Conor here: Richard Murphy highlights a problem governments across much of the world are struggling with. And much like in the UK, there’s little talk about reducing inequality or moving away from growth-at-all-costs and environmental-destruction model but instead more squeezing of the working class and foreign adventures to strike gold abroad.
By Richard Murphy, part-time Professor of Accounting Practice at Sheffield University Management School, director of the Corporate Accountability Network, member of Finance for the Future LLP, and director of Tax Research LLP. Originally published at Fund the Future.
There is no growth, so what does Labour do now?
That’s a relevant question because in October 2024 we saw the Office for National Statistics in the UK say that the UK economy had shrunk by 0.1 per cent that month. Now we know the figure for November, and it grew by 0.1 per cent.
When we look back over the last 18 months to two years, we can see that average growth has been less than 0.3 per cent a month. There is no growth in the UK economy that is worth talking about.
And at the same time, there’s also no inflation in the UK economy that’s worth talking about because In December, that went down by 0.1 per cent, which is, like those numbers for growth, pretty much a rounding difference in statistical terms.
Everything is flat, stagnant, and static. That is what the state of the UK economy is. And this presents the most enormous challenge to Labour, who came into office saying that they were going to deliver growth, and so far we have seen not the slightest evidence that they know how to deliver it.
I’m not going to go through why that’s the case again, because I’ve discussed it in other videos. Instead, I want to talk about what they should be doing because Labour is in desperate need of another reset, and it’s already done it once or twice, and it only got elected in July 2024. But they frankly can’t deliver on the basis of the programme they’ve now got.
According to that programme, there are five things they’re going to do.
They’re going to kick-start economic growth. Good luck, when there’s no sign that there’s any prospect of that happening.
They’re going to make Britain a clean energy superpower. That sounds fantastic, but they’ve just also announced that we’re going to be the hub for AI around the world, and AI is going to absorb vast amounts of energy. Those two policies are in complete conflict with each other, and I can be pretty sure that AI is going to win. We are not, as a result, going to be a clean energy superpower. Instead, we’re likely to be burning more fuel than we have for a long time, and increasing the temperature of the planet as a consequence.
We’re going to take back our streets, apparently, because taking back control sounded like a nice phrase for Labour to use, and they applied it to our streets. The trouble is, it’s taking years for cases to get to court for almost any crime that has now been committed. And of course, we all know that the actual charge rate is minuscule because we do not have enough police.
So that target is, again, utterly meaningless, as is the next one, which is breaking down barriers to opportunity. In the word salad that the average Labour politician now creates, this one ranks up there, high in the aspirational level, because it sounds like it’s Labour doing something for equality. But in practice, it’s not. It’s totally meaningless. It could be anything covered by that. And I don’t believe that there is really any significant change to education or other work opportunity as a consequence.
Just as their fifth objective, which is to build an NHS fit for the future, is something that they have no idea how to do because we have Wes Streeting in charge, which is enough to make us all despair. But Wes Streeting – he’s not planning to create an NHS fit for the future, he’s planning to create an NHS fit for privatisation.
So, what should Labour be doing? Well, the first and obvious advice that I can offer to it is give up these meaningless slogans. Stop pretending that, somehow or other, we will all be taken in by some new catchphrase. Because we’re not. If they ever worked, and maybe they did a decade or more ago, they do not now. We have seen too many politicians put up too many placards, making too many claims, all of which turned out to be utterly meaningless, to ever believe another such word salad. So let’s not bother with those. And Labour should be putting them aside.
Let’s also stop making goals out of meaningless things. Let me use growth as an example. Labour says it wants growth, but you can’t see growth. There isn’t anything that you can say like “That’s growth over there. That’s good.” Because growth is an epiphenomenon of other things happening.
Growth happens because more people are at work.
Or more services are supplied.
Or more things are made.
Or more goods are exported.
Or the government spends more into the economy to deliver services, like health and education and so on, which it says it won’t do at present.
