Eight Prime Ministers and the Economy

11 Apr 2013, by Richard Exell in Economics

For obvious reasons there’s been a lot of interest recently in the performance of different Prime Ministers, so I thought I’d have a look at how they compared on some key economic indicators. In the past fifty years eight people have become Prime Minister: Harold Wilson, Ted Heath, Harold Wilson again, Jim Callaghan, Margaret Thatcher, John Major, Tony Blair, Gordon Brown and David Cameron.

I’ve focused on GDP growth, inflation and unemployment and I’ve used data from the Office for National Statistics. I haven’t used annual data, because I want to get as close a match as possible to the dates they entered and left office. For GDP growth, I’ve used quarterly figures, starting their term with the first quarter that falls wholly in their premiership and finishing with the quarter when they left: if someone became PM in February I’d start with the second quarter, if they left in February I’d finish with the first quarter. For inflation and unemployment I’ve followed the same procedure, but with monthly figures. The only reliable figures for inflation across the whole period are for the Retail Price Index; the most reliable figures for unemployment are those using the ILO’s definition, ONS data using this definition only goes back to February 1971, so I haven’t been able to go further back than Harold Wilson’s second period in office. For David Cameron, I’ve used figures up to the most recent I can get.

Here’s our first chart, for average annual GDP growth:

You need to be a little careful reading this: Prime Ministers aren’t responsible for the economic cycle or global trends and Prime Ministers’ averages can be brought down by their predecessors’ policies. Mr Cameron would probably argue that he inherited a mess and I’d certainly say that the Barber Boom flattered Ted Heath’s average growth figure, while Harold Wilson had to pay for clearing it up. But I think the implication that growth was not quite so special in the 80s and 90s is fair.

Next up is inflation. Some politicians and journalists have argued this week that defeating inflation was the great achievement of the Conservative governments from 1979. This is a common claim, but it requires that we forget that inflation went up a lot before it came down (in particular because VAT was nearly doubled). Harold Wilson had to cope with worldwide inflation following the Yom Kippur War, but Jim Callaghan had already made substantial progress before Mrs T was elected:

And, finally, let’s look at unemployment. The next chart shows average monthly ILO unemployment under each PM.

As I’ve indicated, context is vital, and these Prime Ministers inherited different problems, faced different international trends and had different amounts of time in which to make a difference.

But a lot of commentators this week have claimed that it is obvious that the policies of the 1980s rescued this country from an economic mess and that it is madness to argue otherwise. These charts suggest otherwise.