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Thursday, December 31, 2009

Standards of living fall below 2005 levels

After yesterday's leak of the Prime Minister's New Year message in which he declared that the recession is over, that unemployment will start falling within a year and promised that a “decade of shared prosperity” lies ahead it is interesting to note from today's Guardian how big a hole he has dug for us.

They report on the conclusions of Oxford Economics that the recession has pushed living standards in Britain to below the 2005 general election level. They say that Gross Domestic Product per person is £225 lower than in 2005, whilst UK living standards trail those in US by 25%:

Its findings are the latest to show that Gordon Brown's previous claims to have ended "Tory boom and bust" were wide of the mark. In his pre-budget report this month, the chancellor, Alistair Darling, acknowledged that the economy was likely to have shrunk by 4.75% this year – the worst performance since the 1920s.

Darling thinks the economy will expand by a modest 1.25% in 2010 before accelerating sharply to post an expansion of 3.5% in each of the following two years.

Oxford Economics says that gross domestic product per person has fallen to £22,700 on average in 2009, down from £23,000 in 2005 after adjusting for inflation – a fall of 1.3%. In Labour's first two terms GDP per head grew 12.6% and 8.3% respectively.

Even allowing for some recovery in economic growth in 2010, Oxford Economics expects GDP per head to be £22,775 next year (measured in 2009 prices) – a reduction in living standards equivalent to £225 per person compared with 2005.

It is not a pretty picture. These facts will make it even more difficult for Labour to portray itself as a party of economic competence over the next four months, in the lead up to the General Election.
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