Lost year, or lost decade?

Growth will flatline over the next year, but already things are back where they were in 2002.

I wrote yesterday that it doesn't really matter that the UK is in a technical recession. The zero boundary is unimportant in many aspects of economics, and growth is one – the difference between -0.1 per cent and 0.1 per cent is the same as the difference between 0.1 per cent and 0.3 per cent.

But when economics feeds into politics and the media, the difference does matter. Headlines of "UK not in recession" are far more likely in the event of 0.1 per cent growth than headlines of "UK remains in crippling stagnation"; similarly, the news yesterday was always going to be about the two consectutive quarters of negative growth, not the seven consecutive quarters in which the UK economy has barely changed. Headlines affect how people think, how people think affects how they act, and how they act feeds back into the economy.

All of which is to say that if it didn't matter that we were in a technical recession when the stats were released at 9:30am yesterday, it probably did by the time the front pages were fixed at 9:30pm.

Gerard Lyons, Standard Chartered's chief economist, said:

The likelihood is that the data will further dent confidence and push the recovery back.

The second quarter of 2012 was always going to be a weak one. The OBR, which overestimated Q4 2011 growth by 0.1 per cent and Q1 2012 by 0.5 per cent, predicts a flatlining Q2 2012, with 0.0 per cent growth. If their past pattern continues, we should expect a third quarter of contraction - especially as consumer confidence, hit by the news of recession, will depress that quarter still furter.

Little wonder that Philip Aldrick, the Telegraph's economics editor, is calling this a "lost year", fearing that the overall contraction in 2012 could be 0.1 per cent. But even there, talk of a lost year glosses over the longer term weaknesses. Nominally positive growth below the rate of population growth results in GDP per capita contracting. Even if we find out, after the final GDP figures come out in two months, that we weren't in a national recession, we've been in a per capita recession for a while. And under OBR and ONS predictions for the rate of GDP and population growth, it won't be until 2016 that GDP per capita is back to where it was in 2007. That isn't a lost year; it's a lost decade.

And even talk of a lost decade is understating the problem. Pay rises have been near at or below inflation for so long that the average weekly wage now is worth the same as it was in September of 2002 – and because price inflation remains higher than wage inflation, this is getting worse, not better. In terms of what you can buy for your wage, we've already lost a decade. The trick will be to not lose two.

Buckingham Palace during the Golden Jubiliee, the last time real wages were this low.

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

Grant Shapps on the campaign trail. Photo: Getty
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Grant Shapps resigns over Tory youth wing bullying scandal

The minister, formerly party chairman, has resigned over allegations of bullying and blackmail made against a Tory activist. 

Grant Shapps, who was a key figure in the Tory general election campaign, has resigned following allegations about a bullying scandal among Conservative activists.

Shapps was formerly party chairman, but was demoted to international development minister after May. His formal statement is expected shortly.

The resignation follows lurid claims about bullying and blackmail among Tory activists. One, Mark Clarke, has been accused of putting pressure on a fellow activist who complained about his behaviour to withdraw the allegation. The complainant, Elliot Johnson, later killed himself.

The junior Treasury minister Robert Halfon also revealed that he had an affair with a young activist after being warned that Clarke planned to blackmail him over the relationship. Former Tory chair Sayeedi Warsi says that she was targeted by Clarke on Twitter, where he tried to portray her as an anti-semite. 

Shapps appointed Mark Clarke to run RoadTrip 2015, where young Tory activists toured key marginals on a bus before the general election. 

Today, the Guardian published an emotional interview with the parents of 21-year-old Elliot Johnson, the activist who killed himself, in which they called for Shapps to consider his position. Ray Johnson also spoke to BBC's Newsnight:


The Johnson family claimed that Shapps and co-chair Andrew Feldman had failed to act on complaints made against Clarke. Feldman says he did not hear of the bullying claims until August. 

Asked about the case at a conference in Malta, David Cameron pointedly refused to offer Shapps his full backing, saying a statement would be released. “I think it is important that on the tragic case that took place that the coroner’s inquiry is allowed to proceed properly," he added. “I feel deeply for his parents, It is an appalling loss to suffer and that is why it is so important there is a proper coroner’s inquiry. In terms of what the Conservative party should do, there should be and there is a proper inquiry that asks all the questions as people come forward. That will take place. It is a tragic loss of a talented young life and it is not something any parent should go through and I feel for them deeply.” 

Mark Clarke denies any wrongdoing.

Helen Lewis is deputy editor of the New Statesman. She has presented BBC Radio 4’s Week in Westminster and is a regular panellist on BBC1’s Sunday Politics.