At a glance, yesterday’s growth figures make for encouraging reading. If one is to dig deeper, however, the green shoots of recovery seem more distant than one may hope.
Although a percentage point of growth in one quarter is promising, it is worth remembering that GDP in volume terms is exactly the same when compared with Q3 in 2011. The economy is now flatlining slowly upwards rather than flatlining slightly downwards. It’s welcome, but it’s not significant.
Moreover, the difficulties faced by the British economy are not fully reflected in today’s figures. Living standards are falling and productivity growth is weak. Although we may be leaving recession, it seems we are entering a period of unspectacular recovery, which is quite different from the economic recoveries of previous recessions.
The UK is in the midst of a long-term growth problem which is utterly irresolvable unless government spending and taxation are brought under control.
Spending has risen by 1.4 percent this year in real terms, demonstrating the marginal impact of austerity measures to date. We have seen just a small number of the cuts outlined by George Osborne in his Comprehensive Spending Review implemented. Regulation continues to throttle the economy, whilst high marginal tax rates are disincentivising people from working, saving, and investing.
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