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BEHIND the bad jokes, gimmicks and rather meagre “giveaways” in this week’s Budget, the main story was a substantial downgrading of growth forecasts in a situation where economic growth is already currently the lowest it has been since the Tories came into office and the slowest of the major economies in the G7.
Forecasts for wages and productivity have also been downgraded as have levels of business investment.
As the economist Larry Elliott put it, “the real story was not the latest attempt to boost home ownership but the news from the Office for Budget Responsibility (OBR) on the state of the economy. This was little short of calamitous.”
These dismal forecasts were that GDP growth this year will be 1.5 per cent before falling to 1.4 per cent in 2018, 1.3 per cent in 2019 and 2020 and eventually rising to 1.5 per cent in 2021 and 1.6 per cent in 2022.
This means that, for the first time in modern history, in every forecast year, growth is expected to be below 2 per cent.
Many economists and commentators are agreed that that Britain’s terrible performance when it comes to productivity is a central reason for these forecasts.
While the Chancellor himself has said that rising wages and living standards depend on rising productivity, a boost to Britain’s productivity level would require substantial increased investment levels, something the Tories continually refuse to commit to.
In fact, they will cut public sector net investment in the period ahead. Under the OBR analysis, general government net investment will fall to 1.4 per cent in 2018, down from 2.4 per cent in 2017. It will reach a new low of 1.1 per cent in 2021.
Shadow chancellor John McDonnell was spot on to argue in response that boosting spending on infrastructure through government intervention on a far wider scale would improve productivity, growth and wages.
Furthermore, as I have argued in this column before, investment is the most important factor in economic growth.
This is why when David Cameron and George Osborne took power and slashed the last Labour government’s investment spending it pushed our economy back into recession.
Yet instead of the much needed plan to invest in our future, as Unite general secretary Len McCluskey put it, “the comprehensive package of investment in skills and infrastructure we urgently need was missing. What was offered instead by the Chancellor was piecemeal initiatives.”
It’s also important to understand in terms of living standards that we will be worse off as a result of this Budget.
Already, real wages are lower than in 2010 and the failure to pause the botched roll-out of universal credit will cause real suffering.
The fact is that for millions of working people the result of the government’s refusal to change course will be wages plummeting and personal debt soaring. Average earnings will fall below the RPI this year and in each of the next five years.
And this cost of living crisis will not be spread evenly. The poorest tenth of households will lose about 10 per cent of their income by 2022 while the richest will lose just 1 per cent.
To sum it up, as Jeremy Corbyn said: “Falling pay, slow growth and rising poverty … is what the Chancellor has the barefaced cheek to call a ‘strong economy’.”
Additionally, despite some new spending announcements, it’s important to understand that spending on public services will still fall in real terms, albeit slightly more slowly, and that austerity is very much here to stay, even though many of our public services are facing an emergency situation due to years of being starved of much needed resources.
As Dave Prentis of Unison said, the Budget “left public services gasping for air” and the reality is that our communities face yet more of the cuts that have caused so much human and economic damage since 2010.
In terms of the health service, NHS trusts in England were given an extra £350m for entire winter — less than half asked for to keep the service running — after chief executive Simon Stevens asked for the £350m a week as pledged by some Tory Brexit campaigners last year.
Meanwhile, our schools are still facing their first real-terms funding cuts since the mid-1990s.
And while this week the Tories have been heavy on spin about a supposed new-found desire to tackle the housing crisis, in fact the Chancellor announced no measures to directly increase house-building.
The measures to allegedly boost housing through lifting stamp duty for some will actually boost house prices, not home building, and will therefore place them further out of the reach of many young people.
Finally, environmental groups have termed the Budget as “one of the least green” ever, including through the withholding all subsidies for renewable energy projects until 2025.
Such wrong priorities are not just bad for the planet, but these short-sighted measures will ultimately hurt the economy too.
With Britain’s oil and gas fields due to be decommissioned in 2025, we need to be investing in developing alternative energy sources and the green jobs of the future.
Whether it be their failure to take climate change seriously, their “head in the sand” approach to the deepening crisis in social care caused by the cuts, or their failure to take the universal credit crisis seriously, this is an out-of-touch government with no idea of the reality of people’s lives and no plan to improve them.
It’s time for them to go.
• You can follow Ken at twitter.com/Ken4London or facebook.com/KenLivingstoneOfficial
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