The GDP figures today don’t tell us an awful lot about the state of the British economy or the cost-of-living crisis to come.
Growth for the month of June was down 0.6% but it was largely skewed by the extra bank holidays that month to celebrate the Platinum Jubilee, (it’s worth saying in previous Jubilee years, 2002 and 2012, growth fell by even more.)
Far more important is the looming economic crisis coming and what the Chancellor of the Exchequer had to say about it.
The landscape, frankly, could hardly be more bleak.
The Bank of England has forecast a recession set to last over a year, inflation to peak in excess of 13%, rising unemployment, falling real terms living standards – the list of gloom goes on and on.
And then there’s energy bills – the latest forecasts suggest they could exceed £5000 a year by the spring. That’s not far off five times what they were last winter.
Meanwhile both the Prime Minister and the Chancellor have been on holiday and almost silent on the issue, insisting action should wait for the new Tory leader, while the two candidates for that spot took a while to even acknowledge that more direct help for families would be needed.
Many people feel we’re now on the brink of an economic and human catastrophe and the government is completely asleep at the wheel.
It’s a claim the chancellor rejected giving his strongest hint yet that more help is coming.
“What I’ve said to my leadership team is work up the options of what we need to do to help people through the winter.” He said.
“We’re looking at what headroom we have to make sure we offer that additional support. My message to families today is we will have those options ready to go.”
While this might be one of the clearest indications yet that the government is considering more intervention, he evaded answering whether such direct interventions are now ‘inevitable’.
Remember, Nadim Zahawi is backing Liz Truss’ leadership campaign and she has been very reluctant to commit to more direct help, saying just last week prefers tax cuts to “handouts”.
This slight shift in the signalling is therefore important and telling – it indicates just how quickly minds might be changing behind the scenes as the reality of just how perilous things are becomes clearer.
Ensuring that people feel don’t fall into poverty matters on a human level, but it also matters enormously on an economic level too. Ensuring that people feel they have some spare money to spend in the economy is vital to mitigate economic contraction.
If companies feel they can’t afford to invest, and households feel they can’t afford to spend, businesses will suffer, jobs will be lost and salaries cut, making the whole thing worse.
There are many economists who think more government borrowing to support families this winter is now unavoidable and a suggestion that the problem can be fixed with tax cuts and growth alone (as favoured by Liz Truss) is borderline disingenuous.
Voices from across the political spectrum are calling for things from extended windfall taxes, to energy company nationalisation, to a significant uplift to universal credit.
It is becoming increasingly clear there will need to be action, what form it will take and whether it will arrive in time to help families this winter is still unclear.