Posted by Jeremy Smith

Mr Osborne’s untruth: the chart that shames the Treasury

Osborne as PinnochioThere was much to disagree with in George Osborne’s Budget announced on Wednesday, in particular the increasingly foolish and damaging target to achieve an overall budget surplus of over £10 billion in 2019/20 and 2020/21 via further spending cuts.  But one specific claim made by the Chancellor in his speech to the House of Commons was an outright untruth – yet so far, this has been passed over by the mainstream media.  Mr Osborne said this:

Today, I’m publishing new analysis that shows that if we hadn’t taken the action we did in 2010, then cumulative borrowing would have been £930 billion more by the end of the decade than it is now forecast to be. If we’d taken the advice, Britain would not have been one of the best prepared economies for the current global uncertainties; we would have been one of the worst prepared.”

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Consumer inflation may be low, but asset inflation is high and real wages keep falling

a man pushing over the word "crisis"The latest UK annual CPI inflation statistics, for August 2014, were published yesterday by the Office for National Statistics.  They show annual inflation down to 1.2%. The last time the annual rate was below this was in September 2009, in the depth of the recession, when it fell to 1.1%.  Assuming that the present lower CPI inflation trend is continued in coming months, as seems probable, we will be back to levels last seen in the late 1990s and up to 2004.  The lowest levels this century were in May 2000 (0.5%) and June 2002 (0.6%).

But there is a very big difference between then and now.  Today, wages are running at an annual increase rate of around 0.7%, still well below CPI inflation.  In the period 2001 to 2008, when the ONS wages dataset begins, total wages were mainly rising annually at around 3-5% – and till the 2008 crisis, never fell below the inflation rate.

The chart below shows the picture clearly for the period 2001 to 2014.  Till 2008, total pay (which includes bonuses etc.) was always above inflation in annual % terms, usually well above. Since then, it has almost constantly been below inflation.  N.b. we have estimated that total wage increases remain at 0.7% (the last figure published by ONS, for July) for the months of August and September 2014. Continue reading →

Out of thin air – the (alleged) economic case for a third Heathrow runway

TBFadvert_sept1When I last twice travelled directly to Guangzhou, by China Southern Airline out of Heathrow, the flight was nearly full. But not – by visual impression at least – full of thrusting British entrepreneurs keen to visit the most vibrant economic region of China, thanks to this direct link from Britain’s hub airport. More like ordinary Chinese workers and some visitors. No – increasing trade is a more complex issue by far.

Which is one of many reasons why I was truly jaundiced reading Heathrow Airport’s advertisement yesterday, which compiled a list of highly dubious claims as to the benefits to all of us in the UK of a 3rd runway at Heathrow. I have no doubt that a 3rd runway there would be of benefit to the shareholders of Heathrow Airport, and might conceivably be nicer for passengers, but the specifically economic case for choosing Heathrow over say Gatwick – or indeed Boris Island – is still as thin as ever. Continue reading →

How our taxpayer-rescued banks helped INEOS escape UK taxes

JimRatcliffeSo billionaire Jim Ratcliffe seems to have succeeded in forcing through huge reductions in the pay and conditions of his Grangemouth workforce. See the excellent recent Open Democracy article by Robin McAlpine for the background story. But Ineos, the company of which Ratcliffe is the main owner,  represents much that is most destructive and arrogant about modern global capitalism. Continue reading →

Britain’s output per (available) worker is back to 2003 levels

This week, we have learnt from the Office for National Statistics that 2.5 million were still unemployed in the last quarter of 2012. The UK economy is failing to use the skills and resources of our people to best effect in the common interest. This is to a large extent because the government’s economic policies are wrong.

With 2.5 million still unemployed, the problem is that we have a shrinking economy, largely because we have failed as a nation to invest in our future, and are trapped in the downward spiral of austerity and lack of vision.  We still have perverse economists who argue, in the teeth of the evidence, that the public sector is ‘crowding out’ the private sector – and this at a time of high levels of private sector debt and mass unemployment! Continue reading →