Manufacturing Industry: Productivity (Hansard, 16 February 1989)

§ Lord Brabazon of Tara
My Lords, in the fourth quarter of 1988 output per head in manufacturing 289 industry was at its highest ever level, 52.6 per cent higher than its average in 1979. Hence, manufacturing productivity has grown on average by 4.6 per cent. a year—faster than any of our major international competitors.

Lord Campbell of Croy
My Lords, I thank my noble friend for his reply, which records a notable transformation. Does he agree that that is a tribute to the British workforce as well as to management?

§ Lord Brabazon of Tara
My Lords, it is a tribute to both the workforce and management and indeed to government policy over the past nine years.

§ Lord Jay
My Lords, to complete the picture, has the Minister also noticed that the 1978 level of manufacturing output in volume was not recovered after the collapse of the 1980s until last year and that this is the first time since 1945 that manufacturing output has failed for 10 years to exceed its previous peak?

§ Lord Brabazon of Tara
My Lords, this Question refers to productivity, but manufacturing output has grown strongly by an average of 4 per cent. a year over the past five years while productivity has grown at an average rate of over 5 per cent. over the same period, so the story is not so bleak.

§ Lord Rochester
My Lords, will the noble Lord acknowledge that, although the improvement in productivity of manufacturing industry in the United Kingdom is undoubtedly welcome, we start from a very low base and still have a long way to go before we can match the productivity levels that some of our major industrial competitors overseas have achieved?

§ Lord Brabazon of Tara
My Lords, that is a tricky matter to assess as comparisons of levels across countries are difficult to make. One can certainly say that the United Kingdom's growth in productivity has been faster than that of our competitors, but, even if we are at a lower level, that provides further scope for industry to continue to improve its performance even further.

§ Lord McCarthy
My Lords, does the noble Lord agree with an article in the authoritative current edition of the Bank of England bulletin on the causes of productivity? That article suggests that the main reason for the rise in productivity in the 1980s compared with the 1970s is that, in the 1970s, employers were reluctant to dismiss people whereas they are not reluctant to do so now. If that is so, the high productivity is the consequence of high unemployment.

§ Lord Brabazon of Tara
My Lords, we have been through three stages since 1979. The first stage was recession where there was substantial labour shedding. The second stage, between 1981 and 1983, was economic recovery where output started to recover slowly but employment continued to decline significantly as industry made further efficiency gains. Over the past five years, we have had sustained 290 growth at record levels. There was therefore undoubtedly some labour shedding, but that had to take place as before that time labour was not used efficiently.

§ Lord Jenkins of Hillhead
My Lords, will the Minister explain why he measures comparative growth, which is favourable for the Government. with absolute confidence, but says that absolute levels between countries are shrouded in the miasma of obscurity?

§ Lord Brabazon of Tara
My Lords, I said that it was difficult to compare levels of productivity, but one can compare growth relatively easily. One can make comparisons on the basis of figures produced by the OECD, on which the figures that I have quoted are based, but it is all to the good if we have further scope for improvement.

§ Lord Stoddart of Swindon
My Lords, as further increases in productivity must depend on a high level of industrial investment and as industrial investment is discouraged by high interest rates, exactly when do the Government and the Chancellor of the Exchequer intend to bring interest rates down sharply?

§ Lord Brabazon of Tara
My Lords, that is a very different Question. Interest rates are a subject on their own. I have no doubt that they will not be held high any longer than is necessary to combat inflation, which is by far the worse evil.

§ Lord Taylor of Blackburn
My Lords, I welcome, as I am sure we all do, the increase in these figures. However, having listened to and read yesterday's debate about the training of engineers, does the Minister agree that one of the matters about which we must be careful—I hope that he is aware of this—is that if we do not pursue a good training policy, those figures will not increase?

