London Daily

Focus on the big picture.
Friday, Mar 31, 2023

We won’t like any of the four painful ways out of our economic nightmare

We won’t like any of the four painful ways out of our economic nightmare

We’ve always known that politicians promise too much and deliver too little. But the gap between promises and delivery is a lot wider than it once was. It’s not so much that politicians have become more foolish over time (although, in some cases, that might well be true).

It’s that living standards are not rising like they once were. That means slower growth in tax revenues, bigger constraints on public spending and, all too frequently, a lurch back into painful austerity.

It’s another way of saying Jeremy Hunt’s hairshirt Autumn Statement has been many years in the making. Consider the pace at which per capita incomes have risen over time. Between the Sixties and the Nineties, the average gain per decade was around 24 per cent. Thereafter, however, economic progress has been thoroughly disappointing: an income gain of only eight per cent in the Noughties and a mere six per cent in the 10 years ending in 2021.

It’s easy enough to say that such disappointment results from a refusal to pull the macroeconomic levers hard enough in the right direction. Yet for much of the last two decades, interest rates in the UK and elsewhere have been at rock bottom and, for more than a decade, the Bank of England was in the business of printing money through so-called quantitative easing.

Equally, however, there have been periods of extraordinary fiscal generosity, thanks to Gordon Brown and, more recently, Rishi Sunak (the latter, in part, a response to the economic costs of the pandemic).

Overall, both taxes and public spending are set to take up bigger shares of the economy than at any other point since the Fifties, which is another way of saying the economy is simply not expanding at a fast enough rate.

From here, fiscal pressures will only get bigger. In the near term, the interest paid on government debt is set to rise further thanks partly to the Bank of England’s fight against inflation. The Government will likely struggle to contain public sector pay. Longer term, more resources will have to be devoted to health and social care: our population is ageing.



Investors knew all this when Kwasi Kwarteng came up with his ill-advised “experiment”. If fiscal pressures were only likely to get worse, why head down a tax cutting rabbit hole? The answer, apparently, was that lower taxes would boost economic growth. Kwarteng claimed his actions would raise annual growth from a little over one per cent to around 2.5 per cent.

This was wishful thinking. Economic growth can’t just be created via a tax-cutting magic wand. Any government serious about raising long-term growth needs to think about the fundamental building blocks that lead to higher productivity, starting with education and then the kinds of investments that allow people and jobs to be better connected: improved cross-country rail, bus and road connections, more social housing in otherwise expensive neighbourhoods, greater opportunities for retraining in a world of rapid technological advance.

Even so, there are limits. The growth rates of old may simply no longer be attainable: globalisation is heading into reverse; trade deals are proving tricky to negotiate; and inflation is a more awkward foe than many imagined.

An increase to the energy price cap in April could see the cost of heating the average home doubling since last April, a charity has warned


Ultimately, we need honesty regarding our future economic prospects. We might want high levels of social spending alongside low levels of taxation yet we cannot have both. Dealing with this wishful inconsistency is, however, politically tricky. Options include raising the retirement age a long way, increasing immigration to provide the workers to look after us in our old age, shoving taxes up even more to meet tomorrow’s bills, or allowing inflation to destroy our savings. Each of these will be opposed. At least one, however, is eventually likely to transpire.

Yes, we could get lucky. The energy transition may drive the marginal cost of renewable energy very far down, a potential “manna from heaven” moment for the British economy. In the meantime, however, we may have to accept that political promises are far less credible than they used to be. Politicians may be an optimistic bunch but they should be steeling themselves for the disappointments ahead.

