It’s not every day you get one, let alone two, thumping big reports on the state of the UK economy. But today, Hallelujah, is one of those days. Earlier in the day we got the Institute for Fiscal Studies’ Green Budget. The short message was that the Chancellor has borrowed more than had been previously thought, and will have to impose more austerity than many believed possible, in order to bring Britain’s finances back into order. You can find my full analysis of it here on the Sky News website, while I’ve put the best of the charts onto my tumblr site, here.
However, that’s not all. We’ve also just received the latest comprehensive survey of Britain’s economy by the Organisation for Economic Co-operation and Development. Whereas the IFS’s focus is on the public finances, the OECD looks more broadly at both the economy and the social impact of UK economic policy.
Its main headline recommendations are that the Government needs to provide more investment to boost businesses around the country, and that the Bank of England should stand ready to spend more on quantitative easing.
The entire report is worth a read. As is the IFS’s Green Budget. Bear in mind that while the IFS report is wholly independent, and can therefore afford to be a touch more critical, the OECD report is at least partly influenced by Treasury input, which might explain why it is so supportive of all the Government’s policies (just as it was very supportive of the Labour government’s policies.
In the meantime, here are some of the best charts.
Austerity or not?
On the basis of this OECD chart, the UK’s brand of austerity isn’t actually all that severe. It’s barely more harsh than that being imposed in the US.
What this chart shows you is that the big devaluation in sterling has made manufacturers in Britain far more competitive in price terms. That they still struggle to compete with their overseas rivals underlines how much the export sector is struggling.
This chart compares levels of inequality across the developed world, and what’s immediately striking is how much more unequal (this is the so-called gini coefficient measuring gaps in income, so a bigger number denotes more inequality) than almost any other leading economy. Except, of course, for the US.
But at least there is/was the City…
However, there is one area where Britain excels: financial services. Whereas most other sectors struggle in competitiveness terms, financial services in Britain has a greater level of efficiency than the rest of the G7. Though bear in mind this pre-dates the financial crisis, which probably changed these numbers considerably.
Small firms missing out on investment
One area where the OECD says Britain could improve is in how much money it funnels towards small businesses. Although the UK spends a sizeable amount on backing research and development, as the two charts above show you, most of this goes towards big firms – with the implication that British small firms get less government R&D support than any other country in the OECD. In a way, this is the most shocking statistic in the OECD survey – and is one area where the Chancellor certainly needs to do more.