Use Household Income To Measure Recovery Says LSE

The London School of Economics Growth Commission has called for politicians to track progress in repairing the UK’s economy by measuring how the average household is faring instead of focusing on GDP alone.

In findings published yesterday, the LSE calls for statistics on median household income to be published regularly alongside quarterly GDP figures, and to be used as a measure of whether Government policies are working.

The Committee argues that tracking median household income in the run up to the financial crisis would have revealed that the benefits of growth were being swallowed up by a small segment of society, saying that increasing inequality is not an inevitable by product of growth, especially if policies are pursued that make growth more inclusive.

While in what they bill as a “manifesto for growth”, the authors posit that in the three areas of human capital, infrastructure and long-term investment, the UK risks falling behind its international rivals.

According to the Committee, companies are failing to invest in the UK in part due to “the lack of a long-term industrial strategy” and that what investment there is, is “heavily skewed towards property and buildings, rather than equipment, innovation and new technologies”.

The LSE said the lower level of corporate spending in the UK than in France and Germany accounts for the UK’s lower rate of productivity and that its proposals can provide the stable policy framework that has been lacking in the UK, one that will encourage long-term investment.

The report goes on to say that, by ensuring that difficult and contentious long-term decisions are based on the best available independent expertise, they would help to break the damaging cycle of institutional churn, political procrastination and policy instability.

As an economist at Milsted Langdon, Kevin Butler, is able to share his in-depth research and expert views on a wide range of economic and financial topics.

Posted in Blog, Economy.