It seems increasingly probable that capitalism must evolve radically. The drift to populism shows that our democracy is failing because our model of market-led economics isn’t achieving what a growing majority of voters want.
It was refreshing to find at Harrogate that this view is now widely shared among Liberal Democrat activists, as shown by the response to “Leading the Way”. ALTER (Action for Land Tax and Economic Reform) summed it up in our response: “The Economy must work for Society, not the reverse”.
None of the other three main UK parties seems to question this. Yet we see no plan from any of them that could conceivably deliver “growth” (read on) that meets even most of the urgent needs of any UK government. Labour seems stuck with Treasury orthodoxy but look what happened when Liz (the lettuce) Truss put neoliberalism into overdrive.
The last time I looked (in 2023), Treasury’s own figures on National Wealth showed that the only element which has grown significantly since the 1990s is land wealth. Considering land value (as opposed to building value) is passive and represents wealth tied up and thus non-productive, it is not surprising that everything useful seems to be deteriorating. An owner of land with actual or potential development (buildings, etc.) on it on most days in the past 40 years has seen their wealth grow more than an average wage-earner, while they do nothing. The “real” economy gains nothing. That land owner is behaving rationally; by following the current dysfunctional economic model, the government isn’t – if it wants Growth!
I’m no economist but history tells us that in an emergency we somehow set aside ‘normal’ economics and find the resources to do what needs doing. Is Treasury – or rather ONS – now starting to do this, with its “Beyond GDP” blog?
In “The Growth Delusion” by David Pilling (2018), “Growth” and its measurement Gross Domestic Product (GDP) is likened to a cult. GDP is almost universally seen as “a proxy for a country’s well-being”. If only that were true! To give a few examples of how false this is, these phenomena add to GDP:-
- A motorway pile-up
- Cigarette sales and smoking cessation courses
- Gambling addiction and its treatment
- Rearmament, bombing an enemy and rebuilding afterwards
- Creating pollution and clearing it up
- A meal in a pub with wine (alone)
- Legal and accountancy fees to assist tax avoidance
- Commercially grown food, despite 1/3 of it never being eaten
And these have no place in GDP:-
- A walk in the park to think about a piece of work
- Abstaining from drug use, smoking and gambling
- Housework
- Childcare
- A family outing to pick wild berries
- All forms of volunteering
- Lib Dems meeting for ‘pizza and politics’
- Food grown in an allotment
Humanity cannot continue much longer unless this nonsense is addressed. Treasury mandarins and city slickers everywhere need to be seen as “Emperors with no clothes” or we are all heading for hell in a handcart.
This Labour government is acting like rabbits in the headlights. None of its targets are likely to be achieved. Targets are no substitute for policies and Labour had no policies that could cover the nakedness of their ambitious targets.
If the Liberal Democrat 72 are to prove worthy of the hype we worked so hard to give them last year, they must be bolder and challenge orthodoxy. We cannot afford not to be the vehicle for change that society and voters are desperate for. The change offered by Reform would end all hope.
We believe in evidence based policy making, not ideology. Human beings can be incredibly innovative. Science has just time enough to discover how to save the Planet for generations to come. Economic orthodoxy is the obstacle.
ALTER will do all we can to help develop a fairer, greener economic model. But we need fresh thinking to build on what we’ve begun to do. Our website is static. Our activists are ageing. We can’t cope with modern methods of communication.
