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The Tory Economic competence myth
Labour can’t be trusted on the economy. The Tories are “Strong & stable” as Teresa May keeps bleating on about. Labour spend all of our money. All the polls show that on economic competence the Tories come out ahead of Labour, and on doorsteps I have heard this a few times in the last couple of weeks. A member of my tutor group even said it to me this week. How on earth have they got away with this image? It is completely and utterly lacking in truth. Let’s have a look at the key economic measure that I teach my 16 year old year 12 students Government’s aim for.
Economic growth: If the economy is growing, jobs are created and people are better off (in theory). The UK’s trend rate of growth (our long term average) is around 2-2.5%. Under the coalition and Tories, only once has growth been above 1%. That leaves us with a negative output gap (i.e. we could & SHOULD be doing better). When Labour left power the economy was growing until Osborne and co cut any stimulus (the US & Germany, now thriving, did not do this).
Inflation: Thanks to Boris, Gove, Fox and the other right wing zealots getting their way, Cameron agreed to an EU referendum in which his preferred outcome didn’t happen. We all know that. But since then our exchange rate has collapsed. This is good for exporters & bad for importers. Problem is, in the UK we don’t export as much as we perhaps should and we import a lot. Especially consumer goods and food. If imported food is more expensive, we can’t just stop buying it, so we spend more money on it. This leaves less money for everything else. Inflation has been steadily rising ever since the vote, it is now 2.7%, well above the Bank of England’s 2% target. This is due to costs rising and certainly not due to rising wages…..
Real Wages: Real wage is your actual wage minus inflation. What you actually have to spend. Nurses pay has been “capped” at a 1% rise, as has teachers’ pay (incidentally, MP’s voted through an 11% pay raise for themselves 2 years ago but all in this together eh!?) So this is a pay cut. If prices are up more than my wages, I can afford less. My landlord doesn’t accept lower payment nor does my electricity supplier. “Between 2007 and 2015, the UK was the only big advanced economy in which wages contracted while the economy expanded.” This is from that well known lefty source the Financial Times. Wages in the UK have been falling for ten years. We are the only western country aside from Greece where this is happening. In work poverty is now widespread and linked to the below.
Unemployment: This is the Tories big trumpeted claim, the “jobs miracle”! Record numbers in employment (this is an obvious claim, we have more people so of course we have more jobs!) But the % unemployment rate is also at a record low. Firstly, as usual the Tories have changed the measure, it now excludes more people from the official figures. But most importantly are the types of jobs that have been created. Nearly a million of these jobs are zero hour. Low paid, insecure and importantly, where the employer rarely trains or up skills the worker. This means they can get rid of them whenever they want, and have added no value to their employability. Then there are the self-employed. This induces images of a trading go getter doing deals and making lots of money. The reality is very different. The average wage of the self-employed is £240 a week, 15% lower than in the mid 90’s. These self-employment jobs now account for 15% of the UK workforce. If unemployment was really as low as the figures show, wages would be rising as there would be a lack of labour. But it’s not and they are not.
Trade: The UK has had a trade deficit (importing more from abroad than we export to them) for many decades. Cameron and Osborne wanted a rebalance but it never came. This is hugely impacted by the exchange rate which as mentioned earlier, has meant a rising cost of imports (and the UK consumer imports a lot). So if more money is leaving the country than coming in how is this balanced. It’s balanced by something called the capital account (mainly UK assets). The fall in our exchange rate means it is easier for people abroad to buy things in the UK. And do you know what they want? Houses. Many high end price houses have been purchased by people abroad who will very rarely even frequent it. But it is not just these. Many houses at a “reasonable” price are snapped up by buy to let landlords abroad and then rented back to us. A house is taken off the market for a UK resident wishing to get on the property ladder and the rent being paid goes abroad so that the UKL never sees it again. This is the “trickle down” nonsense you might hear about.
Debt and Taxes: But Labour always put up our taxes! And they increase our debt! It is just untrue. The UK national debt (the total amount the Government has ever borrowed) has risen by more in the last 7 years than ALL LABOUR GOVERNMENTS EVER COMBINED!! Re-read that sentence. It is a huge lie Labour are frivolous with taxpayer’s money. If you look back through history, Labour have also ran smaller budget deficits year on year on average, and paid off more of the national debt in the past. On tax, “the amount of tax paid in the UK is poised to reach the highest level in 30 years and will rise even further because of mounting debt and pressure on public services” according to the Institute of fiscal studies. It is about how they tax too. They are very proud of the income tax allowance changes, “lifting 10million people out of income tax altogether”. Thanks very much, oh but you have raised VAT to 20% taking it back and making the poorest pay most as usual. It’s the equivalent of not punching me in the face so you can kick me in the shin. In their manifesto they have now said they won’t rule out income tax or National insurance increases. But they can cut the top rate of income tax, corporation tax on companies and raise the inheritance tax threshold to £1m. It is the greatest transfer of wealth and income from poor to rich ever.
Then there are the public service, per head (which is what we care about) we all know that school funding, NHS funding and funding for any other public service has fallen. We are now told we will work until we are 67 where we will now get a lower pension and benefit trimmed back. The bombshell of the Tory dementia tax is another astonishing attack on the poor and ill. If you are unlucky enough to be ill in later life, we will take away your last wish of leaving your kids something and make you pay for it.
The Tories tax you more, give you less in crumbling public services and increase debt. It is an astoundingly bad legacy.