Posts tagged ‘HMG’
“Mr Speaker, I am abolishing the Autumn Statement.”
2016 has already delivered much in the way of political upheaval. But no one was expecting this! Granted, there was much laughter as the new Chancellor told MPs that, having done away with the traditional spring Budget and Autumn Statement, he would be moving to an autumn Budget and a Spring Statement. (He had to clarify that this really was a significant change because the Spring Statement wouldn’t actually say much.)
Thus concluded the only truly dependable projection from HM Treasury. What did the rest of this, the last ever Autumn Statement, have to tell us?
Reports of the event were dominated by the forecast effects of Brexit. Of course, nobody knows what these will actually be. The Office for Budget Responsibility plumped for lower growth, higher inflation and more borrowing than before. Its guesses are worth no more than the Bank of England’s – though they were, interestingly, very different. The Bank, in its Inflation Report out earlier this month, had GDP for 2018 and 2019 coming in at +1.5% and +1.6%. The OBR thinks the answer will be +1.7% and +2.1%. Counter-intuitively the OBR is also forecasting lower CPI inflation (2.5% and 2.1% as against 2.7% and 2.5% over on Threadneedle Street). It is likely mere coincidence that higher growth and lower inflation will have combined to produce a less alarming debt forecast. In any event, the inconsistency serves to demonstrate nicely the speculative nature of all these kinds of exercise.
Regular readers will know how important the level of gilt yields is too. They have fallen since the Budget and this has delivered a projected bonanza of £24bn over the course of the next five years. That is the impact of a fall in gilt yields of all of 0.3%. (So long as they don’t go up again, the nation’s finances are safe. Well, safeish.)
The Chancellor briefly alluded to longevity and suggested that the next Parliament consider doing something about it. This is a good idea: the state pension bill is forecast to reach £101.9bn in fiscal 2020-21, up from £91.5bn this year. And that represents a compound annual increase of only 2.7%. More aggressive inflation, or a higher rate of earnings growth would push the cost higher.
We have no idea what growth and inflation will be over the next few years. Nor does the Treasury have much, if any, control over interest rates. There are, however, material numbers over which it does have some say. And in this febrile political environment, with Brexit on the horizon (or possibly not), public debt already forecast to reach 90% of GDP soon and no medium-term prospect of balancing the books, what is the expected net impact of the Chancellor’s policy decisions? Why, to widen the budget deficit by £4bn next year, £6bn in 2018-19 and £8bn the year after that! And those numbers are predicated on the basis of 43 discrete policy changes covering everything from tax reliefs available to museums to the exemptions regime for social sector rent downrating. Taxes up, borrowing up and the tax code as complex as ever. The ghost of Gordon Brown still hovers over the building whose magnificent remodelling he instigated all those years ago.
But – as many have felt, at times, this year – enough of politics. Despite the mainly Brexit-related fuss it caused the Autumn Statement contained nothing to suggest that the management of the country’s economy is to undergo change. The UK’s national debt remains problematic, and the Treasury seemingly content to be at the mercy of future events. That, from a pure investment perspective, is the key message from the last Autumn Statement in history.
So another Autumn Statement has been and gone. As is now traditional the Chancellor tried to lift the mood by repeating some of the more substantial announcements made in his previous set-piece appearances. But there were changes too. Most significant among these was the U-turn on tax credit reform, which would have hit the incomes of low earners hard (for those who have not yet seen the headlines the BBC’s “key points” summary is as good a place to look as any). It was widely and accurately reported that this had become affordable due to improvements in the OBR’s forecasts for the British economy, delivering £27bn of extra pie in the fiscal sky between now and the end of the current parliament.
As usual, there was a gap between spin and reality on the matter. In his speech to the Commons, Mr Osborne attributed his windfall as follows:
“This improvement in the nation’s finances is due to two things. First, the OBR expects tax receipts to be stronger. A sign that our economy is healthier than thought. Second, debt interest payments are expected to be lower – reflecting the further fall in the rates we pay to our creditors.”
Higher tax receipts can indeed signify economic growth. The OBR’s growth forecasts, however, haven’t changed much. In a rather lower-profile address given by Robert Chote, OBR Chairman, he gave the following additional information on this topic:
“[T]he underlying fiscal position looks somewhat stronger over the medium term than it did in July, before you take into account the Autumn Statement measures. This in part reflects the recent strength of income tax and corporation tax. But it also reflects better modelling of National Insurance Contributions and a correction to the modelling of VAT deductions.”
