21 October 2015

Fixing the productivity problem

In July the Treasury published Fixing the foundations: Creating a more prosperous nation, its plan for reversing the UK’s long-term productivity problem and securing rising living standards. By its own analysis, the productivity gap between the UK and leading advanced economies is considerable: we are languishing 31% below the US and 17% below the G7 average. 

The Plan is the subject of an Inquiry from the Business, Innovation and Skills Select Committee, to which BPIF has submitted a detailed response*. We call for quantifiable steps and milestones showing how - and by when - it is expected the UK will catch up with its main competitor nations, and for the Government to work with all sectors in delivering the Plan. 

We welcome the promised publication of a National Infrastructure Plan for Skills. The creation of a further three million apprentices is also good news, provided this delivers quality employer-led apprenticeships and is supported by better careers advice and guidance in schools. However we are less enthused by the prospect of an apprenticeship levy. 

There are some encouraging measures on incentivising investment, including cuts to the corporate tax rate and making the Annual Investment Allowance (AIA) permanent at £200,000. This is welcome, however we also want the AIA raised still further, and the scope broadened to include training focused on continuous improvement . We call for policy changes to encourage longer-term approaches to investment, while welcoming plans to promote more competition in the corporate lending market. We also support proposals for increased devolution - provided they result in greater efficiency, more control of local decision-making and tangible results for the local business community. 

With much of our industry’s output distributed by road, we welcome the creation of a new Roads Fund. However more definitive long-term commitments on future infrastructure investment are urgently needed. We support actions planned to stimulate trade and exports, and the proposed review of statistics for measuring productivity. However although we are pleased at the prospect of reforms to the delivery of public services, the Plan fails to examine how improvements in procurement could drive up productivity in the public sector.

*The BPIF’s response to the Select Committee Inquiry can be found here