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The economy is above its pre-crisis level – but when will voters feel the benefit?

25 July 2014

10:11 AM

25 July 2014

10:11 AM

The economy is now, at last, larger than its pre-recession peak. The coalition parties are keen to claim vindication this morning. Nick Clegg has declared that ‘The rescue has worked’ and used today’s numbers to justify the Liberal Democrat’s decision to go into coalition. While George Osborne is celebrating a ‘major milestone in our long term economic plan’. But he’s also keen to warn that ‘there is still a long way to go’ and to emphasise that ‘the mistakes of the past’ must not be repeated. In other words, don’t let Labour back in.

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Political symbolism aside, GDP is still lower in per capita terms today than it was before the recession. It is also, as the FT’s Chris Giles points out, only services which have fully recovered their lost output.


Having said this, the economy has grown by 3.1 per cent in the past 12 months—a good clip in anyone’s book. The big political question now is whether voters begin to feel this growth. The private sector pay rounds coming this autumn will tell us a lot about whether there’ll be any kind of feel good factor by next May​


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  • davidhill

    A sheer lie and a great whopper this time to boot. Indeed interestingly today’s news that we are back to 2008 levels and the fasting growing economy in the western world does not really mean anything in real terms. Indeed when gdp growth is mapped against inflation the reality is that it does not hold water one bit.

    For on one side of the coin according to ‘this is money’ website’s inflation calculator
    (http://www.thisismoney.co.uk/money/bills/article-1633409/Historic-inflation-calculator-value-money-changed-1900.html), since 2008 inflation has been a compounded 16.39%.

    On the other side of the coin according to the ‘Trading Economics’ website (http://www.tradingeconomics.com/united-kingdom/gdp) the UK’s GDP is still 12% below its peak of 2008 without taking inflation into account. But when inflation is taken into account, the economy in real terms is 30% below the GDP of 2008. Indeed if we were to have a constant growth of 3% in gdp and with inflation running at 1.9% as it is presently, it would take the UK economy 25 years to attain the same gdp as of 2008 in real terms. Therefore as usual the government is not telling the truth and where they are simply trying to make the people think that things are rosy but where in reality they definitely are not.

    But added to this misinformation, one of the ‘big four’ accountancy firms PwC has stated that the nation’s total debt by 2015 will be a minimum of £10 trillion and could even exceed £11 trillion (http://worldinnovationfoundation.blogspot.co.uk/2013/12/uks-debt-id-far-more-than-what-people.html). The ONS states that if the country were sold tomorrow in its entirety it is only worth around £7 trillion a shortfall of at least £3 trillion.

    Therefore the people are being completely mislead into thinking that they are on easy street, but where nothing could be further away from the truth.

  • Adam

    “Feeling the benefit” – my favorite immeasurable measure (which explains why Labour like using it so much).

    Plenty of Venezuelan’s “felt the benefit” through a substantial part of the Chavez Presidency. All this despite the country going to ruin in the background.

    Voters are idiots, we should focus on the metrics – and these are positive. Anyone wishing to “feel the benefit” should spend a few months in Greece.

    • Baccarat

      >Anyone wishing to “feel the benefit” should spend a few months in Greece.
      Have you recently been down there?

  • Alexsandr

    Ah. James has discovered GDP per capita. And why is that so low? Immigration. How can you write this without mentioning the reason why people are poorer?

    • HookesLaw

      Low because there is not as yet much labour saving inveatment because labour are not pricing themselves out of jobs.

      Once tube drivers finally strike themselves out of a job and the underground has motre driverlaess trains then their GDP per capita will rocket.

      GDP per capita rose all through the period when Labour were not bothering about immigration. It has been rising since 2010

    • Makroon

      It is comical to see Forsyth parroting the Balls song, when it is painfully obvious that he hasn’t a clue. Stick to Westminster tittle-tattle Mr Forsyth.

  • CharlietheChump

    And the debt coninues to rise above £1.3 Trillion.

    Don’t get comfortable yet, there is no real plan to deal with this.

    • HookesLaw

      yes there is. Look at the OBR projections.

      • Makroon

        The notes to the OBR bulletin were at pains to point out that the June estimate is based on “less than half of the returns” and therefore subject to revisions (like last year).
        The 2013/2014 deficit latest estimate, was also lowered by a further £1.1B.

