The UK's growth figure for the second quarter of 2018 has just been reported to be 0.4%. Compared to the 0.2% reported in the first quarter this sounds like an improvement. And in purely statistical terms it is, of course. That is the only indisputable thing about it.
Standing back this data remains deeply unexciting. And if it is understood that the first quarter may simply have been depressed by poor weather, which meant consumers deferred some spending simply because they could not, or would not, get out, then the bounce (if it can be called that) might well be little more than a correction.
And let's also be candid: when the figures are so small, and the boundaries for reporting are so wide in proportion to them, the margins for error in this reporting are very high. No wonder the pound is still falling: they're treating the change as no sign of a significant difference in the overall economic environment.
So my point is that we should go back to fundamentals. This growth rate is still very low. There is, despite what the Bank of England is forecasting, little sign that it is flowing through to wage rates. There are signs that it is private debt that continues to fund consumption growth. And there is massive uncertainty for the UK ahead, which is one reason why we remain so weak in comparison to other economies.
There is nothing of any substance to celebrate here. But there is ample reason to think there may be more trouble ahead.
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Out here in the public sector I’m not surprised.
Things are grinding along imperceptibly. There are choke points everywhere. And you have to remember that public sector activity involves working with the private sector.
Those people who might applaud public sector cuts in particular would be advised to remember that fact.
What cuts? Public sector spending continues to increase.
I suggest you stop being very silly
That’s the kindest way I can put that
Steve Mills says, “What cuts? Public sector spending continues to increase.”
Going by the tenor of your question and statement above, you are either being innocently naive and genuinely puzzled by your own question/statement. In which case, fair enough.
Or you are being a disingenuous wind up merchant at best; a dishonest and provocative troll at worst.
Assuming the last of the three of my assumptions, I say dishonest because you are current affairs savvy enough to know of this blog and to comment on it. Therefore you MUST know that the tories have been cutting funds to front line public services left, right and centre. They have even been publicizing/ boasting about their cuts for several years as part of their ‘belt-tightening, live within our means, we’re all in this together’ Schick.
However, assuming the former – innocent naivety – then you have confused increased total public spending with that extra spending actually being spent on properly funded effective front line services which is clearly not the case.
The DWP is just one of many examples. Despite sweeping benefit freezes and cuts over the past 10 years (especially to disability benefits), the DWP have ended up spending more money than they’ve saved. That extra money, and then some, has been spent on the likes of Atos ( since re-named due to much deserved bad publicity) A4E (also since re-named for the same reason as Atos), Maximus (who took over ESA assessments from Atos at twice the cost without this contract being put out to tender), Crapita and a whole host of so-called expensive, ineffective private ‘job providers’. And for what? To create a great deal of unnecessary and vindictive hardship and suffering to a great many people at considerable extra cost to the public purse.
The above, by the way, does not take into account the extra costs incurred by the DWP in defending itself (and losing) in court, the extra cost of tribunals (68% successful in the claimants favour) and the extra strain and costs imposed on the NHS/Social Services.
If anything, your question/statement, ‘What cuts? Public sector spending continues to increase’ is proof positive of fiscal and budgeting incompetence on the part of the tories. Something they are forever accusing Labour of. Talk about the pot calling the kettle black, eh!
Here’s an interesting read for you, courtesy of Richard Murphy from 2015.
http://www.taxresearch.org.uk/Blog/2015/01/12/cameron-debt-and-misinformation/
And another one, from 2016.
http://www.taxresearch.org.uk/Blog/2016/03/13/the-conservatives-have-been-the-biggest-borrowers-over-the-last-70-years/
Steve
You are wrong. Period.
Well said, Sandra Harvey.
The DWP is a national disgrace. A travesty.
And people like ‘Steve’ Mills (if he actually exists, more likely a pseudonym for Dark Satanic….) are so far insulated from the reality of the world around them that they simply don’t notice and/or don’t bloody care.
Smug self-satisfied, ignorant and despicable. We have to share the planet with people like this ?
Indeed, Sandra; the DWP is rogue.
When I were a lad interest rates were real interest rates. And if you went ten pounds into the red the bank manager would explain in detail the implications and the horrors to come if you did not get into the black and sharpish.
Demetrius says:
“When I were a lad interest rates were real interest rates…..”
I’m not sure at what level this is a joke contribution. It’s a hoot on so many levels.
Anyway, don’t mind me I’ll just chortle here in my cardboard box and reminisce fondly about the days when cardboard was cardboard, not this flimsy stuff you get nowadays. 🙂
“There are signs that it is private debt that continues to fund consumption growth. “What could possibly go wrong?
