Economics
Solving the productivity puzzle – the importance of good statistics The perceived wisdom is that UK productivity is low relative to other major economies and has grown dismally since the global financial crisis. Every government since then has tried to find the magic productivity key to boost economic growth. According to the Office for National Statistics’ latest analysis, a part of the puzzle might actually be due to measurement. Using a new methodology to measure hours worked per job, the ONS finds that labour productivity growth was much stronger than previously estimated. While the new methodology doesn’t make the UK suddenly a productivity powerhouse, it makes the UK less of an outlier and policy priorities might change as a result of better evidence.
Growth in every postcode – the way to go? Talking about growth, prime minister Andy Burnham and his Chancellor John Healey are keen to see “growth in every postcode”. This is an admirable ambition but how to achieve it? And is this actually what the country needs? The Centre for Cities recently argued that what was needed was access to “growth opportunities in every postcode” and that the government ought to focus its growth strategy on urban areas with economic potential. Arguing that growth is inherently uneven, they recommend ensuring people can connect into growth wherever they live would be a more coherent economic strategy.
The triple lock – how to defuse a political minefield What was meant to be a quick electoral vote winner in the early-2010s has turned out to dominate public policy ever since. The triple lock of the state pension. With the elderly the fastest growing part of the population, it was always going to be difficult to repeal this promise but the Prime Minister might have just found a way forward. By promising a social care system free at the point of delivery (a topic that has been discussed for decades) in return for a downgraded triple lock in the future, he might get the electoral support he needs. But will a reformed triple lock fund a social care system? According to the Institute for Fiscal Studies the potential savings will not suffice to fund a new social care system. With the public finances where they are, doing so will either require tax increases or spending cuts elsewhere. We have heard this one before.
Discounting review! The Green Book discount rate review is now published and recommends a reduction of the discount rate from 3.5% to 3%. Discounting helps compare social costs and benefits stretching over many years on a consistent basis – the so-called ‘present value’. For an accessible read on discounting see this article from The Observer: ‘Project tram’ v ‘Project pothole’: why the government is… The review also recommended a review of the discount rate every 5 years – a sensible suggestion as the last time the discount rate was changed was in 2003!
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