Two weeks ago I appeared on Iain Dale’s LBC radio show to discuss an interview he had just conducted with the Chancellor George Osborne on a trip to the south-west of England. Iain managed to get Osborne to repeat the dumbest statement that I have ever heard from a Chancellor – that is ‘four years ago the country was close to bankruptcy’.
Such a claim that the country was broke is unequivocally false. A big fat pork pie. In the quarter the Coalition took office in 2010 the economy grew by 1%, which is the fastest quarter of growth since 2007. The economy grew by an average of 0.6% a quarter from the final three months of 2009 to the third quarter of 2010 compared with an average of only half of that in the 14 quarters since then. The UK – with its own central bank and currency – has been able to borrow at historically low rates throughout the recession under both Labour and coalition governments and was never anywhere close to being insolvent. Imagine if the chief executive of any of the biggest 500 companies in Britain declared that their company was close to bankruptcy when it wasn’t – or even if it was – they would be relieved of their duties.
As I have frequently predicted in these columns, real wages continue to plunge. The latest Office for National Statistics (ONS) data showed that. Average weekly earnings were £478 a week, down from £479 in December 2013 and exactly the same as observed in April. Pay was up 0.3% over the last 12 months, which is the lowest ever, and exactly zero in the five months that we have data for since the start of 2014.
We have now had monthly estimates of £478 in January, February, April and May and one of £476 in March so there isn’t much growth there. In contrast the Retail Price Index grew 2.6% over the last year, so real wages are currently falling at more than 2% annum.
The AWE is up by 6.5% since May 2010 while the RPI is up 14.6%. So real wages are now down 8% and that drop has no chance of being restored by election time. I do recall the Bank of England’s ex-chief economist Spencer Dale explaining at the last inflation report press conference that the MPC was fully expecting real wage growth in the second half of 2014, a claim recently repeated by Governor Carney who is headed back to the drawing board.