Professor Peter Clinch:

I will start with productivity. When I became chair two years ago, I was keen that we placed a much stronger emphasis on productivity. It was interesting that when we went looking for the data, it was actually quite hard to find the data at a sectoral level, for example, on productivity. We have just recently produced a report working with the CSO and others and finally we are shedding some light on productivity across different sectors. That is an advance. In terms of productivity the story looks superficially great. Many developed economies are in negative multi-factor productivity growth. It is the big concern for policy makers internationally and some believe that large leading companies are getting well ahead of the follower companies. It is something that we should be concerned about here because we see a big difference in productivity between the multinational sector and the rest of the economy. Our robust productivity rates rely on quite narrow sectors and a narrow range of companies. What is important is to grow productivity in those areas which have high employment intensity. We see lower levels of productivity in areas such as retail, hospitality and construction, and those are the areas on which we need to focus. We also tend to see that internationally traded companies are more productive and there is a learning effect of operating overseas. We have also seen that our productivity growth rates have been boosted by the loss of jobs in areas that are lower productivity such as construction, which is an obvious one, and retail during the crisis. We have to be careful when we look at the very nice figures that bring us to the top of the table of what is going on beneath that and also of the social consequences which are ignored.

In productivity, the story is good, on the face of it, but we have to find ways of boosting productivity right across all business and the public service as well. Public service productivity is also crucial to competitiveness. That comes from things like the discussion we had over investment in infrastructure, investment in talent and skills, supporting and rewarding entrepreneurs, by which we mean the large numbers of people who employ two or three people in all sorts of jobs, not just high-tech or those types of areas. We have also identified the need to improve what is called diffusion, which is getting all the know-how from leading companies over to companies right across the economy. It is really important that the message of higher productivity rates hits those in all jobs, this is not just something for people in white coats and so on. That allows us to answer this question which is that an economy does not have to be low wage to be competitive, it is about productivity growth rates.

If an economy can boost its productivity growth rate by even a small amount, it can skip a generation, in respect of the prosperity of its population. The importance of productivity was demonstrated in the latter years of the Celtic tiger when we saw growth rates in the economy getting ahead of productivity growth rates. This would suggest there is something wrong and there was something wrong. Essentially we turned the clock back to 2001 or 2002, which was where our model stopped being sustainable.