The economic risks of the election

Research by the Resolution Foundation highlights the possible risks to the economy of the election in December. Analysis of the spending plans of the two major parties reveals that they both intend to increase public expenditure substantially. The Conservative party is expected to increase spending to 41.3% of gross domestic product (GDP) by 2023-24 whilst the Labour party plans to more than match that to 43.3% of GDP. Both parties are turning their backs on the austerity policies introduced in 2010 by the Conservative/Liberal Coalition.

That austerity programme was intended to reduce national debt as a percentage of GDP and stop the nation living beyond its means. By the 2015 election, the deficit had been reduced by half, partly by selling off the Government’s shares in the banks nationalised under the previous Labour Government. In 2016, the Chancellor George Osborne set 2020 as the target date for delivering a budget surplus. The 2016 referendum frustrated that and the new Chancellor, Philip Hammond, aimed to eliminate the deficit by the mid 2020’s.

However necessary austerity was for economic reasons its impact on social policies was damaging. Welfare spending was cut, school building programmes were cancelled, and local government grants were slashed, whilst police, courts and prisons budgets were pruned. The number of children in relative poverty increased so that by this year the total was 600,000 higher than in 2012. Another indicator of the consequences of austerity was the increased use of food banks. Numbers seeking this help doubled between 2013 and 2017. The number sleeping rough on any one night doubled between 2010 and 2016 and it is still growing.

Whilst it was inevitable that the parties seeking to win the 2019 election should seek to end austerity and compete to offer a better future for those who have suffered from it, there has also to be concern about how they are going to pay for the increased spending.

The shadow Chancellor John McDonnell has no doubts that this spending will have to be covered by increased taxation on the richest people and companies. He is advocating an increase in the National Living Wage from £7.83 to £10 an hour for everyone 16 and over, not just those over 25. Sajid Javid, the current Chancellor, is proposing an increase to £10.50 an hour over the next five years.

The scope for increased spending on the NHS, the police, schools and local government is well documented but so far there has been little discussion about what the parties propose to do about reducing global warming and climate change. If we are to become carbon- neutral petrol and diesel cars and lorries have to be replaced by electric vehicles and charging points created. Gas fired domestic and industrial boilers have to be phased out.  All that requires a major increase in the production of electricity. So far, none of the parties appears to be addressing these needs.

In other words, we need our politicians to offer us a vision for the future and the policies for achieving it, not just squabbling about the policies of yesteryear. Believe it or not, the needs and challenges of the future are far bigger and more important than whether we leave or remain in the European Union.  We need politicians with the wisdom and courage to say that, and give the nation the leadership that challenges those obsessed about Brexit and heal the divisions that issue has created.

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