52.The Government’s Productivity Plan was launched in July 2015. The Government considers it to be the “first devoted sign of such a specific commitment to all the issues that are relevant for productivity”. We welcome the Government’s focus on productivity. When it comes to the success of British businesses and the UK economy, we share the aspiration of the Government that the Plan is a success. That is why our first announced inquiry was into the Plan and it we will continue to scrutinise its implementation throughout the Parliament.
53.However we are concerned that the document has been described by many businesses as being too vague and long a document to be practical, and that its lack of specific and measurable policies means that there is a risk that the document is destined to collect dust on bookshelves across Whitehall. We have recommended that the Government produces a clear supplementary document outlining the proposed implementation and measure of success of each policy in the Productivity Plan. The Chancellor of the Exchequer published his Spending Review and Autumn Statement 2015 towards the end of our inquiry and we conclude this Report by considering whether and how that Review has moved the Productivity Plan forward.
54.First, there are many aspects we welcome. We commend the Chancellor for confirming that the Annual Investment Allowance will be maintained at a permanent level of £200,000 a year. We received a wealth of evidence asking for clarity and certainly to give the private sector the confidence to make capital and innovative investments and this is a specific and tangible policy that provides such certainty. We also welcome the increased funding for Catapult centres. We believe that these institutions provide a valuable service to businesses looking to cross the ‘valley of death’ and have a positive wider impact on the innovation and productivity of the economy.
55.Secondly, there are some measures in the 2015 Spending Review that we welcome in principle, but on which we seek more detail. For example, the Government has announced that it will push forward with its ambitious target of achieving three million apprenticeship starts by 2020. We welcome the Government’s desire to close the skills gap by encouraging vocational training. However, it appears that the Government has not consulted with, or considered the impact that this policy will have on, industry. Three million apprentices is a significant commitment to place on businesses and we are concerned that this is a decision that has been made with no consideration for what type of training businesses actually want to facilitate. The Government also announced that it will be funding this aspiration via a levy across all large businesses. Given that the Government has suggested that the skills agenda in the economy should be demand-led, we do not believe that the Chancellor has provided enough detail about how the levy will be implemented in a way that adequately protects those sectors that—for legitimate reasons—do not use apprentices.
56.Finally, there are some measures in the 2015 Spending Review that do not promote productivity. Specifically we were concerned to note that the Government has announced that £165 million per year that was given to businesses as an R&D grant to promote investment and crowding-in, will be converted to loans. We find it difficult to accept that many businesses prefer to pay back a loan, rather than receive a grant and are concerned that this will discourage businesses from taking the risk to invest in R&D. The Government should explain how this will help boost R&D investment and provide specific evidence of the rationale behind this shift in policy.
57.The Productivity Plan is a long and broad document. The Committee’s inquiry has looked at the three main themes of skills, innovation and investment. This Report makes recommendations with the objective of seeing the Productivity Plan succeed and to add value to the policies of the Department. We will continue to monitor specific policies of the Department for Business, Innovation and Skills. The Secretary of State said that “boosting productivity is the economic challenge of our age”. Scrutinising the Department’s response to it is our challenge for the Parliament.
Prepared 28 January 2016