The state of the UK economy

Let me quote something I agree with:

Since the crash of 2008-9 “The proportion of people in work moved to its highest level on record, nominal wages are up 17%, real GDP is up 15% and the UK has consistently been one of the strongest economies in the G7. All major income groups have seen their income and wealth rise”.

That was the Governor of the Bank of England.

Here’s something else he said that I also agree with: “Growth appears to have been materially better than we had expected in the summer. Households appear to be looking through the Brexit-related uncertainties at present. For them, signs of an economic slowdown are notable by their absence. Perceptions of job security remain strong. Wages are growing at around the same modest pace as at the start of the year. Credit is available and competitive. Confidence is solid”.

In other words, the Bank now agrees that growth in 2016 is good and unaffected by the referendum.
There is a residual of the Bank’s pessimism of the summer in the lecture. He now says that he still expects inflation to come through and cut real incomes, which could turn off what so far is a consumer led growth rate and recovery. He bases this on the fall in the pound, which he did predict. He acknowledged in the lecture that the pound is up 6% since early November, so the pressure is abating. The Bank needs to research why retail prices were down 0.7% in the year to October, when much of the fall in the pound occurred in 2015 and early 2016. it looks as if highly competitive world markets for goods and highly competitive retailers with too much shop space in the UK are keeping prices down despite the long term fall in the pound over the last eighteen months. It looks as if some price rises may come through in the new year, but it is also the case there is a strong competitive headwind against bad ones.

The Roscoe lecture was clearly the Governor’s wish to be in line with present government policy and with the run of good figures about the economy in recent months. He praised the decision to relax the fiscal constraints a bit. He agrees that a range of measures is needed to boost productivity as the Chancellor has advocated, which is the way to higher real wages. The most notable omission from the lecture was any mention of high levels of migration, which must be having an impact on wages and the labour market, and is having an impact on public attitudes.


  1. Ian Wragg
    December 7, 2016

    And the population has risen by 15%.

    1. Ian Wragg
      December 7, 2016

      And government debt has doubled with tax receipts static.
      Not much to write home about really.

      1. Hope
        December 7, 2016

        I am not sure the Govt can claim credit for the state of the UK economy, Business can. The structural deficit was not balanced by May 2015, nor is it going to be by 2020 and the economy was the central theme for the Tory party seeking office and we had to hear about it endlessly. We still hear endlessly about the economic plan, but they fail to mention its central theme is abandoned and they resoundingly failed to deliver. The second theme was immigration! We have record numbers and the worst in history under the Tories. When are the Tories going to deliver on their central themes which are of significant importance to the public? Cut taxes? hundreds of tax increases and another to insurance to punish the prudent! The Tories were going to deliver on the EU referendum immediately. Not pay the extra £1.7 billion demanded by the EU from UK taxpayers, Cameron not only paid but gave away more than the £1.7 billion it was close to £2.9 billion. Have a bonfire of quangos, when? The Tory party might as well claim the sun came up this morning because they are in office. Ridiculous.

      2. Hope
        December 7, 2016

        800,000 NI numbers issued last year to foreign people,govt figures claim 330,000 entered the country. JR, is it not t e the govt came clean because the figures indicate that immigration is even greater than the NI numbers issued. How do the public services cope with an increase of about a million people in one year? It is not possible to build enough houses to keep up with mass immigration. Do you accept we have a mass immigration problem not a housing crises as deceitfully claimed by MPs? Fiddling figures does not cut the mustard.

      3. Mark B
        December 7, 2016

        Careful Ian, yo might get your comments edited out or not posted like I do.

        Telling the truth is forbidden.

  2. Lifelogic
    December 7, 2016

    Low skilled immigration clearly depresses wages in many industries and is also increasing the PSBR as they are cost far government far more than they pay in. This in benefits and services.

    Credit is available but it is slow inefficient and at high fees and margins. Also with onerous terms. The is still a huge lack of any real competition. 0.2% if you lend to the bank and 15+ times this to borrow, plus fees, costs, low LTVs ….

    They are still a complete joke, with perhaps NatWest, RBS (government owned) being the biggest joke of all.

  3. Dame Rita Webb
    December 7, 2016

    Eh and isn’t the annual growth rate of consumer credit now at around 9 per cent, the highest pace since 2005? While are not around 1.6m households in “extreme debt”, paying out 40% or more of household income to creditors? Sorry JR but your Pravda piece ignores what is driving this “prosperity”.

