Budget 2016: How the Rowntrees Could Cure George Osborne's Productivity Problem

15/03/2016 12:30 | Updated 16 March 2016

It's been easy to miss given the dominance of Europe, but George Osborne must stand before the Commons tomorrow in a very tricky predicament to deliver his eighth Budget. Global headwinds threaten to blow the UK recovery off course, while the Chancellor must try reclaim the Conservatives' new mantle as the 'Worker's Party' after the tax credits U-turn.

The government points to its jobs miracle, but we know progression and productivity has stalled. JRF research has highlighted the value of better jobs for our economy - jobs offering workers more money and chances for progression mean they are better engaged and more productive. The Chancellor could do worse than look to the history books for an answer.

Strange as it may seem, the launch of a new stamp reminds us that these are not new concerns. Our founder, Joseph Rowntree, is one of six British humanitarians to be honoured this week in a new set of stamps by Royal Mail. He had a major influence on the understanding of poverty and the movement for social reform, but if you've ever eaten a KitKat, Polos or Fruit Pastilles, you will have experienced another side of the Rowntree family's legacy.

The Rowntrees were giants in the confectionery industry, with their products becoming household names. As well as developing new techniques for making chocolate and sweets, Joseph and his son, Seebohm, were innovators in business management, marketing and what is today known as human resources.

But the Rowntrees' huge commercial success wasn't achieved at the expense of their workforce. They were responsible capitalists - enterprising, influential businessmen who were also pioneers in employee welfare and social reform.

Seebohm Rowntree, the company's first labour director, was a passionate advocate of the capitalist system. He believed that improving employee welfare was more than just morally right - it would also promote industrial efficiency. He said:

"If they [the workers] are to co-operate in producing a high output of goods, which will compete successfully in the world market, they rightly demand, in their working lives, conditions which will enable and encourage them to give of their best."

He also believed that low wages were bad for the 'nation's economy and humanity' and, as an adviser in David Lloyd George's wartime government, he argued strongly for a national minimum wage in England, which would also be 'a liveable wage.'

Ninety-five years later, we find the modern UK economy and employers facing the same challenges. Living standards may have improved considerably since the 1920s, but we are still asking how workers can share in the prosperity generated by businesses while protecting productivity and profit.

The Rowntrees showed us that a decent standard of living for all is essential if an economy is to grow in the long term, and that better-paid workers can contribute more to business success.

If we were to raise productivity levels in low-wage sectors to levels seen elsewhere, the UK could close a third of the productivity gap with leading Western European economies. But to get there the government, local leaders and businesses must all do the heavy lifting to rebalance the economy and ensure more people benefit from economic growth. Incentivising cities to link economic growth plans to reduce welfare dependency would fire up the regional powerhouses.

Seebohm Rowntree urged us to do the same the best part of a century ago. What better place to start than tomorrow's Budget.