“We got there in the end – a remarkable national effort. Thank you,” tweeted the former Chancellor of the Exchequer, George Osborne, on 1 March. “It was the right thing to do,” replied David Cameron, the man under whose premiership he served.
They were both referring to the target they set the Conservatives of eliminating the budget deficit when they entered office in 2010.
Rupert Harrison, Osborne’s chief economic adviser at the Treasury, was on the BBC’s Today programme this morning trumpeting their performance, pointing to record employment rates. When Osborne’s successor Phillip Hammond rises to deliver his Spring Statement tomorrow, the Office for Budget Responsibility’s forecasts for the economy and the public finances, which he will read out, will be better than projected last November at his Autumn Budget.
Growth for 2017 and 2018 will be higher than expected, productivity going forward not quite as bad as thought, and public borrowing for 2017/18 less than thought.
Yet, when judged against the basics you expect of a government – delivering stability, security, prosperity, greater equality and poverty reduction – their stewardship of the economy has been an abject failure.
It’s all very well saying it was “the right thing to do”, but their actions have caused untold misery to millions. We might be the sixth largest economy, but over 12 million people – 20 per cent of our population – are living in poverty.
If this Government does not change course, particularly on its welfare cuts, the number of children living in poverty will soar to a record 5.2 million over the next five years. There might be more people in employment, but record numbers are in insecure work and, according to the Resolution Foundation, real incomes are not forecast to reach 2007/8 levels again until 2025.
So, when people refer to Osborne as a “centrist”, I react with incredulity: he is nothing of the sort. He presided over the most right-wing economic prospectus this country has seen in a generation.
As a social democrat, you would probably already have expected me to deliver this damning critique of a right-wing Tory administration. But even when judging them according to their own tests, they have displayed gross economic incompetence.
In 2010, Cameron and Osborne promised to balance the books by 2015. They failed to do this, so moved the goal posts.
In 2015, they set a new fiscal mandate to achieve a surplus on public sector net borrowing by the end of 2019-20, and a new supplementary target requiring public sector net debt to fall as a percentage of GDP in each year to 2019-20. A year later, they were already way off course, so they moved the goal posts again.
At the end of 2016, for the third time, the Conservatives – Hammond this time – set new targets. The overarching objective was to “return the public finances to balance at the earliest possible date in the next Parliament”, with a structural deficit of below 2 per cent of GDP in 2020-21 and public sector net debt falling as a percentage of GDP by 2020-21. Last November, the OBR was already saying it would be challenging to meet these objectives by 2025/26, as originally envisaged.
This austerity was imposed in the name of higher growth and lower debt. However, because this extreme fiscal retrenchment helped choke off demand when the economy needed stimulus, it has achieved the precise opposite of what they promised.
So, in five out of their almost eight years in office, GDP growth has come in at less than 2 per cent. We will find out whether it is still projected to come in at under 2 per cent for every year of the current forecast period. This comes at a time when world GDP growth has been revised up, and we should be growing at a far faster rate.
On top of all of this, their policies have failed to reduce our debts in the way the Tories promised. The debt to GDP ratio when Labour left Government was 57.1 per cent. It was forecast to be 86.5 per cent in this year, higher than the EU average. It is unlikely to be substantially below this figure in the revised forecast tomorrow.
In our 13 years in office, Labour borrowed £490bn. In half that timeframe, the Tories have borrowed just under three-quarters of a trillion pounds. Consequently, this financial year the Tories will spend more on debt interest than on housing, transport, law and order, or measures to promote industry and employment.
Given this record, never again can any Tory MP lecture other parties on how to run the economy with any credibility.
But it gets worse. The Tories exacerbated this economic failure by holding a referendum on our membership of the EU without making any plans whatsoever for what they would do if the country voted to leave.
The impact of the aftermath of their referendum has already turned the country from the G7’s fastest growing developed economy into one of its slowest – and we haven’t even left yet.
Before the referendum, the OBR was forecasting that our economy would grow by 2.2 per cent in 2017. Instead, preliminary indications are that it grew by 1.8 per cent. This has been very clearly driven by Brexit.
The referendum outcome has affected UK inflation, real wages and living standards. The largest inflationary effects, caused by the depreciation in the pound, are for product groups with high import shares. These include everyday items like bread, cereals, milk, cheese, eggs coffee, tea and so on, which are now being felt by households.
The OBR has said business investment growth is expected to remain subdued in the face of Brexit-related uncertainty. Average earnings have likewise fallen into negative territory. Growth down, productivity down, earnings down – a Brexit triple whammy making people poorer, not richer.
And public money is now being swallowed up by Brexit. We were told that it would lead to £350m extra per week going into the NHS – there was no sign of it in November’s budget, and we are unlikely to see it tomorrow.
Instead the Treasury is spending much more – £3bn – to prepare for Brexit, on top of the £700m already spent and the further £2.1bn being wasted on organising the civil service so it can cope with this.
This all perhaps explains why more and more centre-right voters – particularly those who voted Remain – and who usually vote Tory as a matter of course, tell me they are in a quandary when it comes to voting.
Right now, they say they feel politically homeless, which is a salutary warning to my party too; Tory incompetence will not deliver a Labour government, and if we acquiesce in a hard Brexit we will be found to be complicit in creating further mess.
Insofar as Cameron and Osborne are concerned, far from patting themselves on the back on Twitter, they should – at the very least – be giving the country a very big apology.