Lincolnshire Research Observatory www researchlincs org uk Global
Lincolnshire Research Observatory www. research-lincs. org. uk Global and National Economic Context The Global and National Economic Context Professor Glyn Owen Economic Development and Regeneration at the University of Lincoln, Faculty of Business and Law
Lincolnshire Research Observatory www. research-lincs. org. uk Global and National Economic Context The UK Economy • • • World’s fifth (6 th? ) (7 th? ) largest Economic growth – trend rate of 2. 3% a year Output doubles every generation (30 years) An end to growth? Maybe – but nobody is planning for what would be a very different world
Lincolnshire Research Observatory www. research-lincs. org. uk Global and National Economic Context Real UK GDP 2005=100 120, 0 100, 0 R 2 = 0, 9893 80, 0 60, 0 40, 0 20, 0 1948195019521954195619581960196219641966196819701972197419761978198019821984198619881990199219941996199820002002200420062008
Lincolnshire Research Observatory www. research-lincs. org. uk Global and National Economic Context Benefits of Growth • Provides resources to meet growing expectations, eg for: • High-tech health care • More years of (better) education • More consumption • Needed to keep employment stable or rising and unemployment within limits: • Growing population needs more jobs • Rising productivity means that a given amount of output can be produced with steadily fewer workers
Lincolnshire Research Observatory www. research-lincs. org. uk Global and National Economic Context The recent Recession • • • Precipitated by banking crisis (one of those in 1974 as well) Worse than 1974, 1981, 1991; same as 1930 s ‘Bad but normal’ not ‘apocalyptic’ (we hope!) Permanent loss of output – GDP 8%-10% lower than if it had stayed on previous track
Lincolnshire Research Observatory www. research-lincs. org. uk Global and National Economic Context The fiscal challenge • Pre-recession finances already weak(ish): £ 40 bn deficit • Recession reduced tax take by £ 50 bn and raised spending by £ 50 bn. Deficit = £ 140 bn • Deficit now falling slowly – much pain still to come in public sector
Lincolnshire Research Observatory www. research-lincs. org. uk Global and National Economic Context Government spending • Spending is in two roughly equal parts: – Departmental Expenditure – Annually Managed Expenditure, code for welfare and debt interest • AME hard to cut – some impossible • Burden falls on DEL, but largest items are: – NHS – protected – Schools – semi-protected • Disproportionate burden on everything else
Lincolnshire Research Observatory www. research-lincs. org. uk Global and National Economic Context The monetary opportunity • Quantitative easing: £ 325 bn injection into the economy • Low interest rates
Lincolnshire Research Observatory www. research-lincs. org. uk What next? Global and National Economic Context • Disappointingly slow recovery, but … • … it is recovery, not disaster • Coalition may have hoped for a pre-election splurge and the non-implementation of the most controversial cuts • Scope for that now looks small but not zero • Focus on off-balance-sheet action
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