The latest UK GDP figures may seem like good news, but a closer look reveals a worrying trend: while the economy grew by a mere 0.1% in the final quarter of 2024, the population increased at a faster rate—meaning Britons are effectively getting poorer.
GDP per capita, the key measure of living standards, has declined for the second consecutive quarter.
With the Spring Statement approaching, the Government must rethink its anti-growth policies, particularly in employment and energy, to reverse this decline.
Jonathan Isaby, Director of The Growth Commission’s important message is as follows:
Dear friends and supporters,
The UK GDP figures for the final quarter of 2024 were recently released – and to read some media reports, you would think that it should be a cause for us to celebrate and congratulate the Government. The Office for National Statistics revealed that growth of 0.1% was recorded between October and December last year, which is being written up in some quarters as “an unexpected boost” for the Chancellor, Rachel Reeves.
But don’t be fooled by this headline number, which is in any case the smallest possible positive statistical rise in raw GDP that could have been recorded. Because if the population is rising at a faster rate than the size of the economy, then the overall effect is that we are getting poorer. And that is exactly what is happening.
Here’s the killer extract from this morning’s ONS release:
There you have it in black and white. For the second successive quarter, the population grew at a faster rate than the size of the economy, meaning that average household incomes, as measured by GDP per capita, are on a downward trajectory. British families are officially poorer now than they were six months ago.
Ever since our founding, the Growth Commission has argued that GDP per capita is the best measure of overall living standards. And it is now formally the measure on which the Government wants us to judge them. In its Plan for Change published in December, GDP per capita was specifically announced as the yardstick against which to measure whether higher living standards are being delivered when it was identified as the ‘milestone’ for the Government’s ‘growth mission’ (as stated on page 21 of the Plan).
As our Chairman, Shanker Singham, said in his reaction to the figures, this “should be a wake-up call for the Government”. He adds:
“In advance of next month’s Spring Statement, the Chancellor should urgently be reviewing many of the anti-growth measures she announced at the Budget. In particular the Government should look again at the measures it is promoting that will make it more burdensome and expensive to employ people and the damaging regulatory policies in the energy sector which are indirectly costing British families dear.”
In a recent House of Lords debate on growth, Lord Udny-Lister specifically took a moment to ask the Government why they ignored the Growth Commission’s recommendations on easing costs for employers ahead of the Budget last autumn. Answer came there none…
It’s hard to believe that Reeves’ optimistic, agenda-setting speech focused on how the Government intends to ‘kickstart economic growth’ was barely a fortnight ago. While it was strong on positive rhetoric, words are not enough – robust action is required and there was a lack of honesty from her about the trade-offs involved in promoting pro-growth policies. For example, ministers need to accept that the current course they are pursuing in areas like Net Zero and many of the measures included in the Employment Rights Bill conflict with their stated aim of putting growth first.
Our immediate response to Reeves’ speech was posted here, but after the dust had settled on what she had to say, Shanker last week wrote this must-read piece for CapX reflecting on the how the Government is faring in this sphere, noting in particular the downgrades to growth forecasts emanating from various sources in recent weeks.
The big news coming from the U.S. since his inauguration has been what President Trump has been threatening and announcing in terms of tariffs.The Growth Commission welcomed his Executive Order instigating an investigation into unfair foreign government practices that harm U.S. trade and how the new administration might respond to them. We also recommended that the UK be top of the list for a potential trade deal and that his administration should also develop a core group of trading allies, including Australia and Japan, which is particularly exposed to China’s market-distorting practices. You can read our full response here.
Alden Abbott covered this in a piece for Forbes, while Shanker gave his take on President Trump’s initial announcements to Nick Abbot on LBC, which you can listen to here. Meanwhile, Christine McDaniel was interviewed on the BBC News Channel about both the likely impact on the U.S. economy of imposing tariffs and Trump’s energy policy (watch here) and also appeared on NYSE Live to respond in particular to the imposition on tariffs on China (watch here).
And finally, here are a few other matters our Commissioners have turned their attention to in recent weeks:
- Shanker gave testimony to the House of Lords European Affairs Committee on the trade costs of regulation and told The Independent why any ‘EU reset’ the Prime Minister contemplates must not compromise our independent trade policy and regulatory autonomy. He also wrote for CapX on why sky-high energy costs are killing the UK’s competitiveness.
- James Carter used a Daily Caller piece to make the case for indexing capital gains in the U.S. tax code in order to end the growth-limiting taxation of phantom gains resulting from inflation.
- Alden Abbott warned against heavy-handed AI regulation in an article for Forbes.
- And our warning that abolishing the non-dom regime will hinder prospects for economic growth in the UK was picked up by UAE newspaper The National.
That’s all from me for today.
Very best wishes,
Jonathan
Jonathan Isaby
Director, The Growth Commission
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