This was one of the findings of a report released by the commission today on how the UK can achieve inclusive and sustainable growth after Brexit. In the study, authors identify four key priority areas: jobs and skills, industrial strategy, economic openness, and finance and growth.
The commission consists of senior figures from business, politics and academia and was formed in 2013 to provide authoritative and evidence-based policy recommendations. UK Growth: A New Chapter was based on the input of senior policymakers, business people and academics, including two former chancellors, George Osborne and Alastair Darling.
In the report, authors noted that although Britain’s flexible job market had pushed the employment rate to record highs, wage growth was “worryingly low”. This, combined with constant technological change and demographic shifts, meant it was essential for government to promote life-long learning.
Furthermore, Britain’s tax laws were “biased in favour of self-employment” and should be reformed to promote investment in buildings and machines rather than people. It recommended changes to tax laws for the self-employed and the introduction of a skills and training tax credit system. This would support companies to invest in people, and encourage workers to retrain.
Boosting skills and wages was key to supporting inclusive growth, the commission said, while immigration policy had an important role in ensuring Britain’s skills shortages did not intensify.
Elsewhere, the commission credited the government for its focus on industrial strategy but found shortcomings in the relevant monetary, fiscal and competition policy. It recommended industrial strategy policy should be framed by a new British State Aid law, enacted to replace European Union state aid rules that will become redundant post-Brexit.
It also called for clear operational rules for the industrial strategy, competitive tendering, independent oversight and statutory publication of analysis underpinning decisions. An overarching strategy should also tackle skill shortages at all levels, with a particular focus on closing the gender pay gap.
On international trade, the commission said that a UK-US trade deal would be essential post-Brexit, as would a new arrangement with the European Union. Chief among the concerns for policymakers negotiating the latter should be the so-called passporting rights for companies in the service sector.
Charles Bean, former deputy governor for monetary policy at the Bank of England, and a contributor to the report, said: “The absolutely essential question is the ease of access of institutions based in London, many of whom are not UK institutions, into the European Union.”
Also, although the UK is a world-leading financial centre, there was, according to the commission, a shortage of competition and access to finance. Vince Cable, former secretary of state for business, innovation and skills, who contributed to the report, said: “The inability of growth companies to get access to credit in particular is one of the killers of British productivity.”
As such, the report proposed a suite of reforms focusing on improving the access to finance for businesses as well reform of equity markets, an increased role for the British Business Bank, and a new infrastructure bank.