In this Institute of Economic Affairs interview, IEA Managing Editor Daniel Freeman is joined by Julian Jessop, Economics Fellow at the IEA, to discuss his chapter in the new IEA book The Great Stagnation: Why Britain Stopped Growing. The conversation covers the impact of austerity and Brexit on Britain’s economic growth since the 2008 financial crisis, and asks how much either can really explain the slowdown.
On austerity, Julian argues that the “savage cuts” of the 2010s are largely a myth: headline public spending continued to grow in real terms through the decade, even as it fell as a share of national income. He makes the case that controlling the deficit after 2008 was necessary to avoid a bigger crisis, while acknowledging that capital spending, including on prisons, was cut further than it should have been. He also connects the tighter borrowing conditions the UK faces today, sometimes called the “idiot premium”, to concerns that the Government is not as serious about the public finances as the coalition was in the early 2010s.
On Brexit, Julian argues the overall economic data shows it was largely a non-event, with UK growth tracking similarly to France and Germany since 2016. He points instead to high energy costs as a better explanation for the UK’s underperformance, and sets out benefits from Brexit including new trade deals, lower tariffs, smarter regulation and reduced budget contributions to the EU. Asked to score austerity and Brexit out of ten for their role in Britain’s growth slowdown, Julian gives both a zero.
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