GIVEN this is a UK Government that often seems to have more front than Blackpool, which will host the Conservatives’ spring conference next month, we should not have been surprised by the dizzying spin put on Friday’s economic output figures.
Chancellor Rishi Sunak was all smiles as he declared the UK economy had been “remarkably resilient” in spite of the Omicron coronavirus variant wave, and proclaimed the country had been the fastest-growing of the Group of Seven leading industrialised nations in 2021. This “fastest-growing” declaration has also been a favourite of Prime Minister Boris Johnson.
Of course, politicians the world over tend to strive to paint themselves in the best possible light and, when it comes to the economy, they choose the figures and timescales which best suit their purposes.
However, with the Johnson administration, it often seems that such spin is supercharged, relative to the usual political window-dressing.
And the portrayal of last Friday’s gross domestic product figures from the Office for National Statistics looked to be a case in point.
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What Mr Sunak was grinning about was a 7.5 per cent rise in UK GDP over 2021 as a whole.
As he crowed about the 2021 performance, what he did not mention was that the UK had seen the sharpest drop in GDP of any of the G7 nations in 2020, a 9.4% tumble which was the worst the country had experienced since 1919.
Surely this context is crucial to people having a proper understanding of the 2021 growth rate?
The House of Commons Library information and research service published a very useful paper on the latest UK GDP statistics, authored by Daniel Harari.
Sadly, far more people will have seen, heard or read about Mr Sunak’s take on the GDP figures, which was widely adopted by acolytes of the Johnson administration on social media, than will have studied the detail and context of the data.
This is a great pity because the substance and reality beneath the gloss put on the figures by Mr Sunak are what matter if we are going to have a proper debate about the actual state of the UK economy, and the performance of this Conservative Government.
The House of Commons Library research briefing notes: “For 2021 as [a] whole, UK GDP growth was 7.5%. This was the highest in the G7 (although Japan has yet to publish figures, it is very unlikely to be higher than this).”
Crucially, however, it adds: “The UK had the largest decline in GDP among the G7 in 2020 (-9.4%) and its relatively strong performance in 2021 was to some degree a recovery from weakness in 2020.”
It should surely be plain to anyone with an economic remit, let alone the Chancellor of the Exchequer, that the 2020 and 2021 performances must be looked at together when trying to come to any kind of conclusion about how the economy has been doing. Indeed, this should be plain to anyone with even a basic grasp of arithmetic.
The research briefing provides some other important pieces of context.
It notes that, compared with the pre-pandemic peak in the final three months of 2019, UK GDP in the fourth quarter of last year was 0.4% lower. Eurozone GDP was at the same level as pre-pandemic. And US GDP was 3.1% higher. Within the eurozone, France’s GDP was in the fourth quarter of last year 0.9% ahead of its level in the final three months of 2019. But Germany was 1.5% adrift. Elsewhere, Canada was 0.2% ahead.
So this does not really chime either with the world-beating picture of the UK economy painted by Mr Sunak.
Furthermore, the briefing paper flags the fact that UK GDP growth of 1% quarter-on-quarter in the final three months of last year is behind corresponding expansion of 1.7% in the US. This is quite a big difference.
Mr Harari’s paper notes that, in its new set of forecasts published on January 25, the International Monetary Fund lowered its UK GDP growth prediction for this year to 4.7% from the 5.0% it had projected in October. The paper observes that growth expectations for the rest of the G7, except Japan, and for China were also downgraded. Global GDP growth of 4.4% is now projected by the IMF for 2022, down from the 4.9% it had forecast previously.
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The House of Commons Library research briefing notes the UK is forecast to see the fastest growth in the G7 in 2022 as well as 2021, but emphasises again the key point that this is “after seeing the largest fall in GDP in 2020”.
Unsurprisingly, Mr Sunak was quick last week to flag the forecast that the UK would be the fastest-growing economy in 2022, ignoring the crucial context of what happened in 2020 and the fact the country was having to climb out of a far deeper hole than other big economies.
The IMF forecast of UK growth of 4.7% compares with respective projections of 4.1% , 4% and 3.9% for Canada, the US and eurozone. These are not huge differentials. And those in the Organisation for Economic Cooperation and Development growth forecasts are even smaller. The OECD projects UK growth this year of 4.7%, and respective expansion of 4.6%, 4.3%, 4.2% and 4.1% in Italy, the eurozone, France and Germany.
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While GDP plunged by 9.4% in the UK in 2020, it dropped by 6.4% in the eurozone, by 4.6% in Germany, by 8% in France, by 3.4% in the US, by 4.5% in Japan, by 3.9% in Brazil and by 3.1% globally.
The huge fall in the UK, both in absolute and relative terms, is crucial when weighing not just the 2021 outturn but also the 2022 forecast.
Mr Sunak last Friday even managed to maintain his smiling demeanour as he went on to talk about people’s concerns over rising prices, a situation rightly characterised by many as a cost-of-living crisis.
Annual UK consumer prices index inflation is forecast by the Bank of England to peak at around 7.25% in April. The UK is also in the grip of an energy-price crisis, but the inflationary troubles are broadly based.
There are undoubtedly major challenges ahead. These should be the focus of the Johnson administration, not spinning growth numbers and ignoring the context in a bid to portray the UK as a colossus strutting the global stage.