How do you think the UK economy will perform over the next 5 years ?

[Nimrod103]

I feel the same way, and I presume this is because GDP per capita is pre-tax, while during the periods in question tax rates have risen sharply, particularly for the productive segment of the workforce.

I actually do feel better off than 5/10 years ago. But a big part of that might be that investment income is not as punitively taxed as employment income. Insofar as that may change with Labour, then perhaps the only societal group who are making gains (broadly, TLF-type people) might also feel the pinch.

So yes, taxes are an issue. And the huge cost of welfare and "free stuff" could make the rich poorer whilst not ultimately doing much for the poor.

I haven’t time to do the research but I’m pretty sure tax rates for higher earners went up more during Labour administrations. But in recent budgets, taxation of investment and rental incomes has been increased considerably and will go up substantially over the next couple of years, and this under what purports to be a Tory government. Abolishing IR35 also has a widespread effect. These things are likely to get worse under a future Labour administration perhaps combined with increases in IHT and a capital transfer tax or CGT on residences. The need for tax income by the state is insatiable, and combined with inevitable rises in the price of green energy, everyone will be feeling a lot poorer in 5 years. And I think the burden will be most heavily laid upon those with skills and/or assets, because the poor have to be protected.

[77ss]

Assuming that we get a Labour Government, none of them have ever left the economy in a better state than when they took office. I think that the level outcome is the best we can hope for.

TJH

GDP per capita (real 2019 £s)

1997 £25,230
2010 £29,893 +18.5%
2022 £32,904 +10.0%


https://www.statista.com/statistics/970672/gdp-per-capita-in-the-uk/

A nice change to see some hard data - rather than just opinion. Thanks!

[Lootman]

GDP per capita (real 2019 £s)

1997 £25,230
2010 £29,893 +18.5%
2022 £32,904 +10.0%

A nice change to see some hard data - rather than just opinion. Thanks!

But data without interpretation isn't much help.

As Scrumpyjack noted, there is bound to be a lag between a different party coming to power and the effects of the previous government fading away. How long is that lag? Could it be long enough to make reading that graph pointless? Could it be more than a 5-year term?

For example Gordon Brown left office with the the government finances in such a mess that one could argue that the UK still has not been able to recover from that. Likewise Thatcher could not immediately reverse the decline that happened under Callaghan. Covid seriously damaged the economy but it is hard to see how that would have been different had Labour been in power. And so on.

Intuitively you would expect the economy to do better under a pro-business and pro-growth Tory party than a Labour government which is instead agonising endlessly about how to divide things up more "fairly". Does someone want to show me how that graph proves otherwise, allowing for the lag factor described above? Show your working and assumptions.

[servodude]

The GDP per capita are fairly meaningless as they are not in real terms ...

GDP per capita (real 2019 £s)

I was just about to point that out too
As a measure it's not perfect but it is about as well adjusted for comparison terms as I've seen

[Lootman]

As a measure (GDP per capita) it's not perfect but it is about as well adjusted for comparison terms as I've seen

For a start I would have thought that GNP per capita is a better measure since that also captures the vast amount of overseas earnings that accrue to the UK, that GDP omits to count.

In my case something like 90% of my investment income comes from overseas. Fluctuations in UK GDP have no effect on that, and therefore on how well off or not I feel.

[Urbandreamer]

The need for tax income by the state is insatiable, and combined with inevitable rises in the price of green energy, everyone will be feeling a lot poorer in 5 years. And I think the burden will be most heavily laid upon those with skills and/or assets, because the poor have to be protected.

Can I reassure you on the price for green energy. As per another thread, the government has fixed the price so low that companies don't want to build the turbines to generate such green energy.
As a result you will either be paying high prices to burn Norwegian gas, or doing without.
So you see, you won't be paying more for green energy.

I happen to agree that, were the government to allow market forces, the price rise would be inevitable. However they believe that they can fix that problem by controlling prices.

[Adamski]

I chose flatline. The uk has deindustrialised to the extent that there's little industry left. So you've got an increasing public sector and population reliant on a tax base which is struggling to grow/ unable to grow in real terms.

Look at our top companies, lot of them in legacy industries like oil and gas, and tobacco. Lot of others in finance, banks, and support services. Much of these (BP, Shell, the banks) are hated by the left. But its these private sector giants which are needed to grow the economy.