So we’re offering a significant financial reward for someone who can reinvigorate our online presence. To learn more, email [email protected]
* Tony Vickers is Secretary and co-founder of Liberal Democrats Action on Land Taxation & Economic Reform (ALTER) and a councillor in Newbury. He spent 20 years researching and lecturing on sustainable taxation: www.landvaluescape.org
Follow @libdemvoice.org on Bluesky
Like us on Facebook
Subscribe to our feed
Sign-up for our daily email digest
Hilaire Belloc's persecution of Charles Masterman
Finding your moral compass
Live in the sky with Liverpool Labour's pie in the sky housing policy
Cheney Payne re-selected for Cambridge
Electoral register update
Unions and campaigners opposing ban on Palestine Action
Craig Levene
Tim Rogers
David Le Grice
Tristan Ward
Jack Meredith
33 Comments
It’s very unlikely that there will be any growth, as the cost of extracting energy has become too high, and we are also finding mineral extraction more expensive. However, as Tony suggests, things can be better for the humans without there being growth. Walk in the park for example. We could, for example, introduce the much discussed Land Value Tax. Given that fossil fuels are becoming more expensive and difficult to obtain, perhaps we need to use the tax system to prioritise use away from fossil transport (ICE cars and aircraft) and towards other uses, including electric cycles, perhaps. Growing one’s own food doesn’t usually provide self sufficiency, but home grown fruit and veg can be low in chemicals and taste better than supermarket.
GDP is a measure of the ‘economic’ output of the economy in a year. Economic output is important because it provides the means of providing for our economic needs wants, be that goods or services. A motorway pile-up does not ‘add’ to GDP – it leads to an allocation of economic resources (which count towards GDP), but those economic resources would have been allocated to another purpose (and counted towards GDP) had there been no pile-up. That said, you are correct that many forms of economic activity are not captured within GDP figures, such as doing your own housework (but if you employed someone to do your housework it would count, though total economic output would be the same.)
So GDP is a useful indicator of the ability of a country to meet its economic needs. GDP is a far more useful indicator so, for example, a slight rise in GDP due to an increased population may not leave the country ‘better off’ in reality.
Regarding your online presence… is the problem really the modern ways of communication? I just looked up ALTER’s website and it looks fine to me in terms of design and having good information there (I don’t know if you have any social media accounts to look up). But it doesn’t look from the website like you’re doing any active campaigning – no updates to say anything has happened for a couple of years. Are you doing anything? Holding any meetings? Talking to people? Etc.? If you’re actively campaigning then you’ll have lots of stuff to put on your website and social media. If you’re not campaigning then it’s going to be tough to find material to invigorate your online presence with.
I’m sorry, but the reason why all the other parties are keen on economic growth is that economic activity is taxed and provides the wherewithal for all the stuff we want more of, schools, hospitals etc. Similarly, economic growth puts wages in peoples pockets and allows them to lead the kind of lives they aspire to. It almost seems silly to say it, but going on a walk or picking berries is not measured as part of GDP because it is not an economic activity. I don’t doubt that our measurement of GDP is imperfect, or that, as Jenny points out, exponential growth in the future might be difficult to sustain, but that’s a slightly different issue. I am intrigued to know, when Mr Vickers is Chancellor, what his first budget will look like
Well said Chris Cory. Levels of GDP correlate pretty well with lots of things liberals care about – such as freedom for women, or gay rights. It is not perfect, obviously, but equally obviously no government slavishly aims to maximise either GDP or GDP per head.
The resolution foundation issued a report in Janiary this year showing how high housing costs (44 per cent more expensive in Britain compared to the OECD average), are harming the UK economy High housing costs outweigh cheap food to widen living standards gaps between poor families in Britain and their German, Dutch and French counterparts
Simon Pittaway, Senior Economist at the Resolution Foundation, said:
“Britain’s recent toxic history of low growth and high inequality has left low-to-middle income families far poorer than their counterparts in Western Europe. These damaging income gaps are even worse once we factor in the prices of goods and services that matter most to these families.
“While food and clothing are relatively cheap, the sky-high cost of housing – which accounts for almost a quarter of all spending by lower-income households – makes Britain a particularly pricey country for poorer families.
“Britain’s housing costs crisis is a major driver of child poverty, and contributes to poor families being £2,300 worse off than their German counterparts. The crisis needs to be tackled urgently – from building more affordable homes to providing better support for low-income renters.”
