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Britain’s slump isn’t all it appears

Ed Conway
The Times

The UK suffered the biggest slump in 2020, according to the OECD club of nations, with GDP falling at an annual rate of 9.7%, worse even than Spain (8.7%), says Ed Conway. But while the report seems to confirm the idea that the UK has suffered a “uniquely dismal fate in the face of the virus”, there is a more likely explanation: that the figure reflects the way we calculate GDP. Back in 1997, when Gordon Brown started “pumping money into public services”, the more he spent the more GDP rose “because public-sector economic output simply equalled what we paid for it”. It made “no allowance for quality”. To reflect productivity better, the Office for National Statistics therefore began to base public-sector output on a basket of measures including elective operations and teaching hours. International bodies urged other OECD nations to do likewise, but it seems that few bothered. We don’t know for sure, but what we do know is that there is “no comprehensive benchmark” for the way GDP is calculated, and since government activity accounts for about one in every five pounds of Britain’s GDP, this matters. Viewed in this light, we can upgrade our slump to just “one of the worst”: hardly good news, but “one has to take what one can”