Productivity growth is the most important driver of long-term income growth, which in turn determines not only the evolution of living standards but also the scope for a government to pursue policy. The financial sustainability of government finances is significantly affected by the rate of income growth.
The current energy crisis shows how important it is for the government to retain this scope for policy not only from an economic perspective, but also to respond to the social and environmental challenges we face. In addition to responding to the short-term challenges, it is therefore important for policy to ensure that productivity growth, already weak before the crisis, is boosted rather than exacerbated in the longer term.