    1. Mark B
      December 7, 2016

      A debt fulled bubble followed by a bust. And the rich will get richer on the backs of the poor and Middle Class.

    2. acorn
      December 7, 2016

      Credit Cards and the government budget deficit are driving aggregate demand in the economy (Q2 2016). As I have said before, it will not be till Q2 2017, when the hedges and futures contracts run out, that the referendum result will start showing up.

      The following quarterly sector accounts add up to zero. It shows which sectors are running a deficit; that is, spending more than they are earning and vice-versa. The government has a deficit, but as the currency issuer, it is not debt as a currency user (a Household or a Corporation) understands it.

      You can see the guys who are stashing the cash in Pounds Sterling, are the private corporations (as profits) and the rest of the world (imports of BMWs; basic foodstuffs; natural gas and electricity etc).

      Central government -£13.8 billion
      Local government -1.8
      Public corporations -0.2
      Financial corporations -7.8
      Private non-financial corporations +4.7
      Households -7.4
      Rest of the world +29.0

      If Osborne’s idiotic attempt to get the government budget in surplus, a + number, who of the other currency users, was going to max out their credit cards to pay for those imports?

  4. Lifelogic
    December 7, 2016

    It could of course be even better with a bonfire of red tape, lower taxes, cheap energy, no vanity project, far less interventions and a sensible PM and Chancellor. But alas we have HS2, Hinkley, renewables loving interventionist, PC, lefties in charge.

    Still Theresa has moved on from “Brexit means Brexit” to “we want a red white and blue Brexit” – so at least that is clear now!

    1. Mitchel
      December 7, 2016

      Interesting that Niall Ferguson has recanted and switched from Remain to Leave (Spectator online article-Fraser Nelson),tweeting:-

      “My mistake was uncritically defending Cameron and Osborne instead of listening to people in pubs”

      I used to like Ferguson and was surprised and disappointed when he not only backed remain but spoke in favour of it in one of the debates.

      Still better late than never!

  5. Anonymous
    December 7, 2016

    Migration is also having an effect on the cost of housing, transport and quality of life so that higher wages do not translate into the all important feel-good.

    It is still a taboo subject and Leave militants have shown no understanding on it whatsoever since the referendum. We are still ‘racists’.

    1. Liz
      December 7, 2016

      All the major TV media news are in denial about immigration and don’t discuss it properly. ITV news recently managed to do a piece on numbers pressure on the health service, blaming it entirely in the indigenous population living longer and not even mentioning immigration. It was not news, it was propaganda and this attitude of denial of the affects of immigration on the non metropolitan elite is followed by all TV and radio media. They must truly think, like Lord Kerr, that we are all stupid.

    2. Dame Rita Webb
      December 7, 2016

      The “feel good factor”? It does not seem to be amongst the people I know who work in the NHS, the schools, the police and the RN.They feel something else more like. Meanwhile MPs are probably feeling jolly good amongst themselves with their pay rise that is around 25% more than the aforementioned are getting this year.

    3. Anonymous
      December 7, 2016

      Correction: Remain militants.

  6. David
    December 7, 2016

    It was hard to buy a house in 2008 and it still is. If I were to move to an identical house, I would have to pay £12k in taxes alone. I have no chance of buying the sort of home I could have 20-40 years ago.

    It could be worse I could be a first time buyer, this complacency on homes could one day let Corbyn in power, a scary thought.

    1. Caterpillar
      December 7, 2016


      The stamp duty situation with housing is truly bizarre. Whilst I appreciate some of the ex-Chancellor’s motives w.r.t. Additional stamp duty for n-th properties, setting this at the second property was always bound to limit labour flexibility. Work forces will naturally move from areas where it is difficult to sell houses so having to pay the additional stamp duty and then hope to sell later, even though people moving into recovering areas will typically rent. Why additional stamp duty starts at two and not three properties is beyond me.

    2. Anonymous
      December 7, 2016

      The renter generation has no reason to vote Tory.

    3. Mark B
      December 7, 2016

      I do not doubt your word, David. But from where I live houses are selling at of above asking and are not staying on the market more than a month or two. There is of course an upper limit and that is being pushed to the max. When the bust comes, as we know they always do, an awful lot of people are going to be very angry, and rightly so.