The only Western economy that has been able to contain housing costs in recent decades is Japan where planning consent was moved from local authorities to central government in the 1980s and high rise tower blocks began to replace single story homes in Tokyo and other Japanese cities. There is an annual propery tax, levied on the owner of the property by local authorities each year. The rate is 1.4% of the assessed value of the property. The value is reassessed every three years.
If GDP growth continues to track growth in energy usage,which it has since the industrial revolution then 2%pa GDP growth means 2%pa energy usage increase. That doubles every 35 years. So we would need to use globally as much energy between now and 2060 as since 1750 or so.
Tony, this is something to bring to the Local Democracy Working Group and the school visits. you could engage young people on this !
GDP isn’t a perfect measure but neither is it so imperfect to not be useful. I’m not sure why anything has to be “unmasked”. Isn’t it more about explaining what it actually is?
It is (or should be) the total spending in the economy. So if I do my own car servicing it doesn’t count towards GDP but if I pay someone else to do it it does. Similarly with lots of things like growing food or child care etc. So we’d expect a richer country to have a higher GDP than a poorer one. It wouldn’t, though, mean that a citizens of a country with only half the GDP as another one would only be half as well off. That car repair bill would probably a lot less in the poorer country.
I’m not sure if Rachel Reeves’ appreciates this point. In the unlikely event that GDP did rise by 10% we wouldn’t be able to afford 10% more teachers and nurses if they all became 10% more expensive to employ.
Why insert the qualification “should be” when talking about GDP? One reason is that in the UK there there is a higher percentage of home ownership than in other countries, like Germany. So German renters contribute to GDP figures whereas UK owners do not. This distorts the figures. So there is a “correction”, some would say “fiddle factor”, of imputed rental values applied to UK GDP totals.
The United Kingdom’s GDP does include imputed rent. Imputed rent is an estimate of the value of housing services that owner-occupiers receive from living in their own homes, even though no actual rent is paid. It’s included in GDP to ensure consistency and comparability between countries where home ownership rates vary.
Without imputed rent, countries with higher rates of homeownership would appear to have a smaller economy compared to those with more renters.
It reflects the economic value of housing services provided by owned homes.
The Office for National Statistics (ONS) estimates imputed rent by:
– Identifying market rents for similar rented properties.
– Applying those estimates to owner-occupied properties based on their characteristics (location, size, type, etc.).
This value is then included under the “Household consumption” component of GDP by expenditure (GDP(E)).
The creator of the GDP measure, Simon Kuznets, warned against over-reliance on GDP as a measure of well-being saying “The welfare of a nation can scarcely be inferred from a measurement of national income.” Some 30 years later Kuznets said “Distinctions must be kept in mind between quantity and quality of growth, between its costs and return, and between the short and the long term. Goals for more growth should specify more growth of what and for what.”The Case Against GDP, Made By Its Own Creator
Thank you for a most pressingly important article!
G. D. P. is a [deliberate?] misrepresentation of our national performance and our general well-being. Nothing on food bank use, the imminent bankrupting of local government and universities etc., etc.
It is hoped that the attached article furthers your case:
https://www.taxresearch.org.uk/Blog/2025/06/20/the-gdp-lie/#:~:text=In%20other%20words%2C%20GDP%20does,of%20the%20country%20is%20
@Steve: No, GDP is not a misrepresentation, and certainly not a deliberate misrepresentation (Don’t you think maybe it’s time you tried to leave the conspiracy theories behind? I mean, your comment basically accuses the entire economics academic community of dishonesty – to me, that is totally unreasonable). GDP is a standard and very well thought through measure of economic activity (Peter Martin explains it very well). We use it because in practice it does correlate well with standards of living: If GDP in a country rises by 5%, then in normal circumstances, it’s very likely that people’s standard of living will also have risen by something like 5%.
GDP doesn’t measure quality of life, and Tony Vickers is right to point that out. It’s arguable that it would be useful to have something that measures quality of life – but the problem is, quality of life is very subjective, so any measure would also be subjective.
