Debunking Labour's promises of economic growth

It is an appealing idea. You grow the economy, and everyone benefits. So much wealth is created that we can solve the environmental problems associated with growth. The only thing is, there is little evidence this is possible.

The UK needs three things, Sir Keir Starmer said last July. “Growth, growth, growth.” Around the same time, the Scottish Government published the National Strategy for Economic Transformation. It called for growth that would “significantly” outpace the last decade. The growth bug affects all of our political parties.

READ MORE: Labour respond to calls to 'block Scottish independence spending'

Growth is hard for political parties to abandon because it is the answer to all of their problems. They believe growth allows us to run a budget surplus or at least a smaller deficit. Everyone sees the benefits as a rising tide lifting all boats. Levelling up will take place. Government spending can increase, and we don’t need to raise taxes. And we can invest in green technology that will enable us to suck all of that carbon out of the atmosphere. Growth, growth, growth, they cry! They hope that people listen. They also hope that people haven’t been watching.

The annual average growth rate in GDP since 2000 has been 2% and is on a clear downward trend. This trend extends back to 1950. More recently, GDP was 0.2% between April, May and June. This means that it is very likely that 2023 will see a tiny positive increase in GDP. That downward trend will continue.

As regular readers will know, we support degrowth, a managed reduction in many sectors of the economy to create more space for wellbeing-directed activities. But in order to give the growthers a fair crack of the whip, we will ignore all of the evidence that suggests that growth in Western economies is incompatible with a living planet and look at the evidence to see if growth is even possible.

“Faster growth is unattainable because the UK’s growth rate is declining, and there is no evidence that centrist or free market economic policies can shift the country onto a higher growth trajectory,” say researchers from Manchester University in their recent book When Nothing Works. Unattainable. But this is exactly what all mainstream political parties promise.

They don’t want growth per se; it is what growth delivers that they are after. Growth is a means not an ends. Everyone hopes that growth leads to an increase in wages, which would be delivered predominantly by increased labour productivity. So let’s look at growth through that lens. This week, the New Economics Foundation tweeted: "British workers have missed out on 15 years of wage growth, and we're all poorer as a result. Wages are around £1000 lower than they were in 2008.” So what is the point of the growth that we have had if most people don’t see the benefits?

To see those benefits, growthers would claim, we need UK workers to be more productive. So how are we doing there? The ONS says this about labour productivity since 2008: "This sustained period of minimal labour productivity growth has been labelled the UK’s 'productivity puzzle'." So no joy there. Incidentally, there is no puzzle. We know why the UK is so unproductive. But that is for another post.

In summary, giving the benefit of any doubt to the idea that growth is achievable without suffocating the planet, we find evidence that growth in the UK is low and declining. The growth over the last 15 years has not gone to wage earners, the majority of the UK, and labour productivity, has been stagnant since the financial crisis in 2008. It has also come at a time of increasing inequality. You would think this would be enough evidence for political parties to set off in search of another destination. But alas, no. Our politicians still promise the impossible. Lies, lies, lies.

READ MORE: Keir Starmer: Labour to impose two-child benefit cap 'more fairly'

So what now?

As a body politic, we have to challenge our policymakers and politicians. We have to release that the sweet-sounding words of growth will never deliver the type of change we require. We would argue that the growth policies that they have been trying for the last forty years have made things worse.

This week we launched our Festival of Economics. With over 40 speakers and sessions, we need some themes to pull everything together. We will do that by asking our speakers three questions:

1. How can our political parties, governments, policymakers and their advisers realistically turn the tide to create GDP growth significantly (as promised) above trend?

2. How can they do that and meet climate and other ecological targets?

3. What are their plans for an economy without GDP growth?

We think this is a great place to start, and we could encourage anyone who meets a politician or a policymaker to ask the same three questions.

More and more people realise that governments are trying to placate us when they promise more growth. They have no plan to grow the economy. Instead, the hope is that we are so fixated on the idea of growth that we are willing to give them one more chance. As the evidence mounts that growth is, in fact, impossible as well as ecologically undesirable, an alternative economic approach dawns over the horizon.