      1. David
        December 8, 2016

        @Mark B
        Is it because that although houses are selling, they are doing so to very indebted people?
        Lets hope the bust doesn’t give us Venezuelan style socialism

  7. Bob
    December 7, 2016

    “He bases this on the fall in the pound, which he did predict. “

    Predict? don’t you mean ensured?

    1. David
      December 7, 2016

      Very true, Carney should be sacked

    2. Lifelogic
      December 7, 2016

      Well he certainly did his best to assist it. Even cutting interest rate to help it fall further.

  8. Antisthenes
    December 7, 2016

    We need forecasts and the ones that predict outcomes based on reliable historical data are the most realistic. Even then it can be assumed that they will not be completely accurate. That though is not the point their worth is to measure actual against expectation so any divergence from the forecast can be addressed at the time of the event not before or after.

    The BoE, the Treasury and the like make forecasts that fail because they are not based on reliable data. They use theory based models that are data deficient because too many variables are unknown. They cannot factor in human behaviour and the unexpected as they do not conform to any pattern or lend themselves to prediction. The theories tend towards conventionally acceptable ones derived from not properly understood historical economic events. The acceptable theorist being the one in fashion at the time. Currently it is Keynes which I believe in the end we will live to regret because of it. If it was Hayek, Mises or another of the Austrian school of economics then perhaps outcomes would more fit the forecasts and our economic growth would be considerably better.

    1. hefner
      December 8, 2016

      You might have a short memory but Keynes’s ideas only came back to the forefront following the 2007-2008 crisis. Who were the economic thinkers of choice from Mrs Thatcher onwards to 2008, if not Hayek and Friedman?

  9. Bert Young
    December 7, 2016

    Carney is a mistake and should resign . He was clearly aligned to the Cameron/Osborne referendum camp making statements that simply stoked up the fire of the Remain group . The ambiguity in economic forecasts was never referred to , only the headlines of doom and despair . His recent speech in Liverpool was much the same suggesting robots would make manual workers mostly redundant .

    Of course there is a degree of uncertainty in Brexit ; of course getting “our cake and eating it” will not happen , nevertheless it is not the role of the Governor of the Bank of England to stick his nose into the political arena and align himself with the EU . I believe that he has been entirely influenced by his American Banking background – who pumped large sums of money into the remain campaign . He must be extremely embarrassed by the positions he took and he should now hand over to a stable and effective Englishman .

  10. JJE
    December 7, 2016

    I prefer to read these speeches for myself rather than the spin put on them by commentators.
    You should provide a link to the text when it exists so that your readers can form their own judgements.
    In this case the Bank of England website will take readers directly there.

    1. hefner
      December 8, 2016

      Seconded. Commentators, JR included, might “sometimes” be biased!

  11. Lifelogic
    December 7, 2016

    It seems Theresa’s interventionist lefty government is still going ahead with Osborne’s moronic sugar tax but exempting fruit juices and sickly sweet smoothies which contain far more sugar. I though Hammond said he wanted to increase productivity so why keep kicking industry in this way. Will sugary tea be taxes too?

    1. Leslie Singleton
      December 7, 2016

      Dear Lifelogic–And it would be good if, re fruit, especially orange, juice, “freshly squeezed” meant what it said. My experience in America is that this term, apparently so hard to understand here, over there means on the premises, indeed immediately before being served–sometimes directly in front of you (Oranges just get lobbed in to this ever so non fancy machine)

    2. Anonymous
      December 7, 2016

      If they legalise cannabis I’d hope to see that heavily taxed as with tobacco and alcohol. If not then why on earth not ? And how will it lead to a reduction in crime unless it is to be supplied free by the state ?

  12. Lifelogic
    December 7, 2016

    An excellent later in the Telegraph yesterday from a retired Barrister. Referring to the writings of Jerome Frank.

    He rightly says “those who think judges decide according to the law are living in a dream world”

    1. Lifelogic
      December 7, 2016

      Another pointing out the the defeat in Austria of the Freedom party was in BBC think described as decisive, yet the similar margin Brexit referendum result was only marginal.

