Productivity and long term growth

Going for Growth 2018 - United Kingdom note

 

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Going for Growth is the OECD flagship report analysing structural policy settings and economic performance to provide policymakers with concrete reform recommendations to boost growth and ensure that the gains are shared by all. The 2018 Interim Report reviews the main growth challenges and takes stock of reforms enacted over the past year -- in both advanced and emerging economies -- on policy priorities identified in the previous issue of Going for Growth.

Country highlights

In recent years, the United Kingdom has been narrowing the gap in GDP per capita relative to the most advanced OECD countries, mainly through higher employment as labour productivity growth remains weak. Income inequality is still above the OECD average but has fallen somewhat recently, partly driven by an increase in the share of national income held by the poorest sections of the society.
To foster growth and ensure that the gains are shared by all, priority should be given to greater spending on education and training to promote skills, thereby increasing productivity and wages. More housing supply would improve labour mobility and reduce skill mismatches, resulting in additional income gains. More investment in research and development and higher infrastructure provision would support technical progress and boost the capital stock, as well as enhance living standards.

Going for Growth 2017 recommendations include:

  • Improve skills by encouraging the expansion of high quality post-secondary vocational programmes; better aligning programmes and policies to local economic development through further decentralisation of funding for skills programmes and by further involving employers. Support lifelong learning of low-skilled workers to ensure that their productivity can adjust to planned increases in the National Living Wage. 
  • Strengthen work incentives and active labour market policies by implementing the Universal Credit and monitoring its effectiveness in moving people towards employment. Raise spending on active labour market policies, in particular for 15 to 19 year-olds, and improve their efficiency by fostering competition among contracted providers, better profiling customers and developing a performance measurement system based on jobseeker features and local labour markets. 
  • Enhance housing supply by relaxing further regulatory constraints to release more land for housing, in particular by thoroughly reviewing the boundaries of protected areas of the Green Belt and by easing skyline restrictions. Enhance the provision of social housing where private sector activity is insufficient to promote greater equity in housing access. 
  • Improve public infrastructure building on the National Infrastructure Plan to further enhance long-term infrastructure strategy and planning; prioritising further public infrastructure investment and continuing to increase access to private financing. Move towards user pricing, especially in areas such as road transport where negative environmental externalities exist. 
  • Promote R&D spending by increasing direct funding – such as grants, loans and procurement – to leverage private sector innovation in emerging sectors and potentially “disruptive” technologies, as well as R&D tax incentives to ensure that support measures for R&D remain balanced between the two sources of funding.

Recent policy actions in these areas include:

  • Spending on lifelong learning pilots has been increased in England to test different approaches to help workers retrain and upskill throughout their adult lives.
  • Support to investment and R&D in a number of productivity-enhancing areas has been increased with the introduction of the National Productivity Investment Fund (NPIF). The fund is to total GBP 31 billion of additional spending over the period of 2017-23, with over a fifth on science and innovation.
  • Investment in housing infrastructure has been increased to deliver 200,000 new homes in areas of high demand with a total investment of GBP 5 billion. GBP 2 billion will be also dedicated to the funding of affordable housing, including funding for homes let at a social rent, bringing the total budget for affordable housing to over GBP 9 billion.

 United Kingdom: Latest Economic Forecast 

United Kingdom: Latest Economic Survey

 

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