It’s a funny kind of recovery we are having. The newspapers are full of it. Chancellor Osborne is full of it. So why aren’t we all rejoicing?
Osborne is a fool who thinks if he keeps telling us life is improving then we’ll be daft enough to believe it, even though it is plainly getting much, much worse. Though if this is a recovery, then perhaps it’s the only kind of recovery that our moribund capitalism can muster.
A few facts. First, Britain’s industrial production fell in August, its biggest drop for nearly a year, according to figures from the Office for National Statistics.
The August drop surprised “analysts” (they had expected a 0.4 per cent rise and got a month-on-month fall of 1.1 per cent fall). Analysts always seem surprised by reality, perhaps because they always assume that the government is telling the truth.
Second, overall GDP is 3 per cent down on its pre-slump peak in 2008 – with industrial production and construction output still about 1 per cent down on their pre-slump peaks.
Third, business investment remains at about 75 per cent of its pre-slump level – despite the government’s belief in the theory of “expansionary fiscal contraction”, which says that government spending cuts lead to economic growth.
“Expansionary fiscal contraction” is an idea that appeals to this government (and the last, one might add). So much so, that no one bothers to read the small print. The authors of this dodgy doctrine had a couple of conditions, including the condition that disposable income should not constrain consumption.
For most workers, consumption is indeed being “constrained” by disposable income. That shouldn’t be a surprise, as average pay has fallen 5.5 per cent in real terms since mid-2010, according to figures collated by the House of Commons Library and published in August. No wonder it doesn’t feel like a recovery.
For many, it’s even worse. The think tank Resolution Foundation has looked at the effect of the economic crisis on workers’ wages using the Living Wage as a measure (£8.55/hour in London and £7.45 elsewhere). It has found that 4.8 million (20 per cent of the workforce) now earn less than this, compared with 14 per cent in 2009.
This includes one in four women, three in four under-21s and two in three working in hotels and restaurants. A separate TUC study shows real take-home pay has fallen by an average of 6.3 per cent in the past five years. Many people took a pay cut to stay in work, but those who have been sacked have been forced to take jobs with fewer hours and lower rates of pay.
For some, of course, life is definitely improving. The number of people earning £1 million or more a year has doubled in two years, according to HM Revenue and Customs. And joy of joys, we now have more than 1,000 people in the country with assets of more than £65 million. Maybe that’s what Osborne means by recovery. ■