The productivity puzzle can be understood and resolved. It is a combination of bad news and not such bad news. There was a sharp fall in productivity at the time of the crisis, because we lost a lot of very expensive output, a lot of people lost their jobs and the net result was a big fall. Since the crisis has hit, there has been a continued loss of top-end jobs in areas such as oil, financial services and banking, which score very well in terms of the way people compile productivity figures. An industry such as oil, which produces a lot of extremely valuable output and has a limited number of very well-paid people, gives an enormous
boost to productivity, as we have learned today from Norway. We have just lived through a period when, through no fault of any of the three Governments who have been presiding over it, there has been a sharp decline in the output of oil—because it is now a very mature province—and a big fall in the oil price. That recent fall is down to market circumstance and to things happening well away from this country.
There was also a big loss of top-end jobs in banking and financial services. There will be mixed views in the House of Commons on the social value of those jobs, but they scored very well in the run-up to the crash. Some of those jobs have now gone all together and some have gone to lower tax jurisdictions elsewhere. The bad news side of it accounts for the drop in productivity during the crisis and the slow growth since the crisis.
The better reason why our productivity is below that of some of our continental comparators is that we have gone for a model—I think and hope with the agreement of all parties—of having more people in employment and of creating conditions in which this economy can produce many more lower paid jobs in the hope that that will lead on to higher paid jobs and more output and activity, which is a better model than those people being out of work.
Let us look at the way the productivity figures are calculated. If a country sacks 10% of the least productive people in the economy, which is the kind of thing that the euro was doing to some of our competitor countries in euroland, it can be flattering for its productivity figures, because the least productive jobs go, and the productivity of the total country rises, but the country is a lot worse off, because it then has 10% of its workforce out of work who would otherwise have been in less productive jobs. It is the same in a business. The easiest way for a business with below-average productivity to get to average or above-average productivity is to close its worst factory, but that is not always the answer that people in this House would like.