Let’s make wealth

I noted that The Scotsman on 25 November had several contributions concerning aspects of the Budget but none mentioned the real “elephant in the room”, namely the fact that in the UK (including Scotland) productivity growth has been virtually at a standstill since 2006 and shows little sign of improving. This has led the Office for Budget Responsibility to lower its forecast of GDP growth and thus hemmed in chancellor Philip Hammond as to what he could do.

I noted further that the Scottish Chambers of Commerce were urging the Scottish Government to go even further “to incentivise Scottish growth, productivity and boost the housing market”. The representative for the Scottish Retail Consortium urged the Government to grow the economy to increase revenue.

These remarks are typical in that everybody thinks it is the Government that should grow the economy and thus create more revenue to spread amongst the lower paid and unemployed in particular. However, the Government has little understanding of how to increase productivity. If it had, the public sector would be more efficient than private companies. There is no evidence of this as far as I can see.

The onus is on both the public and private sectors to increase their value added per person per hour worked, which is the key measure of wealth creation. According to OECD statistics, Denmark enjoyed a 33.7 per cent advantage over the UK (and Scotland) in terms of value added. Compared with nearest neighbour France, the UK has grown 2.35 per cent since 2006, whereas France’s figure is 7 per cent. France’s productivity is currently around 25 per cent above that of the UK.

Despite the efforts of the Scottish Government through Scottish Enterprise, our productivity has barely moved up since 2006 and yet each French worker produces 25 per cent more value per hour than a Scottish worker.

Raising productivity is a task for every single private company and government entity.

It entails a culture change for every person employed to think about how he/she can improve on output to reduce costs and increase value to the customer so that more revenue can be generated at less cost – and then to put it into practice.

Two fundamental questions should be asked relentlessly. How can we reduce waste? How can we add customer value to our products and services? There are ways of doing this systematically through Lean Thinking and other recognised methods as practised extensively in the countries enjoying high productivity rates. Instead of looking to the government for action, organisations representing companies should ask themselves how they can motivate their members to improve on performance. JOHN PETER

Monks Road Airdrie, Lanarkshire