It must be rare in modern history for a Government’s economic policy to get such a comprehensive and universal thumbs down. But Osborne’s managed it. On every single aspect of policy the signals are now flashing red:
- The latest unemployment, published yesterday, shows a big increase of 38,000 during April-June. As there is no rise in aggregate demand and export growth is stymied, the 2.5m jobless figure (7.9%) will now rise remorselessly over the next year towards 3 million.
- The youth unemployment level (16-24 year olds), already at 950,000, will pass 1 million when the new graduates hit the labour market.
- Osborne’s boast that he has created half a million jobs in the ‘latest year’ (i.e. from March 2010) is a lie: more than 300,000 of those jobs were created before the present government came into office.
- GDP, which was growing quite strongly before the May 2010 election, has now flatlined for the last 9 months. The miniscule 0.2% increase in the last quarter is likely to be statistically downgraded to even less, or even a negative figure, in the next month or two.
- Aggregate demand, the key to output and employment, has collapsed as consumer and business confidence has faded.
- Average real incomes are now falling because tax rises (VAT) and high inflation are combined with pay freezes or even pay cuts. Real incomes are likely to remain static in a lost decade (2008-2015).
- Despite the well-understood causes of the 2008-9 financial crash, there has been next to no banking reform and the chances of another eventual banking collapse, given the parlous state of the financial sector, remain high.
- The modest manufacturing upturn, which was supposed to herald the rebalancing of the economy from the City of London to new areas of industrial growth, has petered out. No significant positive drive has been put behind the revival of UK manufacturing.
- Osborne is still sticking recklessly to an excessive and dangerous pace of fiscal austerity which has now been firmly criticised by the new IMF managing director, Christine Lagarde, who has warned that “slamming on the brakes too quickly will hurt the recovery and worsen job prospects”. Osborne take note, but he won’t.
- Above all, there are several valuable initiatives Osborne could take without risking fiscal credibility with the markets – getting agreement with the big economies now languishing with spare capacity (UK, US, Germany, France and Japan) to take measures to promote job creation and investment would be a main one. But as Osborne indicated in his reply to my PQ on 11 August urging such policies, he is in denial about his counter-productive policies.
And the last bottle falls.