In fact, looking at the data presented at Mr Chote’s press conference, the impact of these modelling changes tots up to +£12.6bn over the five fiscal years to 2019-20.
Now let’s look at the rates demanded by those creditors. Here is how the forecasts for the UK’s central government gross debt interest have changed since the summer:
|Summer Budget||Autumn Statement|
£4.7bn out of such large totals is not a huge amount (less than 2% in fact), but in policy terms it is material, equivalent to the entire cost between now and 2020 of increasing the personal allowance to £11,000, the single biggest giveaway of the last Budget.
Underlying the relatively modest reduction in the projected cost of debt interest is a similarly modest reduction in projected gilt yields. The OBR data for these is scrambled between different documents for the Budget and Autumn Statement, which possibly explains why no media source appears to have covered it. But the point is that the average market interest rate assumption for the next five years has fallen all of 0.4% since July, from 2.7% to 2.3%. It is on such details that material elements of this country’s fiscal policy now have to be based.
Of course movements in gilt yields have not always been modest. And what ought to concern us is the extent to which they will impact the exchequer should they begin to rise again over coming quarters. Two short years ago – before cheap oil abolished inflation – the ten year gilt yield stood a full 1% higher at 2.8% as against 1.8% today. The Autumn Statement of 2013 put average interest rates for 2015-2019 at 3.8%. What would a forecast change of +100bp do the £4.7bn bonanza secured by a change of -40bp? A proportionate adjustment would wipe out £12bn at a stroke – exactly the amount of the extra spending on defence announced by the Prime Minister on Monday (to be spread over the next ten years.)
Look further back and the message is equally clear. The first half of 2011 was not exactly the cheeriest of times: Greece was collapsing, emergency monetary measures were in full swing and panic was pushing gold to record highs. Still the ten year gilt yielded more than 3.8% for much of the time. And in the years before the credit crunch began to bite the average was about 4.5%.
Neither is the cost of debt linked entirely to interest rates: there is inflation to consider as well. Of the UK’s £1.5trn nominal value of outstanding debt, over £300bn nominal is index-linked to RPI. Since July the OBR’s RPI inflation assumption has been cut by 0.2%; the average for the next five years is down to 2.4% from 3.1% a year ago. And talking of inflation, the CPI measure – which now governs increases to pensions and other benefits – has also seen forecast falls since the summer. The OBR’s average for the next five years is 0.5% lower now than it was last year, 1.3% versus 1.8%.
But then again, who really is talking of inflation? Not the Chancellor. Neither the word nor the concept made a single appearance in his speech on Wednesday. Still, Mr Chote had something to say:
“[W]e still expect inflation to kick up over the coming year as favourable base effects drop out. We expect it to rise slightly more quickly than in July thanks to greater pressure from unit labour costs.”
Something to think about there, possibly.
In summary the Autumn Statement carried an element of political drama but the macroeconomic substance remained hidden away – when it was not being positively spun, that is. Mr Osborne seems to have a rare knack for making political capital from fiscal policy, rather like his predecessor Mr Brown. But the evolution of the country’s debt position and the official forecasts on which policy is based have relatively little to do with him and much more to do with interest rates (and inflation).
This week’s Budget was, of course, highly political. The Chancellor’s £250,000 reduction in the lifetime allowance for private pensions deprived his Labour opponents of a funding source nominated for one of their policies; his single announcement on inheritance tax was nothing more than an opportunity to poke fun at the Leader of the Opposition for his tax avoidance twenty years previously; and he devoted much of his speech to refuting high-profile opposition criticism of the government’s record and intentions.
There are, however, areas of economic policy over which the Labour and Conservative parties are in total agreement. They compete to paint themselves as the true pursuers of tax avoidance, especially by maleficent multinationals. And they unite in their commitment to bashing Britain’s banks.
As is well known, a coterie of lavishly-rewarded financiers were single-handedly responsible for the credit crunch and ensuing Great Recession (forcing those Northern Rock borrowers to take out 125% mortgages, for example, and then compelling investors to purchase these assets at hideously mispriced levels from the originating banks). So the special tax on bank assets which has been running since 2010 is a great moral enterprise as well as a revenue generator, and we should all applaud the Chancellor for increasing it to bring in another £900m per year.
