Most people do not measure their wellbeing by monitoring monthly economic indices, nor do they have to be told that gross domestic product fell by 0.3% between September and October to be aware that Britain is in the doldrums. Economists were surprised by a contraction that was steeper than forecast. But a focus on small movements in data – always subject to revision – risks losing sight of the bigger picture. The economy has stagnated in 2023 and is expected to do the same in 2024. While the rate of inflation has come down, there is still a cost of living crisis. Real wages have barely grown since the 2008 financial crisis. Productivity has been flat over the same period.
Running a balanced fiscal budget, and in the absence of sustained growth, it gets harder for the exchequer to raise revenue in line with rising demand for public services. Even when cash is increased, as with the NHS, it merely pays for catchup after years of austerity. And where budgets are frozen or cut, as in local government and “unprotected” departments, services decay or vanish altogether.
