UK Productivity: Comparisons (Hansard, 6 June 1989)

§ Lord Young of Graffham
My Lords, the April 1989 Treasury economic progress report shows that output per hour worked in the UK economy in 1986 was about 50 per cent. higher than in Japan and about 5 per cent. lower than in Germany.

The Viscount of Oxfuird
My Lords, I thank my noble friend for that Answer which must please everyone in this country, in particular entrepreneurs. Can he advise how such a dramatic change has taken place? The debate instigated by my noble friend Lord Joseph last year on productivity and jobs indicated a differential of about 25 per cent. between the productivity of this country and West Germany.

§ Lord Young of Graffham
My Lords, there is no doubt that during the decades after the war the productivity of the United Kingdom was such that we were consistently bottom of the top G7 countries in the 1960s and 1970s. During the 1980s we have been top and we are catching up on many of the years of decline. If my noble friend were to ask me for the reason, I suspect that it may be some of the practices referred to by the noble Lord, Lord McCarthy, in the first Question this afternoon.

§ Lord Peston
My Lords, we are aware of the Treasury's latest figures. Of course, one possibility is that they are wrong. However, if we accept them, does the noble Lord have an explanation for the fact that we have an enormous balance of payments deficit, including an even larger balance of trade deficit, while the Germans and Japanese have a massive balance of payments surplus? Does the noble Lord or the Treasury have any explanation of how that is compatible with the alleged figures?

§ Lord Young of Graffham
My Lords, the noble Lord, Lord Peston, is a distinguished economist, and surely he knows that one cannot go around comparing apples with oranges. However, the noble Lord queries the Treasury's figures. It is OECD data which shows that if one takes the GDP per hour worked in the United Kingdom at 100, the figure in Japan is 67 and in Germany it is 105. They are OECD figures. If one takes the GDP per head of population in the United Kingdom at 100, then for Japan it is 106, and for Germany it is 110. We have a change of direction; the United Kingdom is catching up.

§ Baroness Seear
My Lords, I ask a genuine question to seek information. Are the figures relating to Japan based on the Japanese manufacturing industry or do they include the large number of small industry and craft-based workshops in Japan? In those one would expect productivity rates to be very low.

§ Lord Young of Graffham
My Lords, I am grateful to the noble Baroness. If one looks at the output per person employed in the manufacturing industry, isolating it to the manufacturing industries only, then during the 1960s the United Kingdom output per person increased by 3 per cent. per annum and that of Japan by 8.8 per cent. per annum. During the 1970s we were bottom of the growth list of the G7 countries. During the 1970s we were at 1.6 per cent., while Japan had fallen to 5.3 per cent. We continued to be at the bottom. During the 1980s we are at 5.2 per cent. while Japan has fallen to 3.1 per cent. Now we are top. We have a long way to go to climb back but we are doing so.

Lord Morris
My Lords, does my noble friend agree that his figures clearly demonstrate the remarkable success story because record productivity has grown in parallel with a record fall in unemployment?

§ Lord Young of Graffham
My Lords, during the past 33 months we have seen unemployment 724 consistently fall in the United Kingdom. Today it stands at 6.5 per cent. Compared with the other major economies, in the European Community, with the exception of Germany, we are by far the lowest. Indeed, there may be a dispute about Germany's position.

§ Lord Peston
My Lords, I should like to return to my theme. I am well aware that people in the Treasury can do elementary arithmetic, and no doubt the figures are as they stand. However, the fact remains that before the noble Lord goes around trumpeting this success he must look at the whole picture and answer the question that I asked. Will he comment on the fact that the latest Treasury figures show that our productivity has ceased to grow?

§ Lord Young of Graffham
My Lords, the measure of productivity over the whole economy is always a difficult matter. I was asked for productivity in the manufacturing industry to be isolated. However, if one looks at the whole economy, which is a different and more difficult figure to measure, the United Kingdom stands at 2.5 per cent. growth during the 1980s. It is well ahead of that of the United States at 1.2 per cent.; of Germany at 1.8 per cent.; of France at 2 per cent.; of Italy at 2 per cent.; or of Canada at 1.4 per cent. However, I agree that it is beneath that of Japan which stands at 2.9 per cent. for the whole economy. At the end of the day the growth in productivity in this country is responsible for the massive increase in the number of jobs.

§ Baroness Seear
My Lords, does the Minister agree that the important point to make is that the growth rate can be expected to be higher when one starts from a very low base? Does he also agree that one may give the wrong impression if one takes productivity rates year by year and compares country with country? When you start from a low base it is far easier to have a high growth rate than if you start from a high base.

§ Lord Young of Graffham
My Lords, I do not agree with the noble Baroness's words "a very low base". Undeniably, the productivity is lower than that of Germany. We fell back during the decades after the war. However, it is not so different from that of France, although we are still beneath that figure. The point is that we are catching up. I notice that the Treasury paper refers to an entry made by Samuel Pepys in his diary on 13th February, 1665. He said: How despicably they speak of us for using so many hands more to do anything than they do—they closing a cable with 20, that we use 60 men upon". This debate has been going on for at least 330 years. At the end of the day it is jobs that matter and we are demonstrating that our policy works.

§ Lord McCarthy
My Lords, does the noble Lord not agree that the only practice to which I referred was the practice of the Government in breaking conventions and not owning up? To that I now add the practice of blinding us with history.

§ Lord Young of Graffham
My Lords, I am not sure whether one calls the decade of the 1970s history. It is very vivid in the recollection of many of your Lordships.