1.It is clear that the Government places great importance on the productivity of the United Kingdom’s economy. The Secretary of State for Business, Innovation and Skills said that “boosting productivity is the economic challenge of our age”. The Chancellor of the Exchequer mentioned productivity no fewer than 12 times in his 2015 Summer Budget speech. He said that growing productivity was “the key to delivering the financial security families see when living standards rise” and that it would ensure that Britain was “the most prosperous major economy in the world by the 2030s”.
2.While other macroeconomic indicators such as employment and Gross Domestic Product (GDP) have increased since the recession, productivity has stalled. Most developed countries experienced a drop in productivity in the wake of the 2008 financial crisis, however the UK has been one of the worst performers in terms of progress since. This was summarised by the London School of Economics, which told us that “productivity growth has been stagnant since the financial crisis, and the long-standing gap with our international peers has widened”. Productivity is now 14 per cent below the level that would have been achieved if pre-crisis trends had continued:
Figure 1: UK productivity growth—GDP per hour worked
Source: Whole Economy GDP per hour worked, seasonally adjusted. ONS Statistical bulletin, Labour Productivity, Q1 2015, downloaded 8 September 2015. (Q2 2010=100). Note: predicted value after Q2 2008 is the dashed line calculated assuming a historical average growth rate of 2.2%.
3.In July 2015, as part of its effort to improve productivity growth in the UK the Government published the document: Fixing the foundations: Creating a more prosperous nation. In the accompanying press release, the Government branded this document its ‘Productivity Plan’. We have recognised that description throughout our Report (or referred to it simply as the ‘Plan’). The Productivity Plan was launched jointly by the Chancellor of the Exchequer and the Secretary of State for Business, Innovation and Skills. When launching it the Secretary of State described the document as the Government’s “plan for productivity” and its “blueprint for creating a more prosperous nation”.
4.The Productivity Plan consists of 15 different policy areas, built around two ‘pillars’:
Figure 2: Framework for raising productivity
Source: Her Majesty’s Treasury
Given that these policy areas cover such a wide range of economic activities and fundamentally affect business, we were surprised when we asked a panel of large businesses (Rolls-Royce, Virgin Atlantic and EE) that not one of them had been consulted on the content of the Productivity Plan before its publication.
5.We received mixed general reactions to the publication of the Productivity Plan. The majority of the written and oral evidence welcomed the Government’s focus on productivity and the principle of the Plan, while others applauded specific focus on areas of the economy where productivity could be boosted. However, we heard criticism from some witnesses that the Plan did not contain practical or specific measures to achieve its ambitions. For example Dick Elsy, Chief Executive Officer of the High Value Manufacturing Catapult, told us that “there is a gap between the intentions of the plan and the reality”. He concluded that while “the Plan is a wellintentioned framework, it falls short of being specific”.
6.The Government is right to be concerned by the lack of productivity growth in the United Kingdom and the Committee welcomes the Government’s focus on this issue. We endorse the analysis of the problem in the Plan. However, we question whether the document has sufficient focus and clear, measurable objectives to be called a ‘plan’. This broad and expansive document represents more of an assortment of largely existing policies collected together in one place than a new plan for ambitious productivity growth.
7.In order to hold the Government to account for the policies contained within the Productivity Plan, it is important to have some quantifiable measure of success. We agree with the Government that productivity is a complicated economic concept which requires long-term investment rather than kneejerk and short-term policies or announcements. It is true that many of the measures taken by the Government today may not affect the productivity statistics for some time, perhaps beyond the life of this Parliament. The Minister elaborated this point using skills policy as an example:
On a number of the things that are probably relevant, including skills and education, you are not going to get results tomorrow, because we are talking about the education of people from the very earliest ages through to when they leave school.
8.For that reason, it is difficult to call this document a ‘plan’ in the conventional sense, in that it has no specific milestones nor metrics for success. The Minister conceded this point but told us that:
The flipside of it being vague and long is that, while it is long, it is the first devoted sign of such a specific commitment to all the issues that are relevant for productivity.
