Ten years ago Northern Rock collapsed, and anxious savers were queueing outside the bank, a sight unseen in anyone’s lifetime. “It’s awful. Why did no one see it coming?” Queen Elizabeth asked academics at LSE as the world economy tumbled.
She asked that in 2008. What no one saw coming as she spoke was a recession longer than any in living memory. Who would expect that an epic failure of capitalism would turn the country sharply right, not left, back to the failed depression economics of Herbert Hoover? Instead of a Keynesian epiphany, the right has exacerbated the pain and elongated the recession . Worse, they set the scene for Brexit: the great act of national self-immolation that risks dominating the next decade.
A brief summary of the post-crash era looks like this. The country’s economy is 300 billion pounds (Dh1.5 trillion) smaller than it would have been. Real-term incomes have fallen by 10 per cent. (Only the incomes of the top 1 per cent have returned to pre-crash levels : they now take 8.5 per cent of national income, twice the proportion they took in Margaret Thatcher’s 1985, reports the Resolution Foundation .) The income gap according to age and housing tenure has widened. Low- and middle-earners are no better off than they were 15 years ago, though pensioners are 30 per cent richer. Families under 35 are worse off than when Theresa May promised to help the “just about managing” a year ago. Many of us are returning from holiday, but 42 per cent of middle- to low-earning families couldn’t afford even one week away last year; 38 per cent could not afford to save 10 pounds a month. Those driven to use food banks can at least be comforted by Jacob Rees-Mogg finding them “ rather uplifting “.
While incomes grew in the OECD rich countries, only Greece saw a worse income drop than the UK. National debt doubled over the decade, as eliminating the deficit slipped further into the far blue yonder. Investment has stalled: businesses sit on cash piles, fearing the unknowable post-Brexit future. UK productivity has fallen further behind similar countries. The Resolution Foundation points to the current “toxic combination of rising income inequality and deterioration of living standards”.
Only consumer debt keeps the economy growing. For reasons beyond comprehension, the Bank of England chooses this cliff-edge moment to announce it will raise interest rates, due to rising inflation. The Bank was set a 2 per cent inflation target, devised in days when high employment triggered wage inflation. No such luck: despite record employment, wages are falling behind prices, with too many low-paid jobs. Price rises are due to the Brexit fall in the pound, inflating imports as the trade balance worsens. Raising interest rates now is leech-doctor medicine, upending indebted households and cutting national consumption. The Bank of International Settlements warns central banks that raising their rates could derail global growth .
Look how the Cameron and May administrations have diminished the basic decencies of civilised government. Their perverse response to the great squeeze has been an 18 billion pounds cut in income tax, mainly for the better off, and a 9 billion cut in corporation tax . The 4 billion pounds minimum wage rise is dwarfed by 14 billion pounds in benefit cuts.
A million public service jobs have been axed, with more to go. Public service now forms the lowest proportion of the workforce for 70 years — just 16.9 per cent. Wherever you look, you see this great disinvestment in the public realm. Spending on social housing fell to a record low last year. Next year, for the first time ever, the NHS will suffer a real cut per capita. A spokesman for Stansted airport last week protested that the lack of Border Force staff is already causing unacceptable passport queues at airports, even before Brexit begins. Children and young people needing urgent mental health treatment are now kept waiting for 490 days. These are just figures that have emerged in the past week. As I discovered while researching my book, Dismembered: How the Attack on the State Harms Us All, these sorts of figures tumble out every day — truly it has been a decade of destruction.
The great recession has been exacerbated by a lack of public and private investment, and by ideologically driven tax and spending cuts. The next decade threatens worse, depending on what can be salvaged from Brexit. The pandemonium within the Tory party would be raucous entertainment if the Brexit negotiations weren’t so deadly serious. Enjoy the spectacle of the Tory press dividing between Brexit factions — some for Boris, some for Gove, the Mail on Sunday peeling away from Brexit altogether. A country already limping from economic damage is at the mercy of this crew of fanatics fighting over what Brexit means, their inadequate leader only telling us it “means Brexit”. Will she say anything useful in Florence this week? Her draft speech says that city “taught us what it means to be European”, but her party never learned the lesson, poisoning Britain’s mind with a nasty brand of nationalism.
Johnson’s “fearless blueprint for a brighter future” ( as described by the Telegraph ) pledges a bonfire of regulations and lavish tax cuts: staying in the single market and customs union or contributing any money would be a great “betrayal”. Anyone revolted by his cynical isolationism, bogus statistics or the absurdity of his “glorious future” is branded unpatriotic. How this stinks of the 1930s, that other dark depression decade. But yet again he tops this week’s Survation poll as most popular to lead the Tories: Rees-Mogg, in second place, plans no fewer than nine speeches at the Tory conference. This dangerous pair of scoundrels rise by use of raw nationalism: they need to be defied by all in their party with any shred of historical knowledge about where it leads. After the Brexit decline, watch them ramp up the xenophobia.
Labour has the chance now to build a New Deal vision in stark contrast to the dark Brexiteer threats. Labour’s popular manifesto, hastily assembled ahead of May’s snap election, needs deepening into a great plan for investment and rebirth, backed by a well-researched and fireproof road to recovery. There is no knowing if, by the next election, we will be out of the EU: Labour can only hope it inherits a country “in transition”. But where to? From where we stand now, looking at May’s mayhem of a government, we are like prisoners waiting on death row. There we could live many years, hoping for a reprieve or even a pardon from our Brexit moment of madness.
— Guardian News & Media Ltd
Polly Toynbee is a Guardian columnist.