we cannot achieve sustainable increases in our standard of living by employing more and more people for longer hours on low pay. The message is that, when interest rates go up and the supply of cheap labour runs down, do not expect the Bank of England to keep things going by printing money and easing monetary policy The governor expects us to become more productive, and he is right. If productivity goes up by 0.5% a year, after five years we would still have £104 billion to find in cuts. A rise of 4% a year—ambitious but not impossible from a low start—would leave the Chancellor with £18 billion to give away. It can be done. We already have some wonderfully productive companies showing us the way. Unipart even has its own university of productivity, and McKinsey tells us that three-quarters of potential productivity growth comes from adopting these better management practices. So why are the Government not encouraging this The Minister reminded us that in the gracious Speech there are Bills to get Britain working. I am so ancient that I can remember something similar from Barbara Castle’s day, when she was the Minister for productivity. When Gordon Brown was Chancellor, he had a team in the Treasury doing this. The coalition claimed to have an industrial strategy. The Government’s proposals are therefore nothing new So what is missing? What is missing is an understanding that productivity is not just economics. Both Ministers have been in business—they know that productivity has to be a way of life and a culture, because it affects every aspect of a company’s business. And so it must be for Britain. It has to become our way of life, instead of austerity I put it to the Minister that this age of productivity is the real one-nation politics. It raises the standard of living of us all. It is business friendly. It would have the support of the Bank of England. The time has come for our culture to move from the age of austerity to the age of productivity.