Speech

Fixing the foundations: boosting Britain’s productivity

The Business Secretary launches the government’s plan for tackling the economic challenge of our time: increasing Britain’s productivity.

The Rt Hon Sajid Javid MP

Introduction: the progress we’ve made

Birmingham is an incredibly diverse city in so many ways, not least the huge range of businesses that call England’s second city their home. Whether it’s in automotive, the creative industries, or of course jewellery, there’s an incredible breadth of entrepreneurial talent in this city and this room today.

But for all the diversity you all have one thing in common. You all saw the scale of the challenge that British businesses faced in 2010.

The worst recession in almost a century. The biggest budget deficit since the Second World War. The world’s largest bank bailout. A nation saddled with debt and an economy struggling to grow.

Five years on, the picture is very different. Our long-term economic plan is working, and Britain is working. Or economy is growing faster than that of any other G7 nation, and we’ve gone from a record-breaking recession to record employment. Last year, Birmingham alone created more new jobs than the whole of France.

But we’re not about to stop now. I want to take British business to the next level. And the best way to do that is to boost our productivity.

Productivity: why it matters

Productivity is something we’ve been hearing a lot about recently, and that’s because it’s one of the few areas of the economy where Britain is struggling.

Britain is home to some of the world’s most innovative and dynamic businesses, staffed by incredibly talented, hardworking individuals. Yet our productivity – the rate of output per hour worked – is well below its potential. In stark terms, it now takes a worker in the UK 5 days to produce what his or her counterparts in Germany can deliver in 4.

The picture’s not entirely bleak. Standing here in Longbridge a decade ago you could have been forgiven for thinking that Britain’s car industry was in terminal decline. Yet today, the UK is home to the world’s most productive automotive sector. And if one sector can solve the productivity puzzle in such spectacular fashion, there’s no reason why others can’t too.

It’s crucial that they do, because productivity isn’t just some obscure measure, of interest only to economists. It matters to each and every one of us. If we could match USA for productivity, it would boost our GDP by 31% – that’s equivalent to £21,000 a year for every household in the UK.

And higher productivity means higher incomes. When productivity rises, standards of living rise too. So today I’m proud to publish ‘Fixing the foundations’. It’s our plan for productivity, and our blueprint for creating a more prosperous nation.

Let me talk about 3 elements that are particularly close to my heart.

Transport

The first is transport. The internet has revolutionised the way many of us work, but you just had to look at the disruption caused by this week’s strikes to see that reliable transport links are still a vital part of any serious, growing economy.

Yet for decades, successive governments have not invested enough in maintaining and developing the arteries of British business. Congestion on our roads is getting so bad that by 2040 we could lose more than 100 million working days to traffic jams. 100 million days! If we don’t fix this problem British business will, quite literally, get stuck in the slow lane of Europe.

So over the next 5 years we’re going to invest £100 billion in infrastructure. We’re going to create a new roads fund to ensure continued high and stable investment in the strategic road network for generations to come. We’re going to get the rail investment programme back onto a sustainable footing, and change the way we provide public money so that Network Rail focusses firmly on the needs of train operators and passengers.

And, unlike previous governments, we’re going to grasp the nettle of airport capacity in the south east, taking a decision by the end of this year.

Planning

Of course, we haven’t just lagged behind on transport infrastructure. The UK has long been incapable of building enough homes to keep up with growing demand. This doesn’t just frustrate the ambitious of hardworking people who want to own their own home – it also harms productivity and restricts flexibility in the labour market.

So we’re going to introduce a new zonal system, which will effectively give automatic planning permission on suitable brownfield sites like the one behind me. We’ll make sure the homes that are needed get built – if a council fails to produce a suitable local plan, we’ll have it done it for them. And we’ll be devolving major new planning powers to London and Greater Manchester.

Too many homeowners are frustrated by red tape that stops them extending their homes to accommodate growing families. It’s a particular problem in our crowded capital city. So today I can announce that the government will be working with the Mayor of London to make life easier for people who want a little extra space. We’re going to remove the need for Londoners to seek planning permission for upwards extensions up to the height of an adjoining building, provided your neighbours don’t object. It’s a simple step that, at a stroke, will take layers of bureaucracy and cost out of the planning system.

Education

But productivity isn’t just about buildings and roads and infrastructure. It’s also about people. About making sure British workers have the skills they need to compete. And right now, too many of young people are missing out. We’re one of the only advanced countries where the skills of our 16 to 24-year-olds are no better than those of our 55 to 64-year-olds. It’s simply not good enough, and it’s storing up problems for the future.

Part of the problem lies in our system of training. Enter the professional and technical education system today and you’ll be faced with a blizzard of complicated and overlapping qualifications, often with no obvious pathway to a decent job. So we’re going to simplify and streamline the system, replacing thousands qualifications with clear set of routes that allow for progression to high level skills.

And that high-level, sector-specific skills training will be provided, in part, by prestigious new institutes of technology. As is the case in some of the world’s most productive nations, these institutes will be sponsored by employers, registered with professional bodies, and aligned with apprenticeship standards.

The role of business

So our plan for productivity is clear. We’ll get Britain moving, we’ll get Britain building, and we’ll get Britain learning. We’ll deliver the infrastructure and skills this country needs to become the world’s richest major economy.

But there is one thing missing from the plan. You. Because the government cannot do this alone. The plan I’m launching today will create an open, competitive economy and deliver much-needed investment in skills and infrastructure. But only the private sector can produce sustainable growth, create long-term jobs and make the economy as productive as it can be.

Boosting productivity is the economic challenge of our age, and there’s a long way to go. But together we can get there.

On Wednesday the Chancellor talked about fixing the roof while the sun was shining. Today, the sun is shining once more. And, together, we’re fixing the foundations.

Thank you.

Published 10 July 2015