|Not out of the woods|
As with this wood so with the national economy; in 2008 the British economy and our way of life was hanging in the balance. The financial bust created a structural deficit that amounted to 6% of the national economy (caused by the banking collapse) and on top of that we had the recession the rest of the developed world suffered adding some 4% to the downturn. There is no precedent for a the UK economy taking a 10% hit to its national income in two years. Following the bust we have been through a very painful process of rebalancing the economy so we can start again. The rebuilding process has been achieved by a section of society is the same stoic and silent approach that the man in wood has brought to his restoration.
The great news is that since the start of this year we have we enjoying the first signs that this rebalancing has worked. Growth is up, employment is up, inflation is down – so it might be a good time to take stock and think about those who have made the sacrifice to turn things around.
The basic numbers are frightening but simple. To stabilise the economy the Labour Party initially and the coalition latterly have:
1. Increased taxes on income and sales to the tune of £110bn since 2009
2. They have raised duties and tune of £9bn since 2009
3. And they have bought government securities to the value of £385bn in the same period
In an act of extreme foolishness and cruelty both governments decided that they would raise the money from one source and one source alone – the British middle class. Generally speaking the poor (on benefits or poorly paid) have been protected with inflation linked increases to benefit and tax credits. At the other end the rich and owners of capital have done pretty well as corporation taxes have been eased. Amazingly the sacrifices made will the minimum of fuss and complaint – people have just got on with it. There have been no petrol bombs no manning of barricades just the stoic suffering in silence!It’s pretty obvious how this plays out on the direct taxes and benefit deductions, which have left working familes £119bn worse off (that £6,000 per family per year); what is less obvious is the impact of years of ultra-lose monetary policy has been on the winners – and losers. Whilst there are few surprises in the report (published by McKensey in the FT) it does attempt to put numbers on the winners and losers.
|The cost of QE|
In addition to these other penalties we also had to take a 20% devaluation of our currency, the impact of which is not in these numbers but would amount to a significant loss in investment income to the same group of hard working savers.
The middle class tax hike has raised a stagger proportion of the total cash needed to the turn things around and has rightly been described as the great British bail-in. It is therefore no wonder that Ed Miliband has focused his loving attention on this group of the electorate and no mug is he!