My Lords, in the decade from 2010 the UK economy saw the lowest productivity growth since the Napoleonic Wars, which led to the lowest growth in living standards ever recorded. Reversing that performance is the number one mission of this Government. As part of our growth strategy, we have set out far-reaching plans to increase productivity, including restoring economic stability, reforms to planning, to skills and to the labour market, record levels of investment in R&D, new investment in transport connectivity, a modern industrial strategy and a 10-year infrastructure strategy.
My Lords, I believe the Government missed an important opportunity by failing to impose productivity conditions alongside their costly public sector pay rises. I do know that productivity is a complicated area. On most metrics, public sector productivity has been significantly lagging that of the private sector. What measures will the Government adopt to ensure that it increases towards private-sector levels?
In particular, the Minister mentioned planning. Does he agree that speeding up and simplifying planning, and reducing the cost of electricity for businesses, rather than doing endless review, should be important components of the plan that he set out?
I am grateful to the noble Baroness for her Question. To answer her first point, she is incorrect to say that we did not impose any productivity criteria. We have introduced a 2% efficiency and productivity target in the NHS for this year and next year. We have also gone further than the previous Government did by extending that target to all government departments to ensure that we are improving the quality of public services while also improving value for money.
The noble Baroness mentioned planning. A significant programme of planning reform was announced by the Chancellor on her very first day in the Treasury. The previous Government had 14 years to announce those things but never did anything.
My Lords, as a former small businessman, I welcome the Government’s recent announcements to help small businesses, including increasing the threshold for national insurance contributions from £5,000 to £10,500, and cutting business rates for shops, pubs and other leisure properties. Are there any more goodies to come in the future from this new Labour Government for small businessmen?
I am grateful to my noble friend for his support for the policies we have announced for small businesses. He is absolutely right that we protected small businesses in the recent Budget. SMEs are, of course, an essential part of a growing economy. We set out clear plans for small businesses in our manifesto and we will deliver on those in the coming months.
My Lords, the Minister was right to mention skills being central to bringing productivity up. Both our parties had large chapters on skills in our manifestos and, since coming into office, the Government have announced initiatives, consultations and suchlike. Will the Minister tell your Lordships’ House when the first cadre of employees who have benefited from any of the skills measures that the Government intend to bring in will reach the workplace?
The noble Lord is correct to say that both parties are absolutely aligned on the importance of skills reform, which is why we have announced Skills England. We will be increasing the number of people in training and they will enter the workforce as soon as they graduate.
My Lords, the Office for National Statistics may have inadvertently thrown some light on our so-called productivity puzzle. The slide in the quality of its workforce data appears to have coincided with the increasing practice of its staff working from home—in many cases five days a week. Indeed, ONS staff have recently threatened industrial action—to go on strike—if forced to work from the office for two days a week. Do the Government have plans to commission a study across the public sector of the impact that working from home has on productivity? It is a crucial issue.
I know that the noble Lord cares deeply about this issue. He has spoken in debates on this topic before and has made some very important points about productivity. I have also answered a Question in this House on working from home and its impact on public sector productivity. As I said then, the current evidence is mixed. There are clear advantages to working from home for some and there are also clear disadvantages to working from home. Most studies seem to suggest that there are significant benefits to a hybrid model. But there are no such plans to commission the kind of study he mentioned.
Does my noble friend accept that there are some really perverse outcomes in the current way we assess productivity in the public sector, such as smaller class sizes worsening productivity in the education system, or employing more police officers so crime drops and the ratio therefore worsens? Is it not really important that we get a bit of common sense into this?
I completely agree with my noble friend on that point. Measuring public sector productivity is very difficult and contradictory measures are involved. My noble friend is right that, obviously, our priority is improving those public services and we will continue to do so.
My Lords, in the 1970s, we attracted enormous increases in productivity by also attracting vast quantities of Japanese inward investment, which saved our motor industry. Now, unfortunately, our motor industry needs saving again. Could we concentrate on attracting FDI by having the kind of Budget that really makes international investors keen to invest here on a scale much larger than anything that has come before?
The noble Lord is absolutely correct to say that investment is one of the key drivers in raising productivity. Obviously, it was a matter of regret that, under the previous Government, the UK was the only G7 country with levels of private sector investment below 20% of GDP. We are absolutely determined to raise that: the recent international investment summit saw £64 billion of investment come into the UK, creating some 40,000 jobs. We are determined to continue that trend.
My Lords, productivity is now often spoken of in relation to the National Health Service, which the Minister mentioned in his Answer to the Question. The Health Foundation looked at NHS productivity and identified maintaining morale and motivating the workforce as key to it. Alongside essential things such as targets, what effort are the Government making to continue softer leadership, including listening to the workforce and fostering good industrial relations?
The right reverend Prelate is absolutely correct in what she says about the importance of the health service to productivity. A healthier workforce is a more productive workforce. We have a 10-year NHS health plan in the works. It will be published in the spring and will focus on delivering the reforms needed to ensure better value for money for taxpayers and sustainable productivity gains. Of course, good working relations with the workforce are essential to that.