Growth is not something in its own right. In technical terms, It’s an epiphenomenon. It’s a statistical consequence of real things happening.
And this is the nub of my argument. Labour should stop worrying about these stupid and meaningless terms and measures, like growth, and instead talk about what they’re going to do.
Real things that need to be done.
Real changes that would actually have impact upon the lives of people in this country.
Labour should be ending child poverty. Full stop. That’s a goal. It’s a real goal. It is decidedly measurable. It could be done. It would require the government to spend. It would require redistributive tax policies, but they can be adopted whenever Labour likes. That is a deliverable outcome.
It could improve housing stock in the UK. It could get rid of damp housing. It could require that a large number of houses be converted to be green and sustainable. These are tangible benefits which produce real employment opportunities, real benefits for the people living in the houses and real long-term benefits for the generations to come who won’t have to live in the grubby housing that too many people have to endure now.
It could also, for example, decide it was going to reduce actual measures of inequality in the economy. It could, as a goal, decide to literally reallocate some of the wealth of the rich to those who are on lowest income to stimulate the economy because those who are rich, as I’ve explained in previous videos, save and therefore do not encourage new economic activity, whereas those who are on lower income spend and therefore do encourage new economic activity. And they could lay this out as a programme and explain by how much they want to redistribute to encourage that growth.
They could set real targets for investment. Their own investment would be the best thing to do, and they could lay out how to fund it. Again, I’ve explained that if we change the rules on pensions and ISAs, there would be ample money available to the government to fund such a program. It could do that.
So it could say it will build so many schools, so many hospitals, so many houses, so many sustainable energy sources and on, without difficulty.
It doesn’t need big grand projects. The likes of HS2 are for fools. We don’t need those things.
We don’t need new runways at Heathrow when we know that we can’t let planes fly forever to the extent that we have in the past.
What we need are things that are small in themselves but big in their consequences.
Labour could do all of this. It could actually set out a positive vision of achievement.
And as I stress, that is not something which looks grandiose. It’s actually about putting jobs in every constituency in the UK, creating opportunities for long-term employment and real training, and actually delivering what people want where they are now.
If it did that, well, it would actually happen to deliver growth, but it wouldn’t make growth the goal. Growth would just happen to be the consequence, and that’s fine. I don’t mind if growth is the consequence, but what I’m really interested in is things happening. And when Labour begins to believe that its job is to make things happen rather than to write slogans and to aim for some vague, statistical idea called growth, then we might get delivery.
Do I think that Labour is likely to begin to believe in the real world and making change to it? I wish I did.
Have I got hope? Not a lot.
But, at some time, somewhere, some politician is going to understand that this is what UK needs, and is going to offer a programme like that. And when they do, that is what might break the logjam in British politics.
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Next Labour meaningless goal: let’s have fun- Borrowed from Kamala’s campaign.
Labour could stop the unnecessary bleeding of their finances for a start. Thus the UK should give the Ukraine the chop for a start. All those billions of pounds sent to the Ukraine are now a sunk cost that they will never get back – ever. But signing up the UK for a 100 year treaty to continue to send the Ukraine billions more is just a bad joke. It is now at the point where the UK should be hoping that the Russians take over all of the Ukraine so that that treaty is null and void. And somebody cancel Starmer’s passport please. Tell him that he gets it back only when he fixes more stuff at home first so no more trips to Kiev or Davos. Better yet, wait till his next trip and cancel his passport and then tell him that he is a stateless person not entitled to entry to the UK.
Thank you, Rev.
On his way back from Ukraine, Starmer gave an interview to the the current Mrs Johnson’s former partner,
https://www.thesun.co.uk/news/politics/32855183/starmer-balls-ruthless-benefits-bill/, and repeated that he had the balls to cut the welfare bill.
Rev Kev: All those billions of pounds sent to the Ukraine are now a sunk cost that they will never get back
I agree. My heart sank at the stupidity of that treaty and giving the Ukrainians Storm-Shadow missiles and the targeting data to fire them into Russia.
