By IRNA,
London : Britain faces a “new age of austerity” with the current economic recession already pushing living standards to a four-year low, according to a leading thinktank.
A new report by Oxford Economics calculated that gross domestic product per person in the UK fell to an average of £22,700 in 2009, 1.3 per cent below the level before the last general election in 2005.
“The decline in UK GDP per capita over the last four years contrasts markedly with the improvements seen over the Labour government’s first two terms,” Oxford Economics’ managing director Adrian Cooper said.
During Labour’s first two terms GDP per head grew by 12.6% until 2001 and 8.3% until 2005. Even allowing for some recovery in economic growth, the prediction was that GDP would barely change in 2010 remaining below the level five years ago.
“Coupled with the tax rises to be implemented over the coming years – starting on 1 January 2010 – this research underlines the new age of austerity facing the UK economy,” said Cooper, referring to the rise in VAT back to 17.5% this Saturday and April’s rise in the top rate of income tax to 50%.
The report found that the fall in GDP per head combined with the big decline in sterling over the past 18 months meant that Britain has seen an even sharper decline in its relative living standards compared to other major economies.
In 2007, UK GDP per capita measured in US dollars was $45,890 – rivalling that of the United States and well ahead of that in Germany, France, Italy and Japan.
But in dollar terms in 2009, UK GDP per person has fallen to $35,590 – 23% lower than in the US and more than 10% lower than in Germany, France and Japan.
The British economy has also been slow to emerge from recession, shrinking by 0.2% in the third quarter of 2009 while Germany, France, the US and Japan all posted growth in the same period.
The report stressed that the dollar figures calculated at market exchange rates and do not take account of differences in the relative cost of living in different countries.
Measured at purchasing power parity, which irons out those differences, British living standards in 2009 were still higher than in Germany, France, Italy and Japan, but behind those in the US by almost 25% and the gap is expected to widen, it said.
Earlier this week, data from the Office for National Statistics showed that GDP in Britain had grown by an average of just 1.7% a year during the noughties decade – the worst performance since the 1940s.