Britain in the slow lane
“The 1956 Suez crisis was the moment Britain had to wake up to the fact it was no longer the force it once was,” said Larry Elliot in The Guardian. “The 2017 Budget was its economic equivalent.” Forget the extra money thrown at the NHS and housing ( see page 27). The real story was the “calamitous” news delivered by the Government’s official forecaster, the Office for Budget Responsibility (OBR). It estimates that the UK economy will grow by less than 2% in each of the next five years – the worst forecast since 1983. Underlying this is an even more worrying appraisal. For the past century, the UK’S productivity – the measure of each worker’s economic output – has grown at an average of 2% a year. Since the 2008 crisis, this trend has been broken. The OBR used to predict that we would bounce back. Now it thinks we won’t: it predicts productivity will grow to just 1.2% by 2022. In short, “Britain is substantially and permanently poorer”.
It’s hard to overstate how much productivity matters, said Andrew Rawnsley in The Observer. Getting more from each hour worked, by improving technology and working practices, “allows wages to rise, lifts living standards and boosts the tax take to finance additional government spending”. It guarantees that, through the ups and downs, things generally get better. “Absent improvements in productivity, everything else goes to pieces. Including politics. Especially politics.” If Britain is stuck in its low-growth rut for the foreseeable future, it will very likely “blast apart the existing parties”. “We still don’t quite know why productivity growth has been so bad,” said Juliet Samuel in The Daily Telegraph. It has been low across the developed world, but particularly so in Britain. A lack of investment in training and technology is often blamed – perhaps not surprising, when cheap workers are readily available on Britain’s buoyant labour market. “On the bright side, whatever official forecasters tell us about the future, one thing is almost certain: they will be wrong.”
Indeed they will, said Dominic Lawson in The Sunday Times. There is a rich absurdity in offering detailed projections, six years ahead. Forecasts “typically assume things will continue as they are, and thus miss what we most want to know”: when they will change. Besides, it’s not even clear that Britain’s low productivity is such a dismal predicament. France, for instance, has much better figures. But it also has much higher unemployment levels; the unemployed are, by definition, not part of the productivity statistics. Which problem would you rather have? A job where pay doesn’t increase or no job? Yes, forecasters get things wrong, said Janan Ganesh in the FT. But they often “err through optimism” too. The OBR has not, for instance, predicted a recession during Brexit. At present, there is no end in sight to this protracted period of low growth; and Britain is about to seriously disrupt relations with its main trading partners. “We will see how exhilarating voters find that ride.”