Newsletter

Related Articles

London Daily
Close
0:00
0:00
Russia arrested an American reporter for the Wall Street Journal on espionage charges
You Are So Beautiful
Don’t Dismiss China’s Peacemaking Bid
Postmodern Jukebox European Tour Version
Austrian Parliament members walk out when Volodymyr Zelensky begins speaking.
An old French tune (by Georges Brassens) Pomplamoose ft. John Schroeder
Father obliterates council members following viral TikTok of biological male masturbating in women’s bathroom..
Sattahip Motor Show 20
Tsai Ing-wen received a "warm welcome" from the Chinese people in the US.
SONATE AU CLAIR DE LUNE - Moonlight sonata
EU's von der Leyen: "We know this is an era where we rely on one single supplier. China. 98% of our rare earth supply."
A kiss to build a dream on
China and Brazil have signed a new deal that will allow them to trade in their own currencies, bypassing the US dollar as an intermediary
Wonderful Tonight - Eric Clapton (Boyce Avenue acoustic cover)
Elon Musk and Others Call for Pause on A.I., Citing ‘Profound Risks to Society’
Mean Blues
Nashville style execution
La Chansonnette
“We've had evidence prior to the pandemic that masks were largely ineffective at preventing community transmission of influenza “
Pattaya Addicts
Former Starbucks CEO Howard Schultz:
Franz Liszt - Liebestraum - Love Dream
Former Starbucks CEO Howard Schultz rejects being labeled a "billionaire"
Dream a little dream of me
Jamie Dimon is being deposed over JPMorgan Chase role in Epstein lawsuits
Unchained Melody sung like you've NEVER heard!
This is how an electric car saves all the energy that he would have spent if he had lived 50 years longer.
Dave Brubeck - Take Five
Brand new security footage has just been released to the public showing the Active shooter Audrey Elizabeth Hale drove to Covenant Church School in her Honda Fit this morning, parked, and shot her way into the building
Édith Piaf - Non, Je Ne Regrette Rien (Sofie)
Social Media censoring users for saying the true
Rondo Alla Turca
Smart Iranian fashion designer teaching dummy TV anchors lesson about reality
Kiss of fire
AMERICA, 2023
Tom Jones - I´ll Never Fall In Love Again 1967, 1989, 2001
U.S. charges FTX's Bankman-Fried with paying $40 million bribe
Israel Cachao López - Guajira Clásica
Fallen 'Crypto King' Who Owes Millions to Investors Was Kidnapped and Tortured
Edward Maya - Stereo Love (feat. Vika Jigulina) (Extended Mix)
Regulators blame social media for SVB's rapid collapse: 'Complete game changer'
Strauss - Radetzky March - Karajan
AOC explains why she opposes banning TikTok
La vie en rose
UK: Humza Yousaf replaces Nicola Sturgeon as SNP leader and first minister in Scotland
The Temptations - My Girl (Smokey Robinson Tribute) 2006 Kennedy Cent
In a dramatic U-turn against His Government: Judicial Reform Legislation Must Be Halted, Says Israeli Defense Minister Yoav Gallant
Orlando Cachaito Lopez Redencion
Gordon Moore, a co-founder of Intel Corporation, died at 94
Edith Piaf - NON, JE NE REGRETTE RIEN
Powell: Silicon Valley Bank was an 'outlier'
RADETZKY MARCH-2008-Wien, New Year Concert
Bordeaux town hall set on fire in France pro democracy protest
Only you (And you alone)
Police violence in Paris
Strangers In The Night
Paris: Some of the police are stepping down and showing solidarity with the protesters.
Charles Aznavour - La Boheme
Donald Trump arrested – Twitter goes wild with doctored pictures
Summer time
NYPD is setting up barricades outside Manhattan Criminal Court ahead of Trump arrest.
Sting and Stevie Wonder - Fragile (from Sting's 60th birthday concert)
Credit Suisse's Scandalous History Resulted in an Obvious Collapse - It's time for regulators who fail to do their job to be held accountable and serve as an example by being behind bars.
