Six economists give their views on autumn statement
DAVID BLANCHFLOWER
Former member of Bank of England monetary policy committee
Over the three quarters from the last quarter of 2009 to the second quarter of 2010, the UK economy grew by 1.9%. Recall that George Osborne and David Cameron falsely claimed at the time that the economy was "bankrupt" and "like Greece". Now the chancellor is claiming the economy is on the "path to prosperity", based on growth of 1.9% over the last three quarters. Unemployment is higher than it was when the coalition was formed and youth unemployment has risen sharply. GDP per capita is essentially unchanged from when the coalition took office and the deficit reduction plan has stalled. The OBR's own data now suggests that Osborne has lowered GDP by around 1.5% a year by his reckless and failed austerity.
So where is this little burst of growth coming from? It seems that a temporary rise in consumer spending, driven by borrowing and dipping into savings, is the main driver. Maybe I have missed something and all is rosy in the economic garden. Bet I haven't, though.
NICOLA SMITH
Head of economics and social affairs, TUC
The UK's recovery is long overdue and optimists can welcome rising full-time employment levels, falling joblessness and signs that productivity is starting to pick up.
The problem is that these gains are nowhere near enough to secure the fairly shared and sustained recovery that we need. While earnings for the UK's top bankers are up by a third, across the country real incomes are still falling. Recession and stagnation have led to a wage squeeze on a scale last seen by the Victorians. Under-employment continues to rise and, where jobs are being created, a large majority are in low-paid sectors, exacerbating falls in living standards.
The UK is moving back towards its pre-crisis economic model with alarming ease, the importance of tackling our widely decried short-termist culture apparently forgotten.
Rather than conjuring up more financial bubbles, the UK needs fairly paid workers and productive businesses to create growth based on real value.
JONATHAN LOYNES
Director, Capital Economics
Not only has the UK leapt to the top of the G7 growth tables, but there are good reasons to think that the recovery is sustainable. While the recession no doubt did some damage to the economy's supply potential, there is enough slack to allow a number of years of strong growth before capacity constraints are reached and inflation pressures start to build. Indeed, falling inflation could boost growth in the next few years by easing the squeeze on households' spending power.
Meanwhile, fears that the recovery is unhealthily dependent on another housing market bubble look overdone. Yes, the London market looks frothy, but in most other areas the market is not strong enough to have generated an economic recovery. And the economic upturn stretches well beyond housing-related areas of activity. The banking sector remains fragile and households have more work to do to restore their finances. Still, for the first time in a long while, even we practitioners of the dismal science can afford a bit of optimism.
JONATHAN PORTES
Director, National Institute for Economic and Social Research
When the government announced its economic plan in June 2010, it predicted that the economy would by now be about 7% larger, while the deficit would have been reduced by two-thirds. Where are we now? GDP has grown at about a third of that rate, business investment has fallen and the current account deficit has worsened. This remains the weakest and slowest recovery in the UK's recorded history.
Growth was derailed by a combination of bad luck and bad macroeconomic policy, both in the UK and eurozone. Spending, especially public investment, was cut too quickly. While policy was supposed to boost confidence and spur private-sector investment to fill the gap, it did the reverse. It could easily have been worse. The eurozone and global environment is much more benign. Combined with increasingly aggressive action to pump up the housing market, we are seeing a clear, welcome return to growth. It's a pity it's taken so long.
BRIDGET ROSEWELL
Chairman of consultancy Volterra Partners, former chief economic adviser to the Greater London Authority
It seems to be part of our psychology that we don't really believe in recovery until it has almost turned to boom. Over the last year employment has risen by nearly 300,000 in the UK, and in London and the south-east we ought to be worrying about overheating.
Only the north-east and west and the West Midlands are still suffering significant losses of jobs and should be pressing hard to improve their connectivity. Now is the time to liberate further wealth creation by focusing on investment in infrastructure, so that real growth can support future spending of all types and the necessary debt reduction.
Recovery is well established and growth will help to bring down bad debt – used to support current spending – and replace it with good debt – used to support real investments which generate a payback in future growth, wealth creation and the ability to support public services, as well as pay back the loans thus raised.
ANDREW SENTANCE
Senior economic adviser, PwC, and former member of the Bank of England's monetary policy committee
I believe that the UK's economic growth is sustainable – with the right policies, including a gradual rise in interest rates as recovery continues.
The UK economy is rebalancing, but not as expected. Although manufacturing output has risen in recent quarters, it's well down on the 2008 peak.
Services are leading the recovery, but within that big shifts have taken place between different sectors. Professional and business services lead, with output growth up more than 6% in the past 12 months. Financial services and public administration are around 2% down.
This pattern has been a feature of the recovery since 2009. Parts of the services sector which sell overseas appear to be performing more strongly – bar the financial sector.
This reflects the strength of the country as a services exporter – 12% of UK GDP – a bigger contribution than in any other G7 economy.
Autumn statement 2013EconomicsBudgetHeather Stewarttheguardian.com © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds |
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