31 July 2013
In 2010 the outgoing Labour Government bequeathed the incoming Tory-led government an economy that was growing again with four quarters of growth in its last 12 months, with a cumulative total of just over 2 per cent.
The new Tory Chancellor , George Osborne, then cut government spending which reduced demand in the economy and the momentum of growth started by Labour foundered to a dead stop.
The economist David Blanchflower has described the sum total of growth during the Tory term in power since 2010 thus :
“ We need to remind ourselves that the economy has only grown 1.8 per cent in total over the past 11 quarters and, of that, 0.7 per cent is down to Labour’s investment in the Olympics.
“In contrast, over the same period, both Canada and the United States grew by 5 per cent. “
This is why Mr. Blanchflower’s advice on how we should respond to the news of 0.6 per cent economic growth in the latest quarter is
“Hold off on the bunting – 0.6 per cent growth does not a recovery make “
Mr Osborne declares that the economy is moving “ from rescue to recovery”.
This alleged change is certainly not being felt by those at the sharp end of public sector cuts with more to come.
For those as well who have seen their hours of work cut, and those who have seen the value of their earnings fall, there has been no improvement –the “recovery” is invisible.
A recent TUC analysis has found that workers in Britain have suffered a fall in their wages of almost 9 per cent in real terms (taking inflation into account) in the past three years .
The TUC’s findings revealed that in the three years to march of this year, the average annual salary dropped by £2,234 in real terms ( 8.5 per cent.)
The foolhardiness of George Osborne’s policies of austerity mean that if wages continue to trail behind the rate of inflation , consumer spending and economic growth will both remain frail.
The independent Office of National Statistics has recorded that the output of the UK economy is currently 3.3 per cent below the level it was at when The Crash occurred in 2008.
This means that just more than half of the output lost has been recovered in 5 years.
By comparison, in the Depression of the 1930s output was fully restored within 4 years .
At the moment the growth in the economic is being led by consumer spending rather than by George Osborne’s much-promised “export-led recovery” .
Economic growth prospects depend upon living standards rising.
But with the value of wages falling and with so much demand taken out of the economy by public sector cuts, the economy remains in a fragile state.