Brexit is Trampling All Over the Stunted, Twisted Green Shoots of Recovery

The Young Fabian Economy and Finance Network’s Response to the Spring Statement

Almost exactly three years ago today, the then-Chancellor George Osborne stood up to deliver his Budget where he triumphantly boasted of an economy that was, “set to grow faster than any major economy in the worldat over 2% in 2016, 2017 and 2018. The green shoots of recovery, stunted and twisted by half a decade of austerity, were finally visible and the economy looked set to start growing steadily for the first time since the New Labour years.

Fast forward to today and we have one of the lowest growth rates of any advanced economy - growth fell to 1.4% in 2018 and is forecast to fall further (to 1.2%) this year, business investment has been falling for three consecutive quarters (for the first time since the Great Recession of 2008-9) and sterling has fallen by about 13% against the dollar since the referendum (and, no this depreciation did not lead to an export boom – it only served to drive up inflation and drive down living standards). Today’s Chancellor, who boasted of a “remarkably robust” economy could not cover for the fact that Brexit had trampled all over the barely visible green shoots of recovery that could be seen three years ago.

But even if Brexit had not happened, the green shoots of the recovery would still have been warped. We were in the midst of the longest period of wage stagnation since the Napoleonic wars, regressive changes to taxation that benefited the well-off were still set to lead to an increase in income inequality while the freeze on social security benefits was set to lead to an explosion in poverty. In the absence of Brexit, the economy, wages and living standards would have grown a little faster (as would, incidentally, inequality and poverty), but we would still have been lumbered with a misshapen recovery, which would have benefited not the many but the few.

And there was nothing in this Spring Statement that helped to remould our distorted economy. The Chancellor introduced some welcome micro measures to help boost productivity (including £260 million for the border regions of England and Scotland) but then went on to assert that the only path to growing living standards was through productivity growth. This is flat-out wrong. The Chancellor could have chosen to end the freeze to social security payments, which has already led to 200,000 more in poverty and will lead to 400,000 falling below the poverty line by 2020, or he could have abolished the personal allowance and replaced it with a cost-neutral Weekly National Allowance of £2,500 per year to each adult, which would have led to a fall in poverty of 200,000 and only led to losses for the top 13% of earners. The Chancellor could have implemented these measures today to ensure that the benefits of any recovery would trickle down to the poorest in our society, but he chose not to.

It’s worth reading, in full, the Shadow Chancellor’s response to the Spring Statement if you want to understand how much our misshapen economy has cost the poorest in our United Kingdom. We live in a nation where the government has, “forced people to turn to foodbanks to survive” and “largely broken the historic link between securing a job and lifting yourself out of poverty”. Today the Chancellor repeatedly implored the House of Commons to pass a Deal and reap the (mythical) deal dividend, but the sad truth is that even if Parliament did as he asked, nothing in today’s Spring Statement would ensure that all of us, in this together, would benefit from the recovery that followed.  


Jeevun Sandher is Co-Chair of the Economy and Finance Network and tweets @JeevunSandher

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