If you could simply grow the economy by "ending austerity" you'd have no poor countries, as you could simply spend and borrow your way out of poverty. You need a dynamic and thriving private sector to grow the tax base. And can't see it happening as we don't have Germany's industry or America 's tech sector, or the natural resources to do it. Therefore I'd expect a continuation of the managed decline.

[Lootman]

I chose flatline. The uk has deindustrialised to the extent that there's little industry left. So you've got an increasing public sector and population reliant on a tax base which is struggling to grow/ unable to grow in real terms.

Look at our top companies, lot of them in legacy industries like oil and gas, and tobacco. Lot of others in finance, banks, and support services. Much of these (BP, Shell, the banks) are hated by the left. But its these private sector giants which are needed to grow the economy.

If you could simply grow the economy by "ending austerity" you'd have no poor countries, as you could simply spend and borrow your way out of poverty. You need a dynamic and thriving private sector to grow the tax base. And can't see it happening as we don't have Germany's industry or America 's tech sector, or the natural resources to do it. Therefore I'd expect a continuation of the managed decline.

Although someone upthread claimed that Brexit is a factor in UK under-performance, that is hard to prove and in any event I can easily come up with ten factors that are more significant:

1) UK business sectors are overwhelmingly old-school and sclerotic
2) Over-regulation of businesses and employment
3) Taxes at a 70 year high
4) Crippling cost of welfare and the NHS
5) Bottomless pit of liabilities for gold-plated public-sector DB pensions
6) Unions wanting immunity from inflation for workers' pay
7) Everyone and his wife have their hand out for grants, benefits and subsidies
8) Generous welfare payouts for doing nothing make not working a viable lifestyle option
9) Bloated local authorities doing far more than they need to and badly mismanaging their finances
10) General lack of drive and ambition, plus a cynical distrust of anyone who is successful

[mc2fool]

A nice change to see some hard data - rather than just opinion. Thanks!

But data without interpretation isn't much help.

Data and interpretation: https://theconversation.com/labour-are-much-better-at-running-the-economy-than-voters-think-new-research-162368

Over the past century of governments, the Conservatives achieved slightly higher mean growth per quarter (0.62% vs 0.56%), Labour achieved a slightly higher median (0.62% versus 0.58%). In other words, when you add together all the quarterly growth numbers of both parties and divide them by the number of quarters in question, the Conservatives come out on top. But when you take the middle number of each parties’ quarterly growth figures, Labour comes out on top. Incidentally, this analysis does not include the impact of COVID on the economy – including that makes Labour’s performance look better.

These differences are not statistically significant, but the discrepancy between mean and median hints at the presence of outliers of particularly strong or weak quarters in the data that are skewing the mean averages. In fact, Labour have achieved a higher concentration of quarters of positive growth than the Conservatives.
:
So far, our findings have shown that there is no statistically significant difference in the GDP achievements of the two main parties (COVID aside), and that Labour is the more consistent performer. But those who follow politics will be well used to politicians saying, “We inherited a bad situation from the previous government”. What if the performance of a newly elected government is affected by the ongoing policies of the previous administration?

To assess whether the economic performance of either party improves as a newly elected government is given time to implement its policies, we incorporated time-lags into our analysis.
:
What this shows is that the already statistically insignificant gap in real GDP growth between the Conservatives and Labour tends to close even further if you reallocate up to six quarters of growth figures. If you allow seven or eight quarters, however, the gap seems to widen in favour of the Conservatives. But when we ran some econometric modelling to see whether this was statistically significant, we concluded that it was not: there was no clear winner between the two parties.
:
To add an additional layer of sophistication, we then resorted to a technique that implicitly acknowledges that new government’s affect on the economy from their first day in office, often through sentiment rather than new legislation. ... But since new policies may well take months or years to yield results, there is a limit to how much sentiment can affect economic performance. ... Using this analysis, the annualised growth rates for the two parties stayed almost the same as before, and was still statistically insignificant.

In short, the economy grows at a very similar pace under Labour and the Conservatives, but Labour governments seem to do better at tackling recessions and achieve a more consistent performance. And if we discount the global financial crisis of 2007-09, Labour’s (slight) superiority becomes more pronounced.

