ANDREW FISHER highlights factual inexactitudes in the spin of a local MP
According to Croydon Central MP Gavin Barwell, we should all be worshipping at the altar of George Osborne: the economy is on the up.
With spin straight out of Conservative Central Office, Gavin no doubt gets a gold star for peddling the party line, but any honest analysis would cover his work on his MP’s blog with red ink.
Gavin starts on dodgy ground by claiming that the UK is “currently the fastest-growing [sic] major economy in the world”. This is untrue.
The UK economy grew at an estimated 2.6 per cent in 2014. The world’s second-largest economy, China, grew at 7.5 per cent and India (not far behind the UK now) grew at 5.4 per cent. The United States (the world’s largest economy) grew at twice the rate of Britain in the last quarter, and has outpaced the UK over the last year, too.
While honesty matters for most voters, international comparisons of economic growth matter little. If the UK is doing OK, then it doesn’t much matter if somewhere else is doing marginally better, and if Britain is doing badly, it doesn’t much matter if somewhere else is doing marginally worse.
So what is really happening to the UK economy? We do have a recovery, but its underpinnings are very insecure. Like the man who built his house on sand, if the rain comes, Osborne’s recovery will be washed away.
According to Bank of England figures, unsecured consumer credit is growing at its fastest rate since 2005. This is recognised by the independent Office for Budget Responsibility which predicts personal debt levels will rise beyond those that existed just prior to the crash.
If more people are in work, as Osborne and Barwell claim, then surely they’re better off and don’t need to go into debt?
But more people are going further into debt because average household incomes have fallen by 10 per cent under this Government, once you allow for inflation.
The new jobs that have been created have been overwhelmingly low-paid, many are self-employed, or zero hours or temporary. The jobs market now has a lower proportion of full-time employees than before the crash (something I analysed in April and again last month).
In household terms, the recovery is in fact only for the richest 20per cent, whose disposable incomes rose by £940 in the last year. For the rest of us, our disposable income fell by an average of £250, with a fall of £381 for the poorest 20 per cent.
Many of the full-time jobs that have been created do not give people enough hours or pay to provide the security to build solid financial foundations – worsened by coinciding with a period when energy costs, housing costs and rail fares have shot up without any government intervention. For example, the TfL fare rise introduced on commuter routes out of Croydon yesterday mean that fares have risen 20 per cent since 2010.
So when Gavin says more people are able to provide for themselves and their families, he is wrong: in-work poverty is at a record high, meaning a larger number of working people have to receive tax credits and housing benefit to make ends meet. We are all subsidising low-paying employers.
George Osborne promised to slash welfare spending by 10 per cent, but according to the Institute for Fiscal Studies, he has only managed to cut 2.5 per cent – mainly due to subsidising low-paying employers with tax credits and paying rising housing benefit to overcharging landlords.
Gavin also wants to take credit for low inflation – and a recent drop will certainly ease the strain on workers missing out on decent wage rises. However, falling inflation is due to the falling oil price, which is because, under instruction from the United States, the Saudis are keeping the oil price (as part of the new geopolitical Cold War against oil revenue-reliant Russia). So if living standards do improve in 2015, it’s no thanks to George Osborne.
The government is in the middle of a superficial upturn – a period which economists call a “dead cat bounce”. With apologies to my fellow animal lovers; the analogy reflects that after a sustained drop, even a dead cat will bounce. A bit.
The UK economy’s fundamentals remain very weak: economic growth is slowing, the trade deficit is the worst for 30 years, business investment is falling, manufacturing is sliding, and GDP per head remains below pre-crash levels.
And then there’s the deficit.
Osborne’s deficit reduction has ground to a virtual halt this year because the jobs being created are low-paid and not producing the tax revenues necessary to close the deficit.
In 2010, Osborne promised he would have eliminated the deficit by next year. Now he and cheerleaders like Barwell are telling us to rejoice because the deficit has been halved. Yet even that is questionable – most economists, and the editor of the Tory-supporting Spectator magazine, suggest that Osborne is presiding over two-thirds of the deficit he inherited.
As shown in the OBR table re-produced above, by the end of this financial year (2014-2015), the deficit should have been £71 billion, a little less than half of the £155billion Osborne inherited in 2010-2011. Far from eliminating the deficit, Osborne’s austerity programme has succeeded only in driving down living standards and racking-up ever higher debt (both government and personal debt).
The Conservatives began their election campaign yesterday with a much-derided poster claiming that we are on the road to recovery. The road pictured looks like the driveway of a stately home. Others have commented that it is a “road to nowhere”.
With a weak economy built on rising debt, rather than rising incomes, whoever enters No11 Downing Street after the General Election will do well to avoid a another recession within the next couple of years. One can only hope that the likes of fawning courtier Gavin, admiring emperor George’s new clothes, will no longer have any influence after May.
- Andrew Fisher is a Croydon resident who writes regularly for LEAP – the Left Economics Advisory Panel. He is the author of The Failed Experiment – and how to build an economy that works
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Coming to Croydon
- Purley and Coulsdon debating society: Philp v Benn, Jan 5
- David Lean Cinema, Mr Turner, Jan 8
- David Lean Cinema, Leviathan, Jan 13
- Norwood Society talk: Penge, the making of a suburb, Jan 15
- David Lean Cinema, The 78 Project Movie, Jan 15
- David Lean Cinema, Hannah Arendt, Jan 20
- David Lean Cinema, The Imitation Game, Jan 22
- South Croydon business breakfast, Jan 24
- David Lean Cinema, Night Will Fall, Jan 27 (Holocaust Memorial Day)
- David Lean Cinema, Kon-Tiki, Jan 29
- Norwood Society talk: Crystal Palace and Dulwich, Feb 19
- Norwood Society talk: Charlies Dickens in Norwood, Mar 19
- Norwood Society: Balloons and airships at Crystal Palace, Apr 16
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