Chancellor’s weak productivity plan is failing UK
The former shadow chief secretary to the Treasury argues that a more humble Chancellor would accept his efforts to boost UK productivity aren’t working and make some changes.
In a budget full of gloomy forecasts, downgrades, missed targets and broken rules, the gloomiest perhaps was the significant cut to productivity forecasts by the OBR. Significant because the lower forecasts for productivity are what has led to the lower growth forecasts, and significant also because George Osborne’s so-called Long Term Economic Plan has clearly failed to deal with this long-term problem which is getting much much worse on his watch.
The UK has long struggled when it comes to our productivity. But our performance since Osborne has been in charge has been particularly weak. Figures released by the ONS show that output per hour worked in 2014 was 18 percentage points below the average for our partners within the G7. We are 8 years on from the global financial crisis and yet we remain 13% below the level that would have been achieved if pre-crisis trends had continued.
And today we learn that the OBR has revised down productivity forecasts by a whopping 7.5% (down from 21.9% in 2010 to 14.4% today). This is a damning indictment of the Chancellor’s own “Productivity Plan” unveiled in July last year. It was called “Fixing the Foundations – Creating a more Prosperous Nation”. Unfortunately for the nation it is far from a fix. A Government Minister's defence of the plan started with the immortal words, "The flipside of it being vague and long" which is hardly the ringing endorsement the Chancellor can have been hoping for.
Others who gave evidence to the BIS Select Committee inquiry into the Productivity Plan were equally scathing. "There is a gap," said one, "between the intentions of the plan and the reality”. The Committee itself concluded that "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".
Yet the Chancellor stuck to it, as if saying he had a plan would make everything ok. But we can see from the figures today that everything is not ok. A humble and honest Chancellor would have accepted that the Productivity Plan hadn’t worked, that things were headed in the wrong direction and would have said what he would do to change things.
If Labour politicians are so powerful that they can impact on the global economy and thus be blamed for things that go wrong (as the Chancellor has frequently claimed) then this Chancellor is powerful enough frankly to take his share of the blame for our poor productivity performance and start saying how he might put things right. At the very least, he could have announced an urgent review. But instead he blamed the Global Cocktail of Risk and clearly hopes he will get away with it.
Shabana Mahmood is the Labour MP for Birmingham, Ladywood. She is the former shadow chief secretary to the Treasury
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