The Office for National Statistics (ONS) announced today that the economy grew by 0.2% in the last quarter. This announcement had been expected and confirms that the economic recovery is still far from certain.
In fact, if you consider the previous two quarters under Coalition governance this uncertainty becomes even more evident. The last quarter of 2010 saw -0.5% growth, the first quarter this year saw 0.5% growth and then comes today’s announcement. All things considered, in this nine-month period you do not need a degree in economics (although it might help George Osborne…) to work out that this equates to a desperate 0.2 net growth.
As usual with Britain everyone has a ‘dog ate my homework style’ excuse for this economic malaise. The ONS insist there were one-off factors that placed a strain on the recovery, which include the additional bank holiday for the royal wedding, the wedding itself, the after-effects of the Japanese earthquake and tsunami, the first phase of Olympic ticket sales and the record warm weather in April…
Perhaps George Osborne and the Coalition may take some relief from this economic propaganda and the fact that the ONS believe (This being the operative word) that without these events the GDP figure would have been 0.5%. But, and this may be a simplistic understanding of economics, surely every quarter in every year has one-off factors (In December it was the snow, let us not forget) and in times of economic growth we similarly had one-off factors, shit happens, the world spins on, you have to deal with it. These excuses do not hide the reality – the Government’s economic policies are not working and arguably the harsh spending cuts are seeming unnecessary and ineffective.
Interestingly, despite this economic stagnation, last week it was announced that in 2010 £14bn was paid out in bonuses in the city. In particular, the ONS found that banks and insurance companies paid 40% of all bonuses even though they employ only 4% of the workforce.
This revelation brings me to a report published by think tank, the Resolution Foundation. Entitled, ‘Missing Out’ this report has made some enlightening observations about the distribution of national income within Britain in the past thirty years.
Amongst the most revealing is the fact that, the percentage of national income going to the bottom half of earners has declined from 16% in 1977 to 12% in 2010. Breaking the scope of this reality down further, the Resolution Foundation claim that out of each £100 of GDP only £12 (In wages) goes to the bottom half of earners, about £14 goes to the top 10% and £3 to the top 1%. If bonuses are included this gap widens, with the top 1% taking home around £5 of each £100, and the bottom half’s share declining to around £10.
This serves as a stark reminder of this country’s ongoing poor record on social mobility and economic fairness. In fact, these findings coupled with the illuminating unemployment and education statistics published last week (See post: Unqualified and Unemployed: The state of modern Britain) paint a bleak picture of the state of modern Britain.
Matthew Whittaker, the author of the ‘Missing Out’ report said, “The declining fortune of low-to-middle earners is in stark contrast to those at the top, and if you take into account bonuses, the picture looks even worse. This is not just about the finance sector racing away – wage inequality across all sectors of the economy seems to be the driving factor, including in retail, which is the largest employer of those on low-to-middle incomes.”
It’s only fair to note that, the Resolution Foundation state this growth in income inequality slowed after 1996. Showing that despite Labour’s failure to eradicate the gap, the introduction of the national minimum wage and working tax credits at least limited this trend. Equally, it seems worthwhile to suggest that between 1979-1997 Britain had a Conservative government, one that cared little for social mobility and with the Coalition’s current policy portfolio, history is more than threatening to repeat itself.
While, the heart just about suggests Cameron is not Thatcher mark II, he needs to prove that his government’s big talk on social mobility and fairness is not just hot air. Otherwise, this income inequality will only continue to grow and poorer households, regardless of a recession or boom, will continue to miss out.