Britain is ‘bouncing back’ into the same old economy | Economic growth (GDP)

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In some government circles, the excitement before Britain’s opening-up and return to something like normality is making ministers giddy.

Grant Shapps says everyone may start booking a foreign holiday now that he is at work revamping last year’s colour-coded map of the world. With a traffic-light system of testing and quarantine rules in place, it is likely that nowhere will be out of bounds for Britons to visit. Inside No 10, last year’s recession is forgotten and the possibilities during the second half of the year are considered to be almost boundless.

Just the thought of public gatherings and nights at the theatre has allowed the prime minister to relax back into his pie-and-a-pint bonhomie, setting aside the accusations of bungling and lying so eloquently laid out in Peter Oborne’s book The Assault on Truth, or the way Brexit seems to be hastening the breakup of Britain’s union of nations.

In recent weeks, every forecast of economic growth has acquired a healthier glow. Last week, the International Monetary Fund added its voice to those saying the global economy – and the UK’s in particular – would enjoy a broader and faster expansion than previously estimated. The UK is expected to grow by 5.3% in 2021 and by 5.1% in 2022, making it the fastest-growing G7 country at the end of the forecast period.

Senior figures at the Bank of England have fuelled the prime minister’s sense that a period of unalloyed jollity, singing and dancing is within sight by using phrases such as “coiled spring” to describe the strength of the bounce-back. Investment bank economists and business groups paint a similar picture: one where Britain looks like a hive of activity, wheeling and dealing its way to prosperity in a way that boosts the traditional measure of national income – GDP.

It is clear, though, that all the talk of reinventing the post-Covid economy has so far been just that: talk.

Last week’s Halifax house price data showed that traditional markers of success remain paramount inside Downing Street. House prices gained 1.1% in March compared with February, taking them 6.5% higher than they were in March 2020 – well ahead of February’s average 0.4% inflation rate and median annual pay settlements of 1% in the three months ending 28 February, according to XpertHR.

The Treasury has pumped house prices higher with taxpayer-funded concessions on stamp duty that mean the £500,000 tax-free threshold will remain until 30 June and until 30 September at £250,000, before returning to its original level of £125,000.

The booming shares of the big housebuilders show what we have known for decades: that government subsidies for home purchases are channelled into property-industry profits via higher prices. It is the same old Tory practice of favouring an industry that makes donations to its election war chest, cloaked in PR messages about turning Generation Rent into Generation Buy.

Building on flood plains continues apace and housing density, not biodiversity, remains the highest priority of the housing minister, Robert Jenrick.

Meanwhile, the government has scrapped its most ambitious and costly measure to tackle climate change, the £1.5bn green homes grant, and halved the science research budget for universities, leaving a £2bn hole in research funding overall.

Councils are kept on a shoestring budget, and grants for “levelling up” are not only shovelled out by the Treasury as short-term fixes, preventing local groups from making plans beyond one year, but have become tainted as yet another way to favour Tory electoral ambitions.

Jagjit Chadha, the head of the National Institute for Economic and Social Research, is not the only one to despair at the lack of a coherent basis on which the government is devising economic policies and then judging their success, especially against climate goals. Policies masquerade as strategic when the only consistent thing about them is that they are tactical.

The Dasgupta review, commissioned by the May government, has called for a form of national accounting that includes the depletion of natural resources, because of the risk that all social and economic gains could be undermined by catastrophic increases in temperature. Its 600 pages could be the welcome, if belated, opportunity for the Johnson administration to rewrite the standard economic rules, handing ministers such as Jenrick a fresh basis for policymaking.

Cambridge University’s Bennett Institute for Public Policy has put forward a method for remodelling GDP to accommodate such things as the natural environment.

Maybe it is too early to judge whether the prime minister will emerge from the pandemic armed with anything more than a smile and some back-slapping bonhomie. Sadly, the omens are not good.

Hafta Ichi
Source: The Guardian
Keyword: Britain is ‘bouncing back’ into the same old economy | Economic growth (GDP)

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