Within days of the momentous Brexit Referendum, the Chief Economist of the Bank of England in a speech in Port Talbot Wales made some telling points about the then current economic assumptions and the belief that successful business statistics, translate to successful real world outcomes.
Andrew Haldane, in remarks attributed to him and not the Bank, posed the question as to why if UK economy recovery is visible and tangible (the stats surely don’t lie) is there a plethora of community feedback that sales, jobs, confidence and investment are either fragile or missing from large parts of our society.
Why did this matter at all? The tools available to the Bank are small and can be blunt: they only set one interest rate. Monetary policy is for the whole of the UK and not differential for either regions or industries.
It was acknowledged that official date is noisy and mis-measured. It fails to capture fully some areas of activity (like the digital scene) or contributors officially outside the system (the volunteering and household sector). A jigsaw puzzle with some pieces missing and the others slightly water-damaged.
No formal criticism of the Office of National Statistics was made. But simple truths reinforce that in a dynamic and evolving economy, reflecting social as well as policy change, it is impossible to track everything with sufficient precision. Standard measures like the GDP are not perfect measures of societal well-being.
Monetary policy has impacted via quantitative easing different elements and parts of society in differing ways. The most pressing reality is that success in one part of the country (for example London) can be cold comfort to those in other regions who have experienced slow or negative growth in incomes, activity or outcomes.
Mr Haldane made significant comment on the dis-aggregation of the data – getting behind the big numbers. Only in two regions (London and the South East) did incomes in 2015 sit above the level preceding the global economic crisis. The remaining regions across the board were still catching up – ever so slowly for many.
“This has been an uneven economic recovery, looking across regions, income and age cohorts. Large parts of the UK – many regions, those on low incomes, the young, renters – have not experienced any meaningful recovery in their incomes or their wealth.”
It was telling that the conclusion in June 2016 was that, so far as at that time, it had been a recovery for the too few rather than the too many, a recovery delivering too little rather than too much.
Political developments, two general elections and much commentary have seen to bear out this analysis. The desire for recovery (economic, social and communal) has been poorly matched by the realities of the policy choices made and implemented. It was no surprise then that many voters in December 2019 across a diversity of demographic clusters made dramatic shifts. The central policy levers and the professionals who give the advice are only part of the story. The lived experience of communities like Port Talbot, Hull, Stirling or Ruthven were impacted by too little, too late, too narrow outcomes from the period of austerity and Brexit implementation.
The Campaign for Better Business Statistics (via UKPLC) is championing change and necessary reform in how we set about to record, assess and analyse the economy we have now rather than the economy of our undergrad text books of the past. We in 2020 are somewhat hostage to the decisions and non-decisions of the past 20 years …. time to make it better.
– by Noel Hadjmichael, CMR Group
Note: Andrew Haldane’ speech available here.