Lincolnshire Research Observatory Global and National Economic Context The Global and National Economic Context Professor Glyn Owen Economic Development and Regeneration at the University of Lincoln, Faculty of Business and Law

Lincolnshire Research Observatory Global and National Economic Context The UK Economy World’s fifth (6 th ?) (7 th ?) largest Economic growth – trend rate of 2.3% a year Output doubles every generation (30 years) An end to growth? Maybe – but nobody is planning for what would be a very different world

Lincolnshire Research Observatory Global and National Economic Context Real UK GDP 2005=100

Lincolnshire Research Observatory Global and National Economic Context Benefits of Growth Provides resources to meet growing expectations, eg for: High-tech health care More years of (better) education More consumption Needed to keep employment stable or rising and unemployment within limits: Growing population needs more jobs Rising productivity means that a given amount of output can be produced with steadily fewer workers

Lincolnshire Research Observatory Global and National Economic Context The recent Recession Precipitated by banking crisis (one of those in 1974 as well) Worse than 1974, 1981, 1991; same as 1930s ‘Bad but normal’ not ‘apocalyptic’ (we hope!) Permanent loss of output – GDP 8%-10% lower than if it had stayed on previous track

Lincolnshire Research Observatory Global and National Economic Context The fiscal challenge Pre-recession finances already weak(ish): £40bn deficit Recession reduced tax take by £50bn and raised spending by £50bn. Deficit = £140bn Deficit now falling slowly – much pain still to come in public sector

Lincolnshire Research Observatory Global and National Economic Context Government spending Spending is in two roughly equal parts: – Departmental Expenditure – Annually Managed Expenditure, code for welfare and debt interest AME hard to cut – some impossible Burden falls on DEL, but largest items are: – NHS – protected – Schools – semi-protected Disproportionate burden on everything else

Lincolnshire Research Observatory Global and National Economic Context The monetary opportunity Quantitative easing: £325bn injection into the economy Low interest rates

Lincolnshire Research Observatory Global and National Economic Context What next? Disappointingly slow recovery, but … … it is recovery, not disaster Coalition may have hoped for a pre-election splurge and the non-implementation of the most controversial cuts Scope for that now looks small but not zero Focus on off-balance-sheet action