How Labour can reap the benefits of economic growth

The week’s Autumn Statement was quite pessimistic about the growth outlook of Britain. The accompanying OBR analysis forecast growth will be below 1.5 per cent on average over the next five years, and even by the end of the period the growth in potential output is only up to 1.75 per cent. And on this the OBR is much more optimistic than some other forecasters, most notably the Bank of England.

I think that’s wrong and growth is likely to pick up. That presents an opportunity for an incoming Labour government. Labour has spotted the potential here, announcing its own plan for growth. But it could be a lot better. Let me explain how.

First let’s see why current analyses are too gloomy. Growth has been slow in the UK since the Great Recession. We have been caught in a low-growth trap, with interest rates close to zero and debts only gradually being worked away.