[Lootman]

But data without interpretation isn't much help.

the already statistically insignificant gap in real GDP growth between the Conservatives and Labour tends to close even further if you reallocate up to six quarters of growth figures. If you allow seven or eight quarters, however, the gap seems to widen in favour of the Conservatives. But when we ran some econometric modelling to see whether this was statistically significant, we concluded that it was not: there was no clear winner between the two parties.

To add an additional layer of sophistication, we then resorted to a technique that implicitly acknowledges that new government’s affect on the economy from their first day in office, often through sentiment rather than new legislation. ... But since new policies may well take months or years to yield results, there is a limit to how much sentiment can affect economic performance. ... Using this analysis, the annualised growth rates for the two parties stayed almost the same as before, and was still statistically insignificant.

Hmm, well that was a lot of words to then use the phrase "statistically insignificant" twice!

My own take would be that 4 to 6 quarters is far too short a time to turn around the great bulking supertanker that is UK Inc.

So using your election years, Blair inherited a good economy in 1997 and therefore could hit the ground running. Cameron inherited a global financial crisis in 2010 and that is a significantly higher hurdle to overcome. Perhaps we might have overcome it by now, but for Covid. We will never know.

Data, like statistics, can be used to prove near anything you wish. I would love to hear actual reasons why Labour is allegedly better on the economy. Why would that be?

[vand]

Although inflation has been slower to retreat than other economies, the UK is doing pretty well all things considered, and better than many remainers want to admit.

- We have avoided recession (for now)
- The covid bounceback was stronger than originally estimated
- We are growing faster than Germany

I can't be bothered to ref the sources, but if you follow financial news you won't debate any of these

Considering what we've been through over the last few years, I'd say that we're doing pretty well. The next 5 years will have its setbacks, but my base thesis is that things get better slowly over time. The numbers show it. And FWIW I don't think whoever wins the next election will markedly change that.

[mc2fool]

the already statistically insignificant gap in real GDP growth between the Conservatives and Labour tends to close even further if you reallocate up to six quarters of growth figures. If you allow seven or eight quarters, however, the gap seems to widen in favour of the Conservatives. But when we ran some econometric modelling to see whether this was statistically significant, we concluded that it was not: there was no clear winner between the two parties.

To add an additional layer of sophistication, we then resorted to a technique that implicitly acknowledges that new government’s affect on the economy from their first day in office, often through sentiment rather than new legislation. ... But since new policies may well take months or years to yield results, there is a limit to how much sentiment can affect economic performance. ... Using this analysis, the annualised growth rates for the two parties stayed almost the same as before, and was still statistically insignificant.

Hmm, well that was a lot of words to then use the phrase "statistically insignificant" twice!

Actually they use "statistically insignificant" or "not statistically significant" more times than that in the article, emphasising that no matter what considerations they look at, there's no statistically significant difference between the two!

My own take would be that 4 to 6 quarters is far too short a time to turn around the great bulking supertanker that is UK Inc.

Maybe you didn't read the last couple of paragraphs (despite quoting them).

Data, like statistics, can be used to prove near anything you wish. I would love to hear actual reasons why Labour is allegedly better on the economy.

That study doesn't say that Labour is better on the economy. It says there's no statistically significant difference between the two!

Maybe you'd prefer this article: https://www.channel4.com/news/factcheck/factcheck-qa-which-party-has-a-better-track-record-on-the-economy

[RockRabbit]

[
1) UK business sectors are overwhelmingly old-school and sclerotic
2) Over-regulation of businesses and employment
3) Taxes at a 70 year high
4) Crippling cost of welfare and the NHS
5) Bottomless pit of liabilities for gold-plated public-sector DB pensions
6) Unions wanting immunity from inflation for workers' pay
7) Everyone and his wife have their hand out for grants, benefits and subsidies
8) Generous welfare payouts for doing nothing make not working a viable lifestyle option
9) Bloated local authorities doing far more than they need to and badly mismanaging their finances
10) General lack of drive and ambition, plus a cynical distrust of anyone who is successful

Yes, and the last 13 years of Conservative Government haven't led to much improvement in the above, if any. For example, Brexit induced bureaucracy for exporters (and to an increasing extent importers) has gone up (a lot). And it was the government who enabled soft loans (dare I say encouraged) to local authorities to create 'alternative income sources'. The disasters of Woking and Thurrock (and probably more to come) are testament to that decision.

