It feels like only a week or so ago that trolls were all over this blog suggesting that I was wrong to say that the UK was likely to be in recession.
They claimed that I did not know that a recession meant a fall in growth for two quarters in a row. They also suggested that this was unlikely in the first quarter of this year. But what they failed to note was that I wrote in the present tense: I said that I thought that by April 2022 the UK was in recession. I was covering the quarter from February (and I really don't care if they want to argue that I have to use calendar quarters because that would be quite ridiculous).
So, let me turn to today's GDP data for March, published this morning. The highlights are:
- Gross domestic product (GDP) fell by 0.1% in March 2022, after no growth in February 2022 (revised down from 0.1% growth).
- Services fell by 0.2% on the month and was the main contributor to March's fall in GDP, reflecting a large decrease (15.1%) in the wholesale and retail trade and repair of motor vehicles and motorcycles industry.
- Production also fell on the month by 0.2%; these falls were partially offset by construction, which grew by 1.7%.
- Output in consumer-facing services fell by 1.8% in March 2022, following a 0.5% (revised down from 0.7%) growth in February 2022; non-consumer facing services grew by 0.2% on the month following a 0.1% fall in February (revised down from 0.0%).
So, February was not as good as expected and March is worse and will, in my opinion, be revised downwards in due course. As for April, if anyone thinks the economy grew last month when consumer confidence was plummeting then they are suffering from misplaced optimism, to be kind.
So, as I suggested, it is highly likely that we have already had a quarter of negative growth and, I suggest, that is likely to continue for some time given the cost-of-living crisis, inflation and the state of the world economy, plus the measures being taken by the Bank of England to deliberately make everything very much worse. In that case, it is quite reasonable to conclude, as I did, that we are already in a recession now.
This matters. The government said only this week, in the Queen's Speech, that the way to tackle the cost-of-living crisis was to grow the economy, and claimed that is what they will do. The reality is that the opposite is happening. That is hardly surprising, because they lie continually, and must have known this data was coming. But what it says is that even if growth was the answer to all the problems that we face (and by itself, it is not) that option is not on the table, meaning that they need to do something else. But they have no announced plan to do anything else either. In which case people are going to suffer.
I always presumed that the political mindset that allowed the starvation in Ireland to happen in the 1840s as a consequence of deliberate policy, harshly backed up by the law, would never recur. I am having to reappraise that opinion. The mindset of abuse that caused that starvation to be imposed on millions still exists and is to be found in this government and in the Bank of England, which actively wants things to get worse. That is what troubles me, because I cannot see where this ends right now.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
I wonder whether the pitchforks will come out.
At the very least we can expect this, as we are well overdue
https://en.wikipedia.org/wiki/England_riots
What actions would you take immediately Richard?
Knowing we are likely heading to 10% inflation can we “afford” to inject more money into the economy?
I assume you would reverse interest rate hikes but what else would stop many people from having to “eat or heat” this coming Autumn and Winter?
See here
https://www.taxresearch.org.uk/Blog/2022/04/23/its-time-for-a-new-path-on-the-economic-crisis-that-we-face/
Thanks
The Tories will never, ever increase taxes on the better off and wealthy. Never
Sunak has already shown he cares not a jot about poverty. He says he does but then increases NI or loans £200 to people who would not get a loan from anyone but a loan shark
Next winter is going to be cold, long and full of hungry people
“The Tories will never, ever increase taxes on the better off and wealthy. Never”
The High Income Child Benefit Charge was introduced in 2013. Effectively if you earn £60k a year or more, it claws back any Child benefit by increasing tax paid. The £50k income level at which it kicks in hasn’t changed since 2013 so more people are affected by this.
They increased the rate of CGT payable on the sale of residential properties.
They’ve restricted relief on mortgage payment interest to the basic rate – a measure which only affects those paying tax at higher rates.
Under the last Labour government, someone earning £325k a year could put the whole lot into their pension pot and claim tax relief. Under the Tories, that amount is now £4,000
The income level at which personal allowances are restricted (above £100k) hasn’t changed for 12 years – and so affects far more people now than when introduced.
They recently reduced the lifetime allowance for BADR from £10m to £1m
Not making any comment on any of the above but it’s just wrong to say the Tories have never increased taxes on the better off.
Well, you evocation of the Irish famine in all of this is very interesting indeed and not without relevance and certainly helps to ram home the seriousness of the situation.
I have felt for some time that under the Tories we have a ‘Smash and Grab’ State where they will smash up everything and grab as much as they can for themselves.
Why?
Because the real Government are the back seat drivers and Tory party funders who want to grab the country’s wealth for itself.
Sharing wealth is alien to them because of course wealth is power – which is why they cosied up to people like Putin.
And what makes this worse is that the skeletons in the Tories wardrobe make it nigh on impossible to do anything else but to keep lying and close down accountability lest the truth comes out.
Added to that I’m afraid is the copious amount of public ignorance of these factors at play. The economic violence being inflicted – with the Tories making economic warfare on the people – also serves to close down enquiry as people – especially the poor – take up their time just trying to survive.
My view is that the Tories lost the moral right to rule many moons ago. It’s just the moral retribution that is taking its time to come.
Indeed
But it needs to arrive, soon.
Richard, does one bank lending to another bank count towards GDP?
If so, with over 80% of UK lending being between Banks aren’t we actually describing something that more resembles money laundering than productive value creation?
I ask because it seems to me that not only does the way our modern financial system works need drastic re-evaluation, as you point out by championing MMT (and please keep it up) but also many of our measurements of economic performance are extremely shaky.
Bank lending is not part of GDP
[…] Cross-posted from Tax Research UK […]
Sunak hasn’t a clue what to do. His options are : Raise taxes to pay for the cost of living crisis of the lower 2 deciles of the population, increase borrowing or more money creation whether by QE or just BOE electronic generation. Dithering and uncertainty will catch up with him sooner or later.
Enough said? https://consciousnessofsheep.co.uk/2022/05/11/reality-bites/
We are in a very bad position indeed.
Sunak apparently said he wanted Brexit to move the UK economy to be more like India, Brazil and USA so presumably he is not just indifferent to poverty but actively wants it?
“I always presumed that the political mindset that allowed the starvation in Ireland to happen in the 1840s as a consequence of deliberate policy, harshly backed up by the law, would never recur. I am having to reappraise that opinion. The mindset of abuse that caused that starvation to be imposed on millions still exists and is to be found in this government and in the Bank of England, which actively wants things to get worse. That is what troubles me, because I cannot see where this ends right now.”
…
Gross domestic product (GDP) fell by 0.1% in March 2022…Really not sure that 0.1 % either way is equivalent to starving Ireland… surely a bit of perspective is needed? Little wonder you remain marginalised on your blog with immature rants like this.
So you are choosing to ignore the evidence of a deliberately imposed cost of living cross?
When did you have the empathy bypass?