We recently celebrated the anniversary of the return to normal politics. After the mayhem and mendacity of the Johnson-Truss era we’re back to arguments about the state of the economy and the cost of living. It’s all a bit duller. Government ministers no longer go sweating into broadcast studios, fingers crossed, praying that the speaking notes they have been given by Downing Street will not make them look like complete mugs within 24 hours.
Now they are on safer—or at least more consistent—ground. This is the sort of thing you are hearing, and often, from the government minister fulfilling their duty on the morning interview circuit: “Yes, there are strains on household budgets, but most of the rest of the word is in the same boat. Ukraine and Covid should take the blame. We have the fifth or, at worst, sixth-largest economy in the world (India has just grabbed fifth spot), and if you look at the growth of the economy, not least in the light of the recently revised Office for National Statistics figures, we’re doing OK. Really. The economy has bounced back better than we thought. Pity the poor Germans—they are now the runt of the litter, certainly not us.”
I am caricaturing—but only slightly. The Conservative Central Office briefing will then advise the minister to turn their firepower on Labour because “it is the party of higher taxation and fiscal irresponsibility”. They will be reminded to excoriate the previous Labour government for its handling of public finances before 2010, and given a helpful prompt to mention, more than 13 years after the event, Liam Byrne’s truly wretched joke-in-a-note to his successor as chief secretary to the Treasury—“I’m afraid there is no money.” And now you have most of the main Conservative tunes for the election campaign next year.
The school ceiling may be in danger of collapsing but there is, just, enough in some of this for an interviewer not to burst out laughing. Labour, of course, will have its own well-grooved responses. “Taxation is sharply up, Truss-Kwarteng crashed the economy, your mortgage payments have gone—or will go—through the roof, inflation is higher than in most comparator countries, growth—even allowing for the ONS revision—is a big UK problem, the Tories have been in charge since 2010”—and so on. There’s to be very little mention of the economic self-immolation of Brexit—a truth which Starmer calculates he has to stay shtum about—for fear of the political damage in Red Wall seats.
It all matters a great deal because, to quote Bill Clinton’s principal strategist, James Carville, in 1992, “It’s the economy, stupid” that will likely decide the election outcome. And yet you can hear, already, a collective yawn. Round and round we will go—but as the claims and counter-claims get made and rebutted, what insight will the voters glean about some of the less well-known fundamentals of the UK economy? What understanding of it do they have now?
There is a lot of good economic journalism in the UK. Many newspapers and all the public service broadcasters have suitably qualified economics editors who know very well not to get over-excited about a monthly growth or inflation figure. They know, too, that spouting one big, context-free figure about the overall size of the economy, or the total of public spending, or the number of teachers or police officers or hospitals tells you very little about the nation’s wellbeing and even less about how most people are coping with their own budgets. Because, of course, if you don’t take into account the size of the population and, where appropriate, the maths of inflation, you can be led to preposterous conclusions about how rosy it all is out there.
With that in mind, let’s get back to that minister in the studio and tune in to some more of the guff that is likely to adorn the interview.
“We are spending more on the health service than ever.” “We have more nurses than ever before.” “The education budget is up.” “We have more police officers.” The moment you hear this sort of bragging, go into full sceptical mode. Because per head of the population and in real terms (thus taking account of inflation), it’s often simply not true—with the exception of the NHS budget, where, in any event, spending in real terms has increased in all but a tiny handful of years since the health service was created and, pre-Covid, was growing exceptionally slowly. The obvious point is that we spend less in real terms on a whole bunch of things than we did before George Osborne chose austerity as the means to deal with the financial crash.
But even when economic reporting is sober, we still hear far too little about the UK metrics compared to a host of other developed economies. I don’t know if the public has much sense of how we are faring vis-à-vis other countries. But the Brexit campaign demonstrated a considerable appetite for delusion—economic as well as political. A lot of people seem surprised that the sovereignty we have apparently reclaimed has, to put it mildly, produced no economic dividend thus far and with no sign that it ever will.
It’s not only the government that wants to assert that we still have serious economic heft. Many with a particular bee in their bonnet—wanting Britain to have a bigger aid budget, or more generous welfare provision, or a better NHS, or more state-driven green investment or a higher defence budget or a properly financed justice system, and on and on—believe that their particular wish could come true, because “we are the sixth biggest economy in the world”. So if we are not doing it—whatever the “it” happens to be—that can only be because we lack the will, the imagination, the generosity of spirit or the intelligence. Or because the Treasury is full of dullards, the Bank of England just keeps screwing up, or “the blob” has sabotaged everyone’s best efforts. Take your pick.
