§ John Healey
Productivity has grown since 1997, even with rapidly falling unemployment. Productivity growth between 1997Q2 and 2002Q1 has averaged 1.3 per cent. p.a. (comparing each quarter with a year earlier). This is in the context of rising employment (increased employment of over 1½ million since Spring 1997), while unemployment as measured either using the International Labour Organisation methodology or via the "claimant count" has been at its lowest since the 1970s over the past year.
The Government's long-term ambition is that Britain will achieve a faster rate of productivity growth than its main competitors, closing the productivity gap. The creation of a sustainable, stable macroeconomic framework since 1997 has provided the foundation for productivity growth in UK firms, and microeconomic reforms are supporting and encouraging further growth. These reforms include:the Competition Act 1998, which prohibits anti-competitive agreements and abuses of dominant market position;the Enterprise Bill (introduced to Parliament in March 2002), which will build on the achievements of Competition Act by further strengthening our competition authorities;Research & Development tax credits—together the small and large company credits provide £500 million new support for business R&D;the largest sustained growth in spending on science for a decade, with the 2002 Spending Review committing some £1.25 billion additional spending by 2005ߝ06 compared to 2002ߝ03;a Green Paper setting out a fundamental reform of the land-use planning system to ensure that it does not provide a barrier to economic growth and productivity—the 2002 Spending Review allocated the ODPM substantial additional resources to drive forward the reforms set out in the Green Paper;a 10 year plan for transport, which sets out plans for public and private investment of more than £180 billion up to 2010, creating a modern transport network across the UK—the 2002 Spending Review continued the investment necessary to deliver the Ten-Year Plan, increasing public expenditure on transport from £7.6 billion in 2002ߝ03 to £11.6 billion in 2005ߝ06;356Wreduced corporation tax rates—the main rate has been reduced from 33 per cent. to 30 per cent., the lowest ever UK rate; the small company rate has been reduced from 23 per cent. to 19 per cent., and a new starting rate has been introduced, reduced in 2002 to 0 per cent. for profits under £10,000; average corporation tax bills for small companies have been cut by 30 per cent. since 1997;increased investment to raise standards in education-spending per pupil was £2,700 in 1997, but rose to £3,500 last year; this could rise to £4,900 per pupil by 2005–06. which after inflation, is 50 per cent. more per pupil than in 1997;ambitious new policies and targets to improve adult literacy and numeracy, and increase lifelong learning; andreforms to the work permit and immigration systems to ensure that UK employers can recruit staff with the skills they need.
Substantial productivity gaps with our major competitors remain. Nevertheless, recent encouraging evidence includes:the rating of the UK by the OECD as having the lowest barriers to entrepreneurship of any major economy;Global Competition Review awarding the UK competition regime four and a half stars this year (compared with three and a half last year); this rating was bettered only by the US Department of Justice and Federal Trade Commission (5 stars);increased gross expenditure on R&D in the UK of 11.6 per cent. in real terms between 1997 and 2000;improved educational achievement of young people—the proportion of 16 year olds achieving 5 or more GCSEs at grades A⋆-C increased by 8 per cent. between 1997ߝ8 and 2001ߝ2 to over 50 per cent.; andan increase of 61,000 in the number of businesses registered for VAT between 1997 and 2000.