Finance Bill

Debate between Lord Harper and John Redwood

Tuesday 12th September 2017 Commons Chamber

[Mr Harper]

I am always grateful to have excellent suggestions from colleagues in Northern Ireland. It is worth remembering that they bring a particular perspective to Brexit, given that they have a land border with the Irish Republic. We need to be very conscious of tax effects across the border as we leave the European Union.

I set out in my Westminster Hall debate, which I will not reprise now, our good record on economic growth since 2010, our reduction of the deficit and the significant number of jobs that businesses in the United Kingdom have generated. That is all very positive. But I am perfectly happy, as are the Government, to accept that there is one area in which the country’s economic record since 2007-08—under both the Conservative party and the Labour party, when it was in government—has been less impressive, and that is productivity. Since the economic crash, productivity growth has stagnated, and the level of productivity is significantly below that of the G7.

As I have said, it is essential to raise productivity if we are going to increase pay in both the public and private sectors. I want—I think all Conservative Members want—to give public sector workers a pay rise, just as much as Opposition Members do. But we understand that that has to be paid for. There is also an element of fairness. Private sector wages fell, in cash terms, after the crash, but that did not happen in the public sector. The work done by the Institute for Fiscal Studies shows that after a number of years of pay restraint, pay in the public and private sectors is now roughly in balance. It is, perhaps, a little ahead in the public sector if we take account of the more generous pension schemes. I want workers in both the private sector and the public sector to be properly rewarded; I do not want to favour workers in one sector at the expense of those in the other. That idea is missing in the comments we have heard today from the trade unions about public sector workers. We have to have a balanced settlement for workers across the economy, not just those in one area of it.

It is not clear what has caused the lack of growth in productivity. It will probably not surprise anyone in the House to learn that according to economists—I apologise if there are any economists in the Chamber; I stopped my economic training when I left university—a number of things seem to be at the root of this, one of which is that there could well be a lack of wage growth, which means that companies are not investing in capital equipment to make work more effective. As a former Minister for Immigration, I think that having unlimited unskilled migration—it is definitely at the lower end of the labour market, keeping wage growth low—has certainly not encouraged companies to invest in machinery and equipment to drive up productivity. Leaving the European Union gives us the opportunity to reduce importing unskilled workers from the current level. That does not mean reducing it to zero, but reducing it a little will help to improve such an incentive.

[John Redwood]

To help my right hon. Friend, let me say that there is a good reason and a bad reason why productivity has been disappointing. The good reason is that we have generated lots of lower-value jobs—it is better to have a job than no job—and we now need to help those people to work smarter so that they can be paid better. [Interruption.] Labour Members do not want jobs for their constituents, but I do, and I then want to go on and get them, when they have been trained and skilled up, into better-paid work. The bad news is that we have lost a lot of top-end jobs in the North sea oil industry because of the maturity of the fields and the decline of output, as well as the hit on the price, and we have also lost quite a lot of top-end jobs in the City—some people did not like those top-end jobs very much, but the crash destroyed quite a lot of them in the City—and that has obviously depressed the overall productivity figures.

[Mr Harper]

My right hon. Friend makes a very good point. I agree with him that the response to what he said about the growth in jobs was very disappointing. One thing I touched on in my Westminster Hall debate was the comparison between this country and some of our European neighbours. I must say that in Britain, where the level of unemployment for young people has fallen from 20% to 13%—I accept that that is still too high—the record, particularly for younger people, is phenomenally better even than in countries such as France, where the rate remains at 20%, while in some European countries that have completely lost control of their public finances, the rate is—

--- Later in debate ---

[John Redwood]

Fifty per cent.

[Mr Harper]

My right hon. Friend is absolutely right. Half of young people in Greece are unemployed, and that is after a significant number of other young people have come to countries such as the United Kingdom and Germany to work. I must say that that is not a sustainable economic model. I suspect there is going to have to be a shake-up in the eurozone at some point—more fiscal transfers, or looking at the currency—because it is not sustainable for half of a country’s young people to remain unemployed for a considerable period.

Thankfully, we have not had to confront such a problem in our country—we have a different set of challenges—but my right hon. Friend is right about productivity. Let us look at the Bank of England analysis. He has already referred to falling productivity in the oil and gas sector and the financial sector. As I have said, there has been the impact of the financial crisis on allocating capital. I think there is now enough capital in the economy, but the issue is about getting it to the right businesses. There has also been a slowing rate of growth in innovation and discovery, as well as some inaccuracies in the data.

There is no single thing that we can do, which is why I am very pleased that the Government have set out a range of options in the productivity plan published by the previous Chancellor, George Osborne, in his Budget immediately after the general election in 2015, and in the measures set out by my right hon. Friend the present Chancellor, who was in the Chamber earlier. In relation to the national productivity investment fund, the Chancellor has set out some very important areas of spending, which I will briefly mention.

The first area is accelerating the housing supply, which is absolutely critical. I share the concerns expressed by Opposition Members. It is absolutely critical that we look at growing the housing supply urgently so that younger people, and not only younger people, can find affordable houses for them either to rent or to aspire to buy. A very significant sum in the national productivity investment fund will go towards that incredibly important area. The second area is investment in transport. I welcome today’s announcement about the very significant investment in the A303 and the significant amount of money to ensure that we properly protect the ancient monument of Stonehenge. That is very important for me and colleagues from south-west England. We are also seeing improvements to rail, and to the missing link on the A417—the bit of the road that is not dualled—in which the Government are committed to investing. Therefore, there is investment in some important areas of transport.

I also welcome the conversations that my right hon. Friend the Secretary of State for Transport is having with colleagues in the north of England about significant investment that we could make on top of HS2 to connect cities in the north properly. My understanding is that if we see an agreed plan from Transport for the North, the Government will be very keen to fund that to drive productivity growth in the north of England, in the same way that significant investments in road infrastructure have driven productivity growth in London and the south of England.

It is important that we invest in other transport infra- structure such as airport connectivity. Particularly in the light of our leaving the European Union, Britain needs to be able to join up with global markets all around the world. I am particularly keen, as a south-west MP, for the Government to move forward on the Heathrow option and install that extra capacity so that businesses in my constituency, the south-west of England and elsewhere can be joined up properly with the rest of the world.