The Government’S Productivity Plan

Part of the debate – in the House of Commons at 2:04 pm on 28th February 2017.

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Photo of Iain Wright Iain Wright Chair, Education, Skills and the Economy Sub-Committee, Chair, Business, Energy and Industrial Strategy Committee 2:04 pm, 28th February 2017

I will respond to the right hon. Gentleman in a moment when I talk about the structure of our employment market and how I do not think it deals with living standards, helps our constituents, or improves the long-term competitiveness of our nation.

It is little wonder, given the intimate link between productivity and pay, that Paul Krugman said:

“Productivity isn’t everything, but in the long run it is almost everything.”

Reflecting this, wage growth has been anaemic. In the period between 2007 and 2015, British workers suffered a bigger fall in wages than those in any other advanced country with the exception of Greece. Average pay fell in real terms by more than 10%. In the same period, real wages grew in France by 11% and in Germany by 14%. Median pay for workers in this country is still around 5% below its pre-crisis peak. There has been a lost decade of wage growth for our constituents, the British workers.

However, the headline nationwide figures for productivity, worrying though they are, mask the stark differences in regional productivity. Gross value added per hour in London is 32% above the UK average. The only other region with productivity above the UK average is the south-east of England, which is 9% above the average. The regions of the north and the midlands—including my own region of the north-east, and those of my fellow Select Committee members, the hon. Members for Cannock Chase, for Derby North and for Warwick and Leamington—have productivity levels between 10% and 15% below the UK average. In the nations of the United Kingdom, productivity in Scotland, which includes the constituency of the hon. Member for Edinburgh West, is 2% below the national average, while in Wales it is 19% below the average. Were it not for the performance of London and the south-east, the gap between ourselves and our major economic rivals, with whom we are competing for orders, trade and market share, would be even more dire.