02 February 2016

The House of Commons Business, Innovation and Skills (BIS) Committee recently published the findings of an inquiry into the Government’s Productivity Plan. Miguel Coelho, who gave evidence at the inquiry, looks at the findings.

The BIS Committee set out to investigate whether the Government’s Productivity Plan, which spans 15 different policy areas − from transport, energy, and planning to science, finance, and infrastructure − addresses the main causes of low productivity in the UK, and whether it is likely to achieve its desired results.

The Committee’s report contains a number of strongly worded remarks about the Government’s plan. It describes it as representing ‘more of an assortment of largely existing policies collected together in one place than a new plan for ambitious productivity growth’. It claims that the plan holds many commitments for future actions but few clear timelines, specific milestones, or success measures. A persistent weakness, the Committee argues, is that ‘it contains good analysis but little constructive and tangible action’.

The evidence base underpinning some recent policy initiatives relevant to the plan is also called into question. One example that attracts significant attention in the report is the Government’s decision to convert £165m in research and development (R&D) grants to loans. The Committee says that it heard ‘anecdotal testimony of the Minister that businesses she had spoken to had stated that they would prefer to take out a loan (that they have to pay back) rather than be given a grant (that they do not)’, but said that it ‘struggles to accept that the majority of rational businesses in the UK share that view’.

At times, the Committee’s analysis appears to suffer from the same limitations it attributes to the Government’s Plan. The report, for example, takes a swipe at the Government’s target of three million apprenticeship starts over this Parliament, describing it as a ‘blunt and arbitrary tool’, but it seems to adopt an equally ‘blunt and arbitrary’ approach when it calls on the Government to commit to a level of (public and private) R&D investment of three per cent of Gross Domestic Product.

More importantly, by focusing on areas of the plan relating to skills, innovation, and investment the report takes a rather narrow view of productivity, leaving out a number of policy initiatives and institutional changes that are important for future economic prosperity in the UK.

For example, there is not a single reference in the report to the reforms introduced to the land planning system. These mark a significant departure from the current arrangements based mostly on local development control, which our research suggests have contributed to the onset of the current housing crisis.

While the Committee praises the creation of an independent National Infrastructure Commission (NIC), it does not dwell on its role. As we’ve said elsewhere, the NIC offers an opportunity to address an important institutional gap in the governance of infrastructure in the UK. Yet, its effectiveness relies critically on its ability to engage proactively a wide range of interested parties (such as experts, interest groups and local communities) and facilitate an informed debate about the costs and benefits of alternative policy options. Comments on the fresh delays in the decision about expansion of aviation capacity in the South East of England were also conspicuous by their absence in the Committee’s report.

The Government’s decision to reverse a proposed reduction in the Annual Investment Allowance is praiseworthy in the eyes of the BIS Committee, which highlights it as ‘an example of a specific and tangible policy that provides the certainty that allows and encourages investment for the long term’. Yet, the Committee is silent on a wider set of pervasive problems in the formulation of tax policy identified by successive studies.

As our work on select committees in the 2010 Parliament noted, sometimes the departmental focus of select committees makes it difficult for them to consider government strategies that cut across departmental boundaries.  In this parliament however, several committees have taken steps to address this weakness.  The BIS Committee itself, for example, has taken the significant step of establishing a new sub-committee on Education, Skills and the Economy together with the Education Committee “to examine issues around education and skills, and how they impact upon business and the economy”. Such innovations have the potential to improve the ability of the select committee system to examine cross-cutting policy issues.