Productivity Rates

Oral Answers to Questions — Trade and Industry – in the House of Commons at 10:30 am on 22nd March 2007.

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Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions) 10:30 am, 22nd March 2007

What assessment he has made of the effectiveness of his Department in raising UK productivity rates.

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

I thank the hon. Gentleman for that very helpful question. The Chancellor's excellent Budget statement yesterday spelled out our very successful record in delivering sustainable macro-economic stability and our equally successful performance in making effective micro-economic interventions to remove the barriers that prevent markets from functioning efficiently. That has enabled us to raise productivity rates and to enhance UK competitiveness. Since 1997, we have halved the previous gap in UK output per worker compared with France, and closed the gap in output per worker compared with Germany. The Department of Trade and Industry has played its part in stimulating competition and enterprise, enhancing flexibility, and promoting science, innovation and skills. We have provided the first-class stewardship of the economy that has helped to raise productivity rates, and that is something that only a Labour Government can do.

Photo of Andrew Selous Andrew Selous Shadow Minister (Work and Pensions)

In order to boost our productivity to French and German levels and to provide the skills that our businesses are crying out for, will the Minister become the champion across Whitehall of the lost generation of 5 million adults who cannot read properly and the 7 million who cannot do basic maths? This is a vital issue on which a cross-departmental lead needs to be taken. May I ask that the DTI do some serious work on it?

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

I agree with the hon. Gentleman that this is an important issue, which is why we have done something about. We have reduced the figure that we inherited—6 million adults with no basic skills—to the still far too high figure of 5 million. I agree entirely that we must continue to work to provide the basic skills, because it is high skills that will enhance our productivity rates. We in the DTI play our role across government in ensuring that we have the proper structures, programmes and interventions in place to do just that.

Photo of David Simpson David Simpson Shadow Minister (Trade and Industry)

Last year, a DTI report stated that low business investment "hinders" productivity and growth. Yesterday, the Chancellor increased taxation on the small business sector. What are the Government doing to encourage investment in that sector across the United Kingdom?

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

If the hon. Gentleman looks closely at yesterday's Budget statement, he will find that we introduced a new annual investment allowance of £50,000 that will benefit small businesses in particular. He will also notice that we will increase the tax credit rates for research and development, particularly those for small businesses, so he has got it wrong in suggesting that yesterday's Budget did not enhance our competitiveness and encourage investment in the small business sector.

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

Would my right hon. Friend agree that the top productivity levels of the German economy still lag behind those of this country?

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

I entirely agree that we are doing especially well in our management of the economy. The advantages that we have over the German economy are our flexible labour markets, our high investment in research and a strong academic base. The latter means that we have good innovations and we are getting better and better at translating those into products and services. The fact is that we have closed the productivity gap with Germany through our management of the macro-economy and other interventions to support productivity and we are being extremely successful.

Photo of Justine Greening Justine Greening Vice-Chair (Youth), Conservative Party

I am sure that the Minister recognises that one aspect of productivity growth is skills investment in staff. Does she agree that at a time when we have 1 million people on jobseeker's allowance, 1.5 million people saying that they want work and 2.7 million on incapacity benefit, the vast majority of whom also say that they want to work—a huge stock of people who would like jobs—it is ironic that we have invested nothing in skills, so that British industry has had to go across the world to pull in economic migrants to do jobs in this country? Does she agree that that is a real indictment of the Government's policy?

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

I have to say that people are living in two parallel worlds. There is the real world, of the real UK economy, with real performance and 2.6 million extra jobs; a massive investment in skills and education; a huge investment in our science base and research activity; and with an enormous investment in enterprise. Then there is another little world of Conservatives who promise either unaffordable spending commitments or unachievable tax cuts. I know whom the British people believe.

Photo of Mark Prisk Mark Prisk Shadow Minister (Business, Enterprise and Regulatory Reform)

I welcome the Minister to planet earth. It is nice of her to join us this morning. I agree with her that improving our productivity is vital, but after 10 years and 11 Budgets filled with complex schemes and political tinkering, the truth is that our labour productivity, as we have heard, is still behind France and Germany and way behind the US. Is not the real issue the quality of business management and, as my hon. Friends have rightly said, poor labour skills? When will the Government focus on that rather than on cooking up over-complex short-term schemes? What does planet Minister say?

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

The planet Opposition spokesperson has not seen or understood the impact of all the investment that we have made in skills over the past 10 years. I do not know which planet the hon. Gentleman lives on, but were he to look at the statistics—which are not produced in a party political way, but by the Office for National Statistics and others—he would see that the productivity gap between ourselves and France and Germany is closing. He would also see that we are the only country that is maintaining the same level of productivity in relation to the US as we had 10 years ago, although productivity in other European countries has declined. Were he to go around his own constituency, he would also notice that the investment in skills and education is raising standards and ensuring that British companies can perform effectively with the skills that we need.

Photo of Dennis Skinner Dennis Skinner Member, Labour Party National Executive Committee

Does the Minister agree that our unemployment levels are far below those in France and Germany? Will she also agree that the massive amount of enterprise that was a result of the coalfield plan that we introduced in 1997 has meant that unemployment in Barnsley, where every single pit was shut, is 2.8 per cent. or half the national average? In nearly every coalfield in south Yorkshire, north Derbyshire and other parts of the British coalfield area, the unemployment rate is below the national average. The result is that we have jobs in every pit yard in my constituency, even though every one of those pits was shut by the Tories when there were 4 million people out of work.

Photo of Margaret Hodge Margaret Hodge Minister of State (Industry and the Regions)

My hon. Friend is absolutely right. Unemployment is at the lowest level for a very long time, while the employment rate is higher than it has ever been and much higher than the rate in all our competitor countries. Most importantly, it is this Government who have made the appropriate interventions to ensure that the benefits of stability and growth are enjoyed by all areas of the country and not just the richer ones. That is why employment rates are high in my hon. Friend's constituency.