Skills, infrastructure and planning are key to UK productivity

Chancellor George Osborne sets out new plan to “reverse the UK’s long-term productivity problem” by easing restrictions on brownfield development, investment in the North and a new apprenticeship levy.

Antony Oliver
13 July 2015

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A new compulsory apprenticeship levy to force large businesses to “invest in their future” is at the heart of the government’s new plan to boost productivity.

The new levy is expected apply to “large employers” and will support all post-16 apprenticeships with details of engagement with business on the implementation and interaction with existing sector levy boards will be set out in the forthcoming Spending Review.

The government has also committed to publishing its dedicated National Infrastructure Plan for Skills in the summer, providing “analysis of current capability and future need and ensure the UK has the right skills base to deliver and maintain world-class infrastructure”.

“The only way to sustainably raise the living standards of the citizens of our nation is to confront the challenge of our lifetime, to raise productivity,” George Osborne

“A step change in the scale of the apprenticeship programme also needs a step change in funding,” says the report. “Achieving this change will require a reversal in the trend of employer underinvestment in training.”

To support the growth in engineering skills the government has also committed to train an additional 17,500 teachers in STEM subjects and encourage greater use of evidence on ‘what works’ in schools to drive the take up of more vocational technical careers.

“Creating better routes into the higher skills needed for today’s jobs market is something we’ve been behind all along, so we’re glad to see the Government making this the centrepiece of its plans to power up productivity with the creation of Institutes of Technology,” said CBI director general John Cridland.

“As the CBI has made clear, if we get behind growing firms, improve vocational education, upgrade the UK's infrastructure and invest more in innovation and exports, we can make sure the benefits of growth are felt by all,” he added.

In the new report “Fixing the Foundations: Creating a more prosperous nation”, Chancellor Goerge Osborne sets out a plan which he hopes will steer future government policy towards greater productivity across all sectors of the UK economy. 

“The proposed National Infrastructure Plan for Skills will form a vital piece of the puzzle,” ICE director general, Nick Baveystock

“UK productivity has persistently lagged behind other major economies and although it grew in the decades before the financial crisis, it has stalled sharply in the wake of the crisis,” says the report. “Matching the productivity of the US would raise GDP by 31%, equating to around £21,000 per annum for every household in the UK.”

The report sets out a 15 point plan to tackle this productivity plan centred around two key pillars: encouraging long-term investment, and promoting a dynamic economy. Alongside a boost for technical skills highlights the need to reform planning and continue to drive investment in infrastructure, particularly to drive growth in the so-called “Northern Powerhouse”.

“The only way to sustainably raise the living standards of the citizens of our nation is to confront the challenge of our lifetime, to raise productivity,” said Osborne. “This will not be achieved over night and will require a truly national effort by government, business and working people.”

The report was welcomed by the Institution of Civil Engineers who described it as a “sound approach to improving the UK’s productivity, with infrastructure – a catalyst for boosting growth, skills and innovation - rightly placed at its heart”. 

“The proposed National Infrastructure Plan for Skills will form a vital piece of the puzzle,” said the ICE director general, Nick Baveystock.

“We now need to see this vision translate into action - shifting things to the next level,” he added. “While the renewed commitment to many initiatives and policies is welcome - actually achieving the ‘lasting change’ Government aspires to will depend on decisions being made and ultimately, implementation.”  

“The task now is to quickly distinguish between what’s viable and what’s not – and more importantly – this should be publically stated,” Jeremy Blackburn, RICS

As revealed in the Budget, the plan includes measures to creation of a new Roads Fund from 2020-21, financed from a newly  hypothecated Vehicle Excise Duty, and a plan to get Network Rail and the rail investment programme back on track.

However, it also emphasises the need to invest in “reliable low carbon energy” supplies and superfast broadband to ensure it is available to 95% of UK households and businesses by 2017.

Planning reform is also highlighted as critical to enabling the UK to tackle its ongoing shortage of housing and a new zonal system is promised “to give automatic permission on suitable brownfield sites” alongside tougher action to ensure that local authorities make land available for housing.

Jeremy Blackburn, RICS Head of Policy, described the proposed planning reforms as a “forward step in guaranteeing property led growth” but said that measures had to be part of an overall coordinated strategy.

"Stronger compulsory purchasing powers and a new ‘zonal system’ for faster delivery of housing on brownfield land is a positive step towards addressing the gap between demand and supply,” he said

“The task now is to quickly distinguish between what’s viable and what’s not – and more importantly – this should be publically stated,” he added. “While these new measures build on the National Planning Policy Framework and are welcome, the system needs to really pick up speed in order to deliver the vibrant property sector on which the success of our economy depends."

“Tackling planning permission in isolation will neither increase housing delivery nor improve the quality of housing. A more holistic approach is urgently needed,” Dr Colin Brown, IMechE.

However, according to the Institution for Mechanical Engineers (IMechE), the plans did not go far enough to speed up invest in in house-building.

“While today’s announcement on planning reform shows that the Government is taking action on the UK housing crisis, it needs to be far more radical in its thinking if it wants to deliver an effective solution,” said Dr Colin Brown, Director of Engineering at the IMechE.

“Reforming the planning system is a one approach, but we fundamentally need to look at overhauling the way we construct homes in the UK,” he added. “We need a minimum of 250,000 houses to be built each year to keep up with the nation’s growing population. At no point over the last two decades has the figure exceeded 180,000, therefore, it is imperative this number is increased so we can meet demand.”

The need to tackle fundamental barriers ot house building were also highlighted by AECOM practice leader, Design, Planning & Economics, Andrew Jones.

“Tackling planning permission in isolation will neither increase housing delivery nor improve the quality of housing. A more holistic approach is urgently needed,” he said. 

“While opening planning constraints will address one hurdle, the real blockage is often that brownfield sites are contaminated or lack good infrastructure to make them economically viable or desirable places to live. To speed up housing delivery, the government must address these two significant barriers.”