Aux Champs Elysees
Home Secretary Suella Braverman tours potential migrant housing in Rwanda as asylum deal remains mired in legal challenges
Stand By Me - Ben E. King (Boyce Avenue acoustic cover)
Goldman Sachs cuts outlook for European bank debt over Credit Suisse crisis
La Mer (Beyond the Sea) – Avalon Jazz Band
Paris Rioting vs Macron anti democratic law
She
'Sexual Fantasy' Assignment At US School Outrages Parents
Nathalie Song by Enzo Petrachi Stjepan Hauser Cello
Orbán Viktor: the restructuring of the power relations in the whole of Europe is taking place
Shape of My Heart - Sting (Boyce Avenue acoustic cover)
Credit Suisse to borrow $54 billion from Swiss central bank
Radiohead - Creep
The BBC problem about China
Quizás,Quizás,Quizás - Andrea Bocelli - Jennifer Lopez
Strikes-Hit UK Pledges 94 Billion Euros In Cost-Of-Living Budget
Perhaps, Perhaps, Perhaps - Multi-Couples
Russian Hackers Preparing New Cyber Assault Against Ukraine
Pentatonix Havana
"Will Fly Wherever International Law Allows": US Warns Russia After Drone Incident
Paula Cole - Autumn Leaves
UK face biggest fall in spending power for 70 years
Oscar Benton Bensonhurst Blues
Jeremy Hunt insists his Budget will get young parents and over-50s back into work
OH NANANA vs ABUSADAMENTE
If this was in Tehran, Moscow or Hong Kong
Nina Simone - ”I Put A Spell On You”. Vezi aici cum cântă Jeremy Ragsd
Announcing GPT-4
NIGHTWISH - The Phantom Of The Opera
TRUMP: "Standing before you today, I am the only candidate who can make this promise: I will prevent World War III."
Motorshow 2016 Tanjay Negros Oriental
Drew Barrymore
Monica Bellucci - Ti Amo
China is calling out the US, UK, and Australia on their submarine pact, claiming they are going further down a dangerous road
Michael Jackson - Billie Jean Milena The Voice France 2018
A brief banking situation report
Michael Buble (Help Me Make It Through The Night) feat Loren Allred
Memories Canon In D - Maroon 5 (Boyce Avenue piano acoustic cover)
Matteo Simoni - Marina
Maroon 5 - One More Night
Maroon 5 - Memories
Mark Knopfler - Brothers In Arms (Berlin 2007 Live)
Mark Knopfler & Emmylou Harris - Romeo And Juliet (Real Live Roadrunni
Marina, Marina - The LUCKY DUCKIES intimist live concert at Guimarães
Major Lazer & DJ Snake – Lean On Mauranne The Voice France 2016
Love Theme from Romeo and Juliet - Joslin - Henri Mancini, Nino Rota
LoLa & Hauser - Love Story
Linkin Park Jay-Z - Numb Encore (Live 8 2005)
Hallelujah Mennel Ibtissem, The Voice France Leonard Cohen
Leonard Cohen - Dance Me to the End of Love
Leonard Cohen & Natasha Rostova - Dance me to the end of love
La casa de papel - Bella Ciao
La Camisa Negra
L'italiano (Toto Cutugno) - The Gypsy Queens
Juanes - La Camisa Negra
Jonathan and Charlotte - Britain's Got Talent 2012 Live Semi Final - U
John Powell - Assassin's Tango
Joe Cocker - You Can Leave Your Hat On (LIVE in Dortmund)
Joe Cocker - Unchain My Heart 2002 Live
Joe Cocker - A Whiter Shade Of Pale
Jay Z & Alicia Keys - Empire State of Mind LIVE
Jason Mraz - Im Yours (live)
Jarrod Radnich - Bohemian Rhapsody - Virtuosic Piano Solo
James Blunt - You're Beautiful
James Blunt - You're Beautiful & Bonfire Heart (Live at The Nobel Peac)
If You Go Away - Helen Merrill & Stan Getz (Tribute to Virna Lisi)
I'LL BE MISSING YOU
I Say a Little Prayer
Hotel California ( Eagles ) 1994 Live
Historia de un amor - Luz Casal. Vezi interpretarea Biancăi Sumanariu
Here Comes The Sun - The Beatles (Boyce Avenue acoustic cover) on Spot
Heart - Stairway to Heaven Led Zeppelin - Kennedy Center Honors
HAVANA by Camila Cabello Zumba Pre Cooldown TML Crew Kramer Pastra