The Brexit campaign demonstrated considerable appetite for delusion—economic as well as political
You could mount an argument that some of these problems might be solved if the state took more in tax. There’s a legitimate view on the left that we ought to increase the tax take, that the markets would put up with it and the economy would not fall off a cliff. And then we might get some improvement in the public realm.
Maybe—but the UK’s tax burden has gone up sharply and is set to rise to a post-war high of 37.7 per cent of GDP in 2027–28. Higher taxes—even in better economic times than these—are not often a popular election strategy.
You could, au contraire, go all Truss-Kwarteng, and effectively bellow that you are the only people taking the UK’s low growth problem seriously (palpably not true—many have been tearing their hair out about it for years) and assert that you could fix the UK by slashing taxes. We would have milk and honey and proper public services.
But none of this gets you away from a fundamental truth. We are simply not in the Economic Prosperity Premier League. There are many ways of measuring a country’s prosperity but there is an accepted standard of sorts, which takes into account both the size of a country’s population and what an individual can actually buy with what they earn. For those with a technical interest, this is GDP per head using purchasing power parity, and the OECD and World Bank helpfully publish tables using this benchmark.
So where do we stand? The average Brit lags behind not only the Australians, the Americans and the Canadians—but, in all, 13 European countries. Those poor, no-growth Germans are in fact roughly 15 per cent on average richer than we are. The Belgians, often unable to form a government and so deemed worthy of a chuckle, are even more prosperous per head than the Germans. The French are roughly where we are, and Slovenia is catching us up.
We are something like the 17th richest country out of 38 in the OECD club. And that’s before we think about Singapore, oil kingdoms and small sultanates, who are not part of the OECD. And several of those rank far ahead of the UK. I am not suggesting that the only thing that matters in life is real GDP per head. I’d much rather live in the UK than Qatar for any number of reasons. But our economic muscles are, in reality, decidedly flabby.
So let’s discard the “sixth-largest economy in the world” puffery and try this one for size: “This government is proud to preside over the 30th most prosperous economy in the world.” You won’t be hearing it.
But if you carry around this rather important thought in your head, a lot of the rest of the news, and the political debate that accompanies it, makes sense. Because many of our public services palpably provide a great deal less than their continental counterparts. Our health outcomes aren’t great and we don’t, as it turns out, have enough hospital beds or doctors (3.2 physicians per 1,000 people, compared to Germany’s 4.5). Our social care system, if you can even call it a system, is feeble, our childcare provision is lousy, our public transport system is in large parts shoddy and expensive, our armed forces are not well enough equipped.
It's not that this state of affairs is ignored. Many a column inch and a great deal of airspace are given over to reporting shortages and decrepitude (see: aerated concrete)—but the dots don’t get joined up. It’s all very basic maths. If the Germans (and all those other countries) have the same overall tax rates as the UK, they are very likely to have better services. They are—not to put too fine a point on it—richer.
I am not suggesting every interview with a government minister should begin with the presenter reminding her or him of our true economic prosperity standing, but way too often they are allowed to get away with ducking it. Interviews that dwell on quarterly or annual figures will provide some entertainment and mild instruction, but they do not get to enough of the truth.
Our social care system, if you can even call it a system, is feeble
It’s a well-known tactic for a government minister to swat away an interviewer who challenges their upbeat assessment about the state of the economy with the protest that “we can all trade statistics.” But decent journalism involves understanding the data and relaying the insights it reveals to the audience. The figures relating to our prosperity are not that difficult to grip, and some of the underlying features of the UK economy are perfectly easy to understand and are not even that much in dispute.
We are successful at some things: the financial sector (even if it had to be bailed out, massively, by the state 15 years ago), bio-tech, higher education, the creative industries. Good. But we invest way less than most of the world’s prosperous economies. We have a large skills deficit. We have a very bad balance of payments deficit. We have low productivity. We have low growth. We are over-dependent on London and we have pronounced regional and social inequalities. And some of this is now worse because of Brexit. The solutions are—cliché—not easy. But they won’t be any easier to find if we don’t understand where we are starting from.
