Saturday, 7 April 2018

Productivity, Capital, Labour and Profits

Productivity is a major concern for the UK economy and we lag behind many of our European and global competitors.

One of the main reasons for this problem is that when profits are generated by many UK businesses they are squirrelled away in tax havens and re-invested in speculative financial markets in order to avoid or evade a proper contribution to UK taxation. This in turn means that the investment in our capital infrastructure and our capital equipment is severely restricted.

There seems to be a belief in some UK business that instead of investing in new and modern capital equipment we can plug the productivity gap by applying ever-increasing amounts of increasingly cheap labour to our industrial base, ignoring the fundamental economic law of diminishing returns. And when this fails to work we get into the situation we have now where increasing productivity places all of its eggs in one basket, that of reducing wages even further and/or trying to maintain the same output with fewer people.

There is a direct connection between the criminal or morally reprehensible behaviour of corporate tax cheats and the falling productivity rate in the UK and it is a problem which governments must deal with, and very soon, because it will only get worse the longer it is left unaddressed.

The New UK Passport

It is a matter of extreme regret that British jobs will be lost following the decision to have the new post-Brexit UK passport printed abroad.

What is more difficult to understand is the hand-wringing of the Tories over both the colour and the printing of the UK passport abroad when a large section of their party are desperate to begin to engage in unfettered free trade with the whole of the world market and remove the very sort of job protection that might have saved those jobs.

As we exit the European Union we should prepare ourselves for British business to have to compete globally and losing contracts abroad to lower priced competitors is an intrinsic part of that process. It is inevitable that this will drive down British wages as the UK  tries to compete on cost in an unregulated market.

It makes for a very uncertain future for UK workers who will lose the protections the EU has imposed on employers and which the Tories condemn as 'red tape'.