Ninth Report - UK plc

Part of the reason why the UK achieves lower productivity rates than other advanced economies is that levels of business investment and research and development investment have fallen behind.

We welcome the Chancellor’s announcement on full expensing for capital investment but highlight the short period of time that this policy is available for businesses. Many businesses will make much longer-term investment decisions which could benefit from making this change permanent, providing long-term investment stability.

Whilst we recognise some of the challenges associated with the previous R&D tax credits scheme, we call on the Government to conduct an annual review of the impact of recent changes on overall R&D investment in the UK to ensure that any unintended consequences can be remedied quickly.

There is a need to raise not just the basic skill levels of young people entering the workforce but also their digital and “green” skills, both of which contribute to enhancing productivity in the modern digitalised economy.

Witnesses supported the apprenticeship levy in principle but told us that more Government support for skills development should be directed to upskilling existing members of the workforce, whether through reform of the apprenticeship levy or other mechanisms.

We note that there are numerous Ministers with responsibility for skills—from compulsory, further, and higher education to adult and in-work training. The Government previously coordinated a ‘Green Skills Taskforce’ between the then Department for Business, Energy and Industrial Strategy and the Department for Education. We call on the Government to consider reviving such a taskforce to grapple with the wider challenge of skills shortages in the labour market.

There was support amongst witnesses for greater use of automation and a more flexible migration scheme as part of the solution to labour shortages in the UK.

We note the wide range of measures affecting the labour market announced by the Chancellor in the 2023 Budget, which we will consider and respond to in our adjacent inquiry on the UK Labour Market.

Regional disparities in productivity are limiting the UK’s economic growth. A concentration of resources towards cities outside London and to improving regional productivity should be a priority for the country’s overall economic growth. (Paragraph 38) UK plc 17 Government and regulation

The regulatory landscape has changed significantly for many industries following the UK’s exit from the European Union. Witnesses representing business sectors acknowledged the need for effective regulation, but they were clear that it needed to be appropriate and developed by the Government in partnership with industry and others.

Witnesses from a range of industrial sectors were clear that they value partnership with Government to deliver targets as well as effective regulation, and that the recent industrial strategy and sector deals had been beneficial.

We call on the Government to ensure effective partnerships with business and other related parties on the development of regulation, with better use of impact assessments. It would be for the Government, industry, and regulators to determine the form of any future partnership working, but the evidence presented to us indicates that it would boost business confidence and provide a foundation for mutual understanding and effective communication between industry and Government.

The Regulatory Policy Committee should be supported for its work in supporting Parliament in understanding the impact of proposed regulation and we recommend these impact assessments are used much more widely throughout the legislative process. Given the transfer of regulatory oversight from the European Parliament to our Parliament, we recognise the need to ensure that our Parliament finds its way in meeting this new challenge and providing effective scrutiny and oversight of new regulations—both from Government and from regulatory bodies. We draw to the attention of the Liaison Committee of this House the role which select committees can play in this field.

We note that the Chancellor referred to an ‘industrial strategy’ in his Budget statement, but that no industrial strategy was published. Given the global context referred to by our witnesses, and the very real threat of UK investments being tempted into the European or American markets, we call on the Government to make a statement to clarify whether the Government has an industrial strategy or not. If it does, we call on Ministers to engage with business, investors, and workers’ representatives as soon as possible in order to publish any such strategy for the purposes of scrutiny and private sector clarity. (Paragraph 50) 18 UK plc