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The time of year is upon us when political parties in Britain are having their party conferences, which take the form of national conventions . Much like birds migrating to warmer climes, the main players return to the party faithful and outline their strategies developed in smoke filled rooms for winning the forthcoming general election.
Over the past several days, much has been made of the leader of the opposition (Labour Party) Ed Milliband, being taken to task in many areas of the British media for not mentioning how they will manage the economy if they take power.
This is a particularly strange subject matter for him to miss in his keynote speech, as it could be of a huge political benefit to them in outline the situation that UK currently finds itself in. The nature of this is not trying to tell you that one side is good and the other is bad. I just find it an interesting subject matter to see how political debate is formed in the media in relation to the economic reality facing the UK today.
Much of the discourse in recent years regarding the UK economy in relation to the two main parties has followed the notion that Labour spends money at a phenomenal rate, and the Conservatives come in and clear all the mess up. In fact George Osborne, the current UK Chancellor of the Exchequer went as far as to say in 2007 “As has been the case so many times before, it’s the next Conservative government that will have to clean up the mess left by a profligate and irresponsible Labour Party”‘.
However, under closer analysis does this supposition hold true?
With the argument being framed that Labour were responsible for the economic collapse of the UK, this seems an incredibly simplistic position to take. To follow this argument to its logical conclusion one must then accept that they were responsible them for the entire global meltdown. Although many party insiders accused Gordon Brown of being a mobile phone throwing megalomaniac, it is going a step to far even for the Daily Mail to espouse he was responsible for the collapse of the entire global financial infrastructure.
Moreover, If we take the counter position of not supporting the banks, which created a large amount of the debt, then it would have been armageddon for UK society as we know it. The entire collapse of the banking system would have left us living in the stone age within 1 week. Having lived in Cyprus during the bail in, it is amazing to see how fast the cogs of the system stop once the oil like flow of capital and credit evaporate.
In the current economic climate, when we look behind the façade of the what is being claimed to be an economic miracle, you can see why the incumbent government are not shouting from the roof tops about recovery with it being so close to the election.
Without getting side tracked regarding unemployment figures, zero hours contracts, housing bubbles, hidden inflation and other factors, I am a great believer in looking at the facts to get a good understanding of the fundamental trend for the UK economies future.
Upon obtaining the office of Chancellor Of The Exchequer, George Osborne set out a radical platform to which he wanted to be judged by. In my opinion this is where Osborne showed his niavete in that he was setting himself a target which can be used to judge his performance. It is the first rule of politics, never to give your opponents the rope to hang you with!
The goals that he set himself to be judged against, was to proudly maintain the UK’s AAA rating with the agencies, and completely eliminate the budget deficit by 2015.
As we are close to the expiry date to assess his pantheon of achievements, it is quite easy to see that ‘Osburnomics’ has been an unadulterated disaster. For the first time since the 1970’s we have had what all politicians claimed to be the Gold Standard credit rating reduced. This however if we were being incredibly generous you could maybe put down to the international economic situation at the time.
However, if we are to assess him and the Conservative government on what matters more, the deficit, then the real problems begin. I am not a person normally lost for words, however I have been searching for a word to describe how the colossal amount which he has borrowed money.
By the end of the 2010 – 2015 parliament, he would have borrowed a mammoth £207 Billion GBP more than he initially said he would. Under his careful hand steering the Uk economy he has actually increased public debt by 50% in five years. In a world where money is being printed everyday by governments world wide, we have got lost in the every increasing zeros of national debt. However, to put this into some kind of context, he has created more debt than all of the other Labour Chancellors put together.
The best way to sum up his progress could be that he has borrowed way more money than he said he would, and made the economy tremendously smaller than he said it would be.
Evidence to support this claim is the 2010 projections outlined that by the climax of the 2010-15 parliament the nominal GDP of the UK economy would be £1,916 billion, however this has continuously been revised downwards to £1,788 billion today. Further to this, he has borrowed an extra £207 billion more than he said he would in order to make the economy £128 billion smaller.
The continual repetition of the “recovery” narrative can be viewed as being a significant distance away. The economy has only very recently got back to 2007 levels this year. As a result it can be argued that the entire economy has had an average growth rate for the past seven years of 0%!
The Conservatives and some elements of the media would have us believe that Britain is experiencing a remarkable economic recovery, but the reality is that the nation has just endured the slowest economic recovery since the aftermath of the 1720 South Sea Bubble!
George, the maths just doesn’t add up!
This is a guest editorial written by Paul Orford, VP Business Development at TopFX