The Tories in Bournemouth: Cold facts may sink economic ambition

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The Independent Online
JOHN MAJOR cannot be accused of lacking ambition in promising to double living standards over the next 25 years. It would require a dramatic transformation in economic performance.

To double national output of goods and services would require a growth rate averaging 2.8 per cent a year; the economy is growing quicker than that at the moment.

But most economists believe the economy is only capable of growing 2.25 per cent a year over the long term, which would not deliver Mr Major's ambition even in 30 years.

'Mr Major is asking for a definitive break in the trend,' Geoffrey Dicks, an economist with NatWest Markets, said. 'That was a politician speaking, not the voice of cold economic analysis.'

But William Kennedy, lecturer in economic history at the London School of Economics, said Mr Major's aspiration was 'not beyond the realm of possibility'.

He noted that information technology could deliver a dramatic improvement in economic performance, in the same way that electrification boosted the US economy earlier this century.

Mr Major's target is relatively modest compared to the 4 per cent a year that the Department for Economic Affairs believed was achievable in its National Plan of 1964, although that target was only supposed to run for five years.

'It was an attempt to persuade people to invest more, to grow more,' Andrew Britton, director of the National Institute for Economic and Social Research, said. 'But it failed in its objective.'

Mr Major's target looks rather more achievable if you argue that living standards are measured by the amount of money in people's pockets, rather than the output of the whole economy. On this definition, living standards did double from the early 1950s to the mid-1970s.

Environmentalists would argue that all these economic measures of living standards are inadequate.

Does economic growth or greater wealth really amount to improved living standards if it results in greater congestion, worse pollution and a more stressful way of life?