How will the chancellor tackle Britain’s productivity crisis in today’s Budget?
One thing Philip Hammond should take notice of, says the Co-operative Party, is that businesses that share ownership are more successful.
“In real terms, average wages are now lower than they were a decade ago,” according to the party’s communications officer Ben West. “We’re 17 percent less productive than the rest of the G7, and it now takes the average Brit five days to produce the same output as a French or German worker achieves in four. In effect, we all work an extra day each week, just to keep up.”
In an article for LabourList, he says Britain has a “low-productivity economy” for a number of reasons including labour being too cheap and business investment too low, while PLCs are the dominant business model.
“Productivity is key,” according to Mr West. “Higher productivity means a better-functioning economy, with more of us working better, not harder, for firms that generate more output with less input.”
So how can the chancellor make it happen?
- Put workers in charge of the businesses they work for. Businesses in which employees have a say and a stake tend to be more productive, providing strong incentives and channelling workers’ ideas and talents. A 2007 Treasury review found that employee ownership can boost productivity by as much as 2.5 per cent in the long run. The chancellor could re-visit Theresa May’s pledge and push on with compulsory employee representation on company boards. It could also offer favourable tax treatment to firms that distribute profits among staff.
- Boost business investment through a network of regional banks. Germany has thousands of banks, including vibrant state-run and co-operative sectors, many focussed on lending to small and medium sized businesses. In Britain, just five banks hold 85 per cent of all current accounts. The chancellor could learn from the German model by enabling a new generation of mutually-owned building societies and savings banks that are focused on driving long-term investment, rather than short-term dividends for their own shareholders. It could also permit solutions like mutual guarantee societies that enable businesses to lend to each other.
- Create diverse and vibrant markets. The chancellor could review the legal and regulatory burdens that favour the PLC model over other business forms such as co-operatives and match Labour’s commitment to doubling the share of co-operatives in the economy. Doing so would enable co-operatives to enter and challenge the existing players in broken markets, driving up innovation, wages and standards, and pushing down prices for consumers.
- Rebalance the economy. This Budget should unlock the means for regional and devolved government to shape sustainable economic growth. In places such as Preston, local leadership and proactive procurement practices are coming together to support the growth of local firms providing quality jobs and community investment. Through further regional devolution, the chancellor should give local authorities the means to adopt such models.