A genuine recovery has to be built either on a rise in business investment (or of course public investment), a growth in productivity gains, or a sustained expansion of exports. UK business investment, having plummeted by a disastrous 25% at the 2008-9 crash, has still never recovered and as a percentage of GDP it is now 159th lowest in the world, just behind Mali, as I told the PM two days ago. UK labour productivity has fallen drastically as employment, albeit at the lowest wages or on zero hours contracts, has increased significantly while at the same time output has flatlined; productivity cannot rise while wages, already 9% below their 2007 level, continue to fall. And exports, despite a 25% fall in the exchange rate since 2007, are still flat and will remain so while manufacturing remains hollowed out and the exchange rate is still not at a competitive level. So what has taken the strain in this much-hyped recovery? Yet again, personal debt, the one foundation that is anathema to sustained recovery.
And the extent of that personal debt is now deeply troubling. It has actually now reached a level – £1.4 trillion – which is higher than at the pre-crash peak and almost equal to Britain’s entire national output. This is unsustainable, and like all the four booms and busts of the neoliberal years based on these same foundations will end in tears. But not before it has caused a colossal amount of ill-health and impoverishment, probably on a greater scale than ever before. The latest figures show that average household debt has now risen to £54,000. That is double the level of a decade ago. It is also almost double the size of the average wage today.
The Centre for Social Justice report published this week points up poignantly the scale of immiseration already caused, even before the £40bn further cuts earmarked by Osborne for after the 2015 election and the further decline in real wages which continued austerity policies will ineluctably bring about. Already almost half of families in the poorest tenth of the population spent more than a quarter of their income on debt repayments in 2011. Already more than 5,000 people are being rendered homeless by mortgage or rent debts. Furthermore the report found that consumer debt has trebled since 1993 and has now reached £158bn. More that 8 million households, a quarter of the total in Britain, have no savings at all to fall back on, and for low-income households it amounts to half. Outstanding debt on credit cards has also almost trebled in the last 15 years and now stands at £56bn. Moreover there were 300,000 mortgage arrears last year, with 34,000 houses repossessed.
I hope, Mr. Osborne, you’re proud of your ‘recovery’.