9.The effective implementation of the Productivity Plan is just as important to its success as the concept. While it would be unfair to expect the productivity statistics to immediately reflect this new focus of the Government, we will not hesitate to hold the Government to account for the effective and efficient implementation of the Productivity Plan. We were concerned that, in terms of what successful implementation looks like, there were few quantifiable outcomes or metrics in the Plan itself, by which to hold to the Government to account.
10.While the Productivity Plan holds many commitments for future actions, there are few clear timelines. Greater certainty could be achieved if these policies had clear milestones for implementation and success. We therefore recommend that the Government produces a clear supplementary document outlining the proposed implementation and measure of success of each policy in the Productivity Plan, regularly updated with progress against key milestones and dates. We note that of the 16 chapters of policy areas in the Plan, very few have usable measures of performance. Only once the Government publishes quantifiable metrics of success and a roadmap to implementation of the policies contained within the Plan, will Parliament be able to hold Ministers to account.
11.We were concerned that there was little Ministerial direction or oversight when it came to the implementation of the Plan. When we took oral evidence from Anna Soubry MP, the Minister for Small Business, Industry and Enterprise at the Department for Business, Innovation and Skills, and Lord O’Neill, the Commercial Secretary to the Her Majesty’s Treasury, the BIS Minister told us that, in terms of leadership, it was a “genuine joint effort” while the Commercial Secretary to the Treasury elaborated that “it might be conceptually Treasuryled, but it requires everybody”.
12.In terms of implementation, the Ministers told us that it was civil servants who were responsible for the Productivity Plan. The Commercial Secretary to the Treasury told us that “there is a crossdepartmental group set up, led by a senior Treasury official” which met “six weekly” and reported to him “on a regular basis”. The Minister told us that, if there was something “not happening”, he “and maybe other Ministers need to get involved”. This left us in some confusion as to which Department was actually in charge.
13.We have subsequently learned that the “Cabinet Committee on Economic Affairs, chaired by the Chancellor of the Exchequer and attended by Secretary of State for Business, Innovation and Skills, is ultimately responsible for tracking and driving forward these objectives”. However, we also learned that “Lord O’Neill, Commercial Secretary to the Treasury, has day to day responsibility for implementing the commitments”. It is surprising that the Minister tasked with the implementation of the Productivity Plan is not a member of the Committee responsible for driving forward its objectives.
14.Our conversations with the Ministers and subsequent analysis has led us to conclude that the ministerial engagement in the implementation of the Productivity Plan is far too weak. We are concerned that the cross-departmental implementation work for what is meant to be a key part of government economic policy has been left to officials holding periodic meetings. Effective coordination, ministerial direction and political leadership all need to be much clearer and stronger. We are concerned that, without the discipline of regular cross-departmental ministerial accountability, there is insufficient ministerial focus on the implementation of the Productivity Plan.
1 Department for Business, Innovation and Skills and HM Treasury, ‘Speech: Fixing the foundations: boosting Britain’s productivity,’ accessed 30 November 2015
2 HM Treasury, ‘Speech: Chancellor George Osborne’s summer Budget 2015 Speech,’ accessed 30 November 2015
3 HM Treasury, ‘Speech: Chancellor George Osborne’s summer Budget 2015 Speech,’ accessed 30 November 2015
4 Centre for Economic Performance, London School of Economics () para 1
5 Centre for Economic Performance, London School of Economics () figure 1
6 Department for Business, Innovation and Skills and HM Treasury, ‘Speech: Fixing the foundations: boosting Britain’s productivity,’ accessed 30 November 2015
7 HM Treasury, Fixing the foundations: Creating a more prosperous nation, , July 2015, p 7
9 Q65 [Dick Elsy]
10 Q65 [Dick Elsy]
11 For example Q196
12 Q183 [Lord O’Neill of Gatley]
13 Q140 [Lord O’Neill of Gatley]
14 Q132 [Anna Soubry MP]
15 Q132 [Lord O’Neill of Gatley]
20 House of Commons, Productivity: Written Question , asked on 4 November 2015
21 House of Commons, Productivity: Written Question , asked on 4 November 2015
22 Cabinet Office, ‘,’ accessed 30 November 2015
Prepared 28 January 2016