THE BLOG

Election 2017: Winners And Losers

20/04/2017 11:57

Elections create winners and losers. Politicians like to claim that their policies will benefit everyone, '[e]very person, every family, every business, every community the length and breadth of the United Kingdom - England, Scotland, Wales and Northern Ireland', to quote Theresa May. Sadly, this isn't the case.

The 2017 election is not a choice between angels and demons, nor is it a choice between corruption and probity - none of our main parties are perfect, but none are wholly cynical and self-serving. Rather, the election gives us a chance to influence who wins and who loses over the next five years.

The good news is that recent history gives a clear indication of the likely winners and losers of five more years of Conservative rule. Under Cameron and May some groups won big. Over the past 7 years the economy has grown around 15 per cent. In fact, the economy is almost 10 percent larger today than it was at its pre-crash peak in 2008. The winners have been the super-rich. According to Credit Suisse's Global Wealth Report, since 2008 personal wealth has grown at the fastest rate ever recorded. In Britain, the record rises in personal wealth have been accentuated by the £375 billion of quantitative easing authorised by the government in the wake of the Financial Crisis, and the £60 billion announced to shore up the markets after the Brexit vote. The initial wave of quantitative easing resulted in a huge increase in asset values for the top 5 per cent of households. So, since the crash the very wealthy have benefited enormously, and government money has helped them to do so. At the same time, wages have declined. Since 2008, most working people have seen their earnings shrink by around 10 per cent in real terms.

The public sector has been another loser. The NHS, which was in the black in 2010, faced a £1.85 billion deficit in 2016, the largest deficit in its history. As a result, waiting times are up, and the NHS is facing, what the British Red Cross have described as a 'humanitarian crisis.' Conditions in the NHS have led to an exodus of Doctors. A third of Accident and Emergency Doctors left the UK to work abroad between 2010 and 2015. There is a similar pattern in education, where 10,000 teachers left the profession in Cameron's first term. In both sectors, real terms cuts in spending has increased workloads to a point where many professionals are no longer willing to continue.

Running down public services has hit some groups much harder than others. Austerity has hit women's incomes twice as hard as men's. Cuts to lone parent benefits since 2010, for example, have fallen disproportionality on women, for the simple reason that women make up 90 per cent of lone parents. At the same time, as women tend to be low earners they have benefited far less from tax cuts than men.

The paradox of the last seven years is that while the economy had grown, services have been cut and government debt has increased. This situation has arisen because neither Cameron nor May have been able to turn economic growth into increased tax revenues.

The tax take is down for three reasons. First, the tax-free allowance has been raised, and the top rate cut. The cut in the top rate alone, is estimated to cost the Treasury £2.4 billion a year. Secondly, Cameron's 'jobs miracle' has created mostly part-time jobs, self-employment, and casual work on zero-hours contracts. These jobs simply do not pay enough to produce the tax revenues necessary to fix Britain's finances. Finally, Corporation Tax was cut from 28 per cent in 2010 to 20 per cent in 2015, reducing revenue from business. Therefore, in spite of significant economic growth, government finances are in much worse shape than they were under Labour. Indeed, in 2010, when the British government had, apparently, 'run out of money', government debt was running at 78 per cent of GDP. Last year, government debt was nudging 90 per cent of GDP.

While the public sector has been subject to significant cuts, the private sector has benefited hugely from government policy. Since 2015 the Treasury has encouraged all government departments to sell off as much property as they can. Land belonging to the Ministry of Defence, the NHS, and the Ministry of Justice has been sold off, usually to property developers. Holloway prison, for example, will soon be bulldozed to make way for luxury flats. On top of that, George Osborne sold off Channel 4, Network Rail, the Met Office, the Land Registry, as well as government shares in the Lloyds Bank and Royal Bank of Scotland. The sell-offs did not, however, maximise the value of government assets. RBS shares, for example, were sold at a £1.7 billion loss. In this sense, the winners from Osborne's privatisations have been private investors, the losers tax payers.

Young people have also lost out over the last 7 years. Tuition fees have trebled, and the housing crisis means that Thatcher's vision of a 'home-owning democracy' is unlikely to become a reality for the vast majority of millennials. In simple terms, student debt coupled with increasing house prices and stagnate wages has created a situation where most young people will never be able to afford a home of their own. Indeed, in 2016 Home ownership in England fell to its lowest level in 30 years, and government ministers have begun to acknowledge that the future of housing in Britain lies in private rental, rather than private ownership or social housing.

Regardless of the promises made, voting Conservative in 2010 and 2015 has led to a situation in which the wealthiest 5 per cent, and large corporations, have benefited to an unprecedented extent, while public services have been run down, and women, young people, and people who work for a living have lost out. Voting Conservative in 2017 is likely to lead to a continuation of these trends.

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