Better ways to boost UK productivity?

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:


  • 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


  • 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


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