The UK needs productivity growth now. Let’s unleash the power of data for everyone
You know that either the government is fresh out of ideas or the economy really is heading for disaster when, instead of reaching for any number of macroeconomic tools at its disposal, the go-to policy for the people in charge of the money is first to distribute cash handouts to the general population (again), and then plead for workers not to ask for a pay rise.
So which one is it? Is the UK government fresh out of ideas or is the economy really that bad? It looks like both. On the ideas side of the spectrum, last week’s flagship, 300-page levelling-up white paper contained no new money or any redistribution of powers. As Labour’s Lisa Nandy put it succinctly: ‘Is this it?’ Meanwhile, average energy bills are set to rise by £700 a year and inflation is due to hit 7.5%. GDP forecasts have been duly slashed.
What are we supposed to do about all of this? As summed up by the former Goldman Sachs asset management chairman and economist Jim O’Neill, there is only one real solution to the awful spiral of inflation and further declines in living standards. ‘Unless there are productivity increases,’ he told the Today programme, ‘you can’t have rising prices and rising wages that will do anything other than cause a bit of a disaster.’
The UK has long been a laggard on the productivity front. We are not, it seems, a people who really know how to get more out of what we already have — whether that be our labour, capital or infrastructure. The Germans are 10% more productive than us Brits, a statistic that might conform to national stereotypes. But the French are even more productive; current figures show they manage to output almost a fifth more than Brits for every hour worked. That’s how they can afford 35-hour work weeks and nationwide shutdowns in August.
“At the flick of a legislative pen, the chancellor could start adding £28bn a year to GDP”
Why is Britain so unproductive compared to our continental neighbours? The short answer is we are pretty awful at investing in the future. Just take energy as an example. A few weeks ago the Energy & Climate Intelligence Unit think-tank found that if the government had simply maintained existing programmes of investment in energy-efficient and greener homes over the last decade, people’s bills today would be £170 lower. Each and every year.
There are of course plenty of ways the government could be spending money today to increase productivity for tomorrow, but surveying today’s economy, where could we be getting the most productivity gain from the smallest amount of investment?
The good news is that the government has already been provided with an answer. Back in 2018, DCMS commissioned a report which found that, at the flick of a legislative pen, the chancellor could start adding £28bn a year to GDP. If parliamentarians invested a few thousand hours of their time, we could all be much, much richer for it. In fact it is such a good idea that our continental neighbours are already pressing ahead to implement this in a few months’ time. So what is this seemingly magic remedy? Create digital free trade by giving everyone the right to control their data at the press of a button.
We all know that the Silicon Valley giants — Google, Apple, Amazon and Facebook — have monopolised our information flows to such an extent they now seem unassailable. These trillion-dollar companies stifle innovation by hoovering up cash and buying up competitors, leaving consumers with fewer, not more, choices over digital services.
So what exactly is the EU doing to remedy this? Next month, it wants to pass three digital acts. A fourth is on the way. Together, these bills will tear down the effective monopolies that platform companies or ‘gatekeepers’ hold in a number of ways. Some methods are tried and tested interventionist tools in markets that have needed protection from over-powerful actors. But other means are more innovative, such as allowing end users the right to port their data in real time from gatekeepers.
Keen observers will note that under GDPR in the UK we already have the right to data portability, but it hasn’t got us very far. That right was unfortunately written for the postal age and so, in order to enact it, consumers are expected to write an email, wait 30 days and then take receipt of their digital folders, which often come in a dizzying array of formats.
This right is now being updated so at the click of a few buttons, in the same way you ‘sign in’ with Google or Facebook, you will also be able to port your data to any other service. And that’s the key. There’s not much the ordinary citizen can do with the digital information they create each minute of the day by clicking, swiping or typing. But that information is useful to other companies who have the means to make sense of it with their own algorithms. Leaked drafts of the upcoming fourth piece of legislation, the Data Act, show that the act will give owners of IoT objects, gadgets like smart speakers, watches, fridges and even your car, the same rights to port data. You own the object, you will also be able to fully control the data.
It doesn’t take much to imagine a world in which every time you interact with a platform like Audible or iTunes marketplace, that data is immediately sent to a trusted third party organisation to be monetized on your behalf. Or imagine, with a few clicks, being able to send Fitbit data to the UK’s National Health Service (NHS) for vital research, instead of it being siloed with Fitbit’s owners, Google.
But of course, UK digital citizens won’t be able to port their data anywhere because they won’t have such rights. Nor will they have access to the massive productivity gains this simple change in the balance of power in the information economy will bring. Unless of course the UK adopts something similar to the EU, and fast. Liberated from Brussels, the UK could choose to lead the world by going one step beyond.
The glaring hole in the EU’s multi-pronged approach to data portability laws is that while the huge gatekeepers and IoT are covered, the millions of websites and platforms in between, sites like Booking.com, Netflix and Spotify, are very likely not affected by such legislation.
Of course, it takes very little to implement real-time data portability from the backend of a big tech platform. Common standards already exist for such practices, and are widely understood. But the productivity rewards to data analytics, tech startups, health, finance and dozens of other industries would total tens of billions each year. The innovation boom this unlocks would be vast and the redistribution of power to ordinary people to control their digital lives unprecedented. Britain really could be world-beating — but only if it acts now. The alternative is for the UK to sit on its hands and watch once again as our neighbours over the Channel reap while we fail to sow.
Shiv Malik is the co-author of ‘Jilted Generation: How Britain Has Bankrupted Its Youth’, and CEO of Pool Data, which is creating infrastructure for a new data economy.