Now to Richard Murphy’s prescriptions —
Nowhere does Murphy face a fundamental problem, which is —
52.6% of all UK households [latest fig. released 19 Dec 2024] are taking more in benefits/services than they contribute in taxes (in 1977 it was 37%).
https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/theeffectsoftaxesandbenefitsonhouseholdincome/financialyearending2023
The UK’s current trajectory takes it to 60% of the population receiving more than they pay by ~2045, and 70% by ~2080.
Nor is this principally the extra pensioners “robbing from the young.” The percentage of retired households receiving more in benefits and services than contributing in all taxes has actually fallen, from 93.5% in 1977, to 87.6% today. (Plus, they have a lot of wealth and still pay a good deal of tax.) When you remove pensioners from the equation, today 47.2% of non-retired households (in 1977 it was 29.5%) are taking more than they pay.
So it’s far more about working-age UK people failing to pay their way.
In fact there are 9.4m people of working age neither in employment nor ‘economically inactive out of a supposed UK population of 69.5 million. Now are they necessarily to be blamed, given that between taxes and high rents the extra money they would earn would simply be taken away from them.
In the real-world, therefore, the easily taxable wealthy in the UK are already carrying most of the load, while long-term capital gains tax is 28 percent, which discourages venture capital. In the real world, that’s why Starmer and his clowns have to waffle about growth; granted, they have no idea how to achieve it.
In this real-world context for Murphy to write vaguely that Labour “could, as a goal, decide to literally reallocate some of the wealth of the rich” is just as specious and void of feasible specifics as the nonsense we hear from Starmer’s government.
If he reads this, he’s welcome to respond to this by telling me what specific redistributive measures he’s recommending.
Yeah, it might be nice to go after some of the ancient aristocratic landed estates and take that land away but: (a) how do you do that short of a non-democratic revolution?; and (b) if you did do it, how would it actually increase the wealth of the UK or even much improve the well-being of the general population?
Great comment, thanks. You have to get down to the nitty-gritty when you are dealing with these issues. Just a comment from an outsider from the USA. The UK, to me, has been in steep cultural decline since Tony Blair particularly from an intellectual point of view mirroring what has been happening in the US.
Michaelmas – he has written a document full of suggestions for how to tax wealth – https://taxingwealth.uk/
For an example of 1 suggestion, at the moment everyone who pays into a private pension gets a 20% tax rebate from the Government automatically added to their pension. If they are a higher rate taxpayer, then they can also claim the extra 20 or 25% on contributions. In other words, the Government has had the tax from them, but gives them it back if they ask for it. The 2023 figure according to Government records was about £26bn rebated back to higher rate tax payers.
Now 20% is already very generous – nowhere else you can get a bonus of 20% for nothing, so if the higher rate differential rebate was removed, the rich would still want to save in private pensions to get the 20%.
He has written a document full of suggestions for how to tax wealth
Thanks. I’ve downloaded it.
Both the Summary Report and the Full — which, Jesus, is 440 pages! I’m busy now and I’ll need time to think about it.
I’d say that this:
is by design. I know that the leadership of a few countries are trying to reduce the ‘tax-burden’ for the low paid (supposedly) so that the low paid will get more disposable income. The other way of getting more disposable income would be by increasing wages but for ‘reasons’ that isn’t possible.
My guess, a bit tinfoil-hat, but still is that once the ‘tax-burden’ has been lifted from the low paid then government services for them will be argued to be some sort of charity/welfare. Once it is seen as charity/welfare then cuts to government services will be seen as more acceptable.
Current leadership may or may not be aware of Goodhart’s law:
https://en.wikipedia.org/wiki/Goodhart%27s_law
As far as I can tell they are doing what PMC does and will try to get measured things to look good and argue that doing so is all that is needed. Works for GDP, inflation, employment ratio etc etc
I’d say that once wealth has been accumulated then it is difficult to reverse, best is not to allow it to accumulate too much. Increased bargaining power for workers and consumers would be good, however, the ones in power are unlikely to let others have more power so my guess is nothing will change until change is inevitable.
