UK economy ‘has £60bn hole’

4 Sep 13
The UK economy would be £60bn bigger if the level of growth predicted in 2010 had actually taken place, a study undertaken by the Trades Union Congress has found.

By Mark Smulian | 3 September 2013

The UK economy would be £60bn bigger if the level of growth predicted in 2010 had actually taken place, a study undertaken by the Trades Union Congress has found.

Publishing an analysis of the economic recovery, the TUC said that, if output had risen in line with the Office for Budget Responsibility's original forecast in June 2010, the economy would have grown by 7.9% since 2010. Instead, it has only expanded by of 4.2%, meaning there is lost output equivalent to £60bn.

TUC general secretary Frances O'Grady said the analysis indicated the extent to which government spending cuts had hit the economy.

‘The government has been quick to proclaim recent growth as proof that its economic plan is working,’ she said.

'However, a look behind the headline figures shows that our recovery is way behind schedule and that austerity has acted as a huge drag across the economy over recent years.’

The lost output had also contributed to the ‘huge squeeze on living standards over the last three years’, she added. Average earnings in mid-2013 were more than 25% lower than the OBR predicted when the government took office, the analysis concluded.

For the calculations, the TUC took the OBR's June 2010 estimates for growth and compared these with the latest available economic output data from the Office for National Statistics. They also assumed that half the expected growth for 2013 would have occurred in the first half of the year.

On this basis, the TUC also found that business investment grew at just a quarter of the pace expected, leaving a £24.8bn investment gap and that exports were down 20% on OBR forecasts, equivalent to £33.2bn.

Unemployment at 7.8% exceeded the OBR's prediction of 7.3%, leaving an additional 158,000 people out of work.

In addition, more than 80% of jobs created since 2010 have been in low-paid industries, and 46% of the total rise in employment has been in temporary work, she said.

Behind the rise in low paid and casual temporary work, along with increases in involuntary part-time work and zero-hours contracts, lay ‘an increasingly insecure, vulnerable workforce’, O'Grady said.

Meanwhile, the Resolution Foundation think-tank said low economic growth since 2010 had pushed 1.4m employees below the level of the living wage, adding to the 3.4m who were already in this position in 2009 at the depths of the recession.

The living wage stood at £7.20 per hour outside London and £8.30 in the capital for the foundation conducted its research. It has since risen to £7.45 and £8.55 respectively.

Women, people aged 16-20 and those working outside London and the south east were most at risk of being paid below the living wage. In the hotels and restaurants sector, 67% of staff were in this position.

The foundation said a two-tier workforce was emerging, with a lower tier ‘increasingly characterised by low-paid, low-skilled work which is often temporary, part-time or self-employed’.


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