  • southerner

    Every thread on the Spec descends into the normal hand-bagging between Tele on one side plus everyone else on the other. The Camerloons like Hook are out on their own in a padded cell.
    Away from the tribal playground name-calling, we all know Balls and Ed are economically illiterate. We also know that Osborne has ducked every major decision he had to make such that this is the longest recovery in history (worse even than the Great Depression) and he didn’t even match Darling’s modest cost cutting programme.
    Enough already. Get shot of the liblabcon idiots and stop the left wing lunacy that has destroyed almost every facet of our country in the last 40 years.

    • John Hutton

      But UKIP won’t win a single seat

      • southerner

        I think you are wrong but as long as they cause enough carnage to destroy the present cartel the Tories will implode and we might just get a conservative party worthy of the name.

  • Makroon

    Labour is directly responsible for the (world record) -7.4% recession, AND the huge surge in immigration, so I don’t know why they have suddenly switched to talking about GDP/head ….. oh! wait a minute, I do ….. it is due to the absolute incompetence of the government in explaining the realities and facts.

    The Brown-Balls recession, -7.4%, and still they ask why the recovery took longer than Germany (-4.3%), or the US (-5.4).

    • Mynydd

      Just a small point, the economy was out of recession by the time Mr Cameron/Osborne came to power. This was confirmed by the 1% GDP growth figure for Q2 2010. Now after over four years in power the GDP growth figure for Q2 2014 is only 0.8% lower than what they inherited, due to the absolute incompetence of the government. I don’t need them to explain the realities and facts I feel them in my pocket every day.

      • HJ777

        The ‘growth’ generated by Labour in 2010 was generated by an extremely fast (and unsustainable) rise in government spending.

        In fact, the entire value of the ‘growth’ was less than the extra spending required to produce it.

        • Colonel Mustard

          The Q2 2010 growth is one of their treasured myths. It facilitates their denial of reality.

          • Inverted Meniscus

            Yes it is the altar at which all their trolls worship.

            • Mynydd

              As I have said before you don’t do facts you just rant and make childish comments.

              • Inverted Meniscus

                You just keep on peddling lies for the Labour party.

          • Mynydd

            It’s not a myth it’s a fact just check the records.

            • Inverted Meniscus

              Because when you borrow money the economy expands you cretinous imbecile. It does not mean that growth is sustainable. It was a typical piece of dishonesty by Brown using our money to improve his own election chances. He failed and we are all paying the price.

              • Jambo25

                The shrieking cretin Mr. Meniscus shows his high level of rationality again.

                • HJ777

                  Your first contribution is to hurl abuse.

                  Remember that when you are accusing others of not being suitably polite to you.

            • Colonel Mustard

              The myth is that if a Labour government had won it would have continued. That is the myth you silly wee man.

        • Makroon

          It was the classic ‘dead cat bounce’, after a vertiginous fall in output, even a “levelling-off” looks like relief.

      • Inverted Meniscus

        And another lie. Brown borrowed more money before the election thus inflating GDP but creating no sustainable growth. It merely exacerbated the £168 Billion structural deficit and 7.4% contraction of the economy bequeathed by Brown Labour. You keep repeating the Same lie but it simply refuses to become true. Labour Troll.

        • Mynydd

          Government records show that GDP growth Q2 2010 as 1% and Q2 2014 as 0.8%

          • HJ777

            You are correct, but by how much (expressed as a percentage of GDP) did Labour have to increase spending (and hence borrowing) to create that uplift in GDP?

            I think you will find that it was by more than the GDP uplift.

          • Inverted Meniscus

            I refer you to the queation posed by HJ777 safe in the knowledge that you are too thick and too dishonest a Labour Troll to answer it correctly.

      • HookesLaw

        That was bogus – just borrowing money on an unsustainable rate (‘bringing forward’ spending) and of course there was then a massive Eurozone crisis

    • Daidragon

      How can they be ‘directly responsible’ for something that started in the American sub prime mortgage industry?

      • HJ777

        I think you have to ask yourself why the drop in GDP was greater here than in the USA or Germany.

        Remember too that Labour claimed credit for the economic boom, saying it was all down to their (i.e. Brown’s) policies – so they must then accept that their policies played a large part in the crash. No boom, no crash.

        • Daidragon

          I agree it was deeper here because we are too dependent on banking and finance. To say that the largest global financial crash since 1929 is the ‘fault’ of one party in one small country is just laughable though.

          • HJ777

            I have never claimed that it was ALL the fault of the last Labour government. However, they are still highly culpable.

