Neither spending cuts nor the eurozone are to blame for Britain's weak economy The best way of uncovering the causes is to examine the expenditure components of GDP. There are four broad categories: consumers' expenditure, real investment by companies, spending by government and net exports. If we compare the contribution that each of these has made to GDP in the UK with the equivalents in other G7 countries, then we can begin to understand why the UK has done relatively badly. There is little surprise about the company component. Sharp cutbacks in companies' inventories have been a source of UK weakness. Moreover, company fixed investment spending has been weak here as well, although it has been almost as weak in most other countries. What is surprising, though, is net exports, which not only contributed positively to the UK's GDP performance, but more so than in other G7 countries. The other surprise is that far from causing GDP to fall, an increase in government spending here accounted for a positive contribution to GDP of about 0.5pc, about the same as in other G7 countries. So much for "the cuts." There is only one category left. The fall in consumers' expenditure accounts for a drop in UK GDP of about 3pc, compared to an increase of about 0.5pc for the rest of the G7. So here is the answer. Well it is the answer in an accounting sense anyway. But why has consumers' expenditure been so weak? As they say in another context, it's a game of two halves. In 2008 and 2009 real incomes rose but consumption fell. In other words the proportion of incomes devoted to saving rose - and sharply. The reason is that in the boom years, UK consumers had borrowed heavily and the ratio of debt to income soared. In the subsequent bleaker times, consumers decided to reduce their debt, now helped by the banks being less keen to lend. Recently, however, the reason for lower spending has changed. The savings ratio has stabilised but consumers' real incomes have fallen. There are three causes. The first is the major increases in international commodity prices, especially oil. But other industrial countries have suffered from the same thing, so this does not explain the UK's poor relative performance. The second cause is tax. The rise in VAT here took about 1pc off disposable income. On top of this, there have been other tax increases which have lopped off another 0.5pc. So although "the cuts" may not explain economic weakness, the fiscal squeeze more generally partly does. The third cause is the lingering effects of the devaluation which has prompted a succession of price rises across the board. No other G7 country has seen its exchange rate fall as much as ours. This analysis not only sheds some light on the past but also gives some grounds for hope for the future. The factors which have nobbled UK real incomes are fading. Admittedly, last week's news was pretty bleak, with GDP now shown as falling by 0.3pc in the first quarter. But what may well prove to be more important is that there was another sharp fall in inflation, taking it down to 3pc. I believe that it will fall considerably more later this year and into next, even without any assistance from sharply lower oil prices. If these also materialise, which is highly probable if the world economy proves to be weak, then inflation could fall still further, paving the way for an increase in real incomes and a rise in consumer spending - if not this year, then next year and beyond. Roger Bootle is managing director of Capital Economics.