£10,200: How much worse off Britons are after 14 years of Tory rule | Business and Economy

By mzaxazm

After 14 years of Conservative Party government, a person in the United Kingdom is much worse off than if the economy had continued to grow as fast as its pre-2010 trajectory.

Britons had on average £10,200 ($12,950) less to spend or save in total during 2010-2022, when compared with 1998-2010 growth rates, according to an analysis of disposal incomes by the nonpartisan Centre for Cities research institute.

The amount is equivalent to roughly 15 weeks of the average wage in Great Britain, or eight months of the average rent in England.

It is a sobering snapshot of the state of the UK economy as voters go to the polls on July 4 in an election focused firmly on people’s pocketbooks.

UK Prime Minister Rishi Sunak’s Conservatives are widely expected to be deposed by the Labour Party, led by human rights lawyer-turned-prosecutor Keir Starmer, which has for months led the polls by about 20 points.

While Sunak has insisted the economy has “turned a corner” after years of pandemic pain following a return to growth and on-target inflation of 2 percent, the decline of the world’s sixth-largest economy has been years in the making.

What’s behind Britain’s economic struggles?

A primary culprit has been the UK’s weak productivity growth since the 2007/08 financial crisis.

Since there is a limit to how many more hours a worker can put in, the ability to produce more with less is the key driver of economic growth and rising living standards.

Between 2007 and 2022, the UK’s gross domestic product (GDP) per hour worked grew roughly 6 percent, compared with 17 percent in the United States, 12 percent in Japan and 11 percent in Germany, according to OECD data.

According to the Centre for Cities’ analysis, productivity growth in the UK lagged the pre-2010 trend in all but five of the UK’s 63 largest cities and towns.

Eighteen cities were less productive in 2021 than 2010 and even previously strong performers like London, Cambridge and Milton Keynes struggled.

Economists have pointed to Brexit and chronic underinvestment stemming from years of austerity as key drivers of the UK’s lagging productivity.

Professional services firm PwC UK last year identified consistently lower levels of investment than peers such as the United States, France and Germany as the “root cause” of the UK’s productivity gap.

Between 2017 and 2021, the UK’s investment spending amounted to 18 percent of GDP, compared with 25 percent of GDP in Japan, 23 percent in France and 21 percent in the US, according to a PwC analysis of World Bank figures.

The fallout of Brexit has been blamed for exacerbating that gap.

The Economics Observatory, a state-funded public policy project, has estimated that business investment in 2022 was about 10 percent less than it would have been if the UK did not leave the European Union.

Is the UK’s economic malaise uniformly distributed?

Far from it.

To be sure, people are significantly worse off today than they otherwise would be in all but seven of the UK’s largest cities and towns, according to the Centre for Cities.

However, the scale of the divergence varies considerably.

In London, residents have £13,590 ($17,250) less to spend or save on average than if the economy grew in line with the 1998-2010 trend.

In Middlesbrough and Sunderland in the northeast of England, people are worse off to the tune of £13,200 ($16,750) and £12,730 ($16,160), respectively.

The residents of Burnley, a town about 34km (21 miles) north of Manchester, are the most out of pocket, with the average person £28,090 ($35,660) worse off.

Like other regional parts of the UK, Burnley reflects a stark north-south divide in productivity.

Compared with London, the town is about 39 percent less productive as measured by gross value added (GVA) per hour worked.

“Virtually everywhere saw lower growth in disposable income – whether north or south, left-behind or cutting edge,” Paul Swinney, director of policy and research at Centre for Cities, told Al Jazeera.

“The Conservatives came to power at a time when boosting growth in struggling areas was a priority. Sadly, not only has this not been achieved, but a new problem has developed – the faltering of previous innovation superstars such as Cambridge and London. The next government has a big task in attempting to address both of these problems if people across the country are to see prosperity increase once again.”

Does the UK have the resources to revive the economy?

Both Sunak and Starmer have promised to prioritise economic growth, but whichever man is elected prime minister will face constraints while attempting to make bold policy changes.

While the UK’s public services are struggling from years of underinvestment, the country’s tax burden is its highest since 1949 and both leaders have promised not to raise income tax, National Insurance or value-added tax further.

Meanwhile, the UK’s national debt is higher than at any point since the 1960s at some £2.7 trillion ($3.4 trillion) – about the size of the country’s GDP.

The Conservatives and Labour have both pledged to stick to the so-called “fiscal rules” stating that the debt should be falling as a percentage of annual economic output in five years’ time.

If the parties stick to their promises, there will be little space for manoeuvre on taxes, spending or borrowing.

In a damning assessment of both the Conservative and Labour manifestos on Monday, the Institute for Fiscal Studies think tank accused the parties of not being forthcoming about the tough choices facing the next government.

“Regardless of who takes office following the general election, they will – unless they get lucky – soon face a stark choice. Raise taxes by more than they have told us in their manifesto. Or implement cuts to some areas of spending. Or borrow more and be content for debt to rise for longer. That is the trilemma,” IFS director Paul Johnson said.

“What will they choose? The manifestos have left us guessing.”

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