Growth is not going to work for Labour

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[NB: this post started life as a video, but the edit went wrong, so it has become a blog post instead. That might explain the style: the transcript survived when the audit did not].

Rachel Reeves is making growth a national mission, so she says.

I'm not sure that everybody else is signing up to it but that's her plan and that's what she intends to deliver.

Why? Because she believes if she delivers growth she will get the extra revenues that she needs in government to deliver the transformation that Labour says it's going to provide for our society.

Does this make any sense? I have to tell you, not at all.

Have a look at this chart. It's based upon data provided by the Office for National Statistics. So, this is official UK government information. It shows the change in our gross domestic product, that is our national income, in percentage terms year by year since 1949, running up to and including 2023. It is as up-to-date as we can get at this moment.

Look at the pattern. That red line shows that we have a very erratic pattern of growth.

But then look at that black dashed line that runs right through it, and what you'll see is something that is very clear. The trend, which is what that line shows, is marked and decidedly downward.

If we look at some of the averages, because they are more important than any one year's change, one year on another, then the story is even more marked.

Overall, the average rate of growth from 1949 to 2023 was 2.4 per cent per annum.

But that doesn't tell the whole story because from 1949 to 1975, during the post-war era, the average rate of growth was 3.1 per cent per annum.

But let's just look at another period that is good for comparison. That is the period from 1997 to 2009, because those were the Labour years when it was last in office. The average rate of growth was 2.2 per cent. In other words, it was lower than the average for the period as a whole and 0.9 per cent lower than it was on average in the period from 1949 to 1975.

Then look at the period from 2010 to 2023, the most recent period on the chart, and, of course, the period that overlaps with the Conservative government that has just left office. And the average during that period was 1. 6%. Almost half the rate between 1949 and 1975. And significantly lower than the average, of course. In fact, only two-thirds of the average over the whole period.

What is Rachel Reeves going to do when she talks about boosting growth?

Let's suppose that she increases growth to the 1997 - 2009 rate instead of the average current rate. In other words, if she achieves the performance that the Labour government did from 1997 onwards, instead of that which the Conservative government delivered from 2010 to 2023, she would achieve £61.1 billion of growth in a year.

At the recent Conservative Party rate, it would be £44.4 billion pounds a year.

So she would increase growth, at the best, by £16.7 billion pounds a year, at least at first.

And how much would she get to spend out of that on average? The increase in rate is only £16.7 billion a year. And at best, she'll get 40 per cent of that in tax. And she probably won't even achieve that. This is £6.6 billion or so in a year.

Of course, these figures do compound over time, but not by that much. That means that they will increase over the five-year term of the parliament, but so will inflation, and so will demand for services as a great deal of growth is based on a growing population. In other words, the net real additional contribution over this period is going to be small, running to a few tens of billions overall, at most, if she increases growth to the rate Gordon Brown achieved, and that would be optimistic.

Is that really going to transform our society and deliver all the things that we need? As far as I can see it isn't even enough to do all the outstanding repairs on government properties, schools, hospitals, roads and so on, let alone to build what we need or to transform those properties to net zero state and to deal with everything else on which there is a requirement for investment at present, like education and health and justice and so on.

Growth cannot deliver what Rachel Reeves needs. It simply isn't possible. She's going to have to look elsewhere if she wants to meet the needs of the people of the UK.

The only answer to that is that she has to tax wealth.

Will she? I don't know. But what I do know is that growth is not going to work for her, even if she succeeds to the extent that her predecessors did. Growth is not a plan for the country.

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