Prof Steven Keen tried to cobble a respons to this type of argument.
https://substack.com/home/post/p-153799368
Just saying.
It’s the 1970s all over again, but no Mrs. Thatcher in sight.
If you invest in Gilts, it’s time to sell while there is a brief respite in the inexorable rise of Gilt yields and put your money elsewhere: Outside the UK if you can, or into hard, income producing assets that people will turn to as energy gets more dear and the lights and heat start to go out in old Blighty. Coal mines are quite cheap these days.
Thank you, Conor.
Until the general election was called for July 2024, I frequently attended workshops with and receptions attended by the shadow Treasury and Business teams and even Starmer.
Richard is correct to highlight that growth is a consequence of measures, including redistribution of wealth.
At these events, it was staggering to observe how ignorant of economics these aspiring cabinet ministers were, no idea that growth is a consequence, and their infatuation with and reverence for what used to be called asset strippers*. It was worrying to hear that after five decades of deregulation, privatisation and free public money for the rich, more of the same bitter medicine that has not worked is expected to work this time.
When the truth outs about Reeves at the Bank of England** and HBOS***, the connections she leveraged to get a safe seat and her misanthropic attitudes, her continuation of neo-liberalism and reliance on Big Finance shysters will make sense.
*This literally and metaphorically includes Angela Rayner getting handsy with BlackRock’s Larry Fink, not the other way round.
**Reeves did not stay on much beyond graduate trainee. As part of her trainee rotation, she briefly reported to now governor Andrew Bailey. Bailey knows all about her, which gives him some protection.
***Rachel from accounts? Er, no. Rachel from complaints!
If you think Reeves is ignorant about how the economy works, her boss is worse. One wonders how long before he tires of that court jester to save his own skin.
They are arguably bigger fools than the Tories.
When the truth outs about Reeves at the Bank of England** and HBOS***, the connections she leveraged to get a safe seat and her misanthropic attitudes, her continuation of neo-liberalism and reliance on Big Finance shysters will make sense.
Do give some hints, please.
Thank you, M.
Reeves was not retained after her graduate traineeship and left the Bank of England soon after, not the six years her Linked In and Wikipedia profiles suggest. It’s not clear if her masters at LSE was sponsored by the Bank.
The same platforms used to say she worked as an economist at HBOS, but this was changed to retail banking without elaborating what exactly she did at the retail bank. According to colleagues and supervisors, she worked in complaint handling.
Her sister’s in laws, the Cryer family, helped Reeves succeed John Battle as candidate and MP for Leeds West. The Cryers also helped her sister Ellie.
Reeves has talked about how Labour was founded by and for working people, not the unemployed, not the retired, not the disabled etc. She’s almost Calvinist with a view of the elect and others not chosen by God.
Her publications, not just the book on women economists, have been clouded by allegations of plagiarism.
She appeared not to know that her heroine Nancy Astor was the first woman MP to take up her seat in the Commons, not the first woman elected, and was an anti-semite.
Let us not forget that her Commons credit card was suspended after £4k’s of unauthorised spending.
She looks nervous in public and on screen and is reported to be tetchy.
It’s what happens when you create a lie, live that lie and then it is exposed and begins to unravel.
“Growth is not something in its own right.”
Oh you sweet summer child. You just need to change how you measure it until you get a number you like.
Seriously though, what is ‘damp housing’?
Houses that have damp problems? i.e. excess moisture in the walls, mould and the like. Unpleasant to live with, and bad for the health.
You just need to change how you measure it until you get a number you like.”
That’s the trick.
