By John Charles Dyer, UK Correspondent
20 March 2013 Chancellor George Osborne announced his 2013 Budget to Parliament. He also announced the economic forecasts that affected it. As aptly characterized by the Leader of the Opposition, Ed Miliband, estimates of economic growth and government revenues are down, borrowing is up and there is precious little in the budget to address the ailing economy. On the contrary, the Chancellor argued that the failure of the plan proves its necessity. He even argued it is beginning to work.
Subsequently the independent Office for Budget Responsibility held a press conference to elaborate on the detail of those forecasts. The forecasts are dismal, but one should remember, the forecasts have proven in the past to be over optimistic. Their announcement proved a cannon shot in an echo chamber.
Others in the days ahead will examine these forecasts and the budget in detail. I expect it will be some time before analysts have dissected the fine print. I want to focus on one set of figures that I believe may not only undercut the Chancellor’s few more optimistic assertions but raise a fundamental question about the UK economy.
Is the UK economy experiencing a transient Recession or is it in indefinite decline?
Shortly after the Chancellor’s presentation the Office of National Statistics replied to my latest Freedom of Information Request.
One set of figures leapt out. Comparing the last quarter of 2008 to the last quarter of 2012, ONS estimates employment among people aged 16 or older increased only 402,000 from 29,328,000 to 29,730,000.
This figure certainly seems to be out of synch with the Chancellor’s claim that the private sector alone had created 1,25 million new jobs since the election. I have in at least 4 previous articles addressed how misleading were the government’s often repeated prior claims that the private sector had created 1 million new jobs since the election. I won’t repeat all that here. Suffice it to say that ONS could not and would not confirm 1 million “new” private sector “jobs.” Moreover, even a brief review of the detail readily available through ONS shows wishful thinking the hopes of those who suggest - as the Chancellor repeated today- increased “in employment” stats are signs the economy is healing and the government on the right track.
Of more fundamental importance is an associated statistic. The percentage of people over aged 16 in employment fell between the last quarter of 2008 and the last quarter of 2012, from 59.6 percent of the population to 58.7 percent. The economy provides employment to a smaller percentage of the working age population.
No doubt the Chancellor will find someone to blame. Anybody but him. No doubt the Shadow Chancellor will blame the Chancellor. All sides spend a lot of time on blame. No doubt it is somebody’s fault. I will leave that exercise to the politicians and, ultimately, historians.
There are two important points I want to make.
The fall in employment as a percentage of the population demonstrates the employment data offers no solace or encouragement. But it does raise the question whether the UK economy is losing ground long term in its ability to provide for the UK’s growing population.
This latter is a very serious and significant issue. Commentators and Parliament give inadequate attention to this issue. The UK is one of only 3 countries in Europe that does not regularly receive reports concerning this critical ratio. The other two are Latvia and Greece.
If after 4 years concerted effort the economy’s capacity to provide for its growing population is diminishing a responsible government simply must recognize it is either doing something fundamentally wrong in its management of the economy or the economy is failing the population it is supposed to support due to factors outside the government’s control.
Which is it?
In my view we don’t have the data to properly analyze this question.
ONS was unable to provide me a comparison of GDP adjusted to a constant pound and discounted for inflation to provide a constant basis of comparison. I had wanted it for each decade in the last 30.
In simplest terms, GDP is an aggregate of sales of services and products. We all know of quality products that have been around for some time the price for which has risen substantially over the years. An aggregate of such items will be greater today than it was years ago. We also know the value of the pound has changed over time.
I argue that comparing raw GDP figures for 2012 to raw figures for 2002 for example gives a distorted picture of the economy’s performance. I had hoped to adjust out that change so as to compare the productivity of one decade to the next. But alas, that wasn’t to be.
Whether or not anyone else buys my argument, it should be clear that commentators, Parliament and the government should go deeper in examining the economic data, both the data already available and data not yet readily available. The questions one asks determines the answers one receives. Too long commentators and the government may well have been forging ahead with the right answers to the wrong questions. The drop in the percentage of employed in relation to the population raises fundamental questions about both the statistics cited by the government and commentators but also the actual condition of the economy and its realistic prospects for recovery.