Sam Dumitriu of the Adam Smith Institute commented on UK Chancellor Philip Hammond’s budget and the OBR’s prediction that UK growth will be a sluggish 1.5% or lower for the next five years whilst the USA is growing at twice that rate
Hammond has offered support to boost R&D spending and sort out the housing crisis so people can move to higher-paying jobs of the future – but the measures announced “won’t do enough to move the needle”
Hence Dumitriu recommends the following:
Housing:
- The housing crisis is a key driver of the productivity crisis
- The current stock is becoming increasingly unaffordable because the UK is simply not building enough
- This is due mostly to a ‘broken planning system’ which needs:
- Revision of green belt rules, especially near railway stations
- Making it easier to build up as well as out
- Encouraging land held by public bodies to be sold, with planning permisiion
- Scrapping stamp duty altogether as it ‘gums up the market’
Business investment:
- Only Greece and Portugal invest less than the UK as a % of GDP
- The UK tax system encourages consumption at the expense of long-term investment – corporations can deduct all daily expenses such as stationery from their taxable income, but only part of any investment in productivity-improving investments in new machinery as it depreciates
- Firms should be able to deduct capital costs from taxable income in full, and up front
Infrastructure:
- UK cities and towns need to be better connected – and everyone should have a fast connection to the web
- Money going to HS2 should be devolved to the ‘Northern Powerhouse’ and ‘Midland Engine’ and let them decide how best to spend it on transport
- Road pricing is needed to reduce congestion and boost speeds
- Firms should be incentivised to invest and grow their customer bases by improving people’s access to the web
Conclusion – All good macro stuff for government ministers to consider – but no apparent recognition that, for national productivity to get back on trend or do better asap, managers of individual organisations, public and private have by far the greatest impact – so it’s them at their micro-level that need most support