UK Economy Bounces Back

Of course a growth in GDP means there is more economic activity and that can lead to rising living standards for the majority, but the wealth needs to be relatively evenly distributed. There is solid evidence that inequality in the UK is growing, which means that most people aren't benefitting from increased GDP. We're going backwards in terms of the wealth of the "common man".

There's a fascinating little museum in Manchester called the People's History Museum. It has records of the declared wealth of some of the millowners and other worthies, which (even in today's terms) was eyewatering. Meanwhile, the workers lived in filth and squalor. Manchester was known as a rich city, but the majority of people who lived there didn't benefit. We're heading back to that kind of society.

Dickens

Deedaa

It's all very well talking about a growing economy and job creation, but if the jobs created don't pay a decent wage it's no good at all for the average worker.

... and if the cost of living consumes the decent wage - and many are still waiting for that 'decent wage' to materialise, or even be on the horizon - then the growing economy means bugger all to the millions of households struggling to make ends meet.

Of course, some worthwhile jobs will be created, but they will probably be for the highly-skilled - and the hospitality industry might have to pay slightly higher wages to attract staff, etc. But your average 'man in the street' is going to be hit hard with the huge rise in energy prices, NI contributions and the ever-increasing cost of food and transport.

I suppose we have to wait for the 'trickle down' effect? Again.

Waiting for the trickle down effect is like catching and collecting soap bubbles.

Excellent article by Simon Jenkins

www.theguardian.com/commentisfree/2022/feb/17/brexit-life-outside-single-market-utter-disaster

I care about elderly people more than I do pigs, but the principle is the same. Both are victims not – repeat not – of the UK’s decision to leave the European Union. They are victims of Boris Johnson’s subsequent decision, to aid him in toppling Theresa May, to interpret Brexit as requiring Britain to depart the world’s most efficient and benign economic entity, the single market. This had been in large part the creation in 1986 of the right’s hero, Margaret Thatcher, to honour her free-market principles.

MaizieD. I have had a look at the chart more closely. There was a dip in growth after the recovery in 2010 but not a dip into recession which I have always taken as negative growth.

I am not going to argue about what taxation is for. The definition and purpose of taxation is outlined in this link. I will make do with that definition.

www.britannica.com/topic/taxation

As for inflation. we'll see how the next few years turn out. Of course, if we accept Keir Starmer's recent contract with the British people, our security, prosperity and respect is guaranteed. We'll see how that turns out as well.

You can quibble about 'recession', Cunco, but it is an indisputable fact that the economy was recovering from the GFC until the tories came to power and it then dipped. And has dipped again since 2014. It's not an impressive record...

But from your comments about Starmer I can see that you see the world through deep blue glasses.

Britannica is as wrong about taxation as you are, BTW.

Cunco

MaizieD. I have had a look at the chart more closely. There was a dip in growth after the recovery in 2010 but not a dip into recession which I have always taken as negative growth.

I am not going to argue about what taxation is for. The definition and purpose of taxation is outlined in this link. I will make do with that definition.

www.britannica.com/topic/taxation

As for inflation. we'll see how the next few years turn out. Of course, if we accept Keir Starmer's recent contract with the British people, our security, prosperity and respect is guaranteed. We'll see how that turns out as well.

Did you read the whole entry Cunco, including the bits about resource allocation and redistribution of wealth? I would certainly have no argument with that.

Incidentally, whatever your definition Cunco, the accepted definition of recession is a fall in GDP for two successive quarters, which there quite clearly was.

I understand the definition of recession. If people want to use the term recession for a dip in growth, they are redefining it to suit themselves. If recession occurred after the recovery from the Credit Crunch, produce the quarterly evidence. I will accept the ONS evidence whatever it is.

I understand that taxation redistributes income. I also understand from my local council that my council tax goes to pay for local services. If there was no council tax, perhaps local assets could be sold or borrowings increased but ultimately, services would be cut. If you ask the government where taxes go, the answer is to fund spending. As we have seen, taxation is not the only source of funding but I would have thought it indisputable that taxes fund spending.

I have just read a simple explanation of inflation from the Bank of England. It lists the price rises which have contributed to increased prices, mainly energy prices (as, by coincidence, it was in the early 1970's). It states the main way it will combat inflation is raising interest rates; and it says the actions it takes to keep inflation low and stable is monetary policy. It reckons it will reduce inflation to much closer its 2% target in 2 years time. I hope so but I am doubtful. I don't think tiny increases in interest rates will work, especially as real interest rates are negative. I think we are still accommodating inflation rather than suppressing inflation; but we will see. Nobody, especially the Bak of England, has predicted the future lately.

Actually, Maisie, I try to see the world through clear glasses. I mentioned Starmer's 'contract' because it has about as much validity as those much derided messages on buses. Sadly, all politicians get away with outrageous claims which would be denounced as quackery, if judged by normal advertising standards. I was surprised that Starmer, a lawyer, used the terms 'contract' and 'guarantee' in creating his own hostage to fortune.

