Does Britain need a new public body to spur productivity?

• Despite being a key player in the recently established TPI – The Productivity Institute – Diane Coyle, professor of public policy at Cambridge University, claims that ‘Britain needs a new public body to spur productivity as this would help in tackling the country’s chronic under-investment and policy churn’ – this implies that the TPI only sees its role as being a macro-level researcher/ adviser on national productivity improvement policies, not one offering practical advice and support at organisation level and below where most productivity improvement is achieved – and, as such, cannot be held in some way accountable for the UK’s apparent dismal performances over the last several years
• If so, this prompts the question: “So who is accountable for national productivity?” Who can make a big difference to the national SoL – Standard of Living?
• The answer is not one single body – not HMG, not lobbyists like the CBI/ IoD/ FSB or academics like the TPI – it’s the legions of managers on the front-line – and not just senior managers of leading, successful organisations – most potential to improve lies with all levels of manager, especially those at middling and laggard organisations in all sectors – the rest, not the best
• The cumulative effect of their actions is the main driver of national productivity – some even say 80% plus 
• Of course, HMG has an important role to play – managers look to them for support with education of their workforces, research efforts and/ or infrastructure needs, albeit politics always intervenes in deciding how much support, where and when – but HMG lacks sufficient overall control to be made specifically accountable

• So what do managers need now that they do not have?

• They all need to know ‘where are we now’ and ‘how to make big improvements’ on top of carrying out their daily tasks and fire-fighting – in other words, as good ‘starters for ten’, they need:
  • Credible measures – Our readers already know we bang on about official national productivity statistics being seriously flawed, even possibly misleading, given they’re aggregates of aggregates of aggregates and ignore many activities which have no price tag attached – so any campaign to improve productivity is currently  ‘flying blind’ 
  • Better management training and support – The fact is most managers are not productivity specialists, whatever their level – many don’t know how to improve the productivity of resources in their charge and there’s very little practical help readily available to them viz:

• • • No productivity improvement courses at universities, institutes of technology or business schools
    • No best practice databases to tap into, as offered by the APQC in the USA
    • No practical advice from top management consultancies unless latest fads or technology are involved – none seem to focus on cutting waste or better use of existing resources
    • No practical advice from research bodies like the TPI
• And what of national QoL – Quality of Life’ –  the other half of any national performance scorecard – the mental, not material, state of the nation – what factors should be considered there? – who is accountable for them, if anybody? – what is currently measured, if anything? – but all that’s for another post 

• In the meantime, consider what Diane has to say:

Why are economists — and politicians — obsessed with productivity?

For two reasons:

• The first is that unless productivity is rising, living standards stagnate – productivity growth reflects businesses and public services using inputs of labour, capital and materials more effectively, producing more for less – that is what drives economic progress.
• The second is that productivity is flat-lining in the UK, diverging sharply from its previous year-by-year growth – other economies have also experienced a productivity growth slowdown since the mid-2000s, but the UK now has lower levels and weaker growth (or both) than other G7 countries – the succession of economic shocks, the financial crisis/ the pandemic/ Russia’s invasion of Ukraine, help explain the general slowdown, as does demographic change.

But what explains the UK’s specifically dismal productivity problem?

Some culprits will be depressingly familiar. A new report from The Productivity Institute (TPI) documents the consequences of the decade of declining spending per capita on education at all levels above primary school, the way expenditure on research and development as a share of GDP has fallen far behind other G7 economies and the confusing mishmash of small business support schemes.

There is no shortage of diagnostic evidence about the wide range of productivity-limiting challenges – but two overarching weaknesses stand out:

• Long-term under-investment  – Investment in the UK has been lower, as a share of GDP, than in other G7 countries for decades. This is true whether investment by businesses in equipment and buildings, or by public and private sector alike in R&D, or in human capital through education and health. Recent TPI work shows that even industries we think of as Great British success stories, such as finance or software, invest less as a share of their own value-added than their global comparators. Increasing investment is a top priority for a more prosperous economic future.
• Policy churn – This has been widely documented in areas including taxation, education, local and regional government and industrial policy. Policies are not well co-ordinated, either across departmental boundaries or between national, devolved and local government. Edicts from the centre land on under-resourced regional authorities with insufficient regard for local needs and strengths. The combination of the confrontational Westminster style of politics and the UK’s extreme political and economic centralisation seem to make the churn worse than elsewhere. No wonder the uncertainty deters investors, whose time horizon is far longer than that of politicians.

This political economy context is why the TPI’s report, which captures the views of many of the UK researchers investigating productivity, calls for a new independent and statutory body to monitor, evaluate and report on policies for productivity and growth.

This institution would parallel the Office for Budget Responsibility, with a remit covering supply-side policies. It would co-ordinate across areas of policy and levels of government, with a focus on spatial economic growth, and would involve relevant stakeholders in its assessments. And it would need to be protected from policy churn itself with a statutory footing. Many other countries, such as Australia, have now established similar commissions that can offer insights on how to design an authoritative and expert body.

This would not solve the UK’s productivity problem — sadly, there really is no silver bullet. But it would help curtail the damaging uncertainty that is deterring investment in productivity and hence our future standard of living.