Osborne’s economic plan is built on three myths

The UK's economy is not as strong as the Tories claim: here's why

George Osborne ncr

 

As stock markets tumble across the world and the Office for Budget Responsibility downgrades its economic growth forecast for the UK, chancellor George Osborne clings to the fantasy that he has a long-term economic plan.

No doubt the Tories will claim that the looming economic crisis is down to international factors while ballooning public debt since 2008 was the fault of Gordon Brown spending too much.

Yet a series of trends, revealed by the government’s own official statistics, seriously undermine the government’s three central claims that the UK has a strong economy capable of weathering the possible storm to come.

The first is that the economy is being re-balanced towards manufacturing and construction and away from services – the so-called ‘march of the makers’.

The chart below destroys the re-balancing claim, revealing that manufacturing and construction remain far below the level of the first quarter 2008 while services have soared away.

chart - uk gdp output components index q1 2008 100_page_001(click to zoom)

The second is that there has been growth in better paid jobs, with workers moving from the public to the private sector, and that the UK is moving towards a better paid, low welfare economy.  

The next chart counteracts this claim by illustrating the trend since 2008 of annual losses of full-time jobs, replaced with part-time jobs and self-employment.

chart - changes in employment patterns from 2008v2_page_001(click to zoom)

The third is that the UK’s structural deficit will be eradicated by 2019, and that the UK will be back in surplus, purely through the chancellor’s successful economic stewardship.

As the IFS stated back at the time of the Autumn Statement, the chancellor’s windfall of projected greater tax receipts and lower borrowing costs, enabling the damaging tax credits fiasco to be neutralised, had no better than a 50:50 chance of being realised.

Since then, the odds of George Osborne reaping this windfall and meeting his debt reduction target have widened. It seems that the long-term economic plan is not delivering.

Kevin Gulliver is director of Birmingham-based research charity the Human City Institute, is former chair of the Centre for Community Research, and part of the SHOUT save social housing campaign. He writes in a personal capacity. 

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