Nadia Whittome on… the Recession

On 15 February, we woke up to the news that the UK economy officially entered a recession.

“What, only now?”, might have been your reaction. You’d be entirely forgiven for thinking that we’ve been in recession for at least the past two years. After all, most of us have been feeling noticeably poorer. In fact, we’ve experienced the fastest decline in living standards since records began. 

So why is the announcement only coming now? That’s just because the technical definition relies on the simple and imperfect measure that is Gross Domestic Product (GDP) - the value of all goods and services produced in the country. If it goes down for two quarters of a year in a row, a recession is declared. However, that figure alone doesn’t take into account some crucial factors - the most obvious one being population. When we look at GDP per person, it turns out that the UK had already been getting poorer since early 2022.

Neither does it reflect the fact that the downturn hasn’t been felt by everyone equally. For example, while millions were skipping meals to pay their bills, energy companies were announcing record profits. We recently learned that British Gas’ profits increased more than ten times in a year. No recession for them, then.

What caused this turmoil? It’s convenient for those in power to blame unexpected global events. Undeniably, the UK government didn’t cause the Covid pandemic or the energy crisis following Russia’s invasion of Ukraine. But it did have the power to influence how well or badly we coped. Liz Truss’ infamous mini-budget, which sent the pound into freefall, wasn’t some natural disaster. Neither was the government’s handling of Brexit, which has also done us no favours. For all his talk about growth, Rishi Sunak has offered no real solutions, preferring to focus on attacking refugees and trans people instead.

But it’s not just the past couple of years that have felt like a never-ending crisis. I was eleven years old when the financial crash happened, and since then there’s not been a moment when the economy seemed to be in a good state. The recession of the late 2000s was followed by brutal austerity. Benefits were cut, public sector pay was frozen; youth centres, sure start centres and libraries shut down one by one. Rough sleeping, demand for food banks and NHS waiting times all soared. The dire state of healthcare and other services made us less prepared for emergencies like Covid. 

The government promised that a few years of pain would result in growth and prosperity, but this never materialised. In fact, the average worker’s pay is today worth £12 a week less than in 2008, when I was just out of primary school. The strategy clearly hasn’t worked.

So how do we stop this endless cycle of crisis and misery? The answer might seem counterintuitive, but many economists agree: we need more government spending.

Conservative politicians like to compare managing public finances to setting a household budget: you shouldn't spend more than you have, or you’ll be in trouble. But that’s just not how a national economy works. 

If you have a stable job, you usually know exactly how much money you’ll be bringing home the next month. For a government, that’s less obvious: how much it’s able to raise in tax depends on how much people earn - a figure that can go up or down, depending on its actions. A government also has more flexibility: it can print money, raise taxes or borrow to invest - and if it spends well today, it could well have more funds available tomorrow. 

Let me give just a few examples. Properly funding the NHS would mean more people with long-term health conditions being able to return to work (it’s no coincidence that we have record waiting lists for treatment, and record numbers of people out of work due to illness, at the same time). Guaranteeing genuinely free childcare would allow more parents and carers, especially women, to get back to the workplace if they choose to. Investing in publicly owned, cheap renewable energy; building infrastructure like good quality public transport, and insulating buildings would bring down costs for individuals and companies while creating well-paid green jobs up and down the country. We’d all benefit as a result.

Another myth that the Tories want us to believe is that the way to boost growth is to cut taxes for the rich. In fact, the opposite is true. When ordinary people are better-off, they spend more: in shops and restaurants, on the arts, hobbies, travel or learning new skills, which in turn supports jobs. Handouts for the wealthiest, who can afford these things already, don’t work the same way. Instead, any extra money is more likely to be stored in savings accounts, used to buy up properties or disappear in tax havens. That’s why redistributing wealth from the top to the majority is not just the fair thing to do: it makes economic sense too.

Personally, I’m tired of living through crisis after crisis, constantly hearing that working class people must tighten their belts for the sake of a prosperous future that never comes. It’s time to stop this vicious circle and do what Clement Attlee successfully did after World War II: invest in a recovery and improve the lives of the many.

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