What can we tell about the Conservatives long term economic vision from the budget?
THE LATEST UK budget was presented by the Conservative Government as characterised by modest progress and stability, yet there was a lot going on just below the surface.
Predictions for growth, changes to taxes and in employment, NHS funding and approaches to wages and inflation show the Tories have a plan to transform the UK’s economic landscape.
And much of that new policy will impact the poorest in the country.
CommonSpace looks at the hidden pain in yesterday’s (8 March) budget.
- Economic growth is at unprecedented lows
The main thrust of ‘good news’ from the budget was the announcement that growth forecasts had been upgraded by the OBR from 1.4 to 2 per cent for the coming year, before falling back down to 1.6 per cent in 2018-19 before rising again to 2.0 in 2020.
Of course these are a simply projections in a turbulent and unpredictable world system, but taken at face value they are deeply unimpressive.
Business cycles last, on average, about six years. The UK is supposed to be more than seven years into recovery, with the last recession lasting until the second quarter of 2009. The UK economy shrunk in four non-consecutive quarters since then. Taken in this light, a boosted growth prediction of just 2 per cent can hardly be claimed as a victory.
According to the Resolution Foundation, this decade’s growth is the weakest in 210 years.
- Wages are collapsing
Growth is still growth, and in theory it should translate into improved living standards for the working class, who have suffered the best part of a decade of austerity.
But it hasn’t. The UK is the only major economy where recovery hasn’t translated into rising wages. According to the TUC, real wages fell 10.4 per cent between 2007 and 2017, the worst continuous fall since the nineteenth century.
Hammond’s claims that the UK wages are outstripping those of major European competitors have to be caveated with the fact that wage collapse in the UK is second only to Greece, which has seen its economy nosedive in recent years.
- The full picture for unemployment isn’t pretty
Hammond’s second claim to success was falling unemployment. He claimed a 11 year low in unemployment. It is indeed true that unemployment has fallen, but this conceals a deeper truth about contemporary work.
In the timid economic recovery many stable, skilled fulltime jobs have been replaced with part time, precarious, unskilled jobs and by a growth in self –employment.
There are now 910,000 zero hours contracts in the UK. Part time work increasingly means low-paid work, according to the Institute for Fiscal studies, five times as many men working in part time jobs are receiving low pay than in the 1990s.
The Conservatives have always promoted themselves as the party of small business owners, and have traditionally sought to keep taxes on small business low. However, this budget has seen an increase in National Insurance payments for some self-employed workers.
The increase in self-employment is helping to erode the UK’s tax base, as poor workers unable to find enough pay or hours in the jobs market turn to self-employment.
The rise of the so call ‘gig-economy’ is a structural change in the working class. These aren’t the small business owners and freelance professionals of the Tory’s traditional middle class base. 80 per cent of the self-employed live in poverty.
- Is the NHS funding actually funding for privatisation?
Campaigners working to maintain the NHS as a public service in England have raised concerns that new NHS funds promised in the budget are actually going into a programme for further privatisation.
Of a promised £425m investment over the next three years, £335m is going to sustainability and transformation plans which will open hospital services to greater private involvement.
Social Care also saw a promised spend of £2bn over three years, less than the £1bn per year asked for by Labour. But Hammond made clear once again that the long term health reform strategy is to shift public spending from the NHS to social care, rather than adopt and integration model as the Scottish Government has pledged to do.
- Inflation will savage exiting benefits payments
Inflation is expected to tear into existing benefits in coming months and years. The Resolution Foundation has produced a report estimating that a focus on the budget of cutting corporate, income and inheritance tax over re-adjusting welfare for inflation will cost many of the poorest in the country £3.6bn.
Picture courtesy of Foreign and CommonWealth Office
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