Faltering economic recovery has created a £65 billion 'growth gap', says TUC

28 Nov 2011 12:00 PM

The UK's faltering economic performance over the last 18 months has left a £65 billion 'growth gap', the TUC says recently (Saturday) as it launches the first of its series of economic reports days before the Chancellor's Autumn Statement.

The TUC report - which compares the current state of the UK economy with the government's official fiscal forecast at the time of the emergency budget in June 2010 - shows that poor GDP growth, lower than expected tax receipts, rising unemployment and higher welfare spending is likely to leave the economy around £65bn smaller by 2015.

The government's austerity programme, which has contributed to the slowest economic recovery in a century and sent unemployment to a 17-year high, will result in an extra £123bn of public borrowing by 2015, says the TUC.

The report shows that the UK's economic troubles are home-grown, rather than caused by Europe as the government claims, as net trade - the economic indicator most likely to be affected by the Eurozone crisis - is expected to be stronger than forecast in 2011.

It cites the latest independent economic estimates which show that net trade is expected to make a 1.3 per cent contribution to growth in 2011, compared to the 0.6 per cent forecast by the Office for Budget Responsibility last year.

However domestic demand, which the OBR had expected to contribute 1.1 percentage points to growth this year (two thirds of total UK growth), is now set to fall by 0.6 per cent, says the TUC.

Collapsing domestic spending, driven by low wage growth, confidence-sapping tax rises such as VAT and rising unemployment are the main drag on UK economic growth and the government has had a direct hand in causing it, says the TUC.

The report highlights the self-defeating nature of the government's austerity measures, with the £83bn of spending cuts and £29bn of tax rises is only expected to cut the deficit by £56bn as welfare spending soars and tax receipts fall.

Rather than using Europe as the latest excuse for the UK's ongoing economic troubles, the Chancellor should use next week's Autumn Statement to announce that the Eurozone crisis calls for a new economic strategy which prioritises investment in jobs and growth over more spending cuts, says the TUC.

TUC General Secretary Brendan Barber said: 'The government's self-defeating austerity programme is becoming an increasingly costly mistake.

'Not only has it choked off the recovery and sent hundreds of thousands of people on to the dole, it is failing to meets its own central objective of eliminating the deficit.

'The pressure is mounting on the Chancellor to come up with a new economic strategy next week. But re-hashed announcements and desperate attacks on Europe and public sector workers will not help our economy one bit.

'Political machismo and right-wing ideology may make Mr Osborne want to stick with his plans, but a rational Chancellor would see that the unexpected depth of the Eurozone crisis and the likelihood that growth has stalled in our main markets makes a Plan A redundant. When the facts change, so should the strategy.'


2011 contributions to growth (per cent)


Domestic demand

Net trade

OBR forecast March 2011



Latest independent forecasts




Public sector net borrowing (£bn)







Latest independent estimates





OBR June 2011 forecast












- The latest independent estimates are taken from the Treasury's comparison of independent forecasts earlier this month www.hm-treasury.gov.uk/d/201111forcomp.pdf

- The £65bn growth gap is based on the economy in 2015 being 4.5 per cent smaller than the OBR forecast in June 2010.

- The TUC economic report is available to download at www.tuc.org.uk/EconomicReportNov2011

- All TUC press releases can be found at www.tuc.org.uk


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