Focus on productivity, not just Brexit
The CBI’s Budget submission highlights the challenges facing the UK’s economy – and the measures that will help
Talk of ‘deadlock’ following last week’s talks will have given many pause for thought over the weekend. While the EU negotiation is the most complex undertaking of the post-war period, we can’t afford to neglect the other challenges facing the UK economy.
In a little over a year, our economy has gone from the fastest growing in the G7 to the slowest, and the IMF’s recent downgrade has added to existing woes over poor productivity.
That’s why this Budget offers the Chancellor an opportunity to set out how good government, working with responsible business, can help improve people’s lives.
So, when the Chancellor opens his Red Box in a few weeks’ time, business leaders will be looking for measures to create a pro-enterprise environment – delivered through a new, bold Industrial Strategy – to help reinforce the UK economy against future challenges.
Moreover, it’s critical that growth reaches all parts of the UK.
Appointing an independent commissioner for Industrial Strategy will ensure areas without a devolution deal don’t miss out on government funding. And tackling poor teacher recruitment and retention by reviewing incentives, particularly in areas facing the greatest challenges, will also help level the playing field.
For too long, the complexities of Brexit have crowded out domestic priorities, such as improving education, fuelling inward investment in energy and infrastructure, incentivising innovation and promoting competitiveness through the tax system.
Put simply, the only sure way to raise living standards and provide the sustainable public services we need is to solve the UK’s productivity problem.
Let’s start with skills. Preparing the UK’s workforce for technological change is essential to bolster prosperity and improve people’s life chances. By addressing underfunding in schools’ education, incentivising high-quality teaching and delivering the long-overdue careers strategy, the Government can help future-proof tomorrow’s workforce.
Wherever possible, new measures should build on what has already been started, especially infrastructure. There is an urgent need to deliver greater airport capacity in the South East, so we must keep up the pace in delivering Heathrow, with construction beginning by 2020. Further afield, we need to see high-vis vests everywhere delivering existing projects in the current road and rail pipeline, from improvements to the A66 and A69 to making progress on Northern Powerhouse Rail.
Amid heightened political uncertainty – both at home and abroad – British businesses crave stability to help them invest and grow over the long-term. Last week’s energy cap announcement shows that misguided market interventions can be detrimental to the long-term goal of attracting much-needed investment.
Therefore, the Chancellor should set a high bar for tax changes, focusing on targeted measures to incentivise investment and productivity growth. For example, exempting new equipment from business rates and bringing forward the RPI to CPI switch to next April will deliver a fillip for factories and retailers struggling with higher inflation.
Britain’s economy also needs to be match-fit for the future. Unlocking public and private investment in R&D to catch up with our international peers will be vital if the UK wants to be among the leaders of the technological revolution.
Only by setting out a vision for the economy that invites investment by shoring up business confidence, and addresses productivity problems, will the government achieve its aim of sharing prosperity and opportunity more equally around the UK.
This piece was first published in The Times