Not convinced this works

Some economists think the UK is operating at around one third of its pre-crisis levels of activity.

That’s because almost every part of the economy – outside food and drink and the public sector – has been affected.

Government spending is 40% -ish of the economy. We measure government contribution to GDP by what we spend on government – obviously, given the unflattering result of measuring it by output.

40% is more than a third.

More seriously, down by a third I’d accept as a good backoffagpacketestimation. Only a third, naaaah.

5 thoughts on “Not convinced this works”

  1. Are there any figures for that unflattering result?

    Is non-government GDP not measured by, among other things, spend?

    Or is the point that spend and output are equal, for non-government GDP.

  2. OK… Electricity and gas are being produced. Broadband and mobile phones are working. Company websites are working. Food is being delivered and sold and produced. Petrol is being sold and delivered. Stuff such as medicines and bandages and disinfectants are being produced, delivered and sold. Banks are functioning. Tree surgeons and fencing companies are operating. What is not happening is the hospitality industries and non-food shops and maybe some construction activity. They don’t make up 2/3 of the economy

  3. My pub is doing a reasonably healthy trade in take-outs. Probably at most 30% of pre-shutdown trade but certainly not zero.

  4. Dio–Funny money has short-term benefits to keep an illusion going. But soon sev million of those on “furlough” (somebody pointed this out -I forget who) will be staying on furl but at 94.20 a week dole not 80% wages.

    Once that bites millions of transactions that would have channelled income to all parts of the economy won’t happen. Then those people who would have received the £ in those transactions will also have to cut back & so on down the line. Sunak’s funny will only create rising prices to add to a very bad situation.

    Lots of people are already up to their arse in debt to begin with. If the funny causes rising prices, the state can’t let interest rates rise. At 5-6-7 % rates most of the Income tax take would be needed to pay interest on state borrowings already. Just as there are already shite-useless London Councils that are having to use 80% of council tax to pay the interest on LOBO loans.

    Not a rosy picture.

  5. If “Government spending is 40% -ish of the economy.” you now have a good chance to see what value is derived from it.

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