The government were informed time and time again that its ‘austerity’ policies were detrimental to the economy and detrimental to promoting growth. They didn’t listen, and now Office of National Statistics show that productivity has plummeted to levels not seen since the Second World War as a result.
As we have discovered after five years of economic mismanagement, the only reason for ‘austerity’ measures is to increase bank profits. In fact, ‘austerity’ is very good news for major financial institutions, at the expense of business, manufacturing, and citizens as a whole.
From The Guardian
David Cameron has presided over an economy with the weakest productivity record of any government since the second world war, the Office for National Statistics said as it revealed output per worker fell again in the final three months of 2014.
In a separate blow to the government, two-thirds of leading UK economists said they believed George Osborne’s austerity strategy had been bad for the economy.
The ONS said productivity decreased by 0.2% in the third quarter of the financial year, leaving output per hour worked little changed on the previous year and slightly lower than in 2007, before the UK’s longest and deepest modern recession.
“These estimates show that the absence of productivity growth in the seven years since 2007 is unprecedented in the postwar period,” the ONS said.
The economy is dominating the third day of the general election campaign after 100 business leaders wrote to the Telegraph backing the government’s economic policies. George Osborne is due to make a speech this afternoon, while Boris Johnson is launching the Conservatives campaign in London and Samantha Cameron is campaigning at a school.
The ONS figures show that with workers producing less than they did in 2007, Britain’s productivity gap with its major economic rivals, such as the US, Germany and France, has widened.
Weak productivity has been the flipside to strong employment growth, since the increase in the number of people working has not been matched by the hourly output of goods and services they have produced.
Up until the global economic crisis, the efficiency of UK workers tended to increase by around 2-2.5% a year. Had that trend continued, productivity would have been 15% higher than it was before the recession.
An alternative measure of productivity, output per worker, showed some growth in 2014 as a result of employees working longer hours.
“This still isn’t great – productivity [growth] has still not even returned to its long-run average rate of about 2%, let alone recouped any of the shortfall relative to its pre-crisis trend,” said Vicky Redwood, UK economist at Capital Economics.
The ONS said that despite Britain’s poor productivity, businesses were keeping their costs in check by keeping a lid on their wage bills.
Labour is likely to use the latest data to make the case that higher employment is not leading to a pickup in wages and the sort of boost to living standards that would normally follow a recovery in the economy.
The Centre for Macroeconomics polled 50 economists, asking them whether they agreed that the government’s deficit-reduction strategy had had a positive impact on growth and employment. One third disagreed and a further third strongly disagreed. Only 15% agreed, with none strongly agreeing.
There was better news for the government from the latest snapshot of manufacturing from CIPS/Markit. This showed activity standing at 54.4 points in March, up from 54.1 points in February, its highest level since last August. Any reading above 50 indicates manufacturing is expanding rather than contracting.
Howard Archer, UK economist at IHS Global Insight, said: “This is a generally very reassuring survey, which indicates that the manufacturing sector is in decent shape despite latest hard data showing manufacturing output fell back 0.5% in January.”