      1. Anonymous
        December 7, 2016

        Euroscepticism is ‘populism’ – Europhillia is ‘democracy at work’. (BBC think)

  13. M
    December 7, 2016

    Surely Brexit will give us a wider selling area and create the need for better productivity.

    1. John
      December 7, 2016

      Lets say you earn an amount and then decide you need a new door, you order a door. That order creates work at a factory and a fitter and a sales person etc. They all earn and maybe they all decide to spend money here in the UK and that in turn creates orders, here in the UK, and taxes.

      Now, what happens if you earn but are an economic migrant who periodically returns home to eastern Europe? You return home to spend the money on that door you wanted which then generates economic productivity and taxes, only its now in eastern Europe. That productivity chain is moved to another country and we become less productive and efficient.

  14. Citizen
    December 7, 2016

    Good JR you have a belief in things said, anything said or written, by Authorities in the UK.
    A popular new religion is not in existence nor in the cradle which would form the basis of a Representative Democracy to build such Belief. The High Court & Supreme Court are Faith destroyers.

  15. rose
    December 7, 2016

    “All major income groups have seen their income and wealth rise”.”

    While I can see that groups who have come here from poorer countries might well have seen their income and wealth rise, I can’t see how that applies to the British people who were already here. If wages are driven down, zero hours contracts have come in, housing is in short supply so rents have risen, part time work has gone up, and we have 1.6 million officially unemployed, how can they be better off? We know the quality of life is much worse when the population is too large because we feel it every day in going about our lives. What is the figure for top up benefits going to people in work?

  16. matthu
    December 7, 2016

    “He now says that he still expects inflation to come through and cut real incomes …”

    How do we differentiate between inflation caused by brexit and inflation caused by massive Quantitative Easing i.e. printing money over several years?

  17. alan jutson
    December 7, 2016

    Just wait until interest rates rise to historic sensible levels, from the present artificial lows.

    The feel good factor for millions who have pleasured themselves with debt in the last 5 years will vanish in seconds.

  18. MikeP
    December 7, 2016

    Just one teeny-weeny question – How on Earth does Mark Carney square all the good news on jobs, wages, growth and competitiveness with his “Lost Decade” ?

  19. Iain Gill
    December 7, 2016

    I see the home secretary has lost the plot again. So now she is giving the police the powers to declare anyone they like a stalker and ban that person from going near somebody else or place. No courts, no review, just summary justice by the police.
    Given the vast amount of videos now on YouTube showing just how clueless and authoritarian and exceeding their powers already many of our police are this is a slippery slope.
    All sold to the media by the home secretary in feminist tones “it’s there to protect women”, what a complete load of nonsense.
    Where are the politicians speaking up for our hard fought rights to justice?
    I hope you didn’t vote for this nonsense John?

  20. Mark
    December 7, 2016

    I note that Barnier has set out his stall: just 18 months of negotiations so there is time for all 28 to ratify the UK’s ongoing membership before the two year guillotine falls per 50 (3). I hope he is in for a surprise. We should keep the negotiations going until we have left, so there is no going back except on unfavourable article 49 terms that would be a non starter.

  21. lojolondon
    December 7, 2016

    John, you know this, I know this, the people who read your blog know this – but the public at large? I just checked the BBC homepage – no mention of Carney’s speech. When it is bad news for Britain and BREXIT, they headline it and praise him. When it is good news about Britain, BREXIT or any subject that is not part of the ‘message’ – they bury it. £6 Billion every year would be far better spent on the NHS, our roads or High-Speed Broadband – and it would mean for the first time our broadcaster would have to deliver the news people want – not propaganda. TIME TO STOP THE TV TAX.

  22. jeffery
    December 7, 2016

    Since the crash of 2008-9 “…. real GDP is up 15% …”

    A good instance of how to evaluate what is fake information. Amazingly, people actually argue this, so to spell it out. For the UK GDP index:

    Q1,2008: 99.7 Q3,2016: 107.9 = 8.22%

    Q2,2009: 93.4 Q3,2016: 107.9 = 15.5%

    From previous peak to now or from trough to now. 8% over 8years is not “happy days are here again”.

    And you can knock 30% off standard of living (GDP/head) for population growth.

    It is difficult to strike the right balance here. Policy has not been a disaster (much better than Depression), but portraying it as good times does not work either.

