GEORGE Osborne must use his Spending Review this week to to announce new investment in productivity-boosting measures to boost growth. pay and living standards, a thinktank has said

Despite strong employment growth across the country and rising real wages, productivity remains a major challenge, the Institute for Public Policy Research (IPPR) reports.

Output per hour worked is roughly 17 per cent lower than it would have been had the pre-crisis trend in productivity growth continued.

Worryingly, IPPR also found the UK’s in-work training has fallen by four percentage points since 2008, the largest drop of any EU country. The apprenticeship levy and the three million apprenticeships target are welcome, but further cuts to further education and adult skills in the Spending Review could hold back attempts to increase productivity, it said.

The UK’s path to a high-productivity, high-pay economy will be best paved by developing a highly skilled workforce and ensuring effective skills utilisation.

Catherine Colebrook, IPPR Chief Economist, said: "The task for policy makers will be to ensure that the UK continues to invest in developing the skills it needs to compete globally. It is striking that adult participation in education and training in the UK has fallen since 2008 by more than in any other country, at a time when participation has increased across most of Europe. Investment in the country’s skills should be a priority for the Chancellor: instead skills funding looks likely to be cut drastically in the forthcoming Autumn Statement, which will inevitably have knock-on effects to our productive potential.”

The challenges facing the European economy will be addressed at a high-level European Jobs and Skills Summit, held today by IPPR, JP Morgan Chase and the CIPD, bringing together business leaders and policymakers from across the continent. It will launch a new report, which takes a comprehensive look at trends in employment and skills development across the EU28, and in Europe’s five biggest economies: Germany, the UK, France, Spain and Italy.