UK Economy (Competitiveness)

Oral Answers to Questions — Treasury – in the House of Commons at 10:30 am on 26th January 2006.

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Photo of John Bercow John Bercow Conservative, Buckingham 10:30 am, 26th January 2006

What factors he takes into account in assessing the competitiveness of the UK economy.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

We assess economic performance over the economic cycle using a range of measures, including gross domestic product and productivity growth, labour market performance and economic stability. The fact that the UK is the only G7 economy to have avoided any quarters of contraction in output since 2001 shows that the UK is highly competitive in today's increasingly global economy.

Photo of John Bercow John Bercow Conservative, Buckingham

I am grateful to the right hon. Gentleman for that lamentably complacent reply. Given that skills shortages are endemic, productivity growth is at record lows, the regulatory burden upon business is more onerous than ever and this country has slumped from fourth to 13thin the international competitiveness league table since the Government took office, why does he not now accept that the Government and the Chancellor are wrong and that respected commentators—from the CBI to the Institute of Directors and from the British Chambers of Commerce to the London School of Economics—are right to criticise him?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

I am disappointed that the hon. Gentleman thinks my answer is complacent.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

"Complacent" will be quite sufficient to support my disappointment. I took care to answer specifically the hon. Gentleman's question. He asked what factors are taken into account in assessing competitiveness and I answered the question. It did not seem to me that, in a factual question, there was room even for his extravagant expressions of regret.

The hon. Gentleman has expressed judgment on whether the steps that the Government have taken were appropriate, and he will recollect that he was one of the most vociferous and consistent critics of the Government's decision in the early days to give the Bank of England independence. He may well, like most of his colleagues on the Conservative Benches, have changed his view on that, and now has to accept the judgment made by the Government. He nods to indicate that he has.

The hon. Gentleman will know, from his experience and knowledge of this area, that the most important thing in relation to competitiveness and productivity for the UK is macro-economic stability. Indeed, the shadow Chancellor effectively said that in the speech that he made on Monday, when he said that he would not sacrifice the stability that we in government have won for this country for any other purpose, even tax cuts. I suggest to the hon. Gentleman that a significant number of factors are involved on which there may be differing views, but stability has been achieved.

Photo of Jim Cunningham Jim Cunningham PPS (Mr Mike O'Brien, Solicitor General), Law Officers' Department

Does my right hon. Friend recall that under the previous Government, some of the major companies in this country refused to or could not take on apprentices?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

Of course I remember that, and my constituents remember it even more painfully because they lived through those times, when they saw their young people being deskilled, effectively and substantially, by that. I celebrate the fact that, across the UK, there are now 300,000 apprentices in training.

Photo of Richard Spring Richard Spring Vice-Chair, Conservative Party

What role does the Chief Secretary think the collapse in our world competitiveness has played in the fact that we have the worst trade imbalance in our history?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

There has not been a collapse in the competitiveness of the UK. In fact, only this week an independent survey indicated that the UK is the No. 1 place in the world for inward investment. That is the view that other businesses take of the competitiveness environment and productivity of this country. As my right hon. Friend the Chancellor has already told the House, productivity has grown in every year of our stewardship of the economy. The hon. Gentleman's party could not say the same.

Photo of Rob Marris Rob Marris Labour, Wolverhampton South West

As my right hon. Friend says, one of the measures of competitiveness is productivity. There are different ways to measure productivity, one of which is average output per worker per hour. Another, and a major measure for our economy, is the average output per person of working age per year and the Government have a wonderful record in that regard because of high employment. Will my right hon. Friend assure me that we will continue with our policy of high employment because work is the best way out of poverty?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

My hon. Friend is entirely correct. The challenge for the Government is to increase productivity year on year while increasing the number of people in work. We have achieved that to such an extent that there has been a record increase in the number of people in employment. I must remind Opposition Members that that contrasts with the record levels of unemployment when they were in charge of the economy.

Photo of John Hemming John Hemming Liberal Democrat, Birmingham, Yardley

Is the Chief Secretary aware of the substantial damage done to competitiveness by relative gas prices in the UK vis-à-vis the continent? Prices in the forward market are around 40p a therm on the continent, while they are about twice that in the UK. What are the Government going to do about the incompetent way in which they have handled the gas market?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

I do not accept that the Government have been incompetent in our handling of the gas market. I am not immediately able to confirm the particular statistics that the hon. Gentleman quoted, but I will accept them from him. Recently, however, my right hon. Friend the Secretary of State for Trade and Industry explained from the Dispatch Box exactly what we were doing to ensure that industry in this country is properly served in energy, despite the fact that we live in a globalised economy in which energy prices have increased significantly.

Photo of Lindsay Hoyle Lindsay Hoyle Labour, Chorley

Drag factors on competitiveness are over-burdensome regulation and the gold-plating of EU regulation. I know that the Government are working hard to reduce regulation, but could we set higher targets to ease the burden on small companies?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

My hon. Friend will be aware that in the pre-Budget report my right hon. Friend the Chancellor announced a review of this very phenomenon—the gold-plating of EU regulation. The Government believe, as does my hon. Friend, that inefficient and over-burdensome regulation can impose a significant cost on business and we have introduced, and are seeing through, radical and thorough-going reforms to business regulation across the Government.

Photo of Theresa Villiers Theresa Villiers Shadow Chief Secretary to the Treasury

Does the Chief Secretary accept that in a globalised economy, it is vital for our competitiveness that our tax system be as simple, efficient and user-friendly as possible? If so, is he concerned that the World Economic Forum now ranks the UK as low as 67th in the world for tax efficiency; that the length of Tolley's standard textbook on tax has doubled since Labour took power since 1997; and that only this week Mike Brewer, of the Institute for Fiscal Studies, said that the Chancellor had

"done damage to our reputation" as a country with

"an efficient and transparent tax system"?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

First, I welcome the hon. Lady to her position and congratulate her on her promotion. I look forward to working with her. I ask her to pass on my appreciation to her predecessor for the good working relationship that we had.

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

My right hon. Friend reminds me that the hon. Lady has eight predecessors.

Photo of George Osborne George Osborne Shadow Chancellor of the Exchequer

How many Chief Secretaries has the Chancellor had?

Photo of Des Browne Des Browne Chief Secretary, HM Treasury, The Chief Secretary to the Treasury

I am not sure, but I think four.

Unfortunately, the hon. Lady is wrong in her analysis of the tax situation in the UK. Since we came to power, we have cut corporation tax, income tax and small business tax and introduced research and development credits, to such an extent that many international studies consistently show the UK to be an attractive place to do business, with a relatively low tax burden. In fact, the latest OECD figures show that the UK tax burden is well below the average for the EU 15 and the EU 25 countries.