- December 7, 2011
- Posted by: Mark Drakeford AM
- Category: News
Mark Drakeford: Last week’s autumn statement demonstrates just how deep the crisis in the British economy has now become. There was a discussion here yesterday on whether the UK economy is on the brink of a double-dip recession; the Organisation for Economic Co-operation and Development thinks that it already is in recession again. The OECD predicts that real gross domestic product will fall by 0.1 per cent during the current quarter, and that it will fall again by 0.6 per cent in the next quarter. As the mover of the motion said, when you look at the detail of the autumn statement, you easily see where that prediction came from. The UK Government’s own text straightforwardly demonstrates that we are in the grip of a depression, and will remain so for at least another five years. On the basis of the autumn statement’s figures, output from the British economy will not return to its pre-recession peak until 2014, making this the deepest recession and the slowest recovery in the last 100 years.
Against that utterly bleak position, what does the autumn statement aim to do? I will consider just four of the things that are proposed. First of all, the statement confirms that any gains that had been made in average household incomes in the first half of the last decade will be completely wiped out in the first half of this one. For those in the middle bracket of income distribution, real household incomes in 2015-16 will have retreated to where they were in 2002-03. In three years, of which this is the middle year, real incomes in the British economy will have dropped by an astonishing 4.7 per cent. Secondly, as we have heard around the Chamber, a two-year pay freeze for public-sector workers is to be followed by two further years in which pay will rise by a maximum of 1 per cent annually. When inflation is running at over 5 per cent, and you have a Government that switches to regressive indirect forms of taxation, real incomes are inevitably falling. Taken together, this amounts to a 16.5 per cent cut in the living standards of public-sector workers across the United Kingdom. However, that is not enough for Mr Osborne: it does not go far enough, as far as Wales is concerned. The analysis of the autumn statement by the Institute for Fiscal Studies clearly demonstrates that Wales stands to suffer most from any move to regional pay. A further reduction of up to 9 per cent in the incomes of public-sector workers in Wales would be the result of a move in that direction, which represents a race to the bottom in terms of pay and conditions. Does the UK Government not understand that, for every pound that you take out of the pocket of a public sector worker in Wales, you have a pound less to spend on goods and services—the things that private sector employers try to provide? It is economic madness.
The third point relating to the autumn statement is on child poverty. Nearly three-quarters of the reduction in child poverty achieved in Wales in the last decade has already been lost since the coalition Government came to power. The Joseph Rowntree Foundation concludes that the remainder will be gone within the next two years. Again, for Mr Osborne, that was not enough. The autumn statement freezes the working tax credit and reverses an earlier coalition pledge to increase the child element of the child tax credit by more than inflation. The first of these decisions takes £265 million out of the pockets of the least well-off. The second takes £975 million from families struggling to bring up children. The result is that every single piece of ground so painfully won by Labour will be lost, and a minimum of 100,000 extra children will be in poverty as a result of the deliberate decisions that were made by the coalition Government and announced last week.
Finally, as the autumn statement makes clear, public sector net borrowing is expected to total £111 billion more over the next five years than was forecast by the Chancellor in his March budget. Not only is his plan not working in terms of supporting growth and reducing unemployment, but it is not even achieving his own myopic concentration on reducing Government borrowing. As a result, what little capacity there was for growth in the British economy is being strangled out of it—knowingly, deliberately and with deep damage here in Wales. I shall be glad to support this motion