Some evidence here that the outcomes of the oft-mentioned ‘long term economic plan’ of the UK government have fallen far short of predictions and claims. First of all: austerity. Geoff Tily, Senior Economist at the TUC, shows that public sector net borrowing for the first quarter of this financial year was £26.6bn, more than the November 2011 official forecast for the whole of the 2015/16, which was £24bn.
The cuts to public spending and tax increases have reduced the deficit much more slowly than hoped, since growth has been much weaker than forecast since 2010.
The government has claimed many times that it has turned the economy around and saved it from ruin. What it doesn’t mention is that recovery was underway when it came into office in 2010. The combination of austerity and the Eurozone crisis slowed growth significantly until 2013, when it picked up and the chancellor George Osborne in fact relaxed austerity to some extent.
The UK’s recovery since the recession has been the weakest since records began. Those records date back over 100 years. This is especially so when per capita growth is used as a measure of progress rather than the overall growth figures, which have been flattered by rapid population growth due to high levels of immigration.
Productivity growth has also stalled in recent years, putting the UK far behind its competitors. In the first quarter of 2016, output per hour worked was 17% below the pre-downturn trend, which is quite something. This poor performance means that wages can only rise if business profits fall, which would reduce investment and subsequent growth. And now in the wake of Brexit, the economy may be heading into a new slowdown at the very least, as firms put investment and hiring plans on hold. This development may not last long, and the economy should rebound, but it underlines the myth of the government’s claim that it has ‘turned things around’.
Politicians love to repeat slogans and cherry-pick statistics so that they can tell positive stories about the success of their policies. And to be honest, they only manage the economy to some extent; there is much which is beyond their influence. But there is plenty on the economic front to worry about.