The Stagnation Machine

The comfortable version is built out of true facts, and that is exactly what makes it work. Britain does tax people less than France or Germany - the burden on a wage really is lighter here. Headline growth has, in stretches, kept up. "We're doing better than Germany" is, on some measures, true, because Germany has a mess of its own. Nobody reciting these lines is making them up.

They are just arranging true facts into a false comfort. The lower tax did not buy higher growth. It bought lower investment. For fifteen years Britain has under-invested, public and private both, and the damage compounds quietly instead of announcing itself.

Take productivity - the rate at which an hour of work produces more. It ran at about 2.2 per cent a year before the 2008 crash. Since then, about 0.4 per cent (Resolution Foundation). It never came back. And you feel it in the pay packet: had earnings held their pre-crisis trend, the average worker would be around eleven thousand pounds a year better off than they are (Resolution Foundation). Fifteen years, and the line just went flat.

Those are not the numbers of a country a bit behind. They are the numbers of a machine that has stopped adding.

The loop that feeds itself

Here is the grim part - how the pieces lock together. Weak investment gives you flat productivity. Flat productivity gives you flat wages, because you cannot keep paying people more to produce the same. Flat wages give you weak demand. And weak demand gives firms no reason to invest, which drops you back at the start, one turn poorer.

It is self-reinforcing. It does not break on its own. We have been going round it long enough to mistake the motion for stability.

Two things hid the loop. One was migration: add enough workers and the headline economy grows - more people in it - even as output per person stays flat. The country looked busier without getting richer, and the figure that actually matters, income per head, went nowhere. The other was stealth tax. Freeze a threshold, let inflation do the collecting, and the revenue climbs without a vote. Both bought time. Neither fixed anything.

Naming the machine

There is no single villain and no clean date it went wrong. That is what makes it a machine and not a scandal: a set of defaults - underinvest, import labour, tax by drift, put off the hard call - each survivable on its own, together producing a country that works harder for the same and cannot quite see why.

The comparison with Europe is the last line of defence for a settlement that has failed on its own terms. The honest first move is to stop reciting it and name the loop. A country that will not admit it has stopped adding cannot begin to add again.

An opinion of the house. The argument is ours; the record beneath it belongs to no one.