Sorry for the break in blogging, we’re trying to up the ante this year
Probably the most pressing of all news items is the recent dismal growth figures. Over a year ago when Cameron and Osborne claimed we were “Out of the woods” and “Out of the danger zone”. How very wrong they were. With the final quarter of 2011 seeing a contraction of 0.2% this then means that in the last 15 months since Osborne’s Comprehensive Spending Review (CSR) in October 2010, we’ve had a massive 0.3% of growth. Cameron then has the audacity to blame the recent growth figures on the Euro crisis. Well I’m sorry, the UK economy has been stagnating long before the crisis began to effect.
Cameron you said it yourself, “I take full responsibility for everything that happens in the economy.” then take responsibility and change course!
Today we saw Gideon (George Osborne) unveil his first ever Autumn Statement (last year it was a Comprehensive Spending Review) which used to be Brown and then Darling’s Pre-Budget Report, although it’s still the same thing more or less.
What we saw today was a Chancellor willing to blame everyone except himself for his own failures. Gideon may claim as much as he likes that the growing crisis in the Eurozone may have put a dent in its works, but that would just be disingenuous as it’s not at that stage to truly have an impact on a non-Eurozone country such as the UK.
But in a nutshell what we had is:
- Growth forecasts for UK economy cut 0.9% this year and 0.7% next year (And we all know you can’t truly get the deficit down without growth)
- Borrowing forecasts revised up – an extra £111bn to be borrowed over five years (This was the one thing they set about to do, this was the be all and end all test of the Coalition and they are set to fail upon it)
- Pay cap of 1% for public sector workers once two-year pay freeze ends (Which is really going to encourage consumer confidence and spending, the true engine of economic growth)
- Unemployment to rise from 8.1% this year to 8.7% next year and more public sector jobs forecast to go – 710,000 over five years (Again, nothing new there)
- Credit easing and numerous infrastructure projects (I will welcome these, but it’s rather ironic after 18 months of austerity mantra)
- January rise in regulated rail fares to be capped at 6.2%, not 8.2% (While this is certainly better but as a semi-regular rail user, this needs to be below RPI, 5%, we already have the most expensive rail fares in Europe)
- Doubling of free childcare places for deprived two-year-olds to 260,000 in England (The one true policy I’m sure we can all get behind)
- 3p fuel duty rise due in January to be delayed or frozen (Which is still entirely negated with the rise in VAT in January)
- Bank levy to be increased (Which is all very well but not when you remember this is balanced out with the cut in Corporation Tax)
So essentially, we have growth being revised down for the fourth time in 18 months and borrowing expected to be £111 billion higher in 2015.
So when Gideon said “we are out of the danger zone.” around a year ago I didn’t think we’d get around to us saying “we told you so” so soon.
For some reason, going back into the mists of time, the British people have an obsession with private home ownership, even though most of us should technically never be able to afford one without borrowing. In Continental Europe, people are far more satisfied to rent, either from private landlords or more ‘trustworthy’ institutions – maybe there is some correlation between these statistics and the lower levels of stress and dissatisfaction there compared to the UK.
Nevertheless, we are where we are, and there is no going back on the ‘Right to Buy’ scheme introduced by Margaret Thatcher in 1981 however much we might want to reverse it (indeed, many of us may actually agree with it, being as it was extremely popular with the low paid, who for the first time had a stake in their council homes and some sense of freedom, however delusional). What we have now is a housing crisis coming at the worst possible time, during a dire economic climate caused by sub-prime mortgages themselves.
Tensions over housing and its’ availability have an effect on many areas of life, including levels of antagonism towards immigrants, the environment, growth, inequality in our cities, personal debt, and of course the Daily Mail and Daily Express front pages. We need to deal with this timebomb if we are to stem a rise in far-right politics and avoid a lost generation of young people. However, worryingly this government is going about it completely the wrong way.
Not only has it made squatting illegal when there are more empty properties than there are homeless people in this country, but it has appallingly placed a cap on housing benefit, effectively pricing the poor out of our capital city and entire swathes of the country – those parts of the country which have job vacancies. The government is slashing the public sector and saddling young people who go to university with ever higher debt, meaning their chances of even being able to look forward to putting down a deposit are negligible.
