Keir Starmer should be thankful for Lord Mandelson. Were it not for scandal over the Mandelson’s connections with Jeffrey Epstein, more people might have noticed an even greater disgrace this morning. The Prime Minister’s promise of ‘growth, growth, growth’ has ploughed spectacularly into the ground. The Office of National Statistics (ONS) reports today that there was zero growth in the economy in July, and just 0.2 per cent of growth in the three months to July. Besides being lousy news in itself, it is likely to lead to a further downgrading of future growth forecasts, resulting in the Chancellor having an even bigger black hole in her Budget, necessitating even more growth-destroying tax rises. And on goes the vicious cycle.
However, the news on growth is even worse than it first appears. The monthly GDP figures do not take into account population growth, or what we spend replacing worn-out capital. When you factor in net migration of 431,000 in the year to December and look at growth per capita, we are in recession. In fact, on this measure – and surely the per capita figure is what matters more than gross GDP – Britain is stuck in a six-year long slump with no sign of better times ahead.
The ONS’s figures for net domestic product per capita only go up to the first quarter of this year, but at that point the economy per capita was 1.2 per cent smaller than it was in the third quarter of 2019. This isn’t quite unprecedented: NDP per capita took nine years to recover to the level it was just before the 2008/09 crash. But then the economy only just about got its head above water before the current slump began. NDP per capita is now just 3.2 per cent higher than it was in the first quarter of 2008. If anyone feels their living standards have stagnated for the past nearly two decades, there is a reason for static wages – there is little wealth being created.
More worrying still, the shrinkage is especially apparent in the productive side of the economy. In the three months to July, production fell by 1.3 per cent, with manufacturing slumping by 1.1 per cent. It is not hard to name culprits for this dire performance. High energy prices are killing off UK manufacturing, while windfall taxes and Ed Miliband’s refusal to allow new oil and gas development is leading to a wind-down in the North Sea.
As for services, retail is the biggest under-performer, falling back 0.28 per cent over the three months to July (although there was growth of 0.18 per cent in July itself). There are no prizes for guessing why this industry is feeling the pinch, given that it has been especially hard hit by the increase in employer national insurance contributions. The reduction in the threshold at which these become payable – from £9,100 a year to £5,000 a year – has been especially harsh on businesses which employ a lot of part-time staff.
There are, in other words, direct links between government policy and the lack of growth in the economy. But what about Labour’s pro-growth policies? Beyond watering down planning laws, it is hard to name a single one. On the contrary, the Employment Rights Bill threatens a further contraction in job creation. Yet that is hugely popular among Labour MPs and members. Labour is stuck. Starmer and Reeves may want growth, but they have few ideas how to achieve it. Even if the government did have some bright ideas, it is there is little chance that the Labour party would allow them to be implemented.
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