On the other hand, some of the Budget’s fiscal arithmetic depends on raising capital from sales of the government’s stake in Lloyds Banking Group plc. Indeed, quite a lot of the UK’s employment and economic output arises from the financial services industry. It may be some time before the next knighthood is bestowed for services to banking, but despite its present position in public esteem banking does perform a service to the country.
Unfortunately the British government’s record in rescuing financial institutions compares poorly to that of the USA, for example, where the subprime mortgage market kicked things off back in 2007. In another piece of news earlier this month we saw Mr Osborne raise £500m from selling the latest slice of the UK’s stake in Lloyds. The total raised from such sales to date now amounts to £8.5bn, which may seem impressive. But the size of the Lloyds bailout was £20bn. The government still owns 23% of the bank, a stake worth about £13.2bn at the time of writing. Over the Atlantic, the US Treasury had got out of its $45bn bailout of Citigroup entirely by mid-2011, making a $13bn profit on the original amount and further gains on charging for a default protection facility which was never used. Similarly, while the US government still owns mortgage securitization behemoths Fannie Mae and Freddie Mac, which received a combined bailout of over $187bn in 2008 and still face problems, it has received back more than this amount in dividends from both companies. The UK government still owns 62% of RBS, has not sold any shares and has not received a penny back from its £46bn bailout.
RBS, of course, was not assisted by its various financial and managerial idiosyncrasies in the years preceding the crisis. But policies such as the bank levy have not helped. The great purchase protection insurance compensation bonanza – which has seen RBS alone pay out billions over the last four years – has not helped either. And the crisis-period support afforded by the Bank of England lacked the breadth and scale of the several emergency lending programmes of the Federal Reserve and slew of measures taken by the US Treasury under its Troubled Asset Relief Program.
Predictably, all this has reflected poorly on the very balance sheets whose tax rate the Chancellor has just raised. While the Big Four US banks have seen their provisions for losses on loans fall steadily since mid-2010 to about a third of their peak level, combined loss reserves at Barclays, Lloyds and RBS only started to fall a year later and are still at almost 60% of their peak.
The share of the UK’s economic activity accounted for by financial services remains relatively high, at 8%. But it has been falling slightly over the past five years. It is unfortunate, to say the least, that public policy has contributed to this effect.
There is of course an election looming. But it looks as though whatever government takes charge the banking sector can expect more of the same. That is bad for the UK economy. And even in the aftermath of the crash bank shares still make up 12.6% of the value of the FTSE 100. The American approach certainly had its flaws but it has indisputably produced a better outcome and outlook for the financial sector and for US taxpayers than our own.
Yesterday’s Autumn Statement by UK Chancellor of the Exchequer George Osborne was as political as expected. Impressively – and in a break with recent tradition – some of it was not leaked in advance. And beyond the Stamp Duty Mansion Tax, road building in marginal constituencies, wealth fund for hypothetical shale gas production in some long-distant future and customary crowing about how wonderfully the British economy is doing, there were a few items of actual economic interest. (There is a good summary of all the key points from the BBC here.)
It’s great that growth for this year is expected to come in at 3%, up from 2.7% in March, but as has been widely noted, the level of debt will be higher than forecast in spite of this. It is worth quoting the Office for Budget Responsibility directly (all documents here):
[W]age and productivity growth have once again disappointed, while national income and spending have outperformed most in those areas that yield least tax revenue … For these and other reasons, this year has seen a sharp fall in the amount of tax raised for every pound of measured economic activity. As a result, despite strong economic growth, the budget deficit is expected to fall by only £6.3 billion this year to £91.3 billion, around half the decline we expected in March. That would be the second smallest year-on-year reduction since its peak in 2009-10, despite this being the strongest year for GDP growth.
Hmm. Wage growth has indeed been disappointing. As regular readers will know, UK wages have been falling pretty steadily in real terms since the Great Recession. This has been due to both sluggish growth in absolute terms, and – if you have been the Bank of England over the period – completely surprisingly high inflation. In fact, adjusting for RPI, average earnings are back down where they were in the summer of 2000. Putting this another way, British pay packets have not grown in real terms so far this century.
