Guido was struck by a strange sense of déjà vu whilst reading through the Chancellor’s speech to the CPS last night. Jeremy Hunt pledged to deliver “a dynamic, high growth future” and committed that “productivity will be at the heart of it.” Now where have we heard all of this before…

Productivity decreased by 1.4% in Q1 of 2023 compared to the previous quarter and it was down 0.6% on the same period of the previous year. Productivity now is at the same level as before the pandemic in 2019. Despite the fact that almost every Chancellor since 2010 has promised to improve it…

• In February 2022, Chancellor Rishi Sunak outlined three priorities, “capital, people and ideas” and promised “That’s how we’ll rejuvenate our national productivity”.
• In September 2019, Chancellor Sajid Javid proclaimed “we need to raise our productivity“.
• In November 2017, Chancellor Philip Hammond expanded the productivity investment fund to £31 billion, making the “battle to raise Britain’s productivity… the central mission of the Treasury“.
• In June 2017, Chancellor Philip Hammond pledged his “medium term focus would be productivity“.
• In November 2016, Chancellor Phillip Hammond used his Autumn Statement to  “prioritise additional high-value investment.. that will directly contribute to raising Britain’s productivity”.
• In July 2015, Chancellor George Osborne described productivity as “the great economic challenge we face”, before announcing the “Plan for Productivity“.
• In September 2013, Chancellor George Osborne said “the only sustainable way to raise living standards is to raise productivity“.
• In June 2010, Chancellor George Osborne used his first emergency budget to say “We cannot afford to continue” with productivity in decline.

First year economics undergraduates know that lower corporate taxation means more investment and, therefore, higher productivity. Moreover, empirical studies indicate a positive relationship between lower corporate tax rates and higher corporate investments. So why did Rishi hike corporation taxes if the government wants, as all Tory chancellors claim, to increase productivity? 

24 hours ago we learnt that an internal BBC review found too many of their journalists “lack understanding of basic economics”. This morning the corporation’s own “economics correspondent” Andy Verity broke the news that the “UK pays more for electricity than it costs to make”. Clearly he’s just had his first lesson on the concept of profit…

Yet again, Labour have been putting rhetoric over coherent economics. The party has been denouncing the Government’s fiscal proposals, with Sir Keir calling the package a “Kamikaze” budget and Jonathan Ashworth criticising “£45 billion of unfunded tax cuts”. 

These attacks contain an element of self-harm because Labour support many of the proposals.

They plan to vote with the government on scrapping the Health and Social Care Levy, by far the biggest measure in the package, accounting for some 40% of unfunded spending. This is £18 billion of the £45 billion they decry.

Labour also supports the 1p cut to basic rate tax.

In the most generous interpretation, Labour supports billions in unfunded tax cuts, and oppose at most £27 billion.  

None of it is a surprise after Rachel Reeves’s previous monetary mishaps. Guido would advise Labour to spend less time conjuring adversarial attack-lines and more on getting the numbers right. If Kwasi’s unfunded tax cuts are “kamikaze” economics, Labour’s economic platform is no different.

New data from the ONS shows the UK economy is now back at pre-pandemic levels, with GDP growth at 0.9% between October and November – 0.7% larger than in February 2020, just before Covid hit. Obviously good news… although not quite the news we were all told to expect…

Back in January 2021, the FT’s annual economists’ survey painted a dire picture for the year ahead:

“Economists expect the UK economic recovery in 2021 to be slower than in peer countries, because of a lower starting point, a larger services sector, low business investment and the impact of Brexit.”

The survey asked nearly 100 economists to look into their crystal balls and predict the future. Almost all of them said they “expect the size of the economy not to return to pre-pandemic levels until the third quarter of 2022”. Scrolling through the survey made for miserable reading. Unemployment, bankruptcies and the horrors of Brexit were all supposed to thwart our recovery…

Instead, growth is now higher than pre-Covid, and unemployment is estimated at 4.2% – even after the end of furlough in September. Congratulations go to Erik Britton, Patrick Minford, and Tej Parikh, who were the only economists from the FT survey to actually get it right…