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Mr. Purchase: Would the hon. Gentleman like to attribute the causes of the low productivity figures for the United Kingdom as opposed to those of the United States? Could they have anything to do with two decades of under-investment in British capital structures?
Sir Michael Spicer: That is an interesting question. I promise the hon. Gentleman that I will shortly make my remarks directly relevant to it. Last week I asked the Prime Minister about productivity. There seems to be some uncertainty in the Government's mind about what is going on. I asked:
- Why have productivity rates fallen so sharply--
- since the right hon. Gentleman took office?
- I am sorry to have to tell the hon. Gentleman, but productivity--
- has risen--[Official Report, 29 November 2000; Vol. 357, c. 961.]
Mr. Bercow: Give it to the Prime Minister for Christmas.
Sir Michael Spicer: I have taken the liberty of sending it to him as a pre-Christmas present.
On page 3, table 1.1, the Prime Minister should read "Trend labour productivity", and read down a column headed "Actual" and then go to a line that reads "1990-97", where 2.1 per cent. appears. That was a period when the Conservatives were in government, as it happens. That period was chosen by the Treasury, not by me. For 1997-99, there is a fall to 1.6 per cent. The forecast is 1.9 per cent. The figures published by the Government last month show that productivity rates have been falling since they took office. I cannot do better than quote direct from table 1 in the Government's publication.
The situation is serious. I am coming closer to the question of the hon. Member for Wolverhampton, North-East. In a way it is almost a text for what I want to say about the contrast between the Conservative Government and the Labour Government. So worried are the Government about productivity falls that the Chancellor of the Exchequer organised a seminar in his house, No. 11 Downing street. Well, it is not his house because he has not lived there, but it is the house that he is meant to live in, and the house to which he can invite others to attend seminars.
The seminar took place on 15 November, about the same time as the publication of the Treasury document, a copy of which I sent to the Prime Minister as a Christmas present in advance. People were asked to attend the seminar and present the answer to the conundrum, which is why productivity rates were rising slower under a Labour Government than the rate at which they had been consistently rising under a Conservative Government.
Mr. Irwin Stelzer is a distinguished American economist who often writes in The Sunday Times. He is politically unbiased, which is presumably why he was invited to the seminar at the Chancellor's house to give a speech on what should be done about productivity rates. He made two points that the House should know about, the first of which is contrary to the way in which the Labour party goes about things. He said:
- There is, of course, a danger when governments take an interest in microeconomic policy--
- they tend to tinker in the belief that a bit of taxation here, a bit of tax relief there, a subsidy or two, regulatory intervention, some exhortation, and none-too-subtle pressure on business leaders can produce the productivity gains they seek, in the places they think most important.
Such programmes are generally counterproductive. Not so a vigorous competition policy.
- Effective competition makes regulation unnecessary.
The Queen's Speech has some verbiage about trying to do more to make regulation less burdensome, but the Labour Government have introduced a brand new type of economic regulation. Labour Members should be pleased about that because, as I and others have said several times, it is socialism by the back door. What the Government have introduced is not so much the minutiae of regulatory bureaucracy and burden, but a political regime.
All the regulatory Bills that the Government have introduced, including the Utilities Bill--I must declare an interest as President of the Association of Electricity Producers--have a clear and common characteristic in that the regulators are not now so concerned with competition. That is what Conservative regulation was about--we included a sunset clause so that when there was true competition the regulation subsided. However, the Labour Government have included many of their political objectives in the regulations.
For instance, the Office of Telecommunications is concerned not necessarily with competition between telephone companies and suppliers of telephone equipment, but with total coverage. The Office of Gas and Electricity Markets is concerned not with competition, but with fuel poverty. In fact, much of what it is doing is anti-competitive: it is working against competition.