[Lootman]

Maybe you'd prefer this article: https://www.channel4.com/news/factcheck/factcheck-qa-which-party-has-a-better-track-record-on-the-economy

Not really because, again, there is too much focus on statistics and not enough on understanding and explanation. The voters routinely believe that the Tories are better on the economy. That indicates to me that there is more to the issue than mere "data", which of course can always be cherry-picked or manipulated to produce the outcome that the authors prefer.

Then again I routinely distrust academics anyway (despite having two degrees) and so maybe I am just a right-brained guy living in a left-brained world. I routinely get told off for asking "But why?" when presented with alleged "data".

[ursaminortaur]

A nice change to see some hard data - rather than just opinion. Thanks!

But data without interpretation isn't much help.

As Scrumpyjack noted, there is bound to be a lag between a different party coming to power and the effects of the previous government fading away. How long is that lag? Could it be long enough to make reading that graph pointless? Could it be more than a 5-year term?

For example Gordon Brown left office with the the government finances in such a mess that one could argue that the UK still has not been able to recover from that. Likewise Thatcher could not immediately reverse the decline that happened under Callaghan. Covid seriously damaged the economy but it is hard to see how that would have been different had Labour been in power. And so on.

Intuitively you would expect the economy to do better under a pro-business and pro-growth Tory party than a Labour government which is instead agonising endlessly about how to divide things up more "fairly". Does someone want to show me how that graph proves otherwise, allowing for the lag factor described above? Show your working and assumptions.

But the current Tory government is not pro business - "f**k business"

[Lootman]

But data without interpretation isn't much help.

As Scrumpyjack noted, there is bound to be a lag between a different party coming to power and the effects of the previous government fading away. How long is that lag? Could it be long enough to make reading that graph pointless? Could it be more than a 5-year term?

For example Gordon Brown left office with the the government finances in such a mess that one could argue that the UK still has not been able to recover from that. Likewise Thatcher could not immediately reverse the decline that happened under Callaghan. Covid seriously damaged the economy but it is hard to see how that would have been different had Labour been in power. And so on.

Intuitively you would expect the economy to do better under a pro-business and pro-growth Tory party than a Labour government which is instead agonising endlessly about how to divide things up more "fairly". Does someone want to show me how that graph proves otherwise, allowing for the lag factor described above? Show your working and assumptions.

But the current Tory government is not pro business - "f**k business"

But it is still more pro-business than the only alternative that we were offered in 2019. And the discussion here is the relative difference between the two parties, if any.

Now, Starmer and Reeves are sounding remarkably pro-business. Good for them, there is hope. But will the anti-business Labour left just sit around and accept that? Or will they kick off?

[scrumpyjack]

But data without interpretation isn't much help.

As Scrumpyjack noted, there is bound to be a lag between a different party coming to power and the effects of the previous government fading away. How long is that lag? Could it be long enough to make reading that graph pointless? Could it be more than a 5-year term?

For example Gordon Brown left office with the the government finances in such a mess that one could argue that the UK still has not been able to recover from that. Likewise Thatcher could not immediately reverse the decline that happened under Callaghan. Covid seriously damaged the economy but it is hard to see how that would have been different had Labour been in power. And so on.

Intuitively you would expect the economy to do better under a pro-business and pro-growth Tory party than a Labour government which is instead agonising endlessly about how to divide things up more "fairly". Does someone want to show me how that graph proves otherwise, allowing for the lag factor described above? Show your working and assumptions.

But the current Tory government is not pro business - "f**k business"

Sadly they aren't Conservatives!

[ursaminortaur]

But the current Tory government is not pro business - "f**k business"

But it is still more pro-business than the only alternative that we were offered in 2019. And the discussion here is the relative difference between the two parties, if any.

No, as the title says the subject is how the UK economy will perform in the next five years

[77ss]

A nice change to see some hard data - rather than just opinion. Thanks!

But data without interpretation isn't much help.......

Matters are rarely simple and some degree of circumspection is always needed when trying to draw conclusions from data - no matter how good the data.

However, I believe that data is a much better starting point than mere opinion - and much more helpful.

[ursaminortaur]

But the current Tory government is not pro business - "f**k business"

Sadly they aren't Conservatives!

True.