British GDP growth depends on the current fiscal position – a fact that is being forgotten

There is an interesting debate going on in the UK at present about the concept of austerity.

It seems that since they were elected British Labour have thought it necessary to put out ever increasing messages of doom and the need for tough fiscal action aka austerity.

Every week passes since, it seems when the tough talk gets tougher and core promises are abandoned.

Labour Cabinet ministers said the government will take further difficult decisions’ The data shows that the fiscal position is unexceptional, cycling through the rise and fall as dictated by the spending decisions of the non-government sector.

When the economy is strong, the deficit will be lower as taxes receipts increase and welfare spending costs are reduced.

The UK deficit is just above the average of the OECD nations not by much.

The only way the British economy can sustain growth at present is if the private domestic sector plunges into deficit and builds up ever increasing levels of debt.

Withdraw the fiscal support as has been announced and the UK economy is heading back towards recession quickly.

The government celebrated the positive growth performance in the first two quarters of 2024 it failed to acknowledge that that performance was only possible because of fiscal settings.