To ask His Majesty’s Government what assessment they have made of the latest estimates of the current GDP per capita, and of the factors contributing to it.
My Lords, the latest data from the ONS shows that GDP per capita has risen by 0.9% over the past year, in line with the OBR’s forecast, and this is the second fastest in the G7. This compares with a fall of 0.1% during the previous Parliament. The increase in GDP per capita in the past year is due mainly to the strong rebound in both private consumption and investment. Of course, we want to go further, which is why economic growth is the Government’s number one priority.
Indeed so, but the Minister will be aware that the ONS’s latest figures show that in the most recent quarter, economic growth per capita grew by only 0.2%—less than half than in the previous quarter. Will he accept that this is entirely due to the Government’s policies on the national insurance increase, the lack of business confidence because of the Employment Rights Bill, and the wholly unnecessary delay in the Budget? Would he like to clarify his previous remarks about the effect of Brexit being 4% on growth and productivity, when he knows very well that the OBR said that that would be over 15 years? This means that on a per annum basis, the effect is teeny and within the margin of error.
The answer to all the noble Lord’s questions is no. He points out that GDP per capita grew by 0.2% in the second quarter of this year; that compares with 0.1% over the entirety of the previous Parliament. If he wants to make comparisons, I am more than happy to do that. I do not accept the points he makes about the Government’s other policies. We are currently the fastest-growing economy in the G7. On his points about Brexit, the OBR has been very clear that Brexit has permanently reduced the size of our economy by 4%. Its calculations are absolutely clear on that point.
My Lords, does the Minister agree with me that GDP would have been higher had we not had a Government previously who wrecked the economy, wrecked public services, gave us Brexit and left us with massive debt?
My noble friend is absolutely correct. The previous Government gave us austerity, taking demand out of the economy at exactly the wrong moment; a Brexit deal, which reduced GDP by 4%; and the Liz Truss mini-Budget, which crashed the economy. We will take no lessons from the party opposite when it comes to growing the economy.
My Lords, the UK is the sixth-largest economy, measured by GDP. But, on the measure of GDP per capita, it is only the 18th largest. Our demographic profile, with a heavily aging population, is a key reason for this. This year, we expect to reach the scary benchmark of having more deaths than births. Of course, we need to upskill our population in advancing technology. Do the Government accept that we rely on net immigration to sustain the economy in the public sector and that there is no way out of that?
I hear what the noble Baroness says. The OBR is currently considering the economic and fiscal impacts of the immigration White Paper published in May and will report back in its forecast in the autumn. Of course, she is right that we are in a global race for talent, with many countries seeking to improve the attractiveness of their immigration systems for highly talented individuals. The immigration White Paper announced that the Government will review the visa offer for highly talented individuals by expanding the high potential individual visa and reforming the global talent and innovator founder visas. We have also agreed that we will work towards an ambitious youth mobility scheme with the EU, creating maximum economic and cultural opportunities between the UK and the EU. Any scheme would give young Brits the opportunity to travel, to experience other cultures and to work and study abroad.
My Lords, can the Minister confirm that the Government’s pledge still holds—specifically, that the UK will deliver the G7’s fastest growth in GDP per capita for two straight years by the end of this Parliament—and explain why investors, both debt and equity, should buy into this view?
Yes, I can absolutely confirm that that remains our mission. Our growth mission is to have the fastest-growing economy in the G7. We are currently the fastest-growing economy in the G7, and the IMF recently revised up the growth forecast for this year, the second time it has done so. I think both the IMF and the OECD currently forecast that the UK will be the second fastest-growing G7 economy this year. Our growth mission also includes living standards; since the election, living standards are up 2.1% compared with the 1.8% fall over the last Parliament—the only Parliament on record in which living standards were worse at the end of it than at the start. We also have a commitment on GDP per capita, as the noble Lord rightly says; the OBR currently forecasts GDP per capita to rise by 5.6% over this Parliament.
My Lords, the ONS reported recently that 53% of the population are net recipients of state benefits and therefore make a very modest, to say the least, contribution to GDP. Meanwhile, 1% of the population are producing 13% of GDP and paying 28% of our tax. Whether we like it or not, the UK is becoming ever more financially dependent on its top earners but at the same time making it less attractive for them to stay and contribute to the UK. The evidence is mounting—we saw it from France yesterday—that people are considering moving their assets abroad and potentially leaving the country. So does the Minister agree with me that, whatever your ideological view of wealth distribution might be, the UK needs to focus on retaining its high earners, and does he recognise that if only 10% of the top 1% leave—that is 35,000 people—our fiscal black hole would increase very substantially?
That is a very long question but I can give the noble Lord a very short answer. Yes, of course, I agree with him. It is very important that we retain our high earners and retain as much talent in this economy as we possibly can.
My Lords, the equitable distribution of income to enable people to buy goods and services is essential for sustained economic growth, but all is not well. At Melrose, the CEO to average worker pay ratio is 1,112; at Tesco 375; at Marks & Spencer 261; at Associated British Foods 218; and 195 at Sainsbury’s. In view of this scale of inequity, what is the Government’s plan to secure equitable distribution of income for workers and, in doing so, also secure economic growth?
Clearly, we need to make sure that we retain top talent in this country, as the previous questioner asked me about, but we also need to make sure that we increase the living standards right across the income distribution, and particularly for working people. My noble friend will know that wages continue to grow and that in the first 10 months of this Government, real wages rose more than in the first 10 years of the previous Government.
My Lords, one of the problems facing the Treasury and the Bank of England is the quality, or lack of it, of workforce data. Can the Minister tell us what progress is being made with the ONS to improve the quality of the data that the Government have to make their decisions?