This post was first published by the Local Government Information Unit
The summer Budget, and the parallel launch of a ‘Productivity Plan’ (LGiU members’ briefing here) sought to establish a fresh narrative on the economy: the business end, if you will, of ‘One Nation’. While deficit reduction and job creation remain major themes, boosting productivity (and thereby wages, living standards and international competitiveness) looks set to provide a new focus. What does this mean in reality?
The national ‘productivity gap’ and ‘productivity puzzle’ are not new issues, as Andrew Sentance highlights. Britain’s output per hour worked has consistently been lower than G7 or European comparators, and has failed to recover since the financial crisis. With wages depressed, firms have often retained or hired employees despite the economic conditions, but not necessarily invested in skills, technology or otherwise boosting those workers’ output. Early in his Chancellorship, Gordon Brown identified five ‘drivers of productivity’: all are reflected, albeit with a conservative gloss, in George Osborne and Sajid Javid’s ‘Fixing the Foundations’ plan.
As the length of the document demonstrates, the Chancellor is using productivity as a positive political frame for a range of decisions which, in reality, have disparate origins and impacts – most controversially, significant welfare changes. To be meaningful, at a time of institutional change, the focus on productivity must also address deep-seated structural issues affecting individuals and businesses’ interactions with each other and with the state.