The Observer’s take on the ongoing UK financial crisis in Russia – oh come on, Jeremy Hunt | Observer Editorial

Brittany is impoverished. Independent forecasts from the Office for Budget Responsibility released last week predicted a 7% drop in living standards over the next two years – an average of £1,700 per household, wiping out eight years of growth. Real wages will not return to the levels they were before the 2008 financial crisis until 2027.

Chancellor Jeremy Hunt described this as a “made in Russia recession” in his autumn statement last Thursday. Of course, Britain is being affected by the same recessionary factors as the rest of the world: the Covid pandemic, followed by the impact of Russia’s invasion of Ukraine on global energy and commodity prices. foodstuffs. But it is dishonest to claim that Britain’s bleak growth prospects are purely the product of global shocks. Other countries have shown themselves to be more resilient, even as the British economy shows its fragility. The reason is 12 years of conservative economic policy and political instability: what the Institute for Fiscal Studies has described as a series of “proper economic goals”.

These began with George Osborne in 2010. As shadow chancellor, he promised to rebalance the economy from consumption led by a bloated property market to growth led by investment and exports, and away from growth led by the financial sector in London and the south. -is towards more distributed regional economies. He has used the financial crisis as an excuse to impose deep and unnecessary cuts to the public sector, underfund the NHS, schools, adult education and public infrastructure, while eroding the social safety net for parents to low pay and people with disabilities. These cuts have made Britain a much tougher place to live, where pain relief operations are routinely canceled over the winter and working parents are forced to rely on food banks to feed their children. But they have also hurt Britain’s long-term growth potential: more people out of the labor market due to poor long-term health, more people without the skills and qualifications they need to succeed economically and more businesses hampered by poor infrastructure outside the south. is.

Then came a Brexit motivated not primarily by a democratic mandate – people did not vote for a Brexit which was a drastic severance of economic ties with our biggest trading partner – but by the takeover of the Conservative Party by its eurosceptic ideologues. They knew they couldn’t win a Brexit mandate by being honest about its costs, so they took advantage of a country suffering from some of Europe’s biggest regional inequalities, made worse by Osborne’s spending cuts , to propose a populist solution: a fantasized Brexit that would lead to prosperity by reducing migration and freeing up more public spending for the NHS. In short, a series of lies.

George Osborne as Shadow Chancellor in March 2010
George Osborne as Shadow Chancellor in March 2010: “Used the financial crisis as an excuse to impose deep and unnecessary cuts to the public sector. Photograph: Suzanne Plunkett/REUTERS

Brexit delivered by Boris Johnson has corroded the country in two ways. It depressed Britain’s medium-term growth potential at a time when the country could ill afford it. Far from the rebalancing promised by Osborne, it has hampered export-led growth. As a result, people will be poorer for decades. This is largely the reason why the UK economy remains smaller than at the start of the pandemic, while the German, French, Italian, Canadian and US economies have all grown. Everyone who warned that Britain could not afford to leave the single market and customs union was sadly right. The parts of the country that can least afford it will be hardest hit by the Brexit sanction.

The Eurosceptic takeover of the party has also brought instability, delivering the worst prime ministers this country has ever seen. Nowhere was this more evident than in Liz Truss and Kwasi Kwarteng’s disastrous mini-budget. Just seven weeks of his premiership cost billions in higher interest rates and government borrowing costs.

This is the reality of the situation in which Britain finds itself. This is not a “made in Russia recession”, but a global shock to which Britain is particularly vulnerable following 12 years of Conservative government. This is why Hunt has had to raise taxes at all levels: because the decisions taken by Tory Prime Ministers and Chancellors have cost the economy dearly, Britons are being forced to swallow not only the impact of levels records of inflation on their real wages, but higher tax bills.

It is true that Hunt has loosened his self-imposed budget rules enough to allow him to reduce the extent of the immediate pain, so that working-age benefits increase with inflation and the worst spending cuts be postponed beyond the next elections. But the pain felt by many will always be deep and it has been compounded by the economic incompetence of the Conservatives. People who gave nothing away in their budget a decade ago will be significantly poorer in the next general election due to years of cuts to support for working parents and people with disabilities. The NHS will continue to be underfunded and understaffed and thus provide substandard levels of care as a direct result of a lack of resources. The government will not adequately fund remedial education for children from disadvantaged backgrounds most affected by the pandemic and they will feel the consequences for the rest of their lives. Britain is getting poorer and it is the Conservative Party, not Vladimir Putin, that is largely to blame.

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