It was likely that Labour thought that amongst its honeymoon benefits would be an upturn in UK growth as people, released from fourteen years of Tory rule, celebrated with a growth spurt.
We know that did not happen now. The quarterly GDP figures for September showed just 0.1% growth. Now, figures for October are out, and they show a decline in GDP by 0.1%.
As the ONS says of the October data, published this morning:
Main points
- Monthly real gross domestic product (GDP) is estimated to have fallen by 0.1% in October 2024, largely because of a decline in production output; this follows a fall of 0.1% in September 2024.
- Real GDP is estimated to have grown by 0.1% in the three months to October 2024, compared with the three months to July 2024, with growth in the services and construction sectors in this period.
- Monthly services output showed no growth in October 2024 after also showing no growth in September 2024, but grew by 0.1% in the three months to October 2024.
- Production output fell by 0.6% in October 2024, because of falls in manufacturing, and mining and quarrying output, following a fall of 0.5% in September 2024; production output fell by 0.3% in the three months to October 2024.
- Construction output fell by 0.4% in October 2024, following a growth of 0.1% in September 2024, but grew by 0.4% in the three months to October 2024.
There is, then, no honeymoon effect. And nor is one now likely to be seen. Rachel Reeves kissed goodbye to any chance of that with her Budget measures. For an incoming government that built all its promises on the basis of growth, this is not an optimistic start.
That said, no government has that big an immediate impact. This has to be acknowledged. All it could have done by October is change the mood. But in that sense, this is significant. The mood has not changed, and if anything, we know things have got worse since Rachel Reeves delivered her Budget at the end of that month.
As always, it would seem as if Labour's messaging is wrong.
It chose the wrong target.
It did not understand the target.
It did not understand how to deliver it.
And it is already failing to do so, compounding the likelihood that it will by its own actions. This is not good news for them.
What will Reeves do now? Is austerity - what she always said would not happen because growth would prevent the need for it - back on the agenda? Demands for Westminster job cuts make it look that way.
If anyone can spot the difference between Osborne and Reeves (gender apart), they're clutching at straws.
Thanks for reading this post.
You can share this post on social media of your choice by clicking these icons:
There are links to this blog's glossary in the above post that explain technical terms used in it. Follow them for more explanations.
You can subscribe to this blog's daily email here.
And if you would like to support this blog you can, here:
Buy me a coffee!
All one can say is that the sad fact is that austerity has dragged on for so long it has become normalised perhaps?
I mean, looking back to even the late 1990’s to up to about 2005, it was a different world. Not perfect but much better. Add in BREXIT which we cannot ignore and there you have it.
You have written a book about courage in government and politics.
The sad fact is that there is not any where it matters.
Agreed
It is a theme to revisit
Bank of England itself had to borrow money to lend to the government.
All currency outstanding as well as deposits of private banks with the Bank of England are liabilities of the Bank of England.
Is this Reeve’s thinking ?
The Bak of England never has to borrow money
It creates it
And the central bank reserve accounts are not tue liabilities: they can be repaid only at the discretion of the government because they refect money created, not sums deposited.
So, what do you think Reeves believes?
As Osborne said himself Rachel Reeves is a mini me
I’ve said it before and I’ll say it again. I do not see how the ONS can claim to measure GDP accurately every month to say it has changed by 0.1%. They don’t read a measure off a dial: they make estimates. Are they really claiming that their estimates each month are more accurate than one part in a thousand? Even if these estimates are often revised later and by more than 0.1 percentage points?
Within the margin for error, it is unchanged.
And of course GDP puts a value on everything apart from the things that really matter.
Much to agree with
The problem that both the Labour and Conservative Parties face is that no matter how long they run government in Britain between them (the Single Transferable Party), and no matter what they do, or how often they repeat the same prescription; the result is always exactly the same. There is no growth (and Britain is worse than its peer comparators); the answer to failure is austerity, Britain visibly decays and declines; and large swathes of the population are slowly impoverished and made to suffer. That is their emphatic legacy.
They are now shifting, through inevitable, disastrous failure, to an argument that they will do things differently, and they are the the Parties to do it. If you want to do things differently, Labour and Conservative are the last people you require to all ow anywhere near it. They are the problem, they are the system we need to change not the answer – now or ever. Changing them is not enough, but as long as they run Britain nothing will change.
I’ve long wondered, what is the margin of error in all the ONS calculations? Is the reason for not stating it because if they did it would show that their calculations and forecasts are almost pointless? If the margin of error is +/- 0.5% (seems reasonable to me) them all their recent pronouncements on the economy are, well, kinda “about the same as last month”….
I suspect you are right
The GDP growth rate of the UK appears to be around 1% averaged over around ten to fifteen years (the problem for shorter run periods is the wild distortions caused by crises, from the financial crash, through Covid to Ukraine war/energy crisis, and supply bottlenecks). Some analysis of the notorious British productivity problem suggests we have now sunk to all time lows in productivity growth (we really are just hopelessly out of our depth in the modern world?).
I started the bracketed comment merely as a closing waspish joke, but in truth I am not quite sure I am sure……
Reeves has given us all a pretty clear message starting with the election campaign, in May/June.
1. It’s going to be bad, brace yourselves (but if we spend less growth will come).
2. It’s worse than we thought, brace yourselves even more (but if we spend even less, and get the sick and disabled back to work, growth will come but meanwhile, we can’t afford anything).
3. It’s still really bad, but don’t worry, we are increasing the costs of employing lower paid workers, and growth will come. We still can’t afford anything.
4. It’s still really bad so we are introducing across the board cuts in Whitehall to improve morale and efficiency, and growth will come.
5. It’s still really bad, but look at our milestones, for measuring growth when it comes. Meanwhile, we still can’t afford anything.
6. The economy shrank. Sorry. We’ve run out of ideas, but we are chatting to some bankers, who will suggest some agile ceremonies and closing more branches..
Maybe I’m being harsh, but if she has said anything different, I’m open to correction.
As I see it, Reevesonomics says:
1. Cuts produce growth.
2. Growth produces tax revenue.
3. Tax revenue finances public spending.
It was always bollox, but now it is failing in full view.
We’re going to need another big Starmer speech before Christmas at this rate. What’s next after “milestones”?
Signposts?
Indicators?
Harbingers?
That should do the trick.
Starmer’s speech will be billed as ‘BREAKING NEWS’ which used to be reserved for a story that would have people watching, listening and taking notice.
Now it’s to hear a nonentity bumping his gums whose speeches amount to little or nothing.
What is there left to cut?
Pension index-linking.
Benefits (indexing, eligibility, thresholds)
Tax thresholds
All forms of regulation/inspections (Ofwat, Ofgem etc)
Local government support grants
Subsidies paid to… Post Office, Air Traffic control, National Grid & other govt owned Arms Length bodies
Cancel rail network upgrades
Reduce bus susidies
etc etc
There’s lots of room for further disastrous cuts.
Robert, thanks for cheering me up !
There would likely have been some economic bounce if, on assuming office, they had presented optimism and positive vision for the future.
The negativity and blaming of the last govenment wasn’t necessary, the country had already voted them out.
Hmm, I’m not sure.
To borrow a term (from Paul Krugman?), I’m not sure that invoking the Confidence Faire really has significant impact in the real economy. What matters is how they manage the economy. Growth friendly austerity, i.e. not spending money, doesn’t work no matter how optimistic politicians claim to be
I’m with Keynes on this one.
The animal spirits do matter.
Whilst comparison with Osborne is tempting, an example from Labour history may be more accurate. Reeves reminds very much of Philip Snowden, Labour Chancellor 1929 – 1931.
As per Wiki: “Snowden and MacDonald were blinded by their economic philosophy that required balanced budgets, sound money, the gold standard and free trade, regardless of the damage that Keynesians thought it would do to the economy and the people.” Snowden was also heavily influenced by BoE governor Montagu Norman who was as big a neoclassical ideologue as his current iteration Andrew Bailey.
The parallel stretches to Starmer too. Macdonald was notorious for his love of the finer things in life, dining with aristocrats and accepting gifts. If grifting for an executive box at Arsenal and accepting freebies for Taylor Swift was a thing in the 1920s you can be sure MacDonald would have an outstretched hand
Fair comment
Neoliberalism fails on both theoretical and real-world aspects.
It is more akin to a religious dogma.
Reeves and all those who practice it are cultists. The political class seems insane to me.
They are like medieval religious figures who refuse to believe Earth orbits the Sun, even when provided with information that shows their belief to be nonsense.
There’s so much we could do to restore/fix our economy.
They’re still paying interest income on money to plenty of people.
This mechanism of the banks handing out interest to people with money whilst the government taking away from society is the most obviously regressive and contradictory stand point I’ve witnessed in economics.
They can’t pretend the BoE sits separately with its own mechanism to pay money to savers/assets owners and not being able to cough up the needed money to fix society.
That money originates on the consolidated fund. Exactly the same for government spending.
It’s too obviously ridiculous and needs taking apart.
More on the farcical Labour Party masquerading as the party of the people:-
https://billmitchell.org/blog/?p=62243
Total political disenchantment in this constituency yesterday with a by-election with a 16.3% turnout
I am reminded of today’s news from France. With a majority of the voters choosing left-of-centre Parties, the centrist President appoints, first, Barnier , a conservative, and,when that goes all wrong, he appoints Bayrou, another Right-winger, to the same post of Prime Minister. Just as Britain gets the same policies regardless of who we elect,(the Single Transferable Party), so France gets the same policies regardless of who is actually the majority in Parliament. If anything, it reveals the grim, unbending commitment to neo-liberal economics displayed by “centrists” like Macron. Or Starmer. Regardless of uncomfortable facts, they refuse to even bend a bit. Even if the eventual beneficiaries may be the Far Right.
As any good professional salesperson will attest to. Clients and customers, both commercial and private, do not buy products or services per se. They buy what they think a product or service will do for them. They buy a perception. A story about how it will make life/things better, easier, more prosperous, more profitable etc. Labour have a story but it’s the same old neoliberal, miserable, worn out, boring, uninspiring story that we’ve all read before. No wonder no one buying it