A decade on from the global financial crisis, the British economy faces increased risk of renewed recession. Alongside weak domestic growth, global economic growth is at its weakest since the crisis and the risk of a no-deal Brexit remains high.
Any preparation for recession must involve learning the lessons of the government response to the last one.
A new report from the TUC shows how the cuts imposed after the last recession, both in the UK and in much of the developed world, harmed economic growth, with a heavy impact on workers’ pay.
Overall, pay growth has halved across OECD countries in the decade since the GFC. In real terms, annual pay growth has been below one per cent a year for two thirds of countries.
Policymakers and politicians wrongly attribute this entirely to ‘productivity’, despite a failure to find convincing supply-side explanations for the change in growth at a time when controversial policies are acting on demand.
Calls for government expenditure in the face of renewed recession are already widespread, but ‘austerity thinking’ still constrains the options for fiscal policy going forwards.
The report sets out a number of recommendations: