Productivity and long term growth

Going for Growth 2016: United Kingdom

 

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‌The UK has grown at a robust pace in recent years but has shown weak productivity growth since 2007. In particular, gains in multifactor productivity have been subdued, despite comparatively high investment in knowledge-based capital and a business environment generally favourable to entrepreneurship, in addition to flexible labour and product markets. Boosting productivity requires that a number of common structural challenges be addressed, in particular in the areas of educational outcomes – to ensure that educational qualification translates into skills -- public spending efficiency and public infrastructure. For instance, the performance of high-school students in PISA tests in science and reading proficiency is only around the international average and with a tendency to show a high variation across students. Improving access to education at all levels would help to raise equality of opportunities and social mobility.

1. PISA is the Programme for International Student Assessment.

Source: OECD (2014), PISA 2012 Results: What Students Know and Can Do (Volume I, Revised edition, February 2014): Student Performance in Mathematics, Reading and Science, PISA.

Previous Going for Growth recommendations include:

  • Improving outcomes and equity in education by monitoring the impact of previous reforms such as the Education Act 2011 on the average quality of education outcomes and equity across social groups. 
  • Strengthening work incentives and active labour market policies by implementing the Universal Credit, increasing spending on active labour market policies and reducing the cost of childcare.
  • Strengthening public sector efficiency by monitoring the impact of healthcare reform and, if needed, by taking additional measures to increase efficiency in the health care sector.
  • Enhancing the effectiveness of land planning regulation by closely monitoring the effectiveness of the new National Planning Policy Framework in accelerating the planning permissions process, and by taking further steps if needed.
  • Improving public infrastructure by prioritising public infrastructure investment, increasing access to private financing and moving towards user pricing in areas such as road transport.

 

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Recent policy actions in these areas include:

  • In its Productivity Plan put forth in July 2015, the United Kingdom prioritises the upgrading of road network, to be achieved partly by spending GBP 15 billion on new roads over the rest of this decade, and the government launched a National Infrastructure Commission in late 2015.
  • The Productivity Plan also takes steps towards stimulating housing supply and sets as a target that superfast broadband is made available to 95% of UK households and businesses by 2017.

The report also discusses the possible impact of structural reforms on other policy objectives (fiscal consolidation, narrowing current account imbalances and reducing income inequality). In the case of the United Kingdom, improved equity in education and skills among young people, in association with stronger and better active labour market policies, can enhance social integration and reduce income inequality.

Economic Policy Reforms 2016 

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