The Tories say the economy is recovering, and they point to GDP growth statistics of 1.7% last year and a forecast of 2.7% for 2014. Labour, however, say that this doesn't matter, because the cost of living is still high and on the up. At first glance, this might seem absurd - how can a growing economy not lead to increased living standards? The reason is actually quite simple.
By making significant real-terms public spending cuts, Osborne has stifled inflow of money from the Treasury into the wider economy. Keynesian economic theory holds that governments should use public spending to stimulate demand in times of recession, but Thatcher threw Keynes out of the window back in 1979 and Osborne has ramped up the neoliberal experimentation to the point where even Maggie would be disgusted.
Lack of economic stimulus. has contributed heavily to wage repression - as this graph shows, wages have increased at below the rate of inflation in every quarter since the coalition came to power bar one. It is interesting to note that the brief pre-election recovery in real wages came only after two years of fiscal stimulus packages by the Brown ministry. His chosen method of stimulus, relying heavily on quantitative easing and the bank bailouts, was far from optimal - it injected money into the finance industry but neglected other sectors - but it did actually start to show some results by early 2010. Naturally, the Tories took swift steps to shut that nonsense down immediately upon assuming power.
With average wages so far below inflation, it is easy to see why most people just aren't feeling the so-called 'recovery'. Abstract GDP growth figures, however promising on paper, just don't mean anything to ordinary people if the money in their pocket isn't there. But if the economy is growing, and yet it isn't making its way down to us, then where the hell is it?!
That's an easy one too. It's in the pockets of CEOs and bankers, of company shareholders and major landowners. The combined wealth of the richest 1,000 UK households jumped 15% in 2013 and now stands at almost £520 billion, with the result that the UK now has more billionaires per head than any other country. The baseline for entry into this super-elite group is now £85 million - £5 million more than before the recession. So, while the UK as a whole has only just surpassed 2008 levels and the average person is still some considerable distance from that, the richest members of our society are actually much better off than they were six years ago.
Some people, then, have done very well out of the global economic crash and the suffering of millions. The rest of us, meanwhile, are a little more strapped for cash - and it doesn't look like it's getting any better anytime soon. With the Tories plotting a law which will make eliminating the budget deficit by 2018 a legal requirement, more cuts are on their way, which will lead to further wage depression and thus falling demand in the economy. The current trend towards underemployment, with more and more people disappearing from unemployment stats into false self-employment or abusive zero-hours contracts, will continue and the queues outside food banks and job centres will only grow.
Of course, that will push up the welfare bill, sending Daily Mail readers frothing at the mouth and baying for blood. Then the government will be 'forced' to slash social security further, driving more and more people - particularly young people - onto the scrapheap. Welcome to the age of austerity politics. It hasn't worked so far, but the elitist, neoliberal mainstream parties aren't about to let a silly little thing like that stop them! They have the lower orders to crush.
Well, THAT was anticlimactic, wasn't it?
For those who pay no attention to politics whatsoever - other than reading this masterpiece of a blog of course - yesterday the Right Honourable Mr. George Gideon Osborne announced the government's Budget for the financial year ahead. This document contains many things, ladies and gents, but by far the most important is that word which strikes fear into the hearts of princes and paupers alike - taxes.
Now, the Budget is usually one of, if not the most important pieces of legislation of the year. It allows an ambitious chancellor to restructure the UK economy at a stroke, changing the very way in which that shiny stuff we call cash in transferred to and from the vaults of Her Majesty's Treasury. Judicious use of the Budget can make the reputation of a Chancellor, and of a party too.
But it can also break it. And perhaps that is the reason why this particular Budget has contained virtually nothing of any importance. There is an increase in the Personal Allowance (untaxed income) to £10,500. That is welcome, but is a limited change, considering that such an Allowance still falls more than £5,000 short of covering the minimum wage. The threshold for the top 40% rate of income tax has also been raised slightly, effectively extending the tax break given to low earners to those earning more money. For those lucky enough to fall into the reprieved bracket, such a change will also be more than welcome - for the rest, this is actually a bad thing, as it means less tax revenue for government and therefore more spending cuts to follow. But hey, we're used to that, right?
Other than this, not a lot has changed. Pensioners can now withdraw their savings as a lump sum rather than an annuity - this makes sense, as it allows people to organise their own spending, but has little actual effect, provided the pensioner in question is able to resist the temptation to spend it all on sweets. Savers have had a break - after long years of irritation over the low 0.5% interest rate, the removal of the 10% starting tax rate on income from savings will surely be welcome. Alcohol duty is down 1%; tobacco duty up 2%. But these are small changes - tinkering at the edges. There is no meat on the rather bleached and sandblasted skeleton of this Budget.
Why is this? Most likely, Osborne is saving himself for next year. For that will truly be a momentous occasion - the last Budget of this Parliament, just a couple of months before the general election in which the record of the first Coalition in Westminster since the Second World War will be tested. Osborne will be desperate to make sure that that budget goes down very well with the public indeed. It could have a huge effect on the outcome of the election, one way or the other, and the government needs as much money in the bank as possible to create a plan which will inspire the public to cast their vote in a favourable manner. The best way to achieve that, at least in the traditional Conservative mindset which dominates the Coalition, is to keep the economy steady and scrimp on spending now so more money will be available in the future. Hence the tinkering.
Oh, and give us a lovely new pound coin to keep everyone occupied. Look! Isn't it shiny?!
Ahem. In any case, Osborne and co. must have access to data I don't if they think that their current approach is going to get the economy to a position in just one year that they can provide an attractive Budget in time for the election. Much has been made of the drop in UK unemployment in the last quarter, but it must be emphasised that this is merely a numerical drop. Percentage-wise, it hasn't budged one iota - it remains 7.2%, currently 2.33 million people. And that figure doesn't include other dependents, such as pensioners and children. There's still a long way to go before Britain is working again.
Meanwhile, the government - for all its talk of austerity - borrows more every year, with the result that the UK structural deficit is now 5% of GDP. To put it another way, fully one twentieth of everything this country produces is rerouted to pay off the interest on our national debt. The interest Not the debt itself - not by a long way. Despite this rising borrowing, however, public sector cuts continue. All this begs the question - where the Hell is all our money going?! It would be incredibly cynical even for me to suggest it might be to line the pockets of wealthy elites and Tory business partners, but there it is.
All in all, not very impressed, Mr. Osborne. For your sake, and your Party's, next year's Budget had better be a vast improvement.
Now, if you'll excuse me, I'm off to play with my shiny new twelve-sided pound coin like an obedient corporate puppet.
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