The Office of National Statistics (ONS) report yesterday that the average earnings growth rate has now fallen by 0.2%, the first time it has fallen below zero since the crash in 2008-9, is devastating for UK economic prospects and for Osborne’s bombastic claims about the great UK economic surge. It is devastating because the only other three bases of demand are all seriously negative as well. Business investment is still 10% below pre-crash levels because investors have no confidence that the UK recovery will last, net exports (the excess of exports over imports) are disastrously negative by about £115bn this year, and government expenditure is being screwed down by Osborne’s counter-productive policy of trying to reduce the deficit by cuts rather than public investment in stimulating the economy. The fourth base for potential demand is household expenditure, and with average wages this year now nearly 2% below inflation, that source of demand will dry up completely. Of course Osborne will crow about the 1.5 million jobs allegedly created in the private sector since 2010, but with two-fifths of them taken up by self-employment where the average drop in incomes is now 14% below pre-crash levels and with the rest mainly low-paid, insecure jobs on zero hours contracts (wage slavery rather than jobs), there is certainly no increase in demand from that source either.
So BoE governor Carney’s talk of the recovery being on track and “sustained economic momentum more assured” is just absurd whistling in the wind. He’s morphed into Robbie Williams’ actor’s capacity to have a voice and message to cover every contingency, Osborne’s fall guy who’s in a fog about what’s happening and has walked into a lamp-post but still assures us he knows exactly where he’s going. But he doesn’t, and UK economic policy is now drifting dangerously. The spin has got so bad that even IDS has got into the act by claiming his target is full employment – there are still 2.1 million people unemployed and nearly 9 million people economically inactive between 16-64 – when his contribution has been sanctioning (i.e. removing all benefits from) nearly 1 million unemployed people in the last year very often for trivial or simply fabricated reasons because DWP Jobcetre officials have been given targets to do just that.
Of course Osborne will now try to distract attention by claiming it’s all the fault of the Eurozone where economic ‘recovery’ has now juddered to a halt, with all the 3 biggest economies now flatlining. But that’s for completely different reasons in each case – Germany because of the loss of confidence because of the Russian embargo on food imports, France for lack of structural reforms, and Italy because inadequate growth has now now made it impossible to get down its growing debts so that it’s now entering its third recession in 2 years. But the reasons for the gradual but steady economic slide that can now be predicted for the UK economy over the next 2 years are very different, nothing to do with the Eurozone, and the latter cannot let him off the hook on which he has impaled the UK.