It was all meant to be so different. Riding high after an unexpected election victory, and free from the moderating hand of his LibDem coalition partners, George Osborne was finally free to introduce full-blown Tory economic policies.
It started to unravel almost immediately, of course. The plan to cut the tax credits paid to the working poor was defeated in the House of Lords; and a threatened revolt from Tory backbenchers prevented the government reinstating the cuts. Indeed, with a majority of just 10, the government has been forced into a series of humiliating U-turns on everything from taxes on tampons to the forced academisation of every school in England. Worse still, since the 2015 election, the economic storm clouds have been gathering; and it is now clear that (like his New Labour predecessors) Osborne has failed to fix the roof while the sun was shining.
Will Martin at Business Insider provides worrying evidence that the UK economy has peaked and that there is only one way it can go from here:
“UK households reported the greatest pressure on their finances in nearly two years during May. This was signalled by the seasonally adjusted Household Finance Index (HFI) dropping to a 22- month low of 42.3, from 45.1 in April. The reading pointed to a substantial deterioration in financial wellbeing.
“The logic is simple — when people are worried about the state of their finances, they stop spending, and when people stop spending, that can signal serious problems on a macroeconomic scale.”
Within the Westminster Bubble, much is being made of the impact of the Brexit referendum on the UK’s economic performance. And while it may be true that some larger companies have put some investment decisions on hold, there is more to Britain’s economic woes. In an editorial, the Evening Standard suggests that:
“Even without Brexit there would be real concerns about the state of the eurozone, aggravated by the migrant crisis, as well as faltering growth in China.”
The truth is that Osborne has racked up the largest government debt in Britain’s history, and has succeeded in creating a current account deficit (what used to be known as a balance of trade deficit) wider than at any time since the crash of 2008. Meanwhile almost all of the promised infrastructure projects (HS2, Hinkley Point C, Heathrow expansion, Great Western Rail electrification, etc) have failed to materialise; and the so-called “northern powerhouse” amounts to little more than the BBC at Salford Keys and a handful of unwanted fracking operations.
At last the public appears to be cottoning on. According to Ipsos Mori, the number of people who think Osborne is doing a good job has fallen from 56% before the 2015 election to just 42% today:
“These figures come as the public’s optimism for the future of the economy declines from last month to its lowest since March 2013. Eighteen percent say they believe the economy will improve over the next twelve months compared with a quarter (25%) in April. Thirty-eight percent think that it will get worse compared with one in three (33%) last month, leaving an overall economic optimism index score of -20 (down 12 points).”
The one dim light among the gathering gloom for Osborne is that Labour’s approval ratings are even worse than his, with 63% of people saying Labour is not ready to form a government. Although Osborne may want to consider that his own ratings were pretty poor just prior to the “election that never was” in 2007 – If they can get their act together, Labour may yet prove to be the beneficiaries of Osborne’s coming recession.