Chancellor George Osborne is to deliver his last Budget of the Parliament on Wednesday, less than two months ahead of the general election.
Over the last five years, the Government’s approach to managing the UK’s economy has fundamentally failed. We have seen the slowest recovery from recession on historical record, with the UK economy still far smaller than it was at the equivalent point in the economic cycle following any previous downturn since the 1830s.
The recovery that we have seen has also done little to address the economic challenges we faced before the financial crisis. The investment and export led growth we were promised in June 2010 have failed to emerge, with consumer debt increasingly responsible for powering the UK economy.
While the service sector has returned to its pre-recession peak, the manufacturing and construction sectors remain smaller than they were in 2008. With the Bank of England the key source of support for our demand-depressed economy, reliance on monetary stimulus has led to new risks. Expanding bank balance sheets via quantitative easing may have helped stave off a depression, but has not led to any real improvements in our productive potential or consumer incomes.
The impacts of such stagnant and slow growth have been substantial, with people across the economy suffering unprecedented falls in their living standards. Households remain on average £2,500 a year worse off than in 2010 in real terms. At current rates of progress it will take at least five years before living standards even return to where they were before the crisis.
While job levels are up, the quality of work available in the UK has taken a substantial hit, with under-employment and growing insecurity a daily reality for millions. While recent months have seen small increases in real earnings, these have been driven by falling global commodity prices rather than substantial increases in rates of nominal pay growth, which remain far below their historic average.
The Government has even failed against its stated core objective of reducing the deficit. The key reason why deficit reduction is off track is not runaway spending, but poor performance of Government receipts. As wages have failed to meet even modest expectations, tax revenues have disappointed, in-work benefit costs have risen and the improvement in the public finances (despite significant and damaging cuts to vital public services) has fallen way short of the original plans.
At the same time the Government has engaged in tax giveaways which have failed to deliver promised economic gains but have further reduced vital revenues. As a result, we are set to borrow over £54bn more this year than it originally planned; two thirds of which is a direct result of poor growth in wages.
A continued deficit does not mean that spending has not been slashed. Severe and substantial public service spending reductions have still been imposed, causing unprecedented damage to vital services, with those on the lowest incomes being forced to bear most of the pain. At the same time, in-work tax credit cuts have cost low and middle earners thousands of pounds a year.
The Government’s approach has managed to drive down the quality of our public services and undermine our vital social security safety net. Behind this approach lies real human misery: according to the Trussell Trust, 913,138 people received three days emergency food from a foodbank in 2013-14, up 263% from 346,992 in 2012-13.
Decimated services, an underperforming economy and years of real income falls are no basis to build the new economy we need. The UK urgently needs to change course.
Regional Secretary Northern TUC