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Unless Britain improves its productivity, the future for taxes and spending is bleak
If productivity trends in both the private and public sectors cannot be turned around, there will be a 10 per cent of GDP black hole in public finances.
If productivity trends in both the private and public sectors cannot be turned around, there will be a 10 per cent of GDP black hole in public finances.
Tackling Britain’s productivity problem will require long-term public investment in quality education to close the skills gap and boost equality – a plan Adam Smith would have agreed with.
On balance, AI seems likely to do what technology has always done – to reshape work, replace some jobs, create many more and raise productivity.
The bulk of the shortfall comes from online shopping and the government sector.
The problem of lacklustre productivity has afflicted Britain since at least Victorian times.
The cognitive potential of AI seems to mark it out from earlier innovations. The challenge will be to harness and manage it for the common good.
Repairing Britain’s growth problems is difficult without addressing its productivity problems. The UK’s productivity gap with many other countries is widening.
Without an efficient public sector, either services will need to be cut back or taxes will have to rise further. Neither is appealing.
The idea that higher wages should be paid without improving productivity simply means that someone else will have to pay.
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