Economic Survey of the United Kingdom 2005: Executive Summary

The following is the Executive Summary of the OECD assessment and recommendations, taken from the Economic Survey of the United Kindom 2005 published on 12 October 2005.

The stability and resilience of the economy has been impressive and labour and product markets are among the most flexible in the OECD, but structural economic performance judged against a range of indicators can be further improved.

Impressive macroeconomic stability but structural performance
can be further improved

This in turn explains why in terms of GDP per capita the United Kingdom still only ranks just above the median across all OECD countries. Policies to address the apparent relative underperformance have been in place for some time and are already showing results in some areas. To further improve this situation, policy makers should address the following key challenges:

• Raise the general skill level of the workforce. Effective policies will help the economy to absorb innovations and adapt work processes to take advantage of new technologies and so boost productivity.

• Address the apparently mediocre innovation performance. Careful consideration needs to be given to how far it can be improved by policy and how much is explained by imperfect indicators and the structure of the economy.

• Improve transport infrastructure. The consequence of decades of under investment has been congested roads and an unreliable rail system, which may be holding back productivity.

• Increase labour utilisation by helping those claiming incapacity benefit into work. An innovative approach providing more customised help and enhanced incentives to work has been piloted with  considerable success. It is important that this is rolled out nationally, although this may require some change in health care priorities.

• Ensure that public money is spent efficiently to contain the tax burden. Increased expenditure on health and education has been accompanied by reforms aiming to ensure that resources are better used, but further improvements can be made. In expanding childcare the framework needs to be carefully considered to avoid a future escalation in costs. Reforms to the pension system should aim to simplify the system as well as enhance incentives to work and save.

Despite a recent slowdown in growth, output remains close to capacity and inflation close to target, leaving the Bank of England well placed to respond flexibly to future developments. It would appear that major instability from the housing market has so far been avoided. Nevertheless, reforms to the housing market, especially with respect to property tax and planning restrictions, should focus on enhancing stability and increasing the responsiveness of housing supply. Fiscal policy has been strongly supportive since the global downturn in 2000, but the fiscal deficit is now around 3% of GDP and if it does not begin to fall in line with official projections then further measures will be required. 

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Return to the Economic Survey of the United Kingdom 2005

A printer-friendly Policy Brief (pdf format) can also be downloaded. It contains the OECD assessment and recommendations, but not all of the charts included on the above pages.

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For further information please contact the United Kingdom Desk at the OECD Economics Department at webmaster@oecd.org.  The OECD Secretariat's report was prepared by David Turner and Jens Lundsgaard under the supervision of  Peter Hoeller.

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