If we were to sum up Britain’s economic problem in one word, it might well be “productivity”. Relatively low levels of it among the British workforce have depressed economic growth for decades. The phenomenon has puzzled economists and policy-makers, especially in recent years when productivity has been falling in spite of all economic wisdom suggesting that the opposite should be happening. Ten years ago when he was Chancellor, Gordon Brown identified the problem as the single biggest long-term economic challenge facing the nation; it remains so today.
Now the Office for National Statistics gives us a further clue as to why the UK’s workers produce less per head than those in many competitor nations, and why the trends have been unfavourable for Britain.
It seems that British employers are using a smaller proportion of the nation’s natural human talent and skills than they should. The ONS says this “talent deficit” is now costing the UK economy £754bn a year. The finding fits in with much anecdotal evidence; well-educated graduates are finding it difficult to get suitable skilled work, or indeed in many cases any kind of permanent job. It is a worrying statistic, for it implies that all the efforts and investment put into education in the past 20 years or so, especially at university level, have not yielded the economic benefits predicted. It also suggests that there may be some mismatch between the skills the workforce has been developing and those actually required in the economy.
Britain’s employers could be more imaginative about how they make use of the nation’s human capital, but what is also needed is a more liberal labour market that encourages employers to take on more staff at every level, and to train them. Fixing the fiscal mess makes lowering taxation on business trickier than it would otherwise be, but it should be a higher priority still for the Government, and placed ahead of tax cuts for wealthy individuals. Britain’s got talent, and it is time we made the best use of it.