UK Prime Minister, Teresa May, claims that the last 5 years of the Tory lead Coalition government followed by 2 years of full Tory government have been a success in reducing British government debt, increasing employment and recovering from the 2008 crash (for which the Tories have always blamed the previous Labour Government). The illusion of UK economic success (as against the EU for example) has been based on 2 rapidly expanding features of the British economy since 2008, the 'success' of austerity while achieving growth - as shown by the expansion of employment. But the reality is that the key elements of economic life in the UK are in drastic decline.
Employed household incomes have reduced since 2008. The economic downturn had a larger effect on non-retired households, with median income in 2015/16 still 1.2% lower than pre-downturn levels in 2007/08. House prices have continued to inflate - especially in the South East - blocking the younger generation's access to their own homes - and rents have also inflated dramatically. Meanwhile investment is weak and getting weaker, as the Office for National Statistics (ONS) noted in 2014 :
'...the proportion of total expenditure accounted for by spending on investment has fallen (in the UK) from an average of 13.5% in 2007, to an average of 10.9% during 2012 and to 10.4% in quarter 2 of 2013: the lowest level recorded since the 1950s. This compares with 14.1% in France, 16.7% in the United States and 17.9% in Canada. Across the G7, investment accounts for an average of 14.6% of Gross Final Expenditure.'
Poor investment levels are related to under-invested work. The UK's expansion of zero-hour jobs, of 'self-employment' contracts, service work without a technological or industrial base, is one of the two reasons for Britain's already catastrophic and worsening productivity. In April 2016 the Independent newspaper stated;
'The latest decline in the UK’s levels of output produced per hour worked means that Britain’s national productivity is now a remarkable 15 per cent below where it would have been if the pre-crisis trend growth of productivity had carried on. That shockingly poor performance compounds the UK’s status as an international productivity laggard. Britain already has the weakest levels of output per hour of any nation in the G7, with the single exception of Japan.
And there will be more productivity disappointment to come according to the Office for Budget Responsibility. The Treasury’s official independent forecaster made a major downward revision to its productivity growth forecasts in last month’s Budget. The OBR now assumes that the UK’s trend productivity rate over the next five years will rise to just 2 per cent, down from its previous forecast of 2.2 per cent forecast.'
The other reason for Britain's falling investment and falling productivity is a massive rise in share dividends. The (right-wing) Daily Telegraph 25 May 2017 reports;
'The payout ratio for the UK stock market, a measure that reflects the proportion of earnings that are paid out as dividends to shareholders, as a percentage, has been steadily rising over the past three years.
The ratio is now above 60pc, higher than pre-crisis levels ... a figure that income investors have described as “scary” and “far too high”. '
Two of Britain's top firms (AstraZeneca and GlaxoSmithKline) are paying more this year than their profit in dividend payouts. All of the top 14 are paying more than half of their profits to shareholders. UK firms in general pay more of their profits to shareholders than any of the top firms represented in rest of the world's different stock markets.
Household incomes have reduced back to 2008 levels and beyond; housing is is desperately short, much shorter than before 2008; investment is declining to lower levels than 2008; most of the fresh labour is in 'uberised' jobs; productivity is nose-diving to lower levels than 2008. Only the relentless payout to the rich grows and grows.
So what is it that is fuelling May and the establishment's bizarre claims about the strength of the UK economy?
Household debt.
In January 2017 the Guardian newspaper reported,
'Households have £66.7bn of credit card debt outstanding, up £600m on the previous month, while the total level of outstanding consumer credit reached £192.2bn, up £1.9bn on October. The article also pointed out that;
'The latest figures from the Bank of England show unsecured consumer credit, which includes credit cards, car loans and second mortgages, grew by 10.8% in the year to November to £192.2bn, picking up pace on the previous month to grow at its fastest rate in more than 11 years.'
In September 2008, the month that Lehman Brothers collapsed and the banking crash triggered a worldwide recession, the level of UK consumer credit debt hit a peak of £208bn.
Consumer debt is buying the UK economy out of recession. Interest rates on loans still look anchored at the lowest levels but, look out, here comes Brexit's first blow - inflation - as the currency dives. And the wealth accumulated in property looks next in line for a hit, as housing looks less of a payola for landlords and in danger as an asset as May decides to use it pay for old people's care.
The West in general, the EU in particular, and rackety Britain have all been been modelling their financial and more broadly their economic structures on 'managing' globalisation. We have already seen once, in 2008, how that doesn't work. But the West have simply looked the other way since 2008 and built it all up again. Britain (either inside or out of the EU) has been busy re-setting up its own version after 2008, with its over-blown financial structures and its 'free labour' laws. Now, outside the EU, it finds itself among the most vulnerable to the globalised winds. Now, only after Greece, the UK is the weakest link, economically speaking, in the whole Western chain.
With its economic cold weather comes a continuation, a deepening, of the UK's political crisis. The old stability has already deserted and its desertion has already shaken the political system into a Coalition government and two referendums. May will likely win the election on June 8, but this will not buy the 'stability' that Tory grandees crave. If the left hangs on to and deepens its alternative manifesto and its left leadership in the Labour Party, if it helps expand the mass movements against austerity, for the NHS and against war and racism, then it will surely face new opportunities to challenge May - long before 2022.
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