Individual GDP income still lower than when the coalition took office

date: 27 August 2013

embargo: 00.01hrs Wednesday 28 August 2013

GDP income per head - economic growth that takes account of population change - is still lower today than when the coalition took office, according to new TUC analysis published today (Wednesday).

The TUC analysis shows that the UK's rising population has been the driving force behind economic growth in recent years. GDP per person is still 0.7 per cent lower than when the coalition took office and 7.5 per cent lower than the UK's peak level in late 2007.

The current level of GDP per head is £23,728, just 0.7 per cent higher than at the lowest point of the recession in September 2009.

Economic growth at its current rate (0.7 per cent per quarter) will not be enough to prevent a lost decade of economic stagnation, warns the TUC. If the UK economy continues to grow at this pace, along with annual population growth of 0.8 per cent, it will not return to its pre-recession peak level of GDP per head (£25,652) until early 2018.

The TUC analysis shows that with household incomes falling in real terms and the majority of job creation taking place in low-pay, low-productivity sectors, UK economic growth is being driven by a rising population, rather than increased productivity.

While the government has been keen to talk up the UK's recovery, a series of TUC analyses have questioned the sustainability of current economic growth, particularly as living standards continue to be squeezed.

The analysis of GDP per head follows recent research which showed that rising consumer spending is being driven by a sharp drop in household saving, rather than rising incomes. The TUC is concerned that unless real wages and household incomes start rising again soon, the economy risks creating another personal debt bubble of the sort that helped cause the recent financial crash.

The TUC wants to see ministers do more to promote high quality job creation and fair wages as a way to raise living standards and boost productivity.

TUC General Secretary Frances O'Grady said: 'After years of recession and stagnation, prolonged by painful austerity, the government has been quick to claim we are back in recovery.

'But if the economy continues to grow at its current rate it will still take nearly five more years to get back to where we were in 2007. That doesn't sound like much of a recovery.

'The basis for recent economic green shoots is not encouraging either. Too many people are having to run down their savings or turn to credit cards to spend in the shops, rather than see their incomes grow. And behind improving employment figures are millions of workers whose incomes are falling and who can't get enough hours to make ends meet.

'We all want to see the UK economy back on track but any talk of recovery is meaningless unless we get the right kind of growth. We need economic gains that benefit everyone which can only be achieved with more high quality jobs and decent pay rises to get people's living standards rising again.'

NOTES TO EDITORS:

Actual GDP per head, 2007-13

Current GDP per capita (Q1 2013), compared to recent peaks and troughs

Source: ONS

- Assuming current population growth of 0.8 per cent per annum, along with current GDP growth of 0.7 per cent per quarter, GDP per capita will not return to the pre-recession peak in Q3 2007 until Q1 2018.

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