Part of the reason for this is that inflation has been pushed up by increases in VAT, necessary because of the vast level of government borrowing. Even in nominal terms, though, wage growth has averaged a measly 1.5% per year over the last half decade. Why so? Well, public sector wage growth has been capped at 1% for some time, a necessity arising from the vast level of government borrowing. Wages in the manufacturing sector have also been squeezed, which might be connected to the pace of demographic change in the recent past (the gap between real GDP growth and real growth in GDP per capita having risen to 0.8% over the last ten years, above even the high caused by the post war baby boom). And some higher-end pay, in areas of financial services for instance, has suffered too.
In other words, the higher taxes and lower wages caused in large part by the desperate state of the public finances have themselves contributed to a disappointing outturn for the public finances.
Lest one might think that, to coin a phrase, there is an alternative, remember this: the central government debt interest burden is projected to rise to £54bn this fiscal year and to £77bn by 2018/19, the year in which the government’s books might finally balance. Even this year the payments will be more than twice the total current budget for defence. Viewed sensibly, Britain’s debt is already out of control. Worsen the debt burden from here and it could end up entailing default.
This sounds a bit gloomy, because it is. However, was there anything in the statement to give encouragement?
In the context of sovereign debt, the only real positive is economic growth. So it is unfortunate that the anti-bank and anti-wealth elements of yesterday’s announcement will do nothing to stop London’s slide down the rankings of global financial centres in future years. Only a couple of weeks ago there was a survey out showing that New York’s lead over London as a good place for financial sector business had extended (London used to come top of these lists). Bits and bobs of capital spending were announced which will have some positive effects in the relevant areas over the medium term, but growth does not generally benefit from increased regulation of and taxes on business.
The UK is clawing its way slowly towards a balanced budget, having already amassed a punitively expensive burden of debt. Budgets and Autumn Statements / Pre-Budget Reports have been overwhelmingly dominated by political gimmickry for at least the last ten years. It is difficult now to remember budget speeches in which pound note figures for spending and receipts connected to policy changes actually got a mention (standard practice until the arrival of a Mr Brown in 1997). Our Chancellors have little leeway nowadays, but yesterday’s little attacks on banking and The Rich were fiscally unnecessary and potentially damaging. (Listed banks in the UK employ about 700,000 people, over 2% of the nation’s workforce, and that is already down from almost 900,000 in 2007.) Britain’s economic policy remains primarily a vehicle for electoral showmanship, and this is not encouraging.
There are a number of notable points which could be made about the Chancellor’s Autumn Statement yesterday. The political as well as the economic mood has clearly moved in his favour. Some of the measures announced, like the establishment of a moving target for the state pension age, were substantial. And of course the Office for Budget Responsibility has revised its economic forecasts up, meaning that the forecast level of government indebtedness has come down.
It is not the first time that this has happened. At the time of the Autumn Statement in 2010 and of the 2012 Budget, OBR debt to GDP projections drifted ever-so-slightly lower, with the peak level of indebtedness on a Treaty basis coming down by 0.8% and 1.2% respectively – before shooting up again in subsequent reports. But the difference this time is much more material: back in March, debt to GDP was forecast to peak at 100.8% in fiscal 2015-16; now the peak is to reach “only” 94.7% in the same year.
The full text of the OBR’s Economic and fiscal outlook attributes the difference to higher nominal GDP and lower borrowing about equally over the two years 2014/15 – 2015/16. It is worth quoting the following directly from the text:
While most public discussion of economic forecasts focuses on real GDP, the key driver of our fiscal forecast is nominal GDP – the cash value of economic activity – and its composition. The level of nominal GDP is higher across the forecast period than in March. … Whole economy inflation – as measured by the GDP deflator – is little changed from March.
In recent years there has been some debate about the possibility that governments would try to inflate their way out of debt (e.g.). Some economists even advocated this as policy. Regular readers will know that the idea isn’t a serious one – and the UK’s new numbers give some proof of this. In debt terms, the tide might just have turned, and higher inflation has played no part in this projection.
What we can say is that a little growth goes a long way. While the forecast for peak debt to GDP has fallen by over 6%, the cumulative change in real GDP to 2015 since the OBR’s March forecast is only +1.3%. As well as growing the denominator of the debt / GDP calculation, higher growth also reduces planned expenditure and increases projected tax receipts, thereby causing the cash amount of borrowing to fall. For economies with uncomfortably high debt, a growth spurt is the best possible cure.