Ah – yes – well here is an issue that perhaps ought to be tackled in the political debates of the future and probably won’t because “Modern politics misses all the big issues” as you suggested in your post a couple of days ago. You say today “The UK quarterly growth rate has risen to 0.4%, which is no reason to celebrate”, and of course in a sense this is perfectly true IF you make the assumption that economic growth in itself is a good thing. But is there not a case for arguing that Britain, Europe, all the developed economies at least, should not be organising themselves for perpetual growth, in other words, for ever increasing assaults on the global environment, for stripping the earth of depleting mineral resources, for pumping ever more carbon into the atmosphere, for attacking the soil of in an effort to produce ever larger crop yields to feed populations that themselves are either growing or demanding ever increasing quantities of goods and luxuries? Economic growth cannot continue forever; we have but one planet; there are surely limits to what we can wring from the earth. At some point in the future, we shall need to recognise that enough is enough, that to save the planet, we need to discipline our voracious consumption. Political leaders should be the ones who will be arguing that continued economic growth is neither desirable nor possible, and that if the earth is to to be a benevolent home for humanity, and if the human species is to continue to exist into future centuries, a growth rate of 0.4% is bad news, not because it is too low, but because it is too high. However, I have to admit that I have difficulty imagining any political parties in any country of the world openly advocating negative growth rates. That would be political suicide. And I cannot even see any politician winning power having travelled the country using as a campaign manifesto the issues of global warming, depleting resources, overpopulation, and overproduction of goods.
I accept growth can be harmful
But be careful. It can also measure what we do for each other and I see no harm in us doing more for each other
Now that is a great answer!
Richard; that is a great post. If only more people had your vision!
I agree with both – we can’t keep growing for ever and ever in the way we have been, mainly because it’s all predicated on burning fossil fuels, but we must also do more for each other and anthropogenic climate change is the litmus test.
(by the way I wish people would stop saying “save the planet”. The planet doesn’t give a toss about co2, the 6th extinction or anything else humans do – it will last another few billion years before being swallowed by a dying sun and will manage very nicely without us “saving” it and we will just be a dirty smudge in the geological record.)
@ Richard
“I see no harm in us doing more for each other.”
I tend to take a simple minded view although backed up by reams of published psychological research. The Tories relentless devotion to Austerity Cuts is because they received inadequate caregiving as children and in consequence they don’t really see much point in society organising to give it to others.
“It can also measure what we do for each other” – of course, you are correct to emphasise that growth can and should be beneficial to humanity. That should be the objective of economic development – the greater health and wellbeing of humnanity. But what I am saying is that growth ultimately has to stop – there must be limits beyond which any increase in economic activity is counter productive. Remberinbg my long ago studies in economics, I would suggest – there are surely diseconomies that ensue forom ever increasing inputs of labour and capital into the global economy, and diminishing marginal returns. In ecological terms, surely we have to recognise that it would be impossible to maintain a healthy planet – the home of humanity – if we continue to place ever greater burdens on the environment. The trick surely, is to move towards an economic/ecologic system of production of wealth that is sustainable and just. Rather than unending growth, we should be looking towards a system where the wealth won from the planet is more equally and justly shared through the population. But where are the political leaders who will present this alternative vision to the people? And where is the pressure from below, from the mass of the populace, demanding a reform of society that emphasises not growth, but a just and equitable distribution of wealth and wellbeing through the population?
“But be careful. It can also measure what we do for each other and I see no harm in us doing more for each other”
You do a great deal already, Richard. And thankyou for it.
Mike says:
“Economic growth cannot continue forever;”
Not the way we’re accustomed to doing it…true.
We are depleting natural resources and the environment in a way that is wanton and prodigal. But I don’t accept that growth is finite.
We do however need to look at ‘real economics’, the management of resources, in a very different way if we are not to waste the opportunities we have for creating a sustainable and lasting order.
To a great extent that will start from having a more appropriate relationship with, and understanding of, what money is and its relationship to ‘wealth’.
We confuse price and value as a way of life. That has to change. It’s not going to happen easily, if at all.
If the growth is in what we do for each other we need not burn the planet
It’s the current type of material consumption that does that
If you look deeper into the latest economic statistics, they reveal that UK manufacturing is now technically in recession having suffered two successive quarters of negative growth. This is despite the Pound having significantly devalued since Brexit which should make UK manufactured goods cheaper abroad and make imported goods more expensive in the UK, thus providing a competitive advantage for UK producers. Another worrying statistic is that the UK’s balance of trade, which was already dreadful, has gotten significantly worse. I wonder the extent to which Brexit is cutting the availability of workers for UK manufacturing and farms? Is this what has pushed UK manufacturing, much of which is food and drinks, into recession? If so, things could get substantially worse.
