HL Deb 19 May 1998 vol 589 cc1438-42

2.54 p.m.

Lord Randall of St. Budeaux

asked Her Majesty's Government:

What steps they will take to improve the productivity of British industry in relation to other member states in the European Union.

Lord Haskel

My Lords, the Competitiveness UK initiative launched by my right honourable friend the President of the Board of Trade last summer, is central to the Government's drive to work with business to bridge the gap in productivity between Britain and its main competitor countries in Europe and beyond. Under this initiative, business people and other partners are working directly with Ministers in the Department of Trade and Industry to identify barriers to improve competitiveness and develop practical proposals to overcome them. The conclusions of this process will help shape the forthcoming White Paper on competitiveness.

Lord Randall of St. Budeaux

My Lords, I thank my noble friend for that Answer. Is he aware that UK productivity is extremely bad? If the UK could only perform as well as our leading EU competitors, our gross domestic product would increase by £60 billion a year, according to the CBI.

Are your Lordships as baffled as I am by the reports which indicate that the Government and their advisers do not even know the factors which make UK productivity so bad? What have they been doing all these years? Will the Government demonstrate to Parliament their firm commitment to understanding UK productivity problems as well as coming up with a policy that will work and will win the confidence of the British public?

Lord Haskel

My Lords, the Government are aware of the importance of increasing productivity. This Government have a sense of urgency about the need to tackle the problem. On 4th June last year my right honourable friend Margaret Beckett—only one month after taking office—launched the Competitiveness UK initiative. By November of last year the Competitiveness UK paper indicated where British businesses were compared with the best in the world. Six key areas of weakness in the UK's competitiveness performance were identified and a working party was set up to address each area. Those working parties reported their conclusions to the President of the Board of Trade in April this year. The Government are now working with the working party members and holding seminars at 11 Downing Street to see how their ideas can be developed in practice. We will then spell out our policy proposals to address this productivity gap.

The Earl of Radnor

My Lords, will the Minister briefly outline what the Government are doing to aid the productivity of the British beef industry?

Lord Haskel

My Lords, I am not sure that that is a question I ought to answer.

Lord Razzall

My Lords, is the Minister prepared to accept the view of the noble Lord, Lord Randall of St. Budeaux, that the most significant problem faced by the British economy at the moment is the lack of productivity in our industry? That is a view shared by the President of the Board of Trade and the Chancellor of the Exchequer. Will the Minister agree that, as our economy slows down, the most significant step that the Government could take to ensure that the problem is resolved is early entry into the European monetary union?

Lord Haskel

My Lords, I am not sure that early entry into monetary union is the solution to the problem. The fact that the euro will be used more frequently will expose British companies to their lower productivity as compared with other European countries.

Lord Beloff

My Lords, does the Minister agree that a simple way of improving productivity in this country would be diminished productivity on the part of the bureaucrats in Brussels? If there were fewer regulations, British productivity would undoubtedly improve.

Lord Haskel

My Lords, it depends what is meant by regulations. The purpose of some regulations is to produce barriers in the way of business. But other regulations give people more confidence in the product; for instance, regulations in relation to aircraft and pharmaceuticals. The whole matter is extremely complex.

The Countess of Mar

My Lords, is the noble Lord's failure to answer the question of my noble friend indicative of the Government's belief that agriculture is not an industry? Is he aware that there is a huge imbalance between imports and exports in relation to British agricultural products? Most of the products produced in the United Kingdom are of excellent quality and observe all the welfare and hygiene standards required as opposed to what often happens on the Continent. Can he say what Her Majesty's Government are doing about agricultural products in Europe?

Lord Haskel

My Lords, the Government have put forward restructuring proposals for the beef industry and those proposals are now being discussed. So the Government are working on the problem.

Baroness Platt of Writtle

My Lords, does the noble Lord agree that, when small and medium-sized companies are installing high-tech machinery in order to increase productivity, the most valuable thing for them would be fiscal incentives over the following few years? Both the companies and the Inland Revenue would benefit from the future profitability arising from such incentives.

