Immediately after the preliminary growth figures for the last quarter of 2013 had been released, Tory Chancellor George Osborne smugly announced that ‘our long-term plan is delivering a brighter economic future.’ The British economy grew 1.9% in 2013, the fastest rate since 2007. The Tories were jubilant, impervious to the Labour Party’s fake concerns about a cost of living crisis hitting the vast majority of workers throughout the country. All the main political parties are steadfastly committed to neo-liberal austerity programmes to slash public spending and cut the public sector deficit. They differ only in the opportunist slant they give to their reactionary policies. David Yaffe reports.
GDP grew 0.7% in the fourth quarter of 2013, a little below the 0.8% of the previous quarter. The services sector, more than three quarters of the British economy, grew by 0.9%, with business and financial services, vital to the British economy, growing by 1.2%. Manufacturing was up by 0.9% while the construction sector fell by 0.3%. However GDP is still 1.3% below its pre-crisis levels. Services are 1.3% above the pre-recession peak, while manufacturing output is still 8.2% lower and construction output 11.2% lower. Most significant is the stagnation of productivity throughout the economy. The latest labour market statistics in the three months to November 2013 show hours worked growing by 1.1%, indicating that output per hour fell again in the final quarter (Financial Times 29 January 2014). GDP per head is still about 7.5% below its pre-crisis peak. The decline in unemployment, despite falling living standards, is a mirror image of the stagnation in productivity. The average British household is 6% worse off than before the financial crash. This typifies the parasitic character of the British economy and the nature of a recovery driven by debt-fuelled consumer spending and inflated house prices.*
Serious commentators have little time for the overblown claims of the Conservative Party. Lord Turner, former head of the Financial Services Authority, said at the World Economic Forum at Davos in January that the British economy had reverted to its pre-crisis model of growth. He said that the UK economy was responding to an economic stimulus of low interest rates, quantitative easing, and special government schemes to promote bank lending and mortgage borrowing. ‘If you chuck enough monetary stimulus at an economy something happens. It is as if we have had a cracking great hangover, had a stiff drink and off we go again.’
More concerned is Martin Wolf, chief economist at the Financial Times. In an article on ‘The challenges of a post-crisis world’ (Financial Times 29 January 2014) he pointed out that the IMF forecast growth for 2014 in high income countries is quite low: 2.8% in the US; 2.4% in the UK; 1.7% in Japan and 1% in the eurozone. If this is the case then these economies will not reduce shortfalls in output relative to pre-crisis trends. The shortfall in the eurozone would be 13%; in the US 15% and in the UK 18%. He continues that these economies are only ‘achieving modest recoveries from devastating slumps despite extraordinarily accommodating monetary policy.’ He calls this a ‘depressing truth’. Whatever, it is hardly the ‘brighter economic future’ that Osborne was boasting about.
Rogues together
In the Autumn Statement, Osborne made it clear he would not only continue with his savage austerity policies but strengthen them. The government’s plans for the next parliament would see government spending at its smallest share of national income since 1948. The chancellor’s plan to balance the budget by 2018-19 would involve increasing the pace of spending cuts from 2.3% a year in the five years from March 2011 to March 2016, to 3.7% a year in the three years after that. Osborne plans to eliminate the fiscal deficit by a sharp reduction of public spending from 44.7% of GDP in 2012-13 to 38.2% in 2018-19. This will have devastating consequences for the vast majority of working people.
There is no love lost between rogues. Vince Cable, Business Secretary in the ConDem coalition government, announced the day before the growth figures were made public that Britain was experiencing the ‘wrong sort of recovery’ and opportunistically distanced himself from Tory plans to balance the budget. He said he was not wedded to the pace and scale of deficit cuts set out by Osborne after 2015. He regarded the Chancellor’s commitment to save an additional £30bn in the next parliament as ‘political and ideological’. Cable said ‘The Liberal Democrats will reduce the debt burden but ensure it isn’t done at the expense of public services and the most vulnerable in society.’ Could there be anything more shameful than this, coming from a member of the ConDem cabinet that has overseen damaging cuts in public services precisely at the expense of the most vulnerable members of society?
The Labour Party is just as bad. The populist announcement by shadow chancellor Ed Balls to restore the 50% top rate of tax on incomes above £150,000 is no more than a cover for Labour’s reactionary political and economic programme. In an interview with the Financial Times on 18 December 2013, Balls insisted that Labour must be seen as pro-business and pro-financial services. A future Labour government would be committed to running a budget surplus, reducing national debt and investing to promote growth. Balls repeated this mantra at the Fabian Society’s annual conference towards the end of January when he said Labour would run a budget surplus by 2020 and keep a tight control on public spending. He committed the party to cutting the national debt during the next parliament. So the Labour Party will follow the ConDem coalition in making the vast majority of working people pay for the financial crisis.
The Labour Party, just like the Tories and Liberal Democrats, will not fundamentally change anything. British capitalist governments will continue to sustain Britain’s parasitic and decaying capitalist economy and with it the wealth and power of the financial and corporate elite. We have to organise to stop them.
*See David Yaffe ‘British capitalism: a recovery built on sand’ in FRFI 235 October/November 2013 on our website at British capitalism: a recovery built on sand
and earlier articles.
Fight Racism! Fight Imperialism! 237 February/March 2014
