The Chancellor’s dream of American type productivity rates for the UK seems a long way off according to the latest report by the OECD and the reasons are intriguing
Since Labour came to power seven years ago productivity has risen but the rates have been disappointing. Output per worker rose by 2.1% per annum for the 35 years from 1960 but has only been 1.7% since 1997. In 2003 it was even lower at 1.5%.
In its report published on 20th January the OECD suggested that the culprit for the decline was low skills in the working population. Almost 25% of the adult population lacks basic literacy and numeracy skills which is more than twice the rate in Germany.
But this skills gap is longstanding and it is difficult to see why it should have such a marked affect over the last five to ten years. The Confederation of British Industry (CBI) points the finger of blame at over-regulation and red-tape and has asked the government to address the situation as a matter of urgency (see earlier story in Knowledge Base).
Perhaps most worryingly for the Government the OECD report is not complimentary about the increased expenditure in the public sector. A cash increase of 10.2% in the past year has only seen a 1.7% increase in productivity and it advises that the chancellor reduces the rate of public spending in both education and health to avoid “locking in inefficiencies”.
If he takes the OECD advice (unlikely) it could have implications for a city like Brighton & Hove where public services are the largest employer.
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