Alas, I beg to differ concerning the validity of current orthodox economics theory, practice and teaching.
One objective test of current “Economics” is the changing objective data on the use of food banks etc.
The more food banks there are, the worse the theory and related actual effects of “Economics”, unless, as may be the case, their increase is deliberate policy or an indicator thereof.
https://www.taxresearch.org.uk/Blog/2025/06/16/economics-is-crap/#:~:text=Economics%2C%20as%20it%20is%20now,work%20properly%20without%20J
@Steve: Ah, so you want to challenge the whole academic discipline of economics, and all the couple of hundred years of research by many thousands of people that’s gone into our understanding of economics? (That is after all, what is implied by questioning ‘the validity of current orthodox economics theory, practice and teaching’). In that case, can you please give us some indication of what qualifications and study you have achieved which puts you in a position to dismiss a whole academic discipline? I’m guessing you must at least have a PhD in something related to economics, plus a number of peer-reviewed published papers on the subject?
@SimonR. I do have a PhD in economics and peer reviewed published papers and I do challenge the whole orthodox approach to economics practised par excellence by the current chancellor. As a heterodox economist I do not believe that there is only one answer to economic problems. If we do not move away from treasury orthodoxy and start becoming a more equal society, then the extremists will win. It has been shown in a numb er of studies that more equal societies do better than socities like ours that have allowed untold wealth to accumulte to a few at the expense of the many.
Of course the right wing press owned and sponsored by billionaires fight tooth and nail against taxing the wealthy, quoting the ludicrous Professor Laffer as justification for letting the wealthy pay little or no tax. Meanwhile our so-called Labour government penalises the poor, the disabled and pensioners. ‘Trickle down’ economics has been shown to be ‘trickle up’, wholly the wrong direction.
If we don’t challenge current orthodoxy what are the LibDems for?
@Mick: I wondered if you’d reply, given your PhD 🙂 Yes, that’s great, and that means you’re in a good position to question standard economic assumptions, and I’m more likely to pay attention when you do. But your questioning of economic orthodoxy appears to be a lot more nuanced than Steve’s. For example, as far as I’m aware, you haven’t dismissed GDP as a ‘[deliberate?] misrepresentation….‘
I would point out though that trickle-down economics’ is something that almost no-one believes in – it seems to be a common strawman that people on the left falsely attribute to people on the right. So your throwing it in doesn’t lend much credibility to your arguments, PhD or no PhD 🙁
Hm. “Almost No-one believes in trickle down economics “, except Rachel Reeves, Donald Trump, Narendra Modi and others who won’t tax the rich. How else does one explain the continuing refusal to tax the wealthy and move towards a more equal society? Even the LibDems seem infected by this unwillingness to move towards more progressive taxation.
We are all on our own when it comes to Economics. We can get whatever pretty much opinion we like from an expert so I wouldn’t question anyone’s competency on whether or not they had a formal qualification. I’d agree with Mick that a heterodox approach makes far more sense than the orthodoxy. Rachel Reeves might tell us she needs tax money to spend or else she needs to borrow the rest but this is really just household economics. She won’t tell us where money comes from in the first place which does seem to be a fundamental failing. Maybe she doesn’t know?
I suspect she, and all orthodox economists actually do know, but they just pretend they don’t!
There’s nothing wrong with adding up all the spending in the Economy and calling it GDP. It doesn’t tell us anything about how wealth is distributed though, or what the spending should be on rather than what money is actually spent on, and I don’t believe anyone is saying it does. So I would say Steve is wrong to say it’s a deliberate misrepresentation. Maybe some might try to interpret the data in misleading ways but this isn’t the same thing.
I don’t like “corrections” though. If we want to include how wealth, which is what owning a house or anything else actually is, has a bearing on the economy then we need to introduce a new term and call it something other than GDP.
@Mick Hm. “Almost No-one believes in trickle down economics “, except Rachel Reeves, Donald Trump, Narendra Modi and others who won’t tax the rich.