I actually don't believe this news. The government has been printing money to pay for the Pandemic. The furlough etc has all to be paid for amongst other things.The economy in this country has tanked, or will do. My local council has a £70 million black hole. I honestly think we are in for rough times ahead and price rises are going to continue. The government can paint pretty pictures all it wants. I think a recession is coming, plus we have many folks who sadly bought houses that they cannot really afford, if interest rates rise many will struggle. Financial institutions don't seem to do the financial checks they did when we were first time buyers. My great grandchildren and beyond will be paying for this Pandemic.

No, your council tax does not go to financing your local services. Most of it goes to the Treasury, which allocates funds to your council according to a formula based on need.

No, people are not using an arbitrary definition of recession. I gave the standard definition, accepted by all economists.

Has it ever occurred to you that the government and Bank of England could be saying things to suit their agenda?

growstuff

No, your council tax does not go to financing your local services. Most of it goes to the Treasury, which allocates funds to your council according to a formula based on need.

Except the formula based on need gives the most to wealthier areas of the country!

PS. Raising interest rates will not reduce inflation when there is an external increase in energy prices because demand is largely inelastic. All it will do is benefit those with savings at the expense of those with mortgages and other debt and those who have very little or no disposable income after paying for essentials. This is standard GCSE economics stuff.

ayse

growstuff

No, your council tax does not go to financing your local services. Most of it goes to the Treasury, which allocates funds to your council according to a formula based on need.

Except the formula based on need gives the most to wealthier areas of the country!

I know . It's a con. Councils are not in control of their spending, which mainly goes on statutory obligations. They have become an "agency" of central government.

ayse, local authorities are not free to spend money other than in discharging their statutory functions. How they allocate their budget between those functions is within their control.

Growstuff: My Council says its budget is funded by a combination of business rates, central government grants and Council Tax.

I know the definition of recession. The chart of annual GDP (link provided above) shows a dip in growth in the period under discussion, not a recession. I pointed this out to MaizieD who had called it a recession but subsequently changed this to a 'dip'. I thought that was the end of the discussion. As I have said, it you find ONS quarterly data to show a recession occurred in the period under discussion, I will accept it.

Of course, the government and the Bank of England are talking their own agenda. I don't believe that inflation will decline to 2% in 2 years time. I thought that was obvious from my comment. The Bank of England got inflation wrong last year; and edging interest rates up marginally is, in my view, unlikely to do the trick. Inflation proved extremely difficult to reduce in the 1970's and I suspect the same may be true again. As ever, though, we cannot forecast what will happen in an uncertain world and those who try are too often found wanting. So, we will have to wait and see.

Growstuff is right, the generally understood definition of a recession is when growth declines for a period of 2 ore more quarters. Which is just what the ONS data shows.

It is also linked to a period of rising unemployment, which the data on this page also shows increasing for the period 2008 - 2011, only slowly recovering to pre 2008 levels by 2014

www.ons.gov.uk/employmentandlabourmarket/peoplenotinwork/unemployment/timeseries/mgsx/lms

I think you're confusing a recession with a depression.

I am not confused but I am getting tired of this confusion. So let us be clear:

A recession is normally defined as a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.

The election of 2010 was in May when the Labour Party lost power with 258 seats, against 307 for Conservatives and 57 for Liberal Democrats.

According to Statista, Quarterly GDP from Q3 2010 was +0.7%, +0.1%,+0.5%,+0.1%,+0.3%,+0.1%,+0.7%,-0.1%,+1.2%,-0.2%,+0.5%,+0.7%,+0.8% and+0.5% to Q4 2013.

www.statista.com/statistics/970941/quarterly-gdp-growth-uk/

So, growth was unsurprisingly anaemic over this period but on these figures, there was no recession. In 2008-9, there were 5 quarters when growth was negative before marginal growth resumed in Q3 and Q4 of 2009. In the first 2 quarters of 2010, growth was +0.7% and +1.1% as recovery from the deep recession continued. A bounce after a recession is not surprising and indeed it happened in 2021. We probably all agree that, after the bounce, further growth will be harder to acheive.

Sorry but you’re confusing a depression and a recession.

Are you winding me up?

My definition of a recession is the same as Growstuff's definition which MaizieD also agreed. Growstuff said: 'the accepted definition of recession is a fall in GDP for two successive quarters, ..' I agree. Where there was a disagreement was whether there was a recession following the 2010 election. Under this definition, there was not, as shown above.

Mention of a depression is a red herring. A definition of a depression is 'a long and severe recession in an economy or market.' There was a deep recession in 2008-9 and in 2020 but, as far as I know, it has not been described as a depression.

The data does show that GDP declined for two successive quarters. There doesn't have to be "negative growth".

A fall in GDP is negative growth. If you don't believe me, this is from Andy Haldane when at the Bank of England: 'If GDP falls from one quarter to the next then growth is negative.'

The data shows that growth bobbed up and down and was very marginally negative a couple of times after 2010 but not in successive quarters. This contrasts with the recession of 2009 when quarterly growth was from Q1 +0.6%, -0.5%, -1.5% and -2.0%.

But the UK was officially in recession at the beginning of 2012!!! GDP dropped 0.2% in the first quarter following a similar decline.

That was after the Conservatives came to power and had started their austerity policies.

Even in the quarters before January - March 2012, revised figures showed that the economy had stalled (at best) and, most likely, had declined.