Stop focusing on triple dips. Anaemic growth is just as bad

Welcome to stagnation. It's not a nice place to be.

Tomorrow, the ONS will release its second estimate of GDP growth for the fourth quarter of 2012. The revisions may be up or down, and you'd be a fool to bet on which direction it will be. But barring a miracle, it's still going to be terrible growth.

That's true even if the revisions push the estimated contraction into positive territory. Such is the focus on whether or not Britain will enter a "technical recession" for the second time running that we have started to act as if anaemic growth is acceptable. It isn't.

If nothing else, it's important to remember that GDP staying flat is the equivalent of every individual in Britain getting poorer. That's because the British population is growing, usually by somewhere between 0.5 and 1 per cent a year (0.7 per cent according to the most recent figures from the World Bank). As a result, GDP per capita, the share of the national income that each of us receives, is correspondingly lower than GDP. Unless annual GDP growth is higher than population growth, it's not even really fair to say we're "stagnating". We are getting poorer.

But even discounting that possibility, stagnation above the rate of population growth remains an extremely concerning phenomenon. 2013 overall will probably experience real growth in GDP per capita. NIESR's economic forecasts put it at 0.4 per cent growth per capita, and 1.1 per cent GDP growth:

But 1.1 per cent growth is far, far below anything that Britain would need to either keep deficit reduction on track (the main worry if you're George Osborne) or to prevent further erosion of crucial public services (the main worry if you're anyone else). The Bank of England, which made similar projections to NIESR, is so shocked that it is prepared to overlook its entire raison d'être and allow a period of above-target inflation to get us out of those doldrums.

The OBR, kings of the downward revision, have spent the last three years forecasting that 2 per cent growth was just around the corner. That remains their forecast, and currently that growth rate is projected for 2014. The OBR has previously forecast two per cent growth for 2011, 2012 and 2013. Whether that continued optimism is justified or not, when future economic plans are based on it, every miss hits even harder.

(To be clear, the problem isn't that the OBR is frequently wrong. All economic forecasts are hugely variable, and the agency makes clear in its outlooks that the rage of probable outcomes is large. The problem is that the OBR is frequently wrong in the same direction. For over two years now, it has predicted growth above the actual outcome. If someone misses the bullseye nine times in a row, they're just unlucky — but if every one of those shots hits above the centre, it's pretty likely that they need to start aiming lower.)

The worst thing about accepting stagnation as a natural, even positive, outcome is that it will lead to a huge amount of unnecessary pain. It's not just that we won't grow fast enough. It's also that we'll be trapped in a dead zone of investment, too poor for the government to finally decide it has "enough money" to start dealing with our broken housing market and crumbling infrastructure, but growing just enough that it won't be forced to abandon austerity and enact pro-growth measures which actually work.

But if the right is wrongly promoting the acceptability of stagnation, there's a parallel criticism for the left. A "technical recession" isn't that much worse than minuscule growth. The difference between 0.1 per cent contraction and 0.1 per cent growth is 0.2 percentage points. A truism, certainly, but if the Chancellor's forecast was for 2.0 per cent and the outcome was 1.8 per cent, there would be little commentary.

As our economy floats along at the zero line, sometimes slightly over, sometimes slightly under, the temptation may be to crow every time the latter occurs. But that runs the risk of implying that the former is acceptable, when it really isn't. Our corrugated economy is the problem, and that's not going away any time soon.

This puppy is sad at British economic stagnation. Photograph: Getty Images

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

Photo: Getty
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The big problem for the NHS? Local government cuts

Even a U-Turn on planned cuts to the service itself will still leave the NHS under heavy pressure. 

38Degrees has uncovered a series of grisly plans for the NHS over the coming years. Among the highlights: severe cuts to frontline services at the Midland Metropolitan Hospital, including but limited to the closure of its Accident and Emergency department. Elsewhere, one of three hospitals in Leicester, Leicestershire and Rutland are to be shuttered, while there will be cuts to acute services in Suffolk and North East Essex.

These cuts come despite an additional £8bn annual cash injection into the NHS, characterised as the bare minimum needed by Simon Stevens, the head of NHS England.

The cuts are outlined in draft sustainability and transformation plans (STP) that will be approved in October before kicking off a period of wider consultation.

The problem for the NHS is twofold: although its funding remains ringfenced, healthcare inflation means that in reality, the health service requires above-inflation increases to stand still. But the second, bigger problem aren’t cuts to the NHS but to the rest of government spending, particularly local government cuts.

That has seen more pressure on hospital beds as outpatients who require further non-emergency care have nowhere to go, increasing lifestyle problems as cash-strapped councils either close or increase prices at subsidised local authority gyms, build on green space to make the best out of Britain’s booming property market, and cut other corners to manage the growing backlog of devolved cuts.

All of which means even a bigger supply of cash for the NHS than the £8bn promised at the last election – even the bonanza pledged by Vote Leave in the referendum, in fact – will still find itself disappearing down the cracks left by cuts elsewhere. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.