Great news, the economy grew by 2.8 percent last year. It’s great news because it’s better than the 2.6 percent previously forecast and better than anything we’ve seen since 2006.
Like all these things, though, what you mean by good depends on where you start from. Compared to previous post-recession recoveries, 2.8 percent is rubbish.
Source: ONS, OBR
In the past, we have relied on a few years of 4 percent or more to make up for lost ground. This time, we have a lot more ground to make up but growth rates refuse to touch 3 percent and, according to the OBR’s projections, will not do so for the rest of this decade. In other words, that was it. 2014 was your post recession boom.
The ONS report on Economic Well-Being was released on Tuesday. It contained this chart showing per capita GDP and Net National Disposable Income (NNDI) per head since the recession. NNDI strips out depreciation and dividends paid to foreigners.
In other words, then, when you look at the aspects of GDP that contribute to the well-being of people in the UK, there hasn’t been much growth at all.
Once again, to take a longer perspective, Ben Chu helpfully put the figures for the past decade or so onto this chart.
How far the government is to blame for this is a question economists and historians will pore over for decades. A majority of the economists surveyed by the Centre for Macroeconomics think the government’s spending cuts caused a drag on GDP growth. So does the OBR. While its estimates are fairly conservative, others blame austerity policies for 85 percent of the shortfall between where we are now and the OBR’s 2010 forecast.
That said, it’s unfair to blame the sluggish economy entirely on Coalition policies. For most advanced economies the recovery has been slower this time than in previous recessions. Even in the US which, apart from Canada, has grown faster than the other G7 economies, the recovery has been slow. American commentators describe as dismal rates of growth that look enviable to us but compared to previous recoveries they are.
Perhaps the more important question, though, is this. If cuts acted as a drag on GDP growth in the last parliament, what will even bigger cuts do in the next one? US growth and world trade seem to be slowing down and the OBR forecasts for the UK economy suggest continuing slow growth here too. Eight years after the crash, the recovery is still weak and there are no signs of it gathering any more speed. Taking even bigger lumps out of public services is likely to make things worse.