I don’t think any of them expect their policies to result in trickle down. Donald Trump is only interested in money gushing in his own direction, Modi believes in redistribution by pork-barrel rather than trickle down (equally mythical). Reeves thinks you can redistribute from business to people with nobody getting hurt (or pretended to believe it for the election and is not yet prepared to admit it was nonsense).
@Simon R. Re your first comment, we have plenty of campaigning to report but we don’t have anyone able to use FLEET. That’s why our website is unchanged since we lost our old platform, along with our bulk email facility that came with it. HQ didn’t provide AOs with the same set of tools as Local Parties: we’re not alone having this problem. My article therefore ends with a plea for someone to help us broadcast our campaigning! The plea may have already been answered.
@ Mike Peters. As Churchill said of democracy, GDP is the worst measure of societal wellbeing or economic success, except for all the others. I accept that it is better than having no measure but in many ways it is misleading.
@ Chris Cory. you are absolutely right that GDP growth indicates growth of tax base (among other things). But that begs the question: why are we taxing ‘good things’ but not taxing a lot of very bad things? Changing – or at least ameliorating – the primary sources of taxation, which generally add to the real economy (why on earth tax “value added” as in VAT! – or earned income) but not taxing ‘economic rent’ and ‘rent seeking’ behaviour (e.g. speculative land holding or licences to exploit finite natural resources.
@Joseph Bourke. That debunking of GDP by its inventor Kuznetz is really interesting. Standout phrase: “we must not continue to hold [GDP] as the primary indicator of economic progress. Also striking is China being the nation to adapt GDP to deal with its negative environmental consequences. Classical Liberal economic thinking had “LAND” as distinct from “CAPITAL” and many of us think that is where modern economic thinking went wrong. For Land, read Nature: that which is not made by combining Labour with Capital; which cannot obey the “law” of supply and demand, because we live in a finite planet.
There seems to me a natural inclination in this thread to dismiss the concept of GDP as some kind of right wing conspiracy against the lower orders.
I’m not sure why.
GDP is a useful indicator of the inequality in society. If we Google ‘GDP per capita UK’ we are told its $49.463k pa. This converts to £36.832k p.a.
So on this basis an family of two adults and two children should, on average, have an annual income of £147, 287.56
Go figure!
Once upon a time, experts, and everyone else who believed them, held that the earth was flat and the centre of the universe.
Today orthodox/mainstream Economics experts, and those who believe them, hold it is proper/inevitable that some 30% of our children starve/be permanently underfed, and so be seriously harmed, because the experts’ theories say so.
@ Steve,
I don’t really think this is true. You’re overstating the case. The political right will argue that capitalism has kept more people out of poverty than socialism. Most of us can do OK with working for the private sector if we are fit and reasonably capable.
We are all going to be required to work, though, in whatever system is prevalent at the time. Liberal Democrats are, IMO, somewhat naïve if they think they can solve the problem of poverty in our present system. If anyone can’t work or won’t work they aren’t going to be too well off. The system relies upon the threat of poverty to keep us all getting out of bed in the morning to do whatever needs to be done.
I’m not sure how we change that fundamentally. The best we can do is offer a guaranteed job to everyone who is capable of working and put those who can’t work on permanent sick leave.
The idea that we can guarantee to keep anyone out of poverty who is capable of working but chooses not to is a political non-starter.
A 4 person family would on average have an income of £147k
Which just shows what happens when you use the mean for something as skewed as income distribution. The median household income is around £34k, less than a quarter of the mean.
Interestingly, the mean income for the top 10% of earners is £72k, so even there, less than half your number.
Conclusion – a very few people are being paid very large sums of money.
@Jenny Barnes: ‘Conclusion – a very few people are being paid very large sums of money.’
So why do Labour, and our party, find it so difficult to tax them?
