Analysing The Political Economy

Comment: Just How Bad Is It And Can It Get Worse?

By Graham Vanbergen: The United Kingdom is in a mess. Everyone knows this. Even the most ardent supporters of free-market economics know it. This is evidenced by the fact that just about every metric for measuring wealth, health and happiness have gone south, and even if you personally have got wealthier, healthier, and brimming with optimism – you know the vast majority of the country has not, is not, isn’t or fed up with all three.

After fourteen years of a Tory government, just about everything you could care to mention from a governance point of view is in decline. Worse, we have allowed it to happen. Our experiment with populists and their lies has cost us all dearly.

Poverty, the one metric an advanced economy should be proud of eradicating or at least tackling, is rapidly heading in the wrong direction. Take, for instance, disabled people in the UK. They now face worsening discrimination and a growing risk of poverty as a result of government failures to tackle problems ranging from welfare benefits to employment. This isn’t me or those on the left of politics saying so, this is the Equality and Human Rights Commission (EHRC) who said successive UK governments had made little or no progress in addressing 11 policy recommendations identified by United Nations investigators in a highly critical report in 2016, which accused ministers of “systematic violations” of disabled people’s rights. Since 2016, the disabled in our communities have simply been treated worse.

However, it’s the same for the average person in poverty. They now have an income 29 per cent below the poverty line, which is up from 23 per cent in the mid-1990s – according to the Joseph Rowntree Foundation.

That gap is replicated across most working households, and it has been getting worse over the last few decades. The London School of Economics made this point in 2015 – one year before Brexit.

“Median real wages grew consistently by around 2 per cent per year from 1980 to the early 2000s. There was then something of a slowdown, after which real wages fell dramatically when the economic downturn started in 2008. Since then, real wages of the median worker have fallen by around 8-10 per cent (depending on which measure of inflation is used as a deflator – the consumer price index, CPI, or the housing cost augmented version CPIH). This corresponds to almost a 20 per cent drop relative to the trend in real wage growth from 1980 to the early 2000s.”

Where is this worsening picture coming from? From 2010 to 2021, corporate profits rose from £84bn to £128bn – a rise of over 50 per cent. In the same period, tax paid by corporations went from £42bn to £52bn – a rise of just 25 per cent. By contrast, average real wages in the UK will still be lower in 2026 than they were in 2008, analysis by the Office Budget Responsibility projects.


The Big Three

Three events have taken place that have made everything worse. Thatcherism or neoliberal economics itself cannot be blamed – but its ideological swing has gone too far – hence the rise in corporate profits and the corresponding fall in living standards. The peak of that failure was demonstrated so very clearly when the banks collapsed and the taxpayer rescued them in the UK to the tune of £900bn initially – that bottomed out at something like £400bn. Then there was Brexit (We can leave the pandemic out because the whole world suffered from it and whether the UK did better or worse is another debate).

Everyone also knows everything is even worse since Brexit. London’s economy alone has shrunk by eyewatering sums. An independent report by Cambridge Econometrics, commissioned by the London City Hall, showed London’s economy alone has shrunk by £30 billion.It now has 290,000 fewer jobs (150 per cent more than work in the UK’s car manufacturing industry) than if Brexit had not taken place, with half the total two million job losses nationwide coming in the financial services and construction sectors.

That same report concluded that – “The average Briton was nearly £2,000 worse off in 2023, while the average Londoner was nearly £3,400 worse off last year as a result of Brexit.”


Tax Losses

In October 2021, the UK government’s Office of Budget Responsibility calculated that Brexit would cost 4 per cent of GDP per annum over the long term. 4 per cent of 2021 UK GDP is the equivalent of a £32bn cost per annum to the UK taxpayer.

How accurate was that given the supporters of Brexit called it ‘nonsense’, and ‘overly pessimistic.’ Last week, the Office for Budget Responsibility said its long-running prediction is “broadly on track” to show a 4 per cent reduction in the UK economy’s potential productivity compared to if the UK had stayed in the EU.

This week, the economy is reportedly just out of its technical recession (6 months of negative growth). But, the reality is that this decision to leave the EU, the most catastrophic to our economy since WW2, is now costing the treasury – and therefore public services, an estimated £40 billion a year. To put that in context – the entirety of Britain’s military budget in 2023 was £48 billion. Those who drove Brexit – the likes of Johnson, Gove, Rees-Mogg, Farage, Hannan and the rest of them have dangerously weakened the UK. What would you choose to spend £40 billion a year on right now – practically double our military forces, go net zero, save countless lives on NHS waiting lists?



The likelihood of another five years of the Conservative party is mercifully remote. But can you imagine if that became our new reality? Since 2010, we’ve had five Prime Ministers, seven Chancellors, eight Home Secretaries, nine Health Secretaries, ten Education Secretaries and sixteen Housing Secretaries. Astoundingly, the Tories are contemplating replacing the current incumbent at the helm with another.

The biggest worries of the electorate are the economy, health, immigration, housing and education. It’s not possible for the Conservative party to say they have been serious about these issues with so many passing through the doors of the great offices of state as if somehow treating them as a political hippy commune.

The Telegraph newspaper, a strong supporter of free-market economics, Brexit and the Tory party, wrote just yesterday – “High taxes and high debt are the legacy of the Conservative Party’s fourteen years of rule.” Six weeks ago they concluded with one headline – “The Tories have failed on everything.”

It is, therefore, of no surprise that the latest YouGov/Times voting intention poll shows the Conservatives at 20 per cent and Labour at 44 per cent. If that maintains itself all the way to the election – the Tories will be just about wiped out across the country.

If nothing else, Keir Starmer should bring political and economic stability to the table – something the UK desperately needs right now. From there, we can watch the Tory party implode, break into its various factions, and reflect on how they got it all so wrong whilst spending at least a decade ahead in opposition.




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