The Financial Services Authority is concerned not so much with competition in the City of London, but with social banking. The concern is with income distribution. That might be a laudable objective--I am not arguing for or against income distribution--but it is one of the Government's clear political objectives, and it is being built into the legislation as an objective of regulation. It has nothing to do with competition, productivity or economic prosperity, but everything to do with socialist ideas about the distribution of wealth. That is a matter of extreme concern, and is fundamental to our understanding of how, deep down, Labour is destroying the economic prosperity of the country.
Mr. Bercow: I am grateful to my hon. Friend for giving way. Is he aware that 18 months ago it was estimated that as a result of Government regulation the average small firm was facing an additional annual cost of £5,000? Does he agree that that is a matter of particular seriousness when we reflect on the important fact that 99.6 per cent. of businesses in this country employ fewer than 100 people, that they account for about 57 per cent. of the private sector work force and that they generate two fifths of our national output?
Sir Michael Spicer: My hon. Friend's figures are bound to be correct. He does not have to wade through masses of paper, as I do to make sure that my figures are correct. It is right that he should cite those serious figures.
In the Queen's Speech, the Government outline their proposals for a new anti-regulatory body. It is important that regulatory costs and burdens are dealt with, but I do not trust the Government to do so. The ability and willingness of industry to invest is being disastrously affected by the fact that, through the regulatory regime, the Government are introducing a new form of socialism by the back door, with clear political objectives.
Mr. Bill Michie (Sheffield, Heeley): Dream on.
Sir Michael Spicer: I invite the hon. Gentleman to join in. This is a good debate. My argument is that socialism
is incompatible with investment in the free market, so it is incompatible with higher productivity rates. Despite all the wonderful seminars that the Chancellor is organising in his house, and all the aspirations and weasel words, if we are faced with socialist policies, it is whistling in the wind to hope that productivity rates will start rising.Every time we have had a socialist regime for any length of time, productivity rates have gone down, whereas in the last 10 years of the Conservative Administration, especially in the early 1990s, productivity rates were rising rather fast, as a result of the fundamental reforms that were taking place.
A further reason why, under a socialist regime, productivity rates cannot and will not rise fast, whatever the Queen's Speech may state to the contrary--whatever Her Majesty may have been commanded to say to the country--is taxation. In some ways, I do not understand why the Government say that they are not putting up taxes. If I were sitting on the Government Benches, I would say "Dream on" to someone such as myself, who said that taxes were going up. Surely that is what a socialist is in business for--higher taxes and higher spending. That is what government is about, for a member of the Labour party.
I do not understand why there is such denial of taxes going up. I should have thought that it was a matter of great pride for a socialist Chancellor to say that he was putting up taxes and expenditure. That is indeed what he is doing. Every time the figures emerge, and every time he appears before the Select Committee on the Treasury, he will not explain why taxes are going up or whether he thinks that that is good or bad. I do not understand why he will not answer. I should have thought that that was part of the objective.
The facts are clear. I am reading from an outside document, but I could also read from the Government's own figures. The average percentage of GDP taken by taxation in the last five years of the premiership of my right hon. Friend the Member for Huntingdon (Mr. Major), from 1992 to 1996, when taxes were already higher than I would have wanted, was 34.5 per cent. Under the present Prime Minister, the average percentage so far is 36.9 per cent. That represents an increase of 7 per cent.
No one can deny those facts. It is extraordinary that the Government try to argue anything different. That is extraordinary in terms of their own objectives and philosophy and in terms of the facts.
We have to answer the question of the hon. Member for Wolverhampton, North-East. Two absolutely clear-cut matters are relevant, and they will be changed by no Budget or Queen's Speech during the rest of this Parliament. An increasingly political regulatory regime is operating against the interests of industry in this country and against the interests of investment, and there is rising taxation. Those are the two features of the present landscape. It is vital for the Opposition to get that across as the general election approaches and for us to nail down the figures so that people understand that productivity and the fundamentals of the economy are beginning to slow down and crumble. I hope that there will be a major debate about that between the two parties during this Session and as we approach the general election.
Another issue will play a part in our proceedings.
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