Tax and productivity

Andrew Rawnsley was right to say that "politicians have been slow to come to a subject that has been troubling economists for some time", and the result of their apathy is the current low productivity with its projected growth rate of 1.2% (Life is going to turn very nasty if we can`t solve the growth puzzle, 26.11.17). The five "foundations" of the government are based on, in Rawnsley`s words, "addressing skills shortages and deficient infrastructure", but they, despite what the Business Leader states, are most certainly not "fine as far as they go" (An industrial strategy that puts the whole country on the map is the way to lift UK, 26.11.17). There is a huge omission, and without it, any industrial strategy will flounder.

       It is, of course, reform of the existing tax system, which encourages short-termism and a bonus culture. Far too many CEOs are obscenely rewarded because they have overseen a rise in profits rather than in productivity, and an increase in the dividend paid to shareholders rather than in the amount produced. Raising the highest band of income tax would at least show both the government`s serious intentions in dealing with the productivity problem, and its awareness of where much of the problem lies. A sensible tax structure is needed to encourage CEOs to invest in technology and training rather than to accumulate wealth for themselves and shareholders! More scrutiny of bosses` actions instead of workers` hourly productivity would result in bigger dividends for the country as a whole.