If the 0.6 per cent first-quarter GDP uplift reported by the Office for National Statistics is sustained for the rest of this year, Rishi Sunak will be able to claim – as he waves goodbye – that he and Jeremy Hunt have succeeded against their naysayers in dragging the UK economy from pandemic depths back to the level of ‘trend growth’, around 2.5 per cent per annum, that used to be thought of as normal. That’s spookily in line (as is the path of inflation) with Ken Clarke’s achievement as Tory chancellor in 1996 ahead of the election that swept Blair and Brown to power the following May. How lucky is today’s untested, unloved and mostly unknown Labour front bench to be riding to power on a tsunami of anti-Tory sentiment in which a recovering economy, including rising real wages, apparently has no tangible impact on voters’ intentions?
Meanwhile, I’m intrigued by ONS chief economist Grant Fitzner’s claim that ‘you could say the economy is going gangbusters’. Did he pick the right word? Perhaps he meant ‘ghostbusters’, in the sense that, however many economic demons Sunak and Hunt succeed in chasing away, there’s still (to quote Ray Parker Jr’s memorable 1984 lyrics) ‘an invisible man sleepin’ in your bed’: his name is Keir Starmer.
Outside Labour’s box
Labour’s ‘ten policies to change Britain’, published to not much media attention in March, said absolutely nothing about growth or productivity. Other signals so far from Keir Starmer and his shadow chancellor Rachel Reeves have added little: they won’t increase the rate of corporation tax and they will ‘bulldoze’ the planning system to allow more house-building on greenbelt land. But they’ll also add extra costs for employers by enlarging workers’ rights.
So what else might they do to add fizz to the economy without looking like irresponsible incomers on course for a clash with the gilts market? How about some pragmatic pick-and-mix reforms of the VAT system to help smaller businesses that are the bedrock of growth and to boost UK spending by foreign visitors?
Borrow a policy from the Reform party and raise the threshold for VAT registration from £90,000 to £120,000.
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