Britain is facing a productivity crisis – we are working harder than ever but earning less.As the Office for Budget Responsibility announced yesterday, a downgrade in our long-term productivity gains means Britain may never recover from the financial crisis. Lower productivity not only hits ordinary household budgets hard – but lower earnings mean lower future tax revenues which will result in a stagnant economy and a larger budget deficit in future years. Philip Hammond’s budget cannot resolve this without radical changes to how the economy is structured. By applying co-operative values and principles, there is a solution to our productivity crisis, which can create long-term sustainable growth. Our plan for our economy gives workers a stake in the success of the businesses they work for, ensuring they have a say and a share in the rewards. It seeks to re-balance the economy, enabling communities to drive bottom-up growth in every region.
They key issues - and the co-operative solutions
Labour is too cheapThe average UK worker hasn’t had a real-term pay rise since 2006. Lack of regulation, bogus self-employment, and the erosion of workplace rights add up to an economy in which labour is transient, precarious, and flexible. In such an economy, there aren’t enough incentives for businesses to invest in upskilling their staff.
Put workers in charge of the businesses they work forBusinesses where employees have a say and a stake tend to be more productive, because they provide strong incentives and channel workers’ ideas and talents. The Chancellor could make employee representation on company boards compulsory, as well as offering tax breaks to firms that share profits among staff. Learn more
Business investment is too lowCorporate investment in fixed assets has fallen from 11% of GDP in 1997 to 8% in 2014. With labour cheap, there’s little incentive for UK businesses to invest in tools or technology that might make them more productive. A lack of local savings banks means that even when businesses do decide to invest, credit can be hard to come by.
Boost investment via regional banksIn the UK, just five banks hold 85% of all current accounts. In Germany, businesses are supported by networks of not-for-profit local savings banks. We could do the same here by enabling a new generation of building societies and savings banks that are focused on driving long-term business investment. Learn more
We’re riddled with dysfunctional marketsIn almost every sector of the UK economy, from electricity suppliers to banks, a diminishing number of players dominate, using their position to stifle competition. In such markets, there’s little pressure to innovate, maintain quality standards, or to keep prices low.
Create diverse and vibrant markets.The Chancellor could overhaul 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. In sectors like transport, the Government could revisit legislation that advantages profit-making players over community and socially-based suppliers. Learn more
A single type of business is dominant.In all but a handful of cases, the major players in our markets are PLCs (public limited companies), owned by shareholders in the UK and abroad. Too often, regulation treats this business form as the default. In other European countries, markets have a mix of PLCs, publicly-owned, co-operative, and social sector firms.
Level the playing fieldThe Chancellor could overhaul 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. Learn more
Half the country has been written offFor many, the downturn began long before the financial crisis, with wages and disposable incomes falling in every English region outside London from 2003-08. In an economy in which the bulk of investment and growth are focused in a small part of the country, huge amounts of unrealised potential elsewhere holds the whole country back.
Rebalance the UK’s 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 rebuild local economies. Through further regional devolution, the Chancellor should give local authorities the means to adopt such models. Learn more
- Labour is too cheap
- Put workers in charge of the businesses they work for
- Business investment is too low
- Boost investment via regional banks
- We’re riddled with dysfunctional markets
- Create diverse and vibrant markets.
- A single type of business is dominant.
- Level the playing field
- Half the country has been written off
- Rebalance the UK’s economy.
- Make it happen