This week’s data from across the Atlantic is warmly encouraging in this regard. US GDP for the third quarter was revised up in the second estimate to 3.6%, right at the top of the forecast range and the highest rate for one and a half years; confidence has rebounded from the blip of the shutdown; and unemployment fell unexpectedly to 7%, its lowest level in five years. (It is interesting to observe that this is the level which, arriving in 2014, was supposed to see the end of the Fed’s QE3. The press conference at which this was announced panicked the markets. So far this afternoon, by contrast, the S&P 500 is up by almost 1%.) If this is all beginning to add up to a proper global recovery it will be the best possible news for indebted developed-world economies.
As always we need to be careful. Reducing borrowing over the medium term will require continued fiscal discipline, and to borrow one of the Chancellor’s phrases, it can be human nature to focus on “fixing the roof” only when we are being rained on from a great height. And we should not give him too much credit either: he boasted proudly that the budget deficit as a share of GDP is expected to have fallen by 11.1% over the nine years following 2009-10. Another way of putting it is that it will have taken nearly a decade of continued borrowing for the UK to have not quite balanced its books again. Back in 1993 on the other hand, when the deficit peaked at 7.9% of GDP, it took only seven years to bring it up to a surplus of 3.5%: a larger improvement of 11.4% in total.
Still, falling government indebtedness is good news, and long may it continue. With a strengthening and prolonged global recovery there is every reason to think that it will.
When it comes to UK energy supply, this seems to be one thing on which most of our politicians can agree. Ever since Ed Miliband made his commitment to freeze household energy bills two months ago the issue has remained topical to one degree or another. The government’s response to this challenge has been to fob it off with talk of competition, suggest that people wear jumpers, approach the industry with plans for its own price freeze (or possibly not), and most recently to trumpet a reduction in inflationary green levies to be announced in next week’s Autumn Statement.
For while the politics of this issue has been by turns fascinating, brazen and depressing, the inflationary impact of green policy is undeniable. This is quite difficult to quantify, however, since energy policy in the post-Climate Change Act (CCA) world is bogglingly complex. The current estimated impact on bills is of the order of 4%, attributed as follows:
- To the Renewables Obligation, which is set to rise sharply;
- To feed-in tariffs, currently co-existing with the Renewables Obligation but which are planned to supersede it, and to rise sharply both during and after the overlap period;
- To new boy the Carbon Price Floor, which operates by tacking a Carbon Price Support rate to the existing Climate Change Levy in certain cases, and is expected to rise sharply;
- To the rollout of “smart meters“, which will enable energy providers to charge more highly for consumption at times of peak demand, thus incentivizing people to change their ways (and as a byproduct, make it much easier to disconnect the supply to customers).
As well as noting that this low-seeming figure of 4% arose ultimately from zero – and is projected to rise sharply, in line with the requirements of the CCA – we should also note that there are costs which are not picked up by these quasi-transparent figures. For example, there might well be man hours associated with having to negotiate the various areas of 21st-century energy policy. And while some generating costs associated with the CCA are (probably, and for now) not figured on household bills – such as Carbon Capture and Storage – others, such as “biomass co-firing“, probably eventually sometimes are. Oh, and there are always new costs to consider of course, such as the subsidy for new nuclear.
Even what is measurable has already added billions to household costs, is forecast to add tens of billions more in coming decades, and might continue right up until we arrive at the CCA goal of an 80% carbon emissions reduction by 2050.
Back to data, markets, and cleaner information.
The Fuel & Light sub index of the RPI has been rising at an average rate of over 7% over the last five years. By October this component had gone up more over the previous twelve months than any of the other fifteen sub indices except Clothing & Footwear and Seasonal Food.
Some of this will be due to currency movements and some to energy prices. Using the near month ICE Natural Gas Future, the gas price is up by 7.7% over the past year – and some in government have pinned the blame for higher bills on this. Yet the sterling price of oil is 1.4% lower, and the Bloomberg composite price of ARA (Amsterdam, Rotterdam, Antwerp) Steam Coal in sterling has fallen by more than 13%. To attribute all of the inflation to the price of gas is therefore incorrect. (In fact it might also be pointed out in this context that shutting down coal generation on environmental grounds has not been helping.)
The government has a choice: to continue the commitment to inflate energy prices, however marginally, as a matter of policy; or to change policy in an attempt to ease concerns over inflation.