§ Lord Brabazon of Tara
My Lords, I have not yet had an opportunity to read the report of yesterday's debate, but I am sure that the noble Lord makes a good point. I am glad that he welcomes those figures because, from some of the questions that we receive, we wonder whether they are welcomed throughout the House.

§ Lord Peston
My Lords, it is a pleasure to welcome the rise in manufacturing productivity. It compares quite favourably with the heyday of Keynesian demand management in the 1960s and early 1970s, so the Government are doing quite well to get back to our best days. However, given the Minister's earlier answers, is he aware of the CBI statement only a couple of months ago that, although we have improved, it would take us about 10 years—if we continue to make relatively good progress—to equal the productivity levels of West Germany and France, 20 years to equal the productivity levels of Japan and—to quote the Americans—we may never catch up with them? Does the Minister care to comment on that?

§ Lord Brabazon of Tara
My Lords, that is a hypothetical point, but, as I said earlier, I am glad that there is still further scope for industry to improve its performance. The noble Lord referred to the 1960s and 1970s. I shall merely point out that between 1969 and 1979 our productivity growth was the lowest of the G7 countries. Since then it has been the highest, even including Japan and the United States.

§ Lord Aldington
My Lords, my noble friend is right in saying that the increase in productivity has been the highest but is he aware that the actual productivity is not the highest? Is he further aware that when my noble friend who asked the Question was Secretary of State for Scotland the increase in productivity in one of those years was 9 per cent. and not the figure that has just been mentioned?

§ Lord Brabazon of Tara
My Lords, I have now attempted to answer the first part of my noble friend's question on three occasions. I do not think that there is any more than I can say on it. It may well be the case that in one of those years—1969 or 1979—productivity was as high as 9 per cent. The fact is that the average annual growth rate over those years was 2.1 per cent. and we were bottom of the league. It is now about 4.5 per cent. and we are at the top.

§ Lord Molloy
My Lords, in view of the fact—

§ The Earl of Onslow
My Lords, may I—

Noble Lords
Order!

§ The Lord Privy Seal (Lord Belstead)
My Lords, I think it is for the noble Lord to ask his question. The last question came from this side. We shall hear my noble friend; then let us have the next Question.

§ Lord Molloy
My Lords, the manufacturing figures are interesting and encouraging. Will the Government give an undertaking that they will now take even stronger measures to reduce more rapidly that sad aspect of our industrial behaviour—the fact we have only just brought below two million the figure of unemployed people? With the good figures for manufacturing productivity is it possible for the Government to assist wherever they can to reduce unemployment even more quickly?

§ Lord Brabazon of Tara
My Lords, I think the noble Lord will acknowledge that we have done much to reduce unemployment. I understand that it has today come down to under two million for the first time in a considerable period. We shall continue to pursue the policies which bring that rate even further down.

§ The Earl of Onslow
My Lords, can my noble friend try to disabuse the general public of the impression given by the questions in your Lordships' House today that this economy has not been a success? This economy at the moment is about the most successful in Europe. We should be proud of it and not generally carp about its performance.

§ Lord Brabazon of Tara
My Lords, I quite agree with my noble friend. I said earlier that I was glad that these figures were welcome in at least some quarters in your Lordships' House. The fact is that we have had a very remarkable record of economic growth over the past few years. I hope that it can continue.

§ Lord Cledwyn of Penrhos
My Lords, in view of the supplementary question of the noble Lord, should not the Minister take account of the trade deficit? He has been talking about the record performance of the Government in some areas. Is it not a record performance that the trade deficit stands at an all-time high of £14.3 billion. What will the Government do about that? Is that not a case for reducing interest rates which he mistakenly said stand alone?

§ Lord Brabazon of Tara
My Lords, perhaps I was wrong to allow myself to stray from the Question on the Order Paper which was about manufacturing productivity. I have tried to answer a number of questions as best I can. The trade deficit is of course yet another. As I have said, we hope that the trade deficit will reduce. One way of helping with that reduction is of course for manufacturing productivity to increase.