Bouncy, trouncy, flouncy or pouncy’ are not descriptions normally given to our Chancellor Philip Hammond.
But when talking about the state of the economy in his Spring Statement on Tuesday, so rosy was the outlook he described that he said he was at his ‘most positively Tigger-like’.
There was good news everywhere – manufacturing, job creation, economic growth – you name it, things were looking good.
And he had a load of stats and facts to prove it, leaving listeners in no doubt that things are on top form.
Optimistic: The Chancellor painted a very rosy view of the economy in his Spring Statement
Then came the turn of the shadow Chancellor. To John McDonnell the state of the economy was looking very woeful indeed.
Growth is at its slowest for six years, wages falling, millions in insecure work. And he too had his own stats and facts to prove it, which one by one he pelted back at the Chancellor.
Listening to their descriptions it was hard to believe they were talking about the same place.
How did they do it? We’ve looked at the top claims made by Hammond and McDonnell to find out.
‘And under Conservative Leadership now has a manufacturing sector enjoying its longest unbroken run of growth for fifty years.’
Now that sounds impressive. So how long has this unbroken run of growth gone on for? Nine months.
That’s great – and obviously good news for the manufacturing sector – but somehow it was said with such glee you wouldn’t necessarily imagine that he would have been talking about under a year.
The graph below shows that there have been other periods in which manufacturing growth has tended up at a similar pace – it’s just the path was slightly bumpier.
Manufacturing has seen growth every month for the past nine
‘An economy which has added 3 million jobs.’
This does not mean that there are an extra three million people in employment; some people may have more than one job, and more than one person may do a single job.
There are also estimated to be around 2.6 million more adults in the UK since 2010.
Still, it is undoubtedly true that the unemployment rate is at record lows and that significant numbers of jobs have been created.
The employment rate has been growing in recent years at a steady pace
“I am pleased today to report to the House on a UK economy that has grown in every year since 2010.”
Sounds brilliant, doesn’t it – all those years of growth. But turned round the other way, it could just as easily be phrased as ‘we haven’t had a recession’.
This is good, but arguably a pretty low benchmark to crow about. What’s as interesting is how growth has fared.
The rate of growth rose steadily until four years ago, and it’s been declining ever since. The period even covered two quarters of retraction.
Growth has remained sluggish, with two quarters of retraction, but considered year on year it has remained positive Source: ONS
GDP year on year between 2010 and 2017 Source: ONS
‘Wages are lower now – in real terms – than they were in 2010 – and they’re still falling.’
Official figures from the Office for National Statistics shows that wages are not yet back to the same level as they were when the coalition came to power in 2010. But are they still falling? Well it depends over what time frame you look.
The way it’s described by the Shadow Chancellor one might imagine one long, sorry, negative line on a graph falling into increasingly negative territory. Over the past year wage growth has been pitiful, but has been bobbing very slightly up or very slightly down every month.
Weekly earnings are still lower than in 2010 if measured in real rather than nominal terms
Three million people were ‘in insecure work’.
This appears to be from claim from the TUC in February last year. Interestingly, the GMB union puts the number at closer to ten million.
It’s undoubtedly true that there is an increasing trend towards zero-hours contracts and workers lacking the traditional security of a job with a contract.
Some of these will label this ‘insecurity’ as ‘flexibility’ as it does suit some to work more flexibly or to be self-employed. But many will agree with the term.
Growth in the UK economy ‘was among the lowest in the G7 and the slowest since 2012’.
Growth was among the lowest in the G7, the official OBR report shows. However, that was only over the past year. In the first three quarters of 2016, the UK had the fastest rate of four-quarter GDP growth in the G7.
How you choose your timeframe will give you completely different results. This is why in some cases the Chancellor and shadow Chancellor talk about since 2010 – a reasonable starting point since it’s when the Conservative party came into power in the coalition.
But at other times they’ll diverge from that timeline quite arbitrarily – the slowest since 2012, the lowest among the G7 this year – because the numbers paint a different picture entirely.
GDP compared to other countries in the G7
And a word on GDP
It is interesting to note that the OBR report gives different versions for GDP. It is impossible to come up with one single number that encapsulates how an economy might have changed from one three-month period to the next. The OBR is quite realistic about this.
It says: ‘At a time when there is so much interest in the impact of the Brexit referendum vote on subsequent growth performance, these differences [in GDP according to the method of measurement chosen] – and the volatile quarterly profiles that underpin them – are a salutary reminder not to place too much weight on early estimates of short-term movements in GDP as they are both hard to measure and destined for revision.’
Some even question whether GDP is a good gauge of the health of an economy (see video below).
The economy is messy – it’s about humans and their choices and our everyday lives. It’s hard to reduce it to single numbers and even these can be manipulated. In some ways, observing what we see around us, what we read, what we experience, can sometimes tell us just as much.
GDP growth looks quite different depending on how you choose to measure it