            They spent hugely on the public sector (where productivity was falling) and relied on a credit boom to compensate for lack of real growth (did you know, for example, that manufacturing output, which had grown substantially under the previous Tory government did not grow at all between 2001 and 2007 – a highly unusual situation in any advanced economy). They also ran a deficit in a boom (you will remember that the Tory government of the late 80s ran a substantial surplus in a boom). Had we started the recession with a surplus of 2% instead of a deficit of 3% then we would not have the current problem with the public finances.

            They also ignored rapid growth in the money supply and changed the target measure of inflation to exclude any element of asset (particularly house) prices.

            It really will not do for Labour to simply blame banks in America when they helped stoke a boom here. They claimed their policies produced a successful economy – now we know they didn’t, so Labour has to accept an appropriate degree of responsibility.

            • Jambo25

              It was largely the fault of the financial sector which heavily funds the Tory Party.

              • HJ777

                That is weak even by your standards.

                I suggest that you read Gordon Brown’s 2007 Mansion House speech and then try to blame the Tories. Or read Salmond’s letter offering “any assistance my office can provide” to RBS in its disastrous takeover of ABN Amro. Plenty of commentators at the time warned that it was a very bad deal.

                As the more knowledgeable economic commentators have pointed out, the banks behaved badly largely because they were incentivised by governments to behave as they did. Central banks control interest rates and when they get it wrong we get credit booms followed by busts. Who control central banks?

                • Jambo25

                  Yet Barclays was trying just as hard as Goodwin to get Ambro and numerous alickadoos in the city still thought Goodwin had played a blinder when he got it. In the meantime the regulatory bodies in the USA, Netherlands and particularly Britain sat back and allowed what was one of the major frauds in financial history to take place. Is what you’re saying that you want control of interest rates and other elements of policy to be removed from the BoE and reinvested in the Treasury because if you are I would agree with you.

        • Jambo25

          The finance sector was bigger here than in either the USA and Germany.

          • HJ777

            Not that much bigger actually, contrary to popular belief.

            And the banking sector is hardly bigger at all. Our finance sector is proportionately bigger largely due to other financial institutions most of which had nothing directly to do with the crash (e.g. Fund Management companies).

            • Jambo25

              It was the banking brick which broke and brought down the whole edifice. Cameron and Osborne argued for less regulation not different regulation. Moreover the power and therefore the responsibility lay with those very clever people in London. You can spread some of the blame (Quite a lot actually) onto the Americans : particularly Clinton and pals but most of the UK blame sits in London. That’s were formal power and responsibility lay

              • HJ777

                We’ve already established that you know nothing about economics and have not the faintest idea of the causes of the banking crash.

                • Jambo25

                  And we’ve already worked out that you cannot discuss anything with anyone who isn’t a clone without reverting to personal insults.

                • HJ777

                  Says the hypocrite whose first contribution to this thread was to call someone a cretin.

                • Jambo25

                  I only insult supercilious scum like yourself who insult me first.

                • HJ777

                  You really are a thoroughly unpleasant character.

                  And a complete hypocrite.

                  Grow up.

                • Jambo25

                  I treat with respect those who treat others with respect. That’s why I grant you no respect whatsoever.

                • HJ777

                  You’ll be entirely lacking in self-respect by that criterion then.

                  Or you’re a hypocrite.

                  You choose.

                  And why would I value your respect anyway? It’s worthless.

      • HookesLaw

        Thier inept regulation system allowed our banks to buy up this securitised debt.

        • southerner

          You are right (for once).
          And the Camerloons argued for even less regulation.

          • HJ777

            What makes you think more regulation is the answer?

            When regulators get things wrong they impose their mistakes on the entire banking system – and we have seen the result.

            Less regulation would meant that people would be more wary of the risks, rather than relying on the regulator.

            • Jambo25

              Yep and we could go back to the 19th century where financial failures were a regular occurrence.

              • HJ777

                And that would be a good thing.

                Why shouldn’t badly-run banks just go out of business like any other badly-run company without provoking a systemic collapse?

                • Jambo25

                  1) Because banking and investment is so much more a part of our economy now in terms of value, income and employment. 2) For better or worse and I would say for worse we have allowed banking and finance to become far too concentrated in too few firms in far too few centres. If one or two big banking houses or other financial firms go down it isn’t like the 19th century where the results could be short term and local/regional. Its liable to be fairly catastrophic. Look at the panic which set in over Northern Rock which was actually a very small player.