Lord Haskel

My Lords, 1 entirely agree with the noble Baroness. Indeed, the Government have taken steps in that direction. The corporation tax rate for small companies will be cut by 1 per cent. to 20 per cent. from 1st April 1999, following a 2 per cent. cut last July. The capital gains tax taper system to promote and reward long-term investment has an effective top rate of 10 per cent. for gains on business assets held over 10 years. The Government are giving fiscal incentives to these companies in order to invest.

Lord Hardy of Wath

My Lords, where British companies have achieved high records of productivity and can easily be seen as the most successful within the EU, will the Government be vigilant in ensuring that our partner states do not involve themselves in practices which deny Britain the advantages of that achievement?

Lord Haskel

My Lords, the Government are very vigilant in this matter.

Lord Bruce of Donington

My Lords, is the noble Lord aware that the measurement of increases or decreases in productivity is a matter of some difficulty, together with an agreed method of statistical representation? Will the Government therefore take into account that there still remains the largely unmeasurable factor of plain common sense and that one knows, factory by factory but certainly not in its generality, what underproductivity or overproductivity actually means?

Lord Haskel

My Lords, the Government are trying to apply common sense in that they are consulting the actual practitioners. Many of the people involved in the schemes to improve productivity are the businessmen themselves.

Lord Peston

My Lords, is my noble friend aware that my noble friend Lord Randall could have asked this Question or its equivalent at any time during the past 70 years and that it is highly likely that my noble friend on the Front Bench or his equivalent would have answered in terms of working parties? As the problem has existed for at least 70 years, would it not be sensible not to introduce working parties or their equivalent but to try to find another way to deal with this problem? Ever since the Labour Government of 1945 we have been setting up these bodies. We have constantly talked about productivity problems but our relative position has remained not entirely unchanged, but certainly not very changed. The answer is that working parties are not what is needed.

Lord Haskel

My Lords, I can say to my noble friend that this time it will be different. The working parties have reported and last week the first seminar took place to discuss the reports. The Government are determined that the practical proposals will be disseminated to all companies throughout industry and we shall start to benefit from that in a very short while.

The Earl of Home

My Lords, the Minister said that he was trying to identify barriers in order to improve competitiveness. Will the noble Lord tell us whether in discussing this issue the DTI has addressed the question of the aid-to-trade provision in conjunction with the Export Credits Guarantee Department or are the Government sticking to their dogmatic view of abolishing the aid-to-trade provision, which has been a great boon to this country in the past?

Lord Haskel

My Lords, the policy on the aid-to-trade provision has been clearly laid out by the Government. It is not a matter of productivity; it is a matter of doing business deals.

Lord Ezra

My Lords, following up the valid point made by the noble Lord, Lord Peston, that what we least need is yet another working party, perhaps I may say that what we actually need is action based on what is well known over the years. Does the noble Lord agree that one of the major problems that has bedevilled British industry has been a relative lack of investment in new products and new procedures to match those of continental competitors? Is this high on the list of the studies now being conducted?

Lord Haskel

My Lords, not only is it high on the list but the Government have already taken action, as I said to the noble Baroness, Lady Platt. The Government have already given fiscal incentives to invest and, as a result of some of the studies being carried out, there may be further ones; I do not know. But certainly it is very high on the list of priorities.

Lord Davies of Coity

My Lords, far from this issue being complex, does my noble friend agree that the two essential ingredients for increasing productivity are investment in technology and the training of the workforce? Unfortunately, for a number of decades a large part of British industry has failed to do either.

Lord Haskel

My Lords, I agree with my noble friend that investment in technology and investment in skills are important. The Government are addressing themselves to both those matters.

Lord Chesham

My Lords, how will productivity be helped by the introduction of the minimum wage?

Lord Haskel

My Lords, many of us do not need an expert to tell us that fairness at work leads to greater productivity. Many noble Lords, particularly noble Lords on this side of the House, know from their own experience that fairness at work increases productivity. As the minimum wage will increase fairness at work, it will increase productivity.

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