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It is a pleasure to follow Mark Pawsey. He mentioned negative equity. I fear that when interest rates rise, as they may well do over the next few months, there will be an awful lot more people across the country— including many of his constituents and mine—in negative equity. That is a massive concern for this country’s long-term sustainability.
I want to focus my remarks on productivity. Productivity remains the vital element of Britain’s competitiveness. If British makers and doers are to compete in world markets, our productivity has to match or better that of our rivals, yet we are falling behind our competitors. Last month the Office for National Statistics released data showing that output per hour in the UK was 21% below the average of the other G7 countries—the widest productivity gap our country has seen since 1992. Output per worker in the UK fell year on year, while it rose for the rest of the major industrialised nations. That is probably one reason why our share of exports is falling and expected to fall further, as per the Red Book, which means that we will not meet the target that the Chancellor set of doubling our exports by 2020.
Without productivity growth, Britain cannot increase its competitiveness and there will be no long-term improvement in living standards. Wage inequality will increase and in-work poverty will worsen, which will mean that my constituents in Hartlepool, who saw a year-on-year actual—not relative—fall of 6.1% in average full-time wages in 2013 will see further real falls in their wages. That is on top of the fact that Hartlepool has lost £28.9 million since 2010 as a result of public sector cuts—a drop of 24.5% since 2010. That means that spending power in Hartlepool has diminished by £680 a household since the general election. The cost of living crisis in my community will get worse if the Government do not address the issue of productivity.
The Chancellor did not mention the word “productivity” once in the financial statement. Without business investment in new innovation and technology and better skills for workers, our living standards will fall over the long term. In his first Budget, the Chancellor forecast that business investment would rise by 8.1% in 2011, 10% in 2012, 10.9% in 2013, 9.5% in 2014 and 8.2% in 2015. The actual out-turn figures to date have been 3.1% in 2011 and, as this year’s Red Book shows, 3.9% in 2012. The forecast is an actual fall in business investment of 1.2% in 2013. I hope that I am wrong and that pent-up demand for investment will be unleashed in the next few months, but given the record of the past four years, the figures in this year’s Red Book suggesting business investment growth of 8% in 2014 and 9.2% in 2015 seem widely exaggerated and optimistic.
This Budget also marked the time when the Government gave up any ambition for this country’s becoming a leading player in the future of global low-carbon technology. The CBI report “The Colour of Growth” found that investment in the low-carbon economy could have accounted for more than a third of all growth in 2010-11 and had the potential to halve the UK trade deficit by 2014-15. It seems a long time since the Chancellor stated in his first Red Book in June 2010:
“The Government is committed to playing its part in moving to a low-carbon economy. The transition will change the shape of industry, growth and jobs. As part of this, the UK needs £200 billion of investment to 2020 to provide secure low-carbon energy.”
This Budget provided nothing to help realise that ambition, and in certain ways, such as the ending of the renewable energy enterprise investment scheme, it actively worked to deter investment in the low-carbon economy. That target of £200 billion of investment in a decade, which would have helped manufacturers such as those in wind turbine supply chains in my region, the north-east, and my constituency, will now be difficult to realise.
The fact that the Government will exempt from the carbon floor price fuel used in combined heat and power plants for electricity generated to supply manufacturing firms is welcome, and I have asked parliamentary questions about that. Mitigating actions for energy-intensive industries might also help manufacturing, but not immediately, because the announcement in the Budget does not kick in until 2016-17. As my hon. Friend Angela Smith said, it only reverses something that happened on the Chancellor’s watch last year.
Business rate reform, which would help manufacturing, was not mentioned in the Budget. Expanding capital allowances might help incentivise business investment, but again, as my right hon. Friend Mr McFadden mentioned, that measure only reverses the cut that the Chancellor made to such allowances in his first Budget. The tax relief to boost North sea oil and gas investment will only remedy the damage that he did to the sector in his Budget of 2011.
Those matters all show a wider problem in the Government’s economic and industrial policy. Businesses want long-term policy stability and a stable framework that gives them the confidence to plan and invest for the long term. Those oscillations in policy, with a measure in one year’s Budget reversed in a subsequent Budget a year or two later, do not give companies the stability and certainty that they need. It is little wonder that business investment has flatlined and our productivity has fallen behind that of our rivals. That is a real weakness of the Budget that the Chancellor shows little appetite to resolve for the long-term good of the British economy and the good of my constituents.