Tory economics editor Robert Peston is clutching at straws again.
He’s trying to persuade us all that everything we thought we knew about the UK’s economy during the Coalition Parliament was wrong, and that growth was much stronger than we thought. He is being economical with the truth, it seems.
He writes: “The ONS … says that the economy grew 1.5% in the general election year of 2010, then 2% after austerity bit in 2011 – revised up by the ONS from 1.6% – and then 1.2% in 2012, when the eurozone’s economic crisis imposed maximum pain on us.
“The previous picture, of austerity reducing growth from 1.9% in 2010, to 1.6% in 2011, to 0.7% in 2012, has been magicked away by the official statisticians.
“And they have also revised up their estimate of growth for 2013 from 1.7% to 2.2%.
“If these statistics are more reliable than the last lot, a particular school of Keynesian economists may choose to re-examine their contention that only a fool or a liar would say there is a legitimate debate about whether George Osborne’s policies were good or bad for the recovery.”
One of that school of Keynesian economists has hit back – hard. According to Professor Simon Wren-Lewis, Mr Peston’s argument is “just nonsense: complete and utter nonsense.”
He responds: “This ‘particular school’ has never based their assessment on observing what is still the weakest UK recovery since anyone can remember and looking for something to blame. They based it on what macro theory and the great majority of empirical studies tell us would be the impact of the fiscal austerity that happened. At the conservative end of such assessments is the OBR, who calculate austerity reduced GDP growth by 1% in each of the financial years 2011 and 2012. Estimates of this kind are completely independent of data revisions for one period in one country. We might doubt such estimates if they implied that without austerity we would have had implausibly rapid growth, but for this recovery they do not.”
This means that it doesn’t matter how well the ONS or Mr Peston says the economy performed – the simple fact that George Osborne had imposed austerity on the UK (unnecessarily) means growth was restricted by at least one per cent in the years he mentions.
Prof Wren-Lewis goes on to point out that the UK’s growth performance – even with these revisions – is still terrible because Peston has not taken population growth due to inward migration into account: “You really have to look at GDP per head to make comparative statements about this recovery.
“As the ONS point out, this new data still shows that only in this year has GDP per head exceeded its pre-recession peak. Assuming recent data revisions have not changed this, average growth in GDP per head between 1955 and 2008 was about 2.25%. Any recovery from such a deep recession should have seen growth rates well in excess of this.
“Instead the revised data give us 1.1% growth in 2011, 0.5% in 2012, 1.5% in 2013. Only by 2014 had we got near the long term average growth rate. This is still an absolutely terrible performance for a recovery.”
Prof Wren-Lewis goes on to suggest that Peston might be saying as much himself if the Tory Government were not “breathing down the BBC’s neck”. The point that BBC political coverage is being distorted by Tory influence is a very good one, as anybody who has seen Question Time recently will know.
In fairness to Peston, he does point out that any extra economic growth did not translate into higher tax revenues for the government. Where did that money go (if it doesn’t exist only in the minds of ONS statisticians and Mr Peston)?
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