Hooray: Britain’s economy now bigger than before the pandemic

Can you hear the applause? The hallelujahs? Or perhaps this is pushing the boat out too far, maybe even a few apologies from those who so like to trumpet with such pride and regularity that Britain is going down the Swanee? No, I thought not.

Predictably, the hot news that the UK economy has proved incredibly resilient, and is now bigger than it was before the pandemic, has been barely covered and is certainly noticeable by its absence from the usual Twitter-cum-X suspects today. 

Where are all those who have claimed  – on the left and far too many on the right too – that the Tories, and particularly Liz Truss, have trashed the economy, forcing up bond yields, interest rates and pushing the UK into recession? Aren’t they relieved to see that they got it so terribly wrong, that away from the Westminster bickering and politicking, those who dirty their hands were getting on with their business and working hard?

Clearly not, it’s sad to say. Yet everyone should be relieved: the latest figures for Gross Domestic Product from the Office for National Statistics show that overall growth is 1.8 per cent higher than before the pandemic, rather than the 0.2 per cent previously estimated.

That’s another £50 billion or so added to the size of the economy. What’s more, this revision means that UK growth is higher than Germany and France and that the country was not the slowest of the G7 economies to recover from the nearly two-year crippling lockdown.

Once again, the ONS has had to eat humble pie. The revised overall growth number comes after GDP rose by 0.3 per cent in the first quarter of the year instead of the previous ONS 0.1 per cent.  While the estimate for the second quarter of the year to June was unchanged at 0.2 per cent, the numbers can only be good news for all. 

Changing its figures is becoming something of a habit. The ONS also had to make a swift about-turn earlier this month when it revealed that by the end of 2021, the economy was 0.6 per cent larger than pre-pandemic levels rather than 1.2 per cent smaller, as previously estimated. So for 2022, GDP is now estimated to have increased by 4.3%, revised from a first estimate of 4.1%. 

According to the ONS, much of the uptick in growth comes from a stronger performance for professional and scientific businesses and the revision is being made because while data is getting better, it’s still slow to collect. Healthcare, however, grew less because of new real-time data which shows the cost of delivering services. 

Of course these are tiny differences but they still matter a lot: both for confidence and perception but also showing that we are moving in the right direction. 

Chancellor Jeremy Hunt was obviously delighted that the numbers are going up. But he will be less pleased that the brighter outlook will only put more pressure on the government to make earlier tax cuts, especially after the latest dire report from the Institute of Fiscal Studies which shows that the tax burden has been rising faster under this government than any other. 

Frighteningly, the IFS report claims that taxpayers face a total bill of £114 billion in what will become the biggest tax-raising Parliament on record. What a record for 13 years of Tory government. Even worse though is that by the next election, the IFS predicts every household will be paying roughly another £3,500 more than if tax had stayed at 2019 levels. Higher corporation tax, the so-called stealth taxes which are raised by freezing the personal allowances, are to blame. 

If the naysayers do want to hold the Tories to account, then it would be of far more value than criticising the extraordinary tax burden which it is getting away with without proper scrutiny. That, more than any other measure, is what is depressing the country’s animal spirits.

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