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Talk of a U.K. lost decade is rife. Ed Balls, the shadow chancellor, has joined with some independent economic commentators who warn that it's coming unless the government changes course. The right response comes from the British Christmas pantomime: Look behind you! The lost decade's right there.

The numbers tell the lost story. U.K. GDP has not advanced at all for six years. If the decade since 2002 has not been totally wasted, not much has been accomplished. GDP growth per person has been a meagre 0.5 per cent per year. The year for useful decennial warnings was 2002. Pity they didn't see it coming.

The causes of vanishing growth are all too clear to those who look in the right direction. It all began with home cheer. The Bank of England stood by as house prices were forced upwards. The paper gains nourished a false popular belief in increasing wealth, and a necessarily temporary increase in tax revenue. The government responded with an even faster increase in spending, 59 per cent in real terms in the decade to 2010-11. When the paper supports were stripped away, the unhappy legacy is a doubling of government debt from 33 per cent of GDP a decade ago to 66 per cent now.

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Prospects for the next decade look challenging in large part because the bill for the lost one is still far from fully paid. Even with continuing austerity, government debt is likely to rise to more than 80 per cent of GDP. Another nasty barrier to growth, meanwhile, is external: The euro zone crisis will prove stubborn and restrict U.K. exports.

And yet, there are some encouraging signs of structural change. Employment rose by 236,000 in the three months to July to reach a four-year high of 29.6 million. The World Economic Forum judges the U.K. the world's eighth most competitive economy. The pound is weak, not strong as it was in the binge-spending days. The economy is attempting to grow without being doped by house price gains and increased government spending.

Yes, facing up to a lost decade is tough. But the best way is to put behind you the policies that produced it. The growth wrought in austere years will be harder to achieve but more sustainable – a found decade.

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