@Steve: Yes, people did once, a long time ago, believe the Earth was flat and not so long ago that it was the centre of the Universe – although I’m not sure it’s realistic to call those people ‘experts’ – they weren’t people who had studied the subjects and looked at evidence or developed mathematical models in the way modern day academics in science/economics/etc. do. They were proven wrong when other people, just as knowledgeable, carefully gathered evidence to prove the reality that the Earth was round etc. That’s not what you’re doing: You’re basically throwing out a random, unsupported, evidence-free accusation of dishonesty, and indicating that you don’t believe what amount to a whole well studied academic discipline – while failing to provide any grounds for disbelieving it. I’d urge you instead to try reading an introductory economics textbook or two that explains how markets work and the models economists use to estimate the value of the economy – including GDP. It’d more more challenging – but you’d end up a lot better informed.
Are dominant theories always correct?
Might it be appropriate to judge theories by their practical outcomes?
Might policies based on current Neo-liberal theories be a significant contributory factor to the increased use of food banks?
Is some 30% incidence of child starvation/permanent underfeeding acceptable?
And here is some related reading matter:
https://www.taxresearch.org.uk/Blog/2025/05/06/neoliberal-economics-is-a-work-of-fiction/
@Tony: Great to hear your plea may have been answered. I don’t think Kuznetz ever ‘debunked’ GDP. He simply pointed out (correctly) that it’s not a measure of wellbeing and shouldn’t be used as such. And the finite supply of land doesn’t stop it obeying the laws of supply and demand. After all supplies of everything else are ultimately finite too.
@Peter: Agree with you about poverty. That’s one reason I’ve often argued our approach to poverty should be based on guaranteed jobs rather than welfare. We seem to be lone voices here though 🙂 I’d also like to know why GDP per capita apparently differs so much from mean income. That sounds odd to me.
@Steve: Theories are often being refined, but as understanding of science (and economics) grows, it’s becoming rare for fundamental theories to be totally discarded. It’s more like, we make incremental improvements. And I think you misunderstand economics/GDP. Economics tells us what is likely to happen if the Government takes different actions. It doesn’t really make value judgements about which outcomes are good – that’s for us and politicians to decide.
You want to judge by practical outcomes? Sure, let’s do that. Compare with the World before economics was studied and the market economy that you dismiss as ‘neoliberalism’ existed. It was a subsidence economy in which most people lived brutal short lives, labouring in the fields. Malnutrition was everywhere, clean safe drinking water was almost non-existent, and one failed harvest could lead to starvation. Compare that to our lives today and I’d say capitalism has done a pretty good job, wouldn’t you! Of course there is still poverty and that tells us there is scope for improvement/refinement. But do you really want to throw away everything we’ve learned about economics because the World isn’t yet perfect?
And by the way, 30% of children in UK are NOT starving/underfed. You keep repeating that falsehood but it’s still not true. What is true is that something like 20%-25% of families experience at least occasional food insecurity – which is still a big problem we need to fix.
@ Simon,
“I’d also like to know why GDP per capita apparently differs so much from mean income. That sounds odd to me.”
Good question.
One reason would be the “corrections” which are applied. So, anyone who owns an average house worth around £300k is deemed to have an extra income of £1500 or so per month or £18k p.a. in imputed rental value.
I don’t know how far this principle is extended. If someone owns land worth £3 million does this translate into an imputed rental value of £180k p.a. ?
@ Joe Any thoughts on this?
@ Peter In case @ Joe doesn’t get round to answering your question, imputed rent applies to houses, not land. Council Tax is a tax on residential occupation, based on the notional rental value that an owner occupier would pay themselves (or a tenant would be paying them as landlord), if they didn’t live in it themselves. There is no equivalent way of measuring value of undeveloped land. “Land worth £3m” could either be a vast tract of moorland with no ‘hope value’ as a housing site (so no significant imputed rent) or it could be edge of town and quite a small area – just not yet built on but may have full planning consent. I doubt whether that significant “hope value” features in national statistics or GDP specifically but it would have collateral value to the owner.