    1. hefner
      December 8, 2016

      That’s the same game as taking the Earth’s temperature in 1995 at the top of El Niño and then say the growth in temperature till 2013 has been zero for 18 years. Indeed, it was only very slightly increasing till 2013. But in 2015 there was another El Niño and the global temperature between 1995 and 2015 has in fact increased.

      So beware of statistics, specially when a time period has to be defined, specially when handled with people with an agenda they do not think people should be made aware of.

  23. ian
    December 7, 2016

    Forecast of 1.6 GDP by april 2017 now look like the one that got away with all the money printing and interest rate cut.

  24. Prigger
    December 7, 2016

    PMs Question Time:
    BBC Daily Politics commented that Labour’s Ms Thornberry and, Tory Mr Lidington who stood in for the PM as doing a good job. That is the former asked a rhetorical question at length at least twice to which she knew no answer could be given and that Mr Lidington was, in effect, politically professional and polite enough to make some kind of answer.
    No, the whole of it was a total waste of time.
    Parliament needs a major reform. It needs to become a proper business meeting where persons deliberately wasting the time of the meeting and those humouring the wastage of time are punished. Including the Chair of the Meeting ( the business and trades union and Party equivalent of Mr Speaker )

  25. They Work for Us.
    December 7, 2016

    Slightly off topic, Keira Dougdale the Labour Party Leader in Scotland is promoting her vision of a Federal UK. Opening remarks. “To ensure a fair redistribution of wealth to help the disadvantaged across the nations of the UK.” No change there then for England, just keep on paying. There seems to be no appreciation that while Scotland may have Nationhood as a spiritual aspiration in practice it is little different from say Hampshire except that it is more dependent.

    1. APL
      December 8, 2016

      TWFU: “Hampshire except that it is more dependent.”

      Yep. They may have the wonderful financial sector, what country hasn’t jumped on that bandwagon?, but all Scotland FI customers are in England and Wales.

      Pop Scotland 5m ?
      Pop England & Wales 55m

      Go ahead Scotland, do a ‘Ratner’.

      Not to mention an Independent Scotland doesn’t want British military spending on its soil.

  26. Terry
    December 7, 2016

    I do not know how the current Governor has held on to his job. Had it been a Brit like Mr Cameron, who made exaggerated claims in defence of the EU and failed, he would have resigned as British honour dictates. However, he is not British and has no affiliation to this country.
    I am suspicious he may have been attempting to manipulate the system to achieve the results he predicted by cutting interest rates to the lowest level ever recorded. It was not necessary.
    Doing that in the full knowledge that such a disastrous policy has already weakened our banks, our savings and our pension funds, cannot be acceptable to a Conservative Government and I do wonder what thinking in Downing Street enables him to carry on regardless of his crass comments and his clear meddling in the affairs of the British People.
    I have always thought Mr Redwood would be an able candidate for such a post but I fear he knows too much for the comfort of those that wield the power to appoint.

  27. turboterrier
    December 7, 2016

    Mother Teresa has to address the waste that is allowed to happen across every area of government control.

    Pick those areas that have the biggest impact on all the population. Energy should be first on the list and slash all these subsidies and constraint payments and all the other nonsense associated with all this green crap.

  28. Roy Grainger
    December 7, 2016

    UK is one of the EU countries with the lowest rate of wage growth in the lower paid sector. Poland is the EU country with the highest rate of wage growth in the lower paid sector. Supply and demand. Not to mention the clear effect migration has on wages is foolish.

  29. Norm
    December 7, 2016

    I work for a regional charity in the North East. Two years ago we had 300 staff, now we have 114 and turnover is down 50%. There have been no pay increases for 3 years because of massive cuts to our budgets which are funded mostly by local authority and statutory services etc. We’re certainly not all in it together.

  30. John
    December 7, 2016

    Yes, how can you ignore immigration and productivity when it comes to the need to improve it.

    He is Canadian and so knows the USA doesn’t have an issue with Canada over economic migration as the wages and wealth are similar. No doubt he is aware south of the USA boarder there is an issue as the earnings gap is huge.

    I had a broad look at Latvia, an average wage around £8,500 with a 23% tax rate on all of that, about £4 ph ave and then taxed by 1/4. In the UK you can earn £10,800 before any tax is paid and minimum earnings are around £8 ph tax free. They can earn £11,000 working on a farm tax free, accommodation paid and food in 5 months and return home cash rich.

