The iron grip of Whitehall-think of keeping Britain’s productivity down
Jeremy Hunt needs to keep the ship steady, but he’s also missing an obvious trick to allow Britain to build up it’s depleted productivity again, writes John Dickie
Next week, the Chancellor will deliver a budget which is expected to be a kind of “placeholder budget”, focusing on short-term measures to tackle the cost-of-living crisis.
This is rightly the priority, but it means the possibility of any rabbits coming out of Jeremy Hunt’s hat is unlikely.
For most Londoners the streets are not paved with gold. The capital has the highest housing and childcare costs in the country, as well as the highest poverty rates.
Of course, business must play its part and one way that many do so already is by paying the London Living Wage. Research shows that if just a quarter of the UK’s low-paid workers were given a pay rise to the real Living Wage, it could put an extra £1.7bn back into the UK economy through an increase in spending – with London seeing the biggest boost by region at £208m. There is also strong evidence that wage floors increase productivity by helping to increase employee effort, reduce absences and employee turnover.
Boosting our productivity in the future as growth is the only way sustainably to fund public services and tackle inequality.
London has been an engine for growth for the whole of the UK throughout its history. But the capital has experienced a prolonged slump in productivity growth that is affecting the whole country.
Data from the Centre for Cities shows that the rate of growth in output per job in London has collapsed to just 0.2 per cent a year between 2010 and 2019. That is a sharp drop from the average annual increase of 2.7 per cent between 2000 and 2008. And as London is still considerably more productive – 34% in 2019 – than the national average, the slowdown in the capital has a significant impact on the national rate.
There are many reasons for this productivity problem but one that could be addressed swiftly, and critically in these straightened times at no cost, is moving away from the top-down systems that have been imposed by Whitehall and often just don’t work for the capital.
It seems unlikely the Chancellor is going to give more fiscal levers to local leaders on Wednesday, but it is time for the government to deliver on the promise of the levelling up white paper by delivering a ‘devolution revolution”.
Together with some nationwide measures to support business and our economy now – protecting firms against high short-term energy costs; reforming the apprenticeship levy to boost uptake; and supporting effective childcare provision to get more people into work – he should give London and other city-regions the freedom to choose how best to invest their resources.
Freeing local leaders from the iron grip of Whitehall would enable them to invest where it will best deliver growth and, ultimately, enable the UK to be more productive. This would save local councils from having to spend time and money putting together bids for government funding pots. It would also put an end to the bizarre situation where mandarins in Whitehall determine whether Blackburn gets a community centre or Barking funding for its high street.
Over the course of last year, London received more than £650m from multiple tightly ringfenced central government funds. If London government could consolidate these pots to prioritise growth targeted where it is most needed – from skills to transport projects – we would get much better bang for our bucks.
Devolution is the first big step to solve the UK’s productivity puzzle and unlocking the growth that the Chancellor needs to balance his books.