Jeremy Corbyn wants companies that profit from replacing humans with robots to pay more tax, believing that automation presents a threat to workers.
This proposed “robot tax” is superficially convincing. However, a new report from the Centre for Policy Studies – Why Britain Needs More Robots – argues that it would impede productivity growth, depress wage growth, and encourage economic activity to relocate, reducing the UK’s tax base.
The report, published on Wednesday 8 November and written by Daniel Mahoney, argues that if anything, the UK’s problem is too few robots, not too many. There are only 71 robots for every 10,000 employees in manufacturing, compared to more than 300 in Germany. This reflects a wider bias towards labour over capital investment across the UK economy, which contributes to Britain’s productivity problems – and means that Britain could reap outsize rewards for investing in new technologies.
The report also examines the likely impact of automation on the job market and inequality. It concludes that it is likely to be employment-neutral, at least in the medium term, and that while inequality is a concern, it is better managed by improved skills and training than Labour-style central direction and redistribution. It also argues that calls for a Universal Basic Income to combat robot-related unemployment are also premature, given the current employment situation, the costs of the policy, and the fact that income inequality has actually been falling.
Daniel Mahoney, Head of Economic Research at the Centre for Policy Studies, said:
“Going ahead with a robot tax or other measures that would discourage investment in capital would be hugely damaging for the UK.
“The UK already suffers from a low capital-labour ratio, which is dampening productivity growth and holding back wage increases. Corbyn’s plans would exacerbate this problem and simply encourage new technologies and economic activity to locate elsewhere.
“The result would be fewer well-paid jobs, lower wage growth and a reduced tax base to pay for public services.
“There is, of course, potential for automation to lead to growing income inequality in the future – although it is notable that this has yet to occur in the UK. The best way to counter this, however, is not by hampering economic progress, but by reforming skills and training.”
- Daniel Mahoney is the Head of Economic Research and Deputy Director of the Centre for Policy Studies. He is the author of Manufacturing: How to Fuel the Fire (2017) and is available for comment, interviews and written pieces on the contacts below.
- The Centre for Policy Studies was founded in 1974 by Margaret Thatcher and Keith Joseph, and develops and promotes policies to encourage enterprise and enable the institutions of a free society to flourish.
- Why Britain Needs More Robots can be downloaded from the CPS website.
Head of Economic Research
0207 222 4488
Date Added: Tuesday 7th November 2017