SINCE coming to power in 2010 the Conservatives have seen their plans to balance the fiscal books scuppered time and again. In 2010 the Office for Budget Responsibility (OBR), the official fiscal watchdog, reckoned that the budget deficit would be nearly eliminated by 2015. The turmoil in the euro zone, which caused economic growth in Britain to slow, put paid to that. By 2016 it assumed that the deficit would be gone by 2019. Then the country voted for Brexit. The government now hopes to close the deficit sometime in the 2020s.
Unfortunately, more disappointing news came on October 10th, when the OBR suggested that it was considering a “downward revision to prospective productivity growth” in its next economic forecast. It would not be the first time that such a revision had taken place (see chart). Yet with a budget due on November 22nd, this is news that Philip Hammond, the chancellor, could do without.
Productivity usually refers to output per hour of work. In the 20th…Continue reading