I agree with your conclusions
It is hard to know precisely what is happening
What can be said is, as you suggest, none of the consequences of Brexit are positive
“It is hard to know precisely what is happening”
But the general picture is screamingly obvious and has been for ten years.
We seem to have a political class which is looking forward to the autopsy instead of looking after the patient. 🙁
Accepted
https://leftfootforward.org/2018/08/too-many-bean-counters-how-an-accounting-curse-is-hurting-the-uk-economy/ “… boardroom dominance of accountants has accelerated short-termism and neglect of the long-term prosperity of companies and the economy. According to the Bank of England’s chief economist, in 1970, major UK companies paid out about £10 out of each £100 of profits in dividends, but by 2015 the amount was between £60 and £70. Compared to other developed countries, UK companies are paying out the highest proportion of their earnings in dividends, often accompanied by a squeeze on labour and investment.
On average, in 2017, EU countries put 20.1% of their GDP into long-term productive assets. The UK put a measly 16.9% into productive assets … the lack of investment and innovation means that despite the UK labour force working almost the longest hours in the western world, the country’s productivity is low.” suggests Prem Sikka. Our output is expensive compared to that of other nations as a consequence then, despite the dwindling value of the pound. It’s still not worth their buying from here.
That looks like my friend Prem Sikka in action
What caught my eye – but perhaps more relevant to some of the posts regarding the auditing profession – was – rather than Prem Sikka’s piece – johnm55’s comment on it:
“My job as an Engineer Surveyor is in some ways analogous to that of an auditor. We work for as third parties on behalf of the companies that pay us to carry out inspections, the same as auditors. If a boiler or a pressure vessel that I have inspected fails I will be expected to fully explain what I did on my inspection and if the HSE deem that what I did was inadequate I and the company I work for, can be prosecuted. The maximum sentence is, if I remember correctly, five years.
I have not seen or heard of an auditor being prosecuted for an inadequate audit. Perhaps if a few partners of the major accounting firms were to be hauled before the “bloke in the curly wig” we might get better audits.”
It would concentrate some minds
Re Bean-Counters & Prem Sika, I was just reading Danny Dorling’s latest book: “Where do we put our resources? We have only 50,000 family doctors, but 280,000 qualified accountants. What for? Nowhere else in Europe trains so many bean-counters. Too few young people are studying for medicine, nursing, teaching or social work. We regularly employ so few doctors and nurses that often, to achieve minimal levels of cover, others are employed less effectively and more expensively on a temporary basis. We need some accountants and some bankers, but in the UK, as Prem Sikka, Professor of Accounting at the University of Essex explains: ‘If anything, accounting firms have undermined national tax revenues and used their expertise to excel at money laundering, bribery, corruption and other antisocial practices.’ Why do so many clever young adults join the financial services sector — a sector that, not by productivity but by sleight of hand, can make such profits and pay so well?” Dorling, Danny. “Peak Inequality: Britain’s ticking time bomb”
Business, NHS, Education, Social Work – is there any aspect of our society which isn’t critically unbalanced?
I agree
And what is so bizarre – and I say this as a chartered accountant – almost none of them understand business, or accounting come to that. They are good at box ticking and balancing books, but that is far from the same thing
Cist cutting is as far as they get when it comes to a business plan….
One of the downsides of having a very low corporation tax rate is that the tax relief on investing in a business is significantly reduced.
Since paying tax in the UK is, to all intents and purposes, entirely optional for any individual or business that can afford the best tax advisors and lawyers, the tax relief on business investment for these tax dodgers is nil because tax is being dodged.
I think you overstate your case
Bill Kruse says:
“……UK companies are paying out the highest proportion of their earnings in dividends, often accompanied by a squeeze on labour and investment…..”
It’s called killing the goose that laid the golden egg.
Or something very close to it.
Maybe I slightly overstate my case Richard but not by much as has been proven by many businesses and individuals over an extended period of time. Some have been pressured into paying some UK tax when they could, were it not for the naming and shaming, have carried on exploiting loopholes that would have enabled them to continue aggressively avoiding taxes. I won’t name names as there are too many to list.
Off topic I know but worth drawing your attention to. There’s now a Modern Money newsletter you can subscribe to or simply bookmark called “Deficit Owls Worldwide”:-
https://us16.campaign-archive.com/?u=504a7a6d197a077b4bc0bf316&id=d5549eebe5
I particularly liked the reference to New Zealand having a new political party called TOP (The Opportunity Party) except I’d change the wording slightly to “True Opportunity Party” to reflect the need to critically think how you set about creating a society where there’s “genuine” opportunity to achieve well-being for all. Critical thinking is pretty much lacking in the majority of the UK’s political parties’ thinking as the recent focus in this blog on the Labour Party’s adherence to simple minded Neoliberal monetary system nostrums has revealed.
It looks like it’s very out of date….
No here’s the August 2018 newsletter:-
https://us16.campaign-archive.com/?u=504a7a6d197a077b4bc0bf316&id=5a60648eac
Thanks
Forgive me Richard, but I have lost a discussion with Mr John Adams through a closed thread, that I was keen to follow-up, but is now off-topic (but perhaps on a Sunday I can receive a special dispensation?).
Mr Adams,
You have the advantage of me; and no, I am indeed not familiar with “conversation theory”. I had, however picked up from your brief discourse that, as you say “Strictly speaking, agreements and the like are intersubjective refinements of meaning.” This, it now seems to me, assumes an observable ‘conversation’.
Not all knowledge, including social knowledge, however is picked up by ‘observable agreement of meaning’. For example, there is an important distinction that is made in neurobiology between ‘declarative memory’ and ‘non-declarative memory’; that depends in turn on the actual way in which we acquire different kinds of knowledge: in short I am doubtful that all human knowledge can be reduced to a framework in which conversation theory can be universally applied. My objection – and I confess I am not an expert on conversation theory (but it is nevertheless up to you to prove it is applicable to to all forms of social intercourse) – is that conversation theory applies only to declarative memory, and indeed I would be interested to see the experimental evidence that it reliably, conclusively and without ambiguity predicts ‘agreement on meaning’; my general doubt about your argument is that, pending that contingent demonstration, what you are proposing is just another form of reductionism.
When a conversation gets this complicated it becomes a discussion of semantics, …… and I’m going home. I have nails to buff and dusting to do.
Suggest you do likewise.
I hope you won’t skip my post this morning for that reason
“When a conversation gets this complicated it becomes a discussion of semantics”.
Actually, no it doesn’t: but who am I to deny that dusting is not more important?
🙂
May I come at this from a knowledge management (KM) perspective because John is right. It is not just about language.
Knowledge can be seen as an antecedent to conversation (the knowledge of how to speak in a language (say) as well as the knowledge of the subject matters themselves that has to be present before we converse).
As a conversation goes on, one’s knowledge is challenged, refreshed, widened, improved or reinforced/validated. One’s knowledge rarely remains unchanged once it has been exchanged (which is why I love this blog and those whom I exchange with).
Where I think semantics comes into it is where one also obtains knowledge about an individual’s beliefs and attitudes through clues in the language they use to exchange their knowledge – in other words we obtain knowledge about how a person may have obtained their knowledge or organised it in their heads.
Could I recommend Frank Blackler’s paper ‘Knowledge, Knowledge Work & Organisations: An Overview & Interpretation’ (1995) for those interested? It is a superb introductory work in my view (he writes well) and takes the theory of knowledge from the individual to group interaction.
You can find it as Chapter 3 in Choo & Bontis (eds) ‘The Strategic Management of Intellectual Capital & Organisational Knowledge’ (Oxford University Press, 2002) or it may be available on line somewhere on the net.
Thanks.
Thanks
Sounds interesting, Pilgrim,
I may well pursue that reference link. Thanks for it.
The best conversations are always exploratory, probing the other participant(s) knowledge and opinion, and making connections between what we already know ourselves and what another person knows and coming to a new understanding.
Sometimes a second party’s observation can cause us to make a connection, and therefore sense, of something we already ‘knew’ but hadn’t realised we knew. Because we hadn’t put the separate thoughts together that way before.
Our brains are like a supersaturated solution of information, and it takes but a mote of ‘dust’ to start the formation of a new crystal.
Well, that’s how it often works for me. And it’s a very rewarding experience to throw the dust into another person’s brain soup and see the revelation dawn…. a sudden realisation that somebody can now see the answer to a question that has troubled them and they knew the answer all along, but had never before realised. Never before made the connection. It was nothing to do with economics or politics, but the other day I said ‘Cinderella’, and the other persons lights went on. Like a light switch. It’s an amazing thing to see. Well worth wading through a lot of bullshit for.
The brain is described in some quarters as a ‘pattern matching’ machine. In one sense that is all it is. We can’t make-out the right pattern without enough ‘clues’ as to its overall shape, and the wit to interpret them correctly.
Life is full of the philosophical equivalent of optical illusions, same picture ; different interpretation.
[…] back in GDP with UK economic output growing by 0.4%in the second quarter of 2018 (according to Richard Murphy it is private debt that continues to fund consumption growth) — Â But the FSB warns that “these […]