Britain’s growth slumps and the Business Secretary scratches his head
Having spent another day wading through the Epstein-Mandelson email traffic I was going to write another column about how unbelievably grubby the revelations are, but it’s too depressing. So, I thought I’d focus on something more cheerful; the latest downgrades to the UK’s economic growth forecasts.
On his visit to China alongside the PM, the business secretary Peter Kyle said “We are in China where growth is 5 per cent, I was in America a couple of weeks ago where it’s 4.3 per cent,” adding: “Why the hell is Britain one per cent?”
We could give him credit for at least asking the question, even if we’re confident that he won’t like the answers.
The National Institute for Social and Economic Research (NISER) publishes analysis today that shows recent government policies have added 7 per cent to the cost of hiring a graduate or entry-level recruit. Researchers said the move was “dampening labour market dynamism.”
Might the business secretary consider the effects of this? Might he also look at the UK’s increasing number of unemployed (5.1 per cent, forecast to hit 5.4 per cent this year) and put two and two together?
We’d better hope these forecasts are wrong
NISER says GDP growth will be 1.4 per cent this year, which is more optimistic than other forecasters, powered largely by government spending. Things get worse after that, with growth expected to slump to 1.3 per cent in 2027 and a miserable 1.1 per cent in 2028. Now, forecasts can be wrong; they often are, and we had better hope that these ones prove to be too pessimistic.
As for Peter Kyle, he ought to have spent the flight back from China reading a new report from the Adam Smith Institute. Named ‘The Growth Agenda’ the findings appear to come as a perfect answer to Kyle’s “why are we only at one per cent?” question.
In a nutshell, researchers say the problems are the UK’s “extraordinarily high industrial energy costs” (compounded by the rush to net zero), a “complicated and inefficient tax system” and a planning system that stands as “as the single most damaging barrier to economic growth.”
The detail of their critique and the clarity of their policy recommendations mean the report should be required reading for all MPs. It’s not too late to prove the latest NIESR forecasts wrong, but time is running out and we can’t afford for ministers to stand around scratching their heads.