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George’s economic mind-bender

Business as usual for Mansion House diners
Duncan Milligan, Thursday, June 11th, 2015

If the Tories were not already planning new laws to prohibit mind bending legal highs then Osborne’s speech to the London banker’s dinner last night would force their hand. It seems as if more laughing gas is being pumped through the air conditioning at the Treasury than available on a Magaluf weekender.
In the comfortable world of George Osborne and the Mansion House diners, perhaps the economic sun is now shining.
But for the rest of us, the economic sun does not have his hat on. Economic growth is poor and forecasts have been cut again. Lowering inflation is creeping into deflation, a big warning sign.
UK productivity – what we individually produce – has not risen at all since the recession hit. We are importing more goods from abroad than we are making and exporting – huge balance of payments deficits are ‘entrenched’ to use George’s new buzzword.
Wage increases are pretty stagnant and well below their real value pre-recession – it may be 2015 on the calendar but today’s wages are being paid at 2007’s rate.
Food banks are handing out over one million parcels, record numbers are being threatened with court action to recover council tax debts.
Household debt – leaving out mortgages – is reaching record levels with more to come as people borrow to stay afloat.


Mortgage costs –even at record low rates – are climbing because of house price rises in some parts of the country and greater numbers are being evicted for non-payment of their rents.
Investment is lower than it should be – billions of pounds of business cash is sitting in bank vaults, not doing what it should be doing which is investing in skills and boosting productivity. Manufacturing is still five per cent below the pre-recession peak with Mr Osborne’s `march of the makers’ stuck on the road to nowhere.
But instead of addressing the place of austerity in deepening the nation’s financial woes, George Osborne is looking at making austerity a permanent feature of British life.
Seeking to force a permanent commitment to Government budget surpluses – alongside his plans to also legislate against tax rises, national insurance rises and VAT rises, the big three in Government revenue terms – that can only mean more austerity and more cuts.
Because once you have ruled out tax and other rises to help ‘balance the books’ that only leaves public spending cuts in what George considers ‘normal’ times.
Osborne is not just pushing through more spending cuts to propel himself down the road to Wigan Pier. When he gets there he plans to jump off and swim some more.
Still, he is providing gold plated lifebelts for the City bankers. The public’s shares in Royal Bank of Scotland will be flogged off at a £13 billion loss to the taxpayer – which to the City suggests there may be £13 billion profit for them, even though some argue he is selling too soon and at 50p per share too low.
The RBS bailout cost UK taxpayers £45 billion. Current share value is around £3.50, down from the £4 mark earlier this year, so the City sniffs some proper bonus money there to take the edge off the bank levy.
And they are flexing their muscles in that sphere. HSBC is threatening to move its international HQ out of London because they have to pay around £700 million in bank levy.
Even if they don’t – and expect a ‘review’ of the bank levy in the budget – they want thousands of job losses (from the bottom up) and potentially hundreds of branch closures.
Banks are now too big to fail, too big to jail and too big to demand your money back from. Osborne and the Tories would be happy to see them back to business as usual.
However, Bank of England Governor Mark Carney struck a different tone accusing the sector and regulators of overseeing “ethical drift”, telling the same 400 elite bankers last night: “Unethical behaviour went unchecked, proliferated and eventually became the norm. Too many participants neither felt responsible for the system nor recognised the full impact of their actions.”
And not for him blaming the previous Labour Government – the fires were blown over from the US. Banks and the financial sector were just not set up to deal with “the spark of the US subprime crisis” which lit “a powder keg under UK markets, triggering the worst recession in our lifetimes.”
The result was that “global markets were engulfed in flames”. And who were the firefighters?
The chief ‘fire’ officers were Labour’s Gordon Brown and Alistair Darling and the water was the huge sums which came from us, the very UK taxpayers who instead of our moment in the sun will have to endure Mr Osborne’s economic mindbender.


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