Article for ConservativeHome

21st December 2016

Shortly after Theresa May won the Conservative Leadership contest and became Prime Minister, I wrote that she had three main priorities: unify the Party, take Britain out of the EU and rebalance both our economy and society.

After a successful party conference in which she set out her vision of what Brexit meant, May has made it clear that she intends to take the UK out of the EU. In announcing a Great Repeal Bill and her intention to trigger Article 50 by March of next year, the Prime Minister also seems committed to carrying out the intentions of the 17 million British citizens who voted to leave the European Union. It now seems certain that Britain will no longer be a member of the EU after 2019.

Furthermore, it is also noteworthy that, back in Parliament and around the country, there is relief at the way she has taken charge and, as a result, the Party is well on the way to unifying as it moves on from the vote.

What remains, however, is the rebalancing of our economy and our society. With Britain leaving the EU, there must be a sense of urgency in delivering on this task of resetting the economic agenda to build on the success we have achieved economically over the past six years in increasing employment to record levels and bringing down the deficit by more than a half. Whilst the Labour Party seems determined to embark on a programme of renationalisation and price controls, the Conservatives must continue to stand for economic opportunity and ownership for all, with a renewed commitment to free trade.

Having left Government back in March, I have returned to the Centre for Social Justice as Chairman and have launched new research into how the British economy can thrive outside of the EU. One of the most significant areas we hope to look at will be the often overlooked measure of productivity.

Since the global financial crisis, UK productivity growth has lagged significantly behind the US, Germany, Canada and France. In 2014, Germany and the USA were 36 per cent and 30 per cent more productive respectively than the UK. This fall in productivity has cost our economy billions in output and potential wealth creation. This wasn’t always the case. Prior to the global financial crisis, UK productivity growth rates were higher than the G7 average. It begs the question therefore, why has British productivity slowed so dramatically, and what can be done to drive it back up?

A theory behind the slowdown in UK productivity has been the decline in British manufacturing. Manufacturing contributes approximately 10 per cent of total economic output in the UK, half the size it was in the 1990s. Italy, Japan, the USA and – unsurprisingly – Germany all have larger manufacturing bases than the UK. A common misconception is that modern manufacturing is inefficient and unproductive, however this could not be further than the truth. UK manufacturing productivity grew at an average rate of 3.6 per cent between 1984 and 2008, higher than the UK service sector. Has a greater reliance on the service sector been the reason behind productivity growth rates slowing significantly?

The CSJ built its reputation by changing the debate on poverty in the UK. Under Tony Blair and New Labour, poverty was perceived through the single, limited lens of income. An individual or household was considered ‘poor’ if their income dipped below a predetermined level, and the remedy was simply more welfare spending. The CSJ forced Westminster to accept that poverty was actually far more complex. We identified five root causes of poverty: family breakdown, educational underachievement, worklessness, debt and addiction. It is only through addressing all of these pathways that we will successfully tackle poverty and see people flourish. The change in narrative was transformational, and the work done at the CSJ provided the platform for some of the welfare reforms I introduced whilst Secretary of State for Work and Pensions.

The economic debate in the UK needs to change. The Treasury has focused for too long on the dual aims of GDP output and employment. Policy makers have failed to take into account the quality of both growth and jobs. We have to focus more on ensuring that growth is shared equitably across the country and not just among a few in London. We also have to guarantee that people have a career for life and not just a job for now. We want to attack the problem of low productivity, like we did for poverty, through five pathways: education, skills and training, infrastructure investment, business and entrepreneurs, research and innovation.

I believe there are huge opportunities for this country now we have taken the decision to leave the EU, but these cannot be achieved if we do not now seek to put our house in order. Speed is important in the pursuit of this goal, as well as quality research which is why we hope to present our findings to the Government by next summer – at which point Article 50 will have been triggered and negotiations with the EU will be fully underway. I believe the CSJ report should provide Theresa May and Philip Hammond the opportunity to reset the economic agenda and meet the third priority I laid out in July, to rebalance our economy and with it, society.

| First published in ConservativeHome