Misery lurks beneath the figures

published 21 July 2016

"Whose Recovery?" That was the title of a speech given by Andy Haldane, chief economist of the Bank of England, a few weeks ago. In it he pointed out something that MoneyWeek readers know already and that Theresa May also appears to understand: that while UK GDP growth looks like it has recovered nicely since the financial crisis (GDP is up 7%, employment up 6% and wealth up 30%), the headline numbers cover up a good few miseries.

The first is that much of the rise in our GDP has been accounted for by population growth; GDP per head is up only 1% or so since 2009. The second is that our GDP numbers measure (as best they can) income from all UK activities. But that doesn't mean, as Haldane notes, that all the income stays in the UK. Subtract the share flowing overseas (3% of GDP a record high), and the income not distributed to households by companies (which save some revenue), and the truth is that average household income has "effectively stagnated" over the last seven years.

Chuck into that mix job insecurity (more people working part-time and on flexible contracts); lack of job satisfaction (the part-time jobs encouraged by our benefits system aren't usually particularly satisfying); and the political focus on pensioners over the rest of the population (real incomes up 9% since 2008); and you'll begin to grasp why a good number of people feel left behind. That's particularly the case when you think further about the wealth numbers.

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This isn't exactly the first time this has happened. In the 1930s, the old heavy industries were already collapsing and there was misery all around as a result. But those who had jobs, particularly in the "new electric and electronic factories" were seeing "genuine and rising prosperity".* The question now is what we do about it today (spending billions on rearmament isn't ideal as a solution). There are clues in Haldane's speech as to what he fancies policy-wise: "a material easing of monetary policy" and an end to austerity ("monetary policy can't do everything").

And in this week's issue, John looks at the clues we have had so far from May on what her government is likely to want to do. Falling asset prices are unlikely to be the answer ("material easing" mostly prevents this) and a proper debt jubilee isn't either (see our interview with Steve Keen). But a degree of further redistribution of the gains of the last few years almost certainly is. Something, as John notes, for high earners, pensioners and property owners to think about.

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Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.