LAST Thursday, Boris Johnson proclaimed his Government had a “plan for a stronger economy that has all the makings of the strongest and most prosperous in Europe”.
His use of the phrase “has all the makings of” was interesting, particularly given what the Organisation for Economic Cooperation and Development had said about the UK economy last Wednesday.
His claim that the Tories had a plan for a stronger economy came at the end of what seemed like a rather rambling and scattergun speech which went over a lot of old ground and, crucially, appeared to contain little new of substance.
We should not be surprised by any of this.
The Johnson administration is all about big proclamations. Interestingly, its Brexit odyssey has signalled many people are happy enough just to accept all the noise at face value without analysing the substance or utterly contrasting reality.
The economy speech last Thursday from the Prime Minister came hard on the heels of Mr Johnson surviving a vote of no confidence on Monday last week but seeing a significant rebellion from within his own party with 148 Conservative MPs voting against him, amid an intense focus on Downing Street parties during the coronavirus lockdowns.
With Mr Johnson seemingly at pains to try to get back on the front foot, his address last Thursday was full of big talk and sweeping declarations, although the noise failed to disguise the lack of substance for the expert listener.
Predictably enough, the speech saw the Prime Minister get back on one of the Tories’ old hobby horses – the housing market and specifically right to buy, perhaps evoking Margaret Thatcher for some. Before anyone gets over-excited, what was proposed on this front amounted to a hill of beans in the scheme of things.
The OECD’s forecast last week that the UK will next year stagnate and be the worst-performing economy among the Group of Seven leading industrialised nations by a significant margin contrasted starkly with the Prime Minister’s ebullience.
In its latest twice-yearly outlook published last Wednesday, the OECD declared the UK Government “should consider slowing fiscal consolidation to support growth”.
It observed the Johnson administration had already started to tighten fiscal policy. And it noted UK household incomes were falling in real terms.
Mr Johnson and his Cabinet would do well to take these points on board.
In December, the Paris-based OECD had projected the UK would grow by 2.1% next year, so the new forecast of zero expansion represents a sharp downgrade.
The think-tank projects that, among the G7, the US and Italy will be the joint-second-worst performers in 2023, each growing by 1.2%. It forecasts global expansion of 2.8% next year.
The Prime Minister in his speech last week, which seemed far more like an attention-seeking song and dance than a serious economic plan, announced a “comprehensive review of the mortgage market”.
He declared: “Reporting back this autumn it will look at how we can give our nation of aspiring homeowners better access to low-deposit mortgages, and what our own mortgage industry can learn from counterparts around the world who have all kind of alternative ways of offering finance, managing risk, and unbolting the door to ownership.”
Mr Johnson talked about extending right-to-buy arrangements for social housing tenants.
He declared that, over coming months, the Government would “work with the sector to bring forward a new right-to-buy scheme” focused on housing association tenants.
The Scottish Government abolished right to buy – which was a flagship policy of Margaret Thatcher implemented soon after her administration came to power – from summer 2016. The SNP has declared this abolition was “in order to protect and enhance social housing and to protect the investment made in social housing over many generations”.
And the Scottish Government made it clear last week that it would not be changing tack as a result of Mr Johnson’s right-to-buy plans for south of the Border.
The current UK housing market picture is of course, across the board, far from ideal.
With rock-bottom benchmark UK interest rates for more than 13 years now, house prices have surged further and many younger people, and others, have been completely priced out of buying a home.
However, Mr Johnson’s plans are not going to do much, if anything, to help tackle this dismal situation.
Then again, that might be of little concern to some Tories, who might just be happy to see an old Thatcherite policy taken back off the shelf and dusted down to create another distraction for an electorate let down badly by the party’s economic policy errors.
Through his speech, Mr Johnson told people repeatedly that he was on their side as he acknowledged the cost-of-living crisis but offered nothing much, if anything, in the way of actual new help.
There was plenty of Tory ideology in there though, with Mr Johnson talking about “keeping our borrowing and debt under control – giving us the scope to cut taxes both on people, on families and of course on business”.
Of course, even before the coronavirus pandemic hit, public sector net debt had spiralled upwards under the Conservatives, with the UK’s economic performance having been most unimpressive for a prolonged period amid a counter-productive and savage Tory austerity programme.
The Conservatives propelled the UK’s public sector net debt from £1 trillion in 2010 to £1.8 trillion, just ahead of the coronavirus pandemic hitting in early 2020.
Although the Prime Minister talked repeatedly about being on the side of ordinary people, one of the key messages in his speech seemed to be that households would just jolly well have to endure big real-terms cuts in pay amid the country’s inflation crisis. Annual UK consumer prices index inflation had by April surged to nine per cent, its highest since 1982.
Mr Johnson declared: “You have to find ways of tackling the underlying causes of inflation. If wages continually chase the increase in prices, then we risk a wage-price spiral such as this country experienced in the 1970s – stagflation – that is inflation combined with stagnant economic growth.”
As well as offering this lesson on economics terminology, he added: “When a wage-price spiral begins, there is only one cure. And that is to slam the brakes on rising prices with higher interest rates. That has an immediate impact on mortgages and rents. It puts up the cost of borrowing for business. It is bad for investment and growth. It is bad for jobs. It is bad for everyone.
“And, of course, the increase in interest rates considerably increases the cost of borrowing for government.”
It sounded a lot like the call for wage restraint from Bank of England Governor Andrew Bailey, which proved hugely controversial.
So what to make of Mr Johnson’s claim that his Government has a “plan for a stronger economy that has all the makings of the strongest and most prosperous in Europe”?
Data from the Office for National Statistics on Monday showed the UK economy contracted by a further 0.3% in April, after a 0.1% fall in gross domestic product in March. Fears of recession are mounting.
And Brexit, as made clear in the Theresa May government’s own forecasts back in 2018, will continue to be a huge drag on UK economic output.
These projections showed that Brexit would, with an average free trade deal with the EU, result in UK GDP in 15 years’ time being 4.9% lower than if the country had stayed in the bloc if there were no change to migration arrangements. Or 6.7% worse on the basis of zero net inflow of workers from European Economic Area countries. Sadly, the Tories have since clamped down on immigration.
Now we have the OECD projections showing the UK economy sinking to the bottom of the G7 in terms of its anticipated performance next year.
Mr Johnson should perhaps have reflected on all of this before making his somewhat outlandish claim that the UK economy had the potential to be the “strongest and most prosperous in Europe”.
Of course, in these post-Brexit days it seems for the Conservative Government to be all about one-upmanship, regardless of how far the Tory claims are from reality.
Amid the torrent of grim news, far from all of which is fuelled by global factors whatever the Johnson administration might try to claim, the Prime Minister looks very much like a man without a coherent economic plan.