The situation is highly reminiscent of the VAT hikes of 2010 and 2011, which pushed real wages down and the UK household sector back into recession. There is no benefit to this. (Regular readers will know that the “inflation kills debt overhangs” thesis is addled and lazy.) Price inflation is inimical to growth and further impoverishes the poorest.
Which brings us to the Bank of England.
This blog has been scathing about the Bank’s record of forecasting inflation and keeping it contained. Now the Old Lady deserves to be partly exonerated when troublesome price behaviour comes about as a result of government rather than monetary intervention. But to salvage credibility as an inflation fighter – especially as growth returns to a world not used to problem prices – it would not do for her to stand completely idle.
Now for the really exciting news.
Only yesterday, the Governor of the Bank of England announced that he was taking action to rein in some of the recently observed surge in house prices. After all, while a lodestone of the British economy, higher house prices are themselves inflationary.
It is too early to say whether or not this makes Mark Carney more of a hawk than his immediate predecessor. But it does at least suggest a preparedness to take responsibility for price behaviour.
The Bank was careful to distance its manoeuvre from the government’s recently ignited Help to Buy mortgage guarantee scheme, but the coincidence is noteworthy – and has been widely noted, with several reports carrying Mr Carney’s correct assertion that he cannot “veto” the programme to stave off a housing bubble.
The Bank could, however, put up interest rates. And that might well have a dampening, if not deleterious effect on the housing market.
Early signs from the new Governor were not encouraging. Nor would it help those threatened by higher prices for energy – a price inelastic good if ever there was one – to add higher mortgage payments to their burden. But if our government has any intelligence, it will connect the Bank’s move on housing to the current debate on energy, and act accordingly.
With lower price pressure from the fiscal as well as monetary side the outlook for the UK’s economy could just get a little brighter.
The Autumn Statement has been and gone. It is perhaps a sign of its steady-as-she-goes ponderousness that the most interesting question it raised was whether or not the shadow chancellor fluffed a line of his reply due to bamboozlement or a slip of the tongue. (There was certainly nothing like the expansion of VAT to Cornish pasties to get our teeth into.) Various claims have been made about the political points the Chancellor might or might not have scored: economically nothing has changed.
Which is of course to say that growth has disappointed, borrowing targets have been missed and the plan remains to hope we can muddle through the rough patch with modest aspirations towards balancing the books over the medium term. Numbers wise, real GDP growth for the next four calendar years has been revised down from the March estimate of 2.0%, 2.7%, 3.0% and 3.0% to a new estimate of 1.2%, 2.0%, 2.3% and 2.7%. Gross debt on a Maastricht basis, which was forecast to peak in fiscal 2014-15 at 92.7% of GDP, is now predicted to peak one year later at 97.4%. All of which looks as perfectly manageable as ever it did and has done nothing to faze markets.
It was the topic of growth in Britain and around the world with which the Chancellor led off his speech. In his first sentence he said that “the British economy is healing.”
Both the speech and the revised economic projections raise the question: what will a healed UK economy be doing? What would the growth rate be if we and the rest of the world weren’t so sick?
Estimates of the trend rate of growth have of course varied over the years. At the tail end of 1999 the Treasury put the long term growth rate at 2.25%, which it viewed as conservative. Since then GDP has grown at an average annual rate in real terms of 1.8%. Over a longer (30 year) timescale the average rate has been 2.6%. Perhaps an estimate of 2-2.5% is about right.
Whatever the precise trend rate might be, however, there is no evidence to suggest that 0% – which is what we’ve seen over the last four quarters now – is it. There are causes of this weakness we can point to: confidence effects, overseas effects, the contraction of real incomes and so on. But insofar as these prove transitory, the point is that the UK growth rate should be expected to rebound.
Similar effects are observable elsewhere. In the US, the Congressional Budget Office estimates trend GDP growth of 2.3% over the next ten years. The 30 year average is currently 2.8%. Last year, however, quarterly growth slowed to 0.1% at one point, taking the annual rate down to 1.6%. Most recently it had rebounded to 2.5%.
As we get closer to the end of the year it becomes more tempting to predict the future. This is a bit of a mug’s game. Where economic growth is concerned a key question still hangs over the longevity of the various headwinds which have been holding it back. Still, it is worth remembering that in many cases growth is indeed being held back relative to trend. That doesn’t mean the only way for it to go is up. But it does mean that’s the natural path for it to take.