HAUSER and Señorita - I Will Always Love You
HAUSER - Waka Waka
HAUSER - Sway
HAUSER - Lambada
HAUSER - Historia de un Amor
HAUSER - Despacito
Great Pretender
Georgia May Foote & Giovanni Pernice Samba to 'Volare' - Strictly Come
Gary Moore - Still Got The Blues
GIPSY KINGS VOLARE Penelope Cruz
Fugees - Killing Me Softly With His Song
French Latino - Historia de un Amor
For A Few Dollars More The Danish National Symphony Orchestra (Live)
Flashdance • What a Feeling • Irene Cara
Filip Rudan - “Someone You Loved” Audicija 4 The Voice Hrvatska Sez
Eric Clapton - Wonderful Tonight
Enya - Only Time
Enrique Iglesias - Bailando (English Version) ft. Sean Paul
Enrique Iglesias - Bailamos
Elena Yerevan Historia de un amor
Ed Sheeran - Shape of You (Official Music Video)
Ed Sheeran - Perfect Symphony [with Andrea Bocelli]
Ed Sheeran - Perfect (Official Music Video)
Easy On Me - Adele (Boyce Avenue 90’s style piano acoustic cover) on S
ERA - Ameno
ELENA YEREVAN- Cancion Del Mariachi-IN STUDIO-2017 DPR
Dust In The Wind - Kansas (Boyce Avenue acoustic cover)
Don't Let Me Be Misunderstood
Despacito x Shape Of You - Pentatonix
Deep Purple - Child In Time - Live (1970)
David Foster When A Man Loves A WomanIt's A Mans World (SealMichael Bo
Dance me to the end of Love ( Pi-Air Design )
Coolio - Gangsta's Paradise (feat. L.V.) [Official Music Video]
Conquest Of Paradise (Vangelis), played on Böhm Emporio organ
Cielito Lindo
Chico & The Gypsies - Bamboleo
Canción Del Mariachi - Antonio Banderas, Los Lobos • Desperado
Camila Cabello - Havana (Audio) ft. Young Thug
Camila Cabello - Havana ( cover by J.Fla )
California Dreamin' - The Mamas & The Papas José Feliciano (Boyce Ave
Buster Benton - Money Is The Name of The Game
Hallelujah Pentatonix
Bobby McFerrin - Don't Worry Be Happy (Official Music Video)
Bob Dylan - Knockin' On Heaven's Door Emilia The Voice Kids France
Besame Mucho - Cesaria Evora
Ben E. King - Stand by Me Sax Cover Alexandra Ilieva Thomann
Bella Ciao
Bella Ciao - INSTRUMENTAL
Beautiful in White x Canon in D (Piano Cover by Riyandi Kusuma)
Bad Romance - Vintage 1920's Gatsby Style Lady Gaga Cover ft. Ariana Savalas & Sarah Reich(1)
BELLA CIAO 2020 - KARAOKE ITALIANO
BAMBOLEO - Gipsy Kings • Antonio Banderas, Katya Virshilas
BAILANDO (original)
Awesome Ukrainian yodeler - SOFIA SHKIDCHENKO (with English subtitles)
Avicii - The Nights
Atom - The Great Gig in the Sky
Aretha Franklin - (You Make Me Feel Like) A Natural Woman (Official Ly
Antonio Banderas - Cancion del Mariachi (Desperado)
André Rieu - Zorba's Dance (Sirtaki)
André Rieu - Can't Help Falling In Love
André Rieu & Mirusia - Ave Maria
Andrew Reyes Elton John - Don't Let The Sun Go Down The Voice 2020 (
Andreas Kümmert Whiter Shade Of Pale The Voice of Germany 2013 Showd
And I Love You So
All About That Bass - Postmodern Jukebox European Tour Version
Alan Walker - Faded (Piano Cover)
Ain't No Sunshine -- Bill Withers (cover by Canen 12 y.o.)
African music
Adriana Vidović - “Creep” Audicija 4 The Voice Hrvatska Sezona 3
Adriana Vidović - “Believer” Nokaut 3 The Voice Hrvatska Sezona 3
A Fistful of Dollars - The Danish National Symphony Orchestra and Tuva
4 Beautiful Soundtracks Relaxing Piano [10min]
2CELLOS - Whole Lotta Love vs. Beethoven 5th Symphony [OFFICIAL VIDEO]
2CELLOS - Smooth Criminal (Live at Suntory Hall, Tokyo)
2CELLOS - Smells Like Teen Spirit [Live at Sydney Opera House]
2CELLOS - Despacito [OFFICIAL VIDEO]
13 Year Old Girl Playing Il Silenzio (The Silence) - André Rieu
094.All About That Bass
00 - SADNESS PART 1
(Ghost) Riders In the Sky (American Outlaws Live at Nassau Coliseum, 1
(Everything I Do) I Do It For You - Bryan Adams (Boyce Avenue ft. Conn
What a wonderful world
Moon river
×