                • HJ777

                  All the more reason to avoid systemic collapses by not allowing regulators to (i) force all banks to behave in the same manner and (ii) to effectively prevent new market entrants by over-regulation.

                  If you want to gain some understanding of the issue then I suggest that you read Philip Booth. At present, you are woefully short of any understanding.

      • ButcombeMan

        But it did not start there..

        Northern Rock, British bank, borrowing from and lending to British customers. Went bust on Brown’s watch. It was the canary in the coal mine. Brown and his aides, too stupid and economically illiterate, to comprehend.

        When he did comprehend what he and Greenspan had done, he tried to cover it up.

    • Baccarat

      Labour this, Labour that, the fact is that they soon will get back in power. You’d better get accustomed to this inevitable prospect. You had it too good for the last four year, we had enough of repulsive Toryism on our heads (fortunately the cons have been kept in check by the Libs)

  • Alex

    1. Per capita is the only meaningful measure; unless you think that China is more prosperous than the UK.
    2. The GDP data in the run up to 2008 wasn’t real; it was based on an asset bubble due largely to interest rates that were too low. And the current GDP figures are increasingly based on an asset bubble due largely to interest rates that are too low.

    • dado_trunking

      *Median* GDP per capita – in some developing economies like Wales, Northern Ireland, Scotland and the English periphery you might find this figure is negative.

      • Rhoda Klapp8

        And that mixture of prosperity and failure to prosper occurs at all levels, down to within the home. That’s why we gross it up. Unless you are the kind of person who can always find a victim.

      • MichtyMe

        Scotland’s ain’t, it’s 120% UK average.

        • Jambo25

          Scottish GDP surpassed the 2008 figure rather earlier than the UK’s.

      • Lemniscate

        Not sure median GDP per capita makes sense as a statistic. Don’t you mean median income?

        • the viceroy’s gin

          I think he means GDP per sockpuppet.

          • dado_trunking

            GDP per gidiot equivalent

            • the viceroy’s gin

              …ok then, GDP per idiot sockpuppet. Problem is, you can’t divide by infinity, lad.

  • telemachus

    The big political question now is whether voters begin to feel this growth.
    *
    The redundancy there is whether
    The answer is a resounding no

    • ButcombeMan

      The suggestion that voters (in work) are NOT “feeling the benefit” is for a lot of people, misplaced. Those in work with mortgages, have benefited from record low interest rates for years. This has increased spending power, allowed other debt to be repaid or allowed mortgage debt to be paid off quicker.

      Those who have maintained full employment, even without large pay increases, have been better, not worse off, though of course the creeping impact of 40% tax has hit many.

      The delicate balancing act for whichever government inherits, is to bring near normality to interest rates without crippling households.

      There is no sign that Labour have understood this.

      Keep talking about “feeling this growth” is quite infantile, could come back to haunt a future Labour government and seriously underestimates the period of recuperation the economy has needed to recover from “The Big Brown Mess”.

      • HJ777

        And, especially for the lower paid, the rise in personal allowances has resulted in an increase in take-home pay that has tended to counteract price rises.

        • ButcombeMan

          Indeed. I forgot that.
          In general, the message from Labour is wrong.

          The people who find it really tough are those who loaded themselves with unaffordable debt during the Brown Boom.

          Self evidently Brown and Labour lulled a lot of people into believing the good times would never end.

          Brown lied about defeating “boom and bust”. He and Balls are either stupid or duplicitous. You choose.

          • HJ777

            He and Balls were/are arrogant and incompetent and simply believed their own propaganda.

            There is no easy solution for those loaded up with debt. For many, if not most, of them it is to a large extent mortgage debt – and a high proportion have made no provision for repayment (i.e. they are interest-only mortgages). Inflation isn’t eroding the value of the debt appreciably and they remain extremely vulnerable to interest rate increases as they aren’t paying off any of the capital.

  • dado_trunking

    After six years the economy ‘is over its pre-crisis’ what? What measuring tape are you now using – have you checked it hasn’t shrunk in the wash before making this up?

    • Mike Barnes

      You had £10000 in your William Hill account on 1/1/2008. By April 2009 you’ve lost 7.2% of your £10000 because of a series of crazy bets. Ever since then you’ve been steadily clawing it back and today, finally, you’ve got £10000 again.

      But you’re not as rich as 2008, things are a bit more expensive than they used to be and you’ve got at least 2 million extra mouths to feed.

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