Since I last wrote we have had a budget. Always a high-risk moment for any Chancellor but this one went off relatively smoothly. The only real shock in it were the growth figures, which were projected downwards. I’m a bit suspicious of growth figures; can a Chancellor really provide forecasts telling us what will be happening in six years time by a tenth of a percentage point?
Of course these aren’t the Treasury forecasts but that of the Office of Budget Responsibility. The previous Chancellor, George Osborne gave them the job, probably because he knew the Treasury ones were invariably wrong. The trouble with their methodology is they base their forecasts on what has happened in prior years.
Productivity is a particular concern to them. But stagnation in productivity is not unique to the UK; it has taken hold across the developed world over the past decade. France, a comparable country to us, has higher productivity than us, probably because of its labour laws, but much lower employment. Is it not better to see lower wages than joblessness, which has a far greater moral and psychological impact? And what about the productivity that is going on in the field of information technology? These are new ways of exchanging and providing services not well captured by traditional statistic collecting. If you don’t mind, I will reserve judgement on these forecasts for now.
What is certain however is that we face a time of unprecedented economic change and as a nation we need to improve our productivity. How can the Government help with this? For the business environment, it means trying to make the UK into one of the best places in the world to start and grow a business. For people, it means making sure more people have the skills to seize the opportunities of today and tomorrow’s labour market. For ideas, it means being among the top performers investing in research and development. For places, it means making sure everyone can find good work opportunities near to where they live. While for infrastructure, it means upgrading the connections we rely on, be it physical or digital.
With Brexit around the corner, productivity matters more than ever. Ultimately, it means better-paid jobs for people and more money for our public services.