What our housing market needs is a Keynesian-style investment in house building and construction; not only would this lower house prices for first-time buyers, but it would also ease tensions in the community and increase demand in the economy generally, leading to growth and the beginning of the end of the deficit that the ConDems love to remind us about so much. As a bonus, it would even lead to a return of Location Location Location to our TV screens. Gordon Brown’s plan before the proverbial shit hit the fan in 2007 was to build 3 million new homes – we need this sort of commitment now, coupled with a healthy proliferation of 1940s-inspired New Towns (hopefully better designed than the likes of Milton Keynes) and more social housing. Today’s announcement from Cameron and Clegg about guaranteeing 95% mortgages may look like a repetition of exactly what went wrong in the first place, but should not be dismissed entirely, as it is the taxpayer, not the banks, helping first-time buyers, and there is real potential for an increase in demand as a result.
However it goes nowhere near far enough. If we can’t get people to fall out of love with the owner-occupier dream, then we need to build, build, build, spending more money in the short term to get us out of the mess in the long term.
Yesterday we saw a good sign in the economy that inflation had fallen from 5.2% to 5%. We welcome it but it’s still not good enough, especially when Eurozone inflation has remained at a reasonable 3%. It seems however, this is rather irrelevant with the news released today by the Office of National Statistics (ONS) where unemployment has risen to 2.62 million from July to September.
That’s right, the Prime Minister and Chancellor of the Exchequer who over a year ago claimed “we were out of the woods” now had the audacity to have one of their Ministers for Work and Pensions, Chris Grayling, claim that “What we’ve seen over the last quarter has been the real impact of the crisis in the eurozone”. That’s right, they’re blaming their old punch bag, Europe. Don’t get me wrong, the crisis in the Eurozone is severe, but it in now way at a stage to make a real impact on unemployment figures, especially in a non-Euro state.
With the number of people claiming Jobseeker’s Allowance rising to 1.6 million by 5,300. The highest number of women out of work since February 1988 at 1.09 million rising by 43,000. Youth unemployment breaking the 1 million mark at 1.02 million with a rising by 67,000 and the unemployment rate of 8.3% being the highest since 1996 and the total number of unemployed people the highest since 1994, it’s about time Cameron and Gideon took another look at their plan.
With inflation around 5%, consumer confidence falling for four months on the trot, business confidence falling to a two year low, growth flat-lining in the past 9 months and growth expectations themselves being cut, you would have thought Gideon (George) Osborne would think things could not get any worse.
Well apparently they can. It seems 100 leading economists have written into the Observer to tell Gideon to adopt a plan B. Now while letters like this have been done in the past, the difference being that this time it has an alternative outline. It’s an alternative Miliband and Balls should take head to:
- An immediate halt to cuts, to protect jobs in the public sector. (Although I wouldn’t not cut entirely, for one, I’d cut the renewal of Trident).
- A new round of quantitative easing but the money wouldn’t go to the banks. Rather to finance a “Green New Deal” to create thousands of new jobs.
- Benefit increases to put money into the pockets of those on lower and middle incomes and give a boost to spending.
- A financial transaction tax to raise funds from the City to pay for investment in transport, energy and house building. (Robin Hood Tax anyone?)
- Introduce a truly progressive tax system so that those at the bottom don’t face the greatest burden proportionately (Or simply having the rich pay their taxes will be a start)
- Introduce a tax on land value to increase revenue and reduce the possibility of another debt-fuelled housing price boom.
- Copy South Korea and China’s model of state assistance for industry by creating a British investment bank. (Something that Lord Mandelson was beginning to champion in the last year of the Labour Government)
- Invest in transport and infrastructure to create jobs, but also to encourage people out of their cars and into trains or on to bicycles
- Judge the economy not on whether there is growth in GDP, but on a new catch-all criterion that takes into account the desire for minimal unemployment, and for work-life balance, economic and social stability, and job satisfaction.
Going to use a bit of the Brigid Jones BULS blog formula this morning.
It turns out there’s going to be the biggest drop in middle-income families incomes since the 1970s and so pushing 600,000 more children into poverty according to the IFS. This is while Gideon (George) Osborne has announced a £840 million tax break for multinationals using tax heavens while it turns out the amount of tax money lost in the FTSE 100 by tax avoidance is estimated to be £18bn. So much for the cuts being “progressive”.
To insult to misery, it turns out public sector job losses will 50% higher than originally predicted. So much for Cameron’s pre-election claim that any Minister who came to him with front-line public sector cuts would be told to go back and have a rethink.