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11 September 2013

The government's Alice in Wongaland recovery

Alistair Tice

Following a series of improved economic data and forecasts over summer, Tory Chancellor George Osborne announced on 9 September that Britain's economy was "turning the corner".

He claimed that signs of economic recovery in the last six months vindicated his fiscal (austerity) policies and that "those in favour of Plan B have lost the argument."

Such optimism follows a "Boom Britain" headline last month in the London Evening Standard which pointed to "surging manufacturing output, strong car sales, rising property prices and record retail figures".

Well, there's certainly no economic recovery for the majority of us. According to the Trade Union Congress, average pay has fallen 6.3% in real terms over the last five years.

Working 40 hours a week, the average worker is over 30 a week worse off after inflation than in 2008.

One million have been unemployed for over a year, 1.5 million part-time workers want full-time work and over a million are on zero-hours contracts.

Recovery for who?

It's not surprising then that despite the Tory propaganda most people don't feel better off. A YouGov poll last month found that only 10% of people thought that economic improvement had benefitted people on middle and lower incomes. 70% thought it had not.

So what is happening in the economy? Is there a recovery or not? After revised GDP figures, Britain apparently avoided a 'triple-dip' recession and has recorded 0.3% and 0.7% growth in the first two quarters of this year, with forecasts of 0.9% for the third quarter. Is that enough growth to record a dip?

One commentator has described the 'recovery' as "Alice in Wongaland" because of the 70% rise in payday loans over the last year.

There are now one million families taking out such loans every month. And half a million people have gone to food banks in the last year.

The head of market analysis at a foreign exchange firm said: "This growth is the result of debt-fuelled consumer spending, underpinned by a drop in the savings ratio and higher house prices."

Indeed, fuelled by the government's Funding for Lending and Help to Buy schemes, there are fears of a new housing bubble with prices rising over 5% in the last year.

Reality

Pointing to manufacturing output in June, July and August's Purchasing Managers Index reaching a two and a half year high, the Con-Dems claim that the economic recovery is broad-based and sustainable.

Let's put these figures in perspective. Britain's GDP is still 2.9% below its peak before the recession. Manufacturing output is still 10% below its 2008 level.

Business investment last year was 10% below 2010. Despite a 25% fall in sterling making British exports cheaper, July's trade deficit doubled to 3.1 billion with exports to the EU flat and to the rest of the world falling.

Tory hopes of economic recovery are likely to be dashed against the continued fall in real living standards as Osborne's back-loaded cuts hit even harder and "the slowdown in the emerging markets [China, India, Brazil], the possibility of further turbulence in the eurozone, and the risk that instability in the Middle East will push up oil prices" (Osborne's own words!).




http://www.socialistparty.org.uk/articles/17384