Actually “damp housing” was my favorite suggestion. I assume he means housing which is, well, damp where is should not be, and thus is moldy and unhealthy for humans to live in.
buildingscience.com has a lot of good (if detailed) articles by the likes of John Straube and Joe Lstiburek on the topic. Basically there is a lot that has been done wrong in the last 50 years, both in new builds and retrofits. And a lot which is still done wrong now.
https://buildingscience.com/documents/published-articles/pa-built-wrong-from-start/view
It is interesting that damp housing is very much on the increase, why? Too much rain, too persistent, the ground never dries out. I know this from personal experience. Pay someone to provdide remedial measures and they will tell you this is going on all over the UK, increased rainfall, especially across summer particularly, makes it impossible for the problem to dry out. Older houses that were built on footings rather than on a big swadge of concrete suffer more as every room is built above grass, mud. Water gets into the walls from below and just rises up, very difficult to treat, requires the home to be well ventilated and well heated (which of course no one can afford these days, especially big houses) We will be seeing more problems with this in the future. Of course its leads to moss, mold, spores and all sorts of very unhealthy things happening, especially respitory diseases .. got asthma, even mild? youre in trouble if this happens in your bedroom or living areas, of course knock on from this is more demand on the NHS, treament, medications .. especially the young and elderly.
Another out of touch public sector academic proposing nonsense.
The idea that you can tax rich people is laughable, they will just leave (Branson, Ratcliff) and go somewhere else.
Any suggestion of a reform of government bonds, will leave to an immediate sell off, and a rise in interest rates, just like what happened under Truss.
they will just leave, good riddance, so sorry you can’t take your real estate with you.
What happens in the UK will be a good lesson for the rest of us. The era of growth is ending, and for reasons beyond economics. What to do.
Get small.
Isolation ho!
Not just real estate, but also their Sterling. All they can do with Sterling is spend it in the UK, or swap it with someone else for a different currency – and then the next person has the same issue.
Yes it can cause the exchange rate to fluctuate if a very large amount was put up for swap in one-go, but then their notional wealth decreases as well. In any case, the Sterling still exists and still can be used in the UK.
mysyk: sorry you can’t take your real estate with you.
Yup. Those who are wealthy through ownership of land and real estate are definitely in the category of the taxable wealthy.
I’m sure, like the USA which the UK is trying to imitate, there is deep corruption in the permanent government and ruling establishment. From a distance, I see the City of London and MI5/6 as ruling institutions rather than the actual political parties. Why is Starmer the exact replica of Boris Johnson?
the U.K. labour party has their own bill clinton, tony blair. he has successfully driven out any potential new dealer types.
like the clintonites running the democratic party, they are still waiting for their market miracles, and blaming us for not learning to code.
so as they selloff the country, that market miracle becomes ever further away than it already was, ain’t gonna happen. never was, never will.
On the exceptional front, the US has solved the stagnation problem by pumping trillions of dollars into its economy. Since January of 2017 the country has averaged deficits of $2 trillion, and it has managed real GDP growth of almost 2.5%. Just imagine what would happen if all the Neoliberal economies adopted this solution?
Did you forget a sarc tag ?
There is already a great deal of inflation baked into the US cake by the massive emission of credit supporting the profligate printing to deal with the stagnation problem. When the dollars come home to roost, the crash will, like the Great Depression 1.0, be blamed on tariffs rather than the torrential expansion of credit that preceded the crash. Economists never learn from these events.
If it is any consolation, past annual British growth per capita was about:
0.2% between 1270 to 1770 according to Holdrick-Prescott (from ‘Postwar US Business Cycles: an Empirical Investigation’ in Journal of Money, Credit and Banking 29 (1997) at 1-16).
0.03% up to 1663, according to Broadberry, et al. (https://www.cambridge.org/core/books/british-economic-growth-12701870/A270234C137117C8E0F1D1E7E6F0DA56)
0.84% from 1663 to 1707 (Broadberry again)
0.27% from 1707 to 1822 (Broadberry again)
1.03% after 1822 (Broadberry again)
So, growth was pretty poor even during the height of the industrial revolution. British productivity performance was entirely static in almost the entire period between 1870 and 1940, and even that flatters the UK because of the sharp uptick in growth between 1932 and 1937 thanks to the UK instituting imperial preference and being the first major country to abandon gold.
