Living Standards Crisis Set to Deepen

The critics of austerity have been proved right. The OBR confirm today what we already knew - the recovery is at least two years behind schedule. The Chancellor has failed to meet the objective he set of a rebalanced economy growing enough through exports and investment to close the deficit by the time of the next election.
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The Chancellor talked up better growth and lower borrowing but what voters want is a fair share in the recovery.

This is why he kept quiet about a key Office of Budget Responsibility forecast. They now think wages growth will be even worse than the prediction they made in March.

This is why the government is now in a such difficult political situation. If the economy is doing better then workers will want to know why they are worse off - and want to know who to blame.

The critics of austerity have been proved right. The OBR confirm today what we already knew - the recovery is at least two years behind schedule. The Chancellor has failed to meet the objective he set of a rebalanced economy growing enough through exports and investment to close the deficit by the time of the next election. The trade deficit will be worse than expected and what was already a low forecast for business investment has been slashed again. Our recovery looks even more dependent on consumers spending more. And as their wages are still failing to keep up with prices, this means that we have a fragile recovery based on household borrowing.

No wonder so few say they are sharing in recovery. Real wages have been falling since late 2009 and are not expected to start rising until next year. Living standards in 2015 will be lower than at the time of the last general election. That has never happened before.

Despite the Chancellor's frankly ludicrous boost about hitting his borrowing target a year early, borrowing has stayed high for the last three years. Austerity economics delayed recovery and the resulting stagnation has meant lower tax revenues and higher social security spending. It is inevitable that now the economy is finally showing signs of life, borrowing has started to fall.

All that shows is that if the Chancellor had gone for growth first, rather than deliberately delayed it, then we would be in a much stronger position today.

The more the Chancellor boasts about recovery, the harder it is for him to justify the economic hardships and service cuts that millions suffer. This is why his failure to tackle Britain's living standards crisis and get the economy growing in a sustainable way will count today. He may want a permanently small state which makes young people work until they drop, but voters see austerity as nasty medicine. They expect it to deliver a cure so that wages can rise and services be restored. Economic recovery ends the cover the Chancellor needed to pursue his real political agenda.

Of course he has tried to sugar the pill today, and some measures are welcome. It is good that the Chancellor has finally acknowledged his failure to cut youth unemployment. But with a million young people out work he should be taking action now rather than waiting till April 2015. Young people need a job guarantee now. We have had one in the past and it worked.

The infrastructure plans announced yesterday look good, but are little more than a letter to Santa given the government slashed its own capital spending.

The 2008 crash showed that our economy had fundamental flaws. We need a new economy with government action to lift productivity and build a higher wage, more sustainable recovery. That is the very opposite of what we got today.