The UK economy is £140bn smaller than the government predicted in 2010, according to new analysis published today (Sunday) by the TUC in its Budget statement.
The analysis shows that the economy has grown at just two-thirds of the rate the Chancellor expected when he first took office.
The TUC says that spending cuts have resulted in slower growth, low productivity and a weak recovery in wages.
UK workers are still over £40 a week worse off than before the recession. And UK productivity is 17% down on its pre-crisis trend.
As a result the government has collected far less in tax than expected, with public debt rising by £460bn between 2010 and 2015.
The TUC’s Budget statement calls for:
- An immediate investment boost in infrastructure
- Lifting the one per cent public sector pay cap
- Reversing the planned cut to local government grants
- Introducing an urgent, comprehensive rescue package for British steel
- Introducing a Job Guarantee for long-term unemployed young people
TUC General Secretary Frances O’Grady said: “This government has presided over the slowest recovery in UK history.
“George Osborne has missed target after target on growth, wages and the deficit.
“We need a better plan for long-term growth that has investment in infrastructure, skills and decent jobs at the heart of it.
“We cannot afford another round of cuts, which are making public services worse without making the economy or the public finances better.
“The Chancellor may have begun paying lip service to the importance of supporting industry, but he’s delivered little more than a rag-tag of pre-existing policies bundled together.
“Without a better-balanced economy and a proper industrial policy, vital industries will continue to decline and millions of families will face an uncertain future.”
The TUC’s Budget statement says that the Chancellor has failed to fix many of the problems in the UK economy that he identified when taking office in 2010. And in many cases he has made them worse:
On re-balancing the economy:
The much-heralded “march of the makers” has failed to materialise, with growth remaining skewed towards the service sector.
While it is good that the service sector is 12.5% above its previous peak, manufacturing has remained virtually stagnant. Manufacturing has grown by just 0.1% a year since 2010 and is still 5.9% below its pre-crisis summit.
Meanwhile, the construction industry has suffered periods in recession and is still 2% smaller than it was before the crash.
And despite repeated talk of creating a ‘Northern Powerhouse’, London now accounts for 22.5% of the UK economy – up from 20.4% in 2010.
On living standards:
While employment has recovered, wage growth has remained very sluggish.
Even if real earnings rise at the speed projected in November by the Office for Budget Responsibility (now very unlikely), they will have been below their pre-crisis peak for eleven years.
The only comparable period for wage stagnation is the Great Depression era of the 1920s and 1930s.
On private debt
Consumer credit is growing at its fastest rate for a decade. The burden of this debt is highest for those on lower incomes, with one in eight (3.2 million) UK households in problem debt.
Meanwhile, corporate debt has remained alarmingly high since the financial crisis at over 120% of GDP.
On the public finances:
Public sector borrowing in 2015-16 is likely to be around four times higher than was planned in 2010. This is largely the result of weak tax revenues from households and businesses.
On business investment:
In 2015 business investment was 9.6% cent of GDP – lower than before the crash.