The flatlining of the economy over the last generation may therefore be characterised as a reversion to the pre-industrial mean, and it is unsurprising that in such a zero sum game, distributional conflict should be at risk of increasing.
Naturally, the newish government has absolutely nothing of value to say about any of this. Indeed, I was alarmed the other day when John van Reenen (head of Reeves’ new advisory council) declared that the UK’s performance could be improved by the UK rejoining the single market. He made this statement shortly after Starmer declared his ambition of the UK becoming an ‘AI superpower’, which was almost Johnsonian in its use of hyperbole.
Reintegration with the single market would entail acceptance – without opt-outs – of the acquis communautaire, including the EU’s vaunted 2023 AI Act (a Thierry Breton production). This Act imposes significant new regulation of the AI market. Starmer’s AI prospectus entails a large amount of laissez-faire or, at best, ‘light touch regulation’, which would presumably entail undercutting (i.e., stealing) such AI growth potential as the EU might otherwise be capable of generating.
All this suggests that the government doesn’t really know what it is doing, beyond indulging in yet another form of British ‘cakeism’.
Then the answer to the title question is “Live like it’s the Middle Ages again!”
And so Technofeudalism, the Middle Ages with cellphones?
(I don’t believe that’s feasible, actually; it’s too unstable.)
Elon’s Lament
I don’t care what they say
I won’t stay in a world without growth
[Verse 2]
Can’t sell my cars
Time to head for Mars
I’m so sad
Equities’ outlook is bad
Twitter was just a fad
[Chorus]
I don’t care what they say
I won’t stay in a world without growth
Peter & Gordon, “World Without Love“
Oh God!
Thanks, though. Best song parody for a while.
A day without growth is like a day without sunshine…
Economy is ultimately a function of the physical universe, and what makes everything function in the physical universe is energy. Cheap energy and high energy utilization means wealth. Expensive energy and low utilization means poverty. The UK won’t revive its economy unless it has access to cheaper and more abundant forms of energy.
Second, growth doesn’t matter, productivity is what matters. Productivity increases per capita wealth. Productivity is largely a function of capital investment.
The UK won’t revive until it makes changes to encourage cheap and abundant energy and encourage heavy capital investment to increase productivity. They also need to improve the education system to make sure they have the human capital to accomplish these goals.
Instead, the bipartisan direction of the UK seems to be a commitment to remaining a tourist destination while maintaining some banks conducting international financial swindles out of London, they are practically a Caribbean Island in the North Sea. Of course the economy is shrinking.
The UK won’t revive until it makes changes to encourage cheap and abundant energy and encourage heavy capital investment to increase productivity.
Thank you.
…. they are practically a Caribbean Island in the North Sea.
It’s a whole collection of islands in the Caribbean and elsewhere run out of London, and once you start to get a sense of the full scale of it kind of impressive. The words of Philip K. Dick come to mind: “The empire never ended.” It’s the financial part of the empire running on the down low.
Doesn’t help the rest of the country outside London much.
A lot of towns outside London are genteel Third World type places now, lucky if they have an Amazon distribution center or a Lidl market, whereas fifty years ago they had serious factories and manufacturing.
This is Shaxson’s Treasure Islands
https://www.goodreads.com/book/show/12030401-treasure-islands
Oh — and they’re not all islands (viz. Nevada) and the main operators are in the City and on Wall Street …
they are practically a Caribbean Island in the North Sea
Wait until AMOC slows down and even stops. Then it will become a mini Labrador or Iceland…
That’s why the music is good.
https://www.youtube.com/watch?v=3QMiCBJ7yRM
I found a lot of Trump’s address to border on parody. “Golden Age?” Seriously? The land where prices always go down, the stock market always goes up, and robot pollinators solve the birth rate problem. We’re headed to Mars right after we get our canal back.
It made “Mornin’ in ‘Murca” look sober and realistic.
I think the next few years will be an accelerationist’s dream/nightmare.
I thought that Mars is a codeword for Greenland. Trumpusk will land marines in a spaceship there, and colonize it, and Make Another Great America.