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

The hon. Gentleman is absolutely right. In terms of bang for our buck, the amount of great work that the universities sector carries out and the number of spin-out companies that higher education provides are a magnet, in contrast with the “stickiness”, for foreign direct investment. We have to make this country as attractive as possible to such investment. Just as I referred to London and the south-east pulling up our productivity, I dread to think what our productivity and investment levels might be if we did not have that foreign direct investment.

Despite the R and D spend of both Government and business, we have never spent the OECD average—far from it. In the past 35 years or so, we have spent 2% of GDP on R and D only once and that was in 1986. The long-term trend is around 1.6% or 1.7%, which is not good enough if we want living standards to be maintained or productivity to rise. Productivity weaknesses clearly need addressing, and the previous Government introduced the productivity plan. We welcomed the Government’s attention on this pressing matter, but the plan lacked focus and did not demonstrate how success would be judged. Rather than being a clear road map or strategy for how the UK would close the productivity gap, it disappointed by being a mere collection of existing policies, with nothing new, distinctive or game-changing. The plan had 15 areas covering all aspects of Government and business activity, incorporating skills, R and D, housing and transport. However, it had no meaningful metrics to evaluate its relative success or failure and no milestones to track progress.

Although the plan was a Treasury initiative, the old Department for Business, Innovation and Skills clearly had a role to play, but clear lines of communication and accountability were non-existent. BIS and Treasury Ministers told our Committee that the plan was monitored by civil servants, which seemed somewhat relaxed given that productivity was meant to be the Government’s most pressing economic challenge. They seemed to forget that they were members of a ministerial Sub-Committee. Productivity now seems so 2015.