Working people across the UK are facing a crisis of living standards. Ten years after the financial crisis, wages still haven’t recovered to their pre-crisis peak, and millions face insecurity at work.
Yesterday the TUC issued its report calling on the government to use its Spring Statement to announce a spending increase of £25 billion to protect our economy.
We now know that overall economic growth since the financial crisis has been slower than in any of the comparable periods that followed recessions in the 20th Century. Over 2009-2018 growth averaged only 1.9% a year; over 1931 to 1940 (from the end of the great depression) growth was 4% a year. The next weakest recovery was from 1975 to 1984 (2.2% a year), which even included the ‘Thatcher’ 1980-81 recession.
Comparison of economic growth since 2008-09 recession with major recessions in the 20th Century
Action needed in the Spring Statement
Although the Chancellor has previously suggested he will not use spring statements as a second annual budget, the TUC argues that the UK economy faces immediate risks that require urgent action.
Global growth is slowing sharply, international trade disputes are damaging business confidence and volatility in financial markets signals wider dangers.
The Prime Minister’s refusal to take the threat of a no deal Brexit off the table is causing additional problems for Britain, leaving companies unable to make investment decisions, and having to build reserves for contingency plans in case of a chaotic and costly departure from the EU.
On top of all this, austerity has meant that UK public services have been cut to the bone. Even after the proclaimed ‘end of austerity’, spending is now (i.e. in 2018-19) £750 or 14% below the level in 2009-10. In five years’ time, spending will still be £500 lower for each person that it was in 2009-10.
Real departmental spending, £ per head
The increase in spending basically covers the increase to funding for health. For other public services, already savage cuts will continue - by up to 4 per cent per head by 2023/24. The damage to services and to a workforce struggling to cope with rising demand at a time of staff shortages is obvious.
The impact on local government particularly severe, and almost one in 10 councils are now expecting legal challenges based on reductions in service provision.
In a statement issued with the report, TUC General Secretary Frances O’Grady says it as it is:
“Austerity didn’t mend the holes in the roof, it tore it down. And it’s left Britain in a far worse state to survive the challenges ahead.
“With the global economy slowing down and Brexit causing so much uncertainty, we cannot afford to delay the rebuilding that Britain needs.
“Positive action is needed from the government. We must direct more funding to public services to strengthen the economy at its core. And every community must get investment in the modern infrastructure needed for growth.”
The Chancellor has planned a small boost to spending in 2018/19 as part of the Prime Minister’s alleged commitment to ‘end austerity’. But the scale of the weakness demands much more. We call for an immediate boost to spending of £25 billion:
These increases are necessary to rescue our public services, and to help start build the infrastructure we need for the twenty-first century.
But they’re needed to boost our feeble growth too. From the point of view of the economy, according to the range of IMF multipliers (0.9 – 1.7), the spending should strengthen nominal GDP in 2019-20 by between one and two percentage points of GDP. Working people need a change of approach. The Chancellor should take this opportunity to deliver it.