HC Deb 05 November 1998 vol 318 cc994-6
2. Jane Griffiths (Reading, East)

If he will make a statement on his recent productivity seminars. [56859]

The Chancellor of the Exchequer (Mr. Gordon Brown)

With business, we are putting in place a strategy to tackle the long-term economic weakness of a 40 per cent. productivity gap between this country and our most successful competitors. The pre-Budget report sets out what we must do in the coming year to help to equip the British economy for the challenges ahead.

Jane Griffiths

Does my right hon. Friend agree that, in constituencies such as mine, where unemployment is almost zero, there is no cause for complacency, and that productivity is a key to achieving all our targets?

Mr. Brown

I agree that productivity is a central issue for the British economy. The director-general of the Confederation of British Industry told its conference that our productivity is 37 per cent. behind that of the United States and that the big picture is clear. The CBI agrees about the action that is necessary. I believe that our discussions with British business will yield results, and I have always said that we will make changes in the Budget, in regulations or in public spending, if necessary—if a case is proven—to help to bridge the productivity gap. The only party that does not seem to be willing to join the debate is the Conservative party.

Mr. Malcolm Bruce (Gordon)

Will the Chancellor acknowledge that, in the seminars, business leaders have argued that productivity is predominantly their responsibility and that the Government's responsibility is to create the climate in which they can compete? The 0.5 per cent. reduction in interest rates announced this morning is welcome, but do we not have to go a lot further down that road before we are competitive in Europe and have a sustainable exchange rate? What policies will the Chancellor pursue to help the Bank of England to deliver interest rates that are much closer to the European average?

Mr. Brown

Of course I welcome the Bank's decision. I think that the hon. Gentleman will agree that the most important thing that the Government can do is to create a long-term framework for monetary and fiscal stability. That is exactly what we have done by making the Bank of England independent, tackling the inflationary pressures in the economy and cutting the fiscal deficit by £20 billion. Of course we must work with business to tackle any barrier to productivity that exists in our economy. That is why we are looking at the future of competition policy and at regulation in some areas, and why we have agreed to look at some aspects of the tax system.

The extra £20 billion that we are to spend on education over the next three years will make a huge difference to our ability not only to give an opportunity to every child and student who wants it, but to deliver an efficient economy. It is a pity, again, that the Conservative party cannot support that.

Mr. David Heathcoat-Amory (Wells)

Is the Chancellor aware that, according to his own figures, the additional tax and regulatory burden on British industry will amount to £39 billion over this Parliament? The figure comes from published tax revenues and from compliance cost assessments published by Government Departments. Instead of lecturing British industry about productivity, will the Chancellor do something to reduce the daily burden on its ability to compete in international markets? Will he immediately take steps to repeal regulations and remove the additional burdens before they do more damage to employment? Above all, will he stop blaming British industry for Government failings?

Mr. Brown

The first people to draw attention to the productivity gap in British industry were the previous Government, in the competitiveness White Papers that they published every year, saying that we had to do better.

We have cut corporation tax twice, to 30p, and small business tax twice, to 20p; we have introduced a long-term rate of capital gains tax at 10p; and in the first year we have cut regulations by 30 per cent. from what they were under the Conservative Government. The Conservatives want us to abandon our proposals for a national minimum wage and a working families tax credit. If those things work in America, they can work in Britain.