Productivity

Bill Esterson Excerpts

Wednesday 17th June 2015 Commons Chamber

[John Redwood]

I agree, but only if we have ineffective or over-the-top regulation. Removing it can give more people access to the market and provide a greater competitive challenge, but we need some regulation, because we need rules and certain guarantees in the market.

Let us take a sector that I asked the shadow Chancellor about. It was a problem that, in the Labour years, we had a long period of practically no growth in public sector productivity. I am the first to admit that the concept of productivity is more difficult in parts of the public sector. People actually like more teachers relative to the number of pupils, because they hope that that will create better teaching and a better system in classes, but it means that productivity falls. That means that we need other parts of the public sector, where the productivity issue is more straightforward or more like the private sector, to be even better, so that the overall performance of the public sector does not lag behind and cause difficulties. As we have quite a big public sector in this economy, the performance of the public sector is very important. It also happens to be the area where Ministers have most control and most direct influence, so it is the area that this House should spend more time on, because we are collectively responsible for the performance of the public sector. I think most parties now agree that we want to get more for less in the public sector, so that we can control public spending. There are disagreements about how much control we should exert on public spending, but I hope there is agreement that if it is possible to do more for less while improving—or not damaging—quality, that is a good thing to do.

[Bill Esterson (Sefton Central) (Lab)]

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[John Redwood]

I am afraid I need to move on because many people wish to speak. Time is limited.

I draw the attention of my right hon. Friend the Chief Secretary to the Treasury to the issue that I raised with him in my intervention. One very important industry that is almost completely nationalised—the tracks, signals and stations are completely nationalised and the train operating companies are very strongly regulated and controlled by franchises, so they are almost nationalised—is the railway industry. It is a growing industry, and this Government are committing a lot of money to it. It is an industry which, I believe, all the main parties in the House wish to commit money to and wish to grow and invest in.

However, an independent study in 2011, the McNulty report, showed that our railway does less for more cost than comparable railways on the continent. It should be a matter of great concern, and I hope it will be a matter for review by those dealing with the railways and with public spending, because as we channel those huge sums of money into our railway to try to get expansion and improvement, we need to pull off the trick that the best private sector companies manage—of driving quality up and costs down at the same time. A myth in some public sector managers’ minds is that a cut in the amount spent is bound to lead to worse quality or impaired service, whereas every day in a good private sector company they go to work saying, “How can I spend less and serve the customer better? How can I apply new technology so that I get more for less? How can I have a better skilled and better motivated workforce?”—I hope it is not done by unpleasant management, because that usually leads to the wrong results—and “How can I motivate the workforce more so that they are empowered to achieve more and do less?”

That is the spirit that we need in the public sector, and if we began with the railways, it would make a very important contribution to improving our overall productivity rate.

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[Bill Esterson (Sefton Central) (Lab)]

I think that business will take a rather different view if Conservative Members take us out of the EU, as some of them are hellbent on doing.

I congratulate the hon. Member for Hertsmere (Oliver Dowden) and my hon. Friend the Member for Sheffield, Brightside and Hillsborough (Harry Harpham) on their excellent maiden speeches, and you, Madam Deputy Speaker, on your election. This is the first time that I have served under your chairmanship.

Government Members talk about the difficulties in oil and gas as though they are the only reason for the low productivity in our economy, but they are not the only cause. Since the crash, we have seen weak investment in new equipment; a lack of bank lending, despite the attempts of the Treasury to boost it—or perhaps because of those failed attempts; problems in infrastructure; and challenges and difficulties in respect of skills. All those factors have played a part in the low productivity and weak recovery that we have seen, alongside a fall in living standards, since the crash.

[Debbie Abrahams (Oldham East and Saddleworth) (Lab)]

Another issue for small businesses is late payments. Businesses spend hundreds of thousands of hours a year chasing late payments, but the Government did little about it in the last Parliament. I hope that they improve their record in this Parliament.

[Bill Esterson]

That is an excellent point. The uncertainty for business, which has contributed to a lack of investment and the other problems that I have touched on, is not helped by the treatment of small and medium-sized businesses by some larger businesses in the supply chain.

[Andrew Bridgen]

It is certainly true that business hates uncertainty. There was a drop-off in business investment in the run-up to the general election, but that was because of the uncertainty over who would be in government and the fear of business that there would be a hard-left Labour Government.

[Bill Esterson]

I take it from the hon. Gentleman’s intervention that he will support, with every fibre of his being, the yes campaign in the EU referendum to avoid the damage that would be done if this country left the EU. I welcome his conversion to the cause.

Government Members have talked about the jobs that were created under the coalition over the past five years. Let us be clear that those jobs were created by private businesses, not by the Government. I think that the Government have shown a worrying complacency, given that we have had the weakest recovery since the war and that productivity has been so low over the past seven years, decreasing by 0.5%. It has been pointed out that that productivity has gradually started to inch up, which is welcome.

In the analysis by Government Members, I see little evidence of skills development for workers in predominantly low-paid jobs. In my constituency, a third of people in work now are paid less than a living wage. That is not a recipe for high living standards or an improvement in their day-to-day lives. We need an increase in productivity. That will help to lead to higher paid jobs, and that comes from skills and from the kind of investment I have talked about.

We heard from another colleague that the scale of the problem with productivity in this country is that output per hour is 17% below the G7 average and 31% below that of the United States. Unless that picks up, the sorts of problems I have mentioned with the very high number of low-paid jobs will continue. We will end up with an economy that relies on low-skill, low-wage employment and see a continued fall in living standards. Let us remember that since 2010, people in work are on average worse off by £2,000 a year. There is a very long way to go to make up that shortfall.

I want to talk about one particular skill that historically we have really struggled with: management. I want to talk about the role of managers and leaders in motivating and getting the best out of staff and organisations, whether in the public or private sectors, and the role that that has to play in raising productivity. Some 85% of people in a professional occupation have a higher education qualification, but only 44% of people in management roles have a higher education qualification. We just do not regard management and leadership in this country as high-quality roles. We do not treat them with the importance they deserve. There is not an automatic understanding that management and leadership are skills in their own right, and that leads to a number of problems. We need to regard them far more highly.

Before I came to this place five years ago, I worked in training and development and went into a lot of large organisations. Typically, the problem was with middle-ranking management—or that was the analysis given by senior managers. We often discovered that in fact the real difficulty lay with the senior management and leadership as well. That is a real problem. The importance of having good management and good leadership should not be understated in any discussion of productivity. Employee performance is linked to how well people are looked after. Yes, remuneration is important, but often it is the motivation, the way they are treated and the way that management behaves that are critical. [Interruption.]My hon. Friend the Member for Blaydon (Mr Anderson) behind me uses the right word: respect. That is absolutely crucial. If we want to improve productivity and compete internationally, we have to look at management as a skill, along with all the other factors that hon. Members have mentioned.

[Several hon. Members]

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