    The productivity gap is these economic migrants returning home to spend their earnings back in say Latvia etc. The productivity chain is broken and moved to Latvia etc where they spend their money and why we have lost so much productivity.

    I wish the BoE Governor, with his new found interest in facts, extends that to explain the causes for declining productivity in the UK. That being economic transient migration from economies that are not of a similar value and a growing black economy.

    What a stupid idea it is to have unlimited migration from economically poor countries and to continually expand into more poor zones. And what of the effect of having often very capable educated migrants leaving their home country?

  31. Mick
    December 7, 2016

    Off topic abit, after watching the full debate today on Brexit and the not so close result, is it possible Mr Redwood for a list of all the MPs that voted against it and there by the will of the people

    1. Lament
      December 8, 2016

      Most if not all of the SNP MPs voted against.

      The Scottish National Party, one could imagine might be seen by some as a possible cause for embarrassment to the UK government as a whole. But no, they are an embarrassment to any movement or Party which ever in the history of the world has called itself a Nationalist party or an Independence party. In Gaelic, “nationalist” and “independence” appears to not only have lost meaning in translation into English but turned into its very opposite. But how many of them know Gaelic or what some call Scottish, amongst SNP MPs? They are so English upper-class in attitude and garb that the English working class believes they must live in the gin-and-tonic belt.Worse, they probably do, or have aspirations in so doing. Always the lament of good normal everyday Scottish folks. Whenever historically they get a set of heroes, in two minutes they turn into SNPeers

    2. hefner
      December 8, 2016

      Mick, Why ask JR to provide such a list. You should do your homework and work it out yourself from Lazy bum or what?

  32. John
    December 7, 2016

    Any body else enjoying the huge equity increases in value? Not to mention commodities.

    For a nation now mostly invested in managed equity pensions has seen a boon, 20%, final salaries are history for the young and not so young.

    Ofcourse as the Pound recovers, probably pre June vote levels Q1 2017, equities will revert to other currencies. That’s not to say that the pension and ISA funds didn’t profit take. Most of the UK population say a 4 figure increase but if they went on holiday only saw less then £100 increase to their currency expenditure.

  33. Grinpeas and beans
    December 8, 2016

    Caroline Lucas Green Party MP took a curious of position on the Article 50 Amendment in Parliament and voted against it. Although she honestly kept her stance on being pro-EU she also indicated many times in the past that unlike the Labour Party she was in fact in favour of a Referendum on the EU membership.
    So, she liked us to have a vote as it presumably was good for us. We are of course so sorry we voted the opposite way to the backstreet bookies indicated. Darned Democracy!!!!!! Tut Tut. You just can’t rely on it to deliver dictatorship with a side serving of grinpeas when the electorate has had darned schooling!!! Bah Humbug!

  34. Lindsay McDougall
    December 8, 2016

    The concern about the UK economy arises from the Bank of England cutting base rate last month and authorising an extra £130 billion of QE. This was a quack remedy to deal with a non-existent problem and was the exact OPPOSITE of what was required. The result will be accelerating inflation from now onwards.

    The consequence for economic growth is that the OBR forecast is likely to be wrong. Growth is likely to be strong in 2017 as inflationary pressures build up. In 2018, growth may be average, with inflation well established. Growth will be below average in 2019 and 2020, as measures are taken to dampen down the inflation. This was the pattern in the mid-seventies, the early eighties, the late eighties / early nineties and the late naughties.

    The Chancellor of the Exchequer has been irresponsible in pencilling in an increase in State debt over the next two financial years. Luckily, we have merely had an Autumn Statement. Let us see what is actually in the Spring Budget and the implementing Finance Bill. There is still time for an adjustment.

    It is no co-incidence that these erroneous policies have come from Remainers / Remoaners. Are they actively malevolent or are there heads full of neo-Keynsian nonsense?

  35. What a carry on
    December 8, 2016

    It is good that MPs, at least at this stage in Brexit, have in the main procedurally respected the Referendum result, the Will of the People.

    It is good too, that female MPs opposed to Brexit have not played the female card of argumentum ad puellam pulchram. (aka the Argument from a Pretty Girl) to promote the EU. In Labour’s case, there are precious few who in the real world could have pulled it off.

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