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Back in 2008, Gordon Brown famously "saved the world" by injecting money into our banking system. The UK lent them money so they could continue trading. And we, the people, have been paying for that decision ever since. Austerity is simply the Government cutting its costs to pay back those wealthy organisations who lent the money to save our banks. Gordon must be so angry at how his decisive action has caused the biggest increase in inequality for many decades.
So was austerity Gordon's fault or is it the fault of the 2010 Government? You decide....
In 2010 the incoming Chancellor, George Osborne likened our economy to a household budget and started a program of cutting costs which has continued through to this very day. A household budget is a poor analogy; a business is a better one. In a business you can adjust sales, gross margin and fixed costs. Swap in the terms GDP for sales (GDP is a poor measure I know but the one that’s used), high quality jobs for gross margin (enabling people to feel valued) and Government expenditure for fixed costs and there's the analogy. The 2010 Government started cutting fixed costs, something any turnaround manager would start on and Labour agreed.
What George didn't do was come up with an industrial strategy to rebuild the economy and help us develop skills so we can succeed at these new high value industries; the ones needed to improve national gross margin; needed because the previous tax generators; the casino bankers and oil fields have busted their flush. "So George why did you not develop a strategy? Apparently you’re not an economist (nor a business manager) and secondly many including me say you are beholden to an ideology that reaches back centuries about free markets and non-interference with them"...So it's all George's fault?
Long, long before George Osborne, it was clear even in 1997 that the UK was over dependent on banking and oil, so what did Gordon Brown do to develop new high margin industries? The opposite, it seems he encouraged low cost labour and this sent a big signal to business “you don’t need to bother with risky hi-tech, just pay your workers less and make profits that way”. True, New Labour did start its industrial strategy around 2005 after eight years but it was all derailed in 2008 anyway. One good thing he did was encouraging more students, our Universities are world leading for teaching and research and that is a good foundation to build on for a high margin economy. But tuition fees? Back then they went up to £3,000 a year, affordable by graduates of most disciplines.
The consequences of a lack of industrial strategy from either Government since 1997 (apart from those three brief years) is now clear in the latest productivity statistics – a fall of 0.5% over three months, this means that on average for each hour we work we are creating less wealth than we did three months earlier. No wonder many of us are paid less in 2017 than we were ten years ago and it’s one of the reasons the Government isn’t raising enough tax so they can’t afford to keep our parks, libraries or hospitals open.
And @SageAndOnion's take on this is (and you are welcome to come to a different conclusion);
"Gordon, I just about forgive you, you may not have saved the world or brought in a meaningful industrial strategy but you did try and you expanded access to university without making it unaffordable, but I do think you should have bought RBS cheaper"...........continues right.......
"And George, your first action in 2010 was to cut fixed costs and that was fine, but since then you have caused untold damage to the UK because you didn't seem to know what you were doing. I hope you have learned from this as I understand you are doing six important jobs now including teaching economics at Manchester University. Unpaid I hear, as it is quite likely you will be pedalling dangerous dogma, and hopefully any students attending will learn how not to do it. But if you have realised your mistakes then do please admit them, we will respect you more, could learn from you and you then might even get paid for your lecturing!"
Back to the APPS page Article by Clive Stevens 4th July 2017
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