Broken Britain

4th February 2022 / United Kingdom
Broken Britain

By TruePublica Editor: There really isn’t any good news is there. It’s all self-inflicted wounds of incompetence and it’s gangrenous enough to fill the political mortuary. We’re seeing this almost daily now as people walk or are pushed. It’s like peak Trump, only more embarrassing. When Tory MP David Davis said in the Commons to Boris Johnson recently – “in the name of god, go” – I’m sure we’re all exhausted by the clown and his circus enough to agree. Broken Britain has arrived and this is what it looks like.

One good example is Munira Mirza who quit over the prime minister’s ‘scurrilous’ Jimmy Saville remark. This is the same extremely principled Munira Mirza who wrote an article for Conservative Home defending Boris Johnson’s Islamophobic burqa comments in 2018.

We don’t know how many letters the 1922 committee has. I’m told it’s well over forty. A threshold of 54 needs to be met before Johnson can be challenged.

Whatever moral compass the Tories had, many of them are now demonstrating they have no idea how to steer the very rocky waters just ahead of us all.

And we have it all. A cost of living crisis, rampant inflation not seen for decades, rising interest rates, a real-term pay cut for the majority of households in the near to medium future, a global economy that is de-coupling, the crumbling ideology of Brexit and an incompetent Prime Minister drowning in accusations of law-breaking, corruption and malfeasance. All this before even attempting to unify our wounded nation and get back to the business of competing in what is a rapidly changing world. We’ll all be ‘left-behind’ the way it’s going.

Cost of Living Crisis

For one thing, markets are now pricing in inflation for the foreseeable future (at least 5 years) and not as generally predicted by economists to fall again later this year. And don’t be conned by inflation. If your electric bill was £100 last year and it goes up to £125 this year, you have 25 per cent inflation. If it’s £125 this year and it’s £119 next year, inflation on your electric bill has fallen by about 5 per cent. And that is the message you get. The fact is, you’re still paying nearly 20 per cent more than you were. And that position can only be negated by your wages going up by £19 – anything less and your standard of living falls. All households will be hit with household energy, food, footwear and clothing and car fuel inflation this year – and the markets are saying, prices won’t fall back much for the foreseeable future.

As for Sunak’s plan to save us all – giving people two hundred quid because they can’t afford to pay £800 then asking for your £200 back isn’t really help is it?

 

Poverty

The less money you have, the harder inflation is to deal with – and right now one in five households live in poverty. This is before the cost of living crisis bites. Here is the latest data from the Joseph Rowntree Foundation – “More than one in five of the UK population (22%) are in poverty– 14.5 million people. Of these, 8.1 million are working-age adults, 4.3 million are children and 2.1 million are pensioners.” A staggering 31 per cent of Britain’s children now live in poverty. And all this is set to get a lot worse.

Dropping council tax by £150 to people who don’t pay because there’s no household money in the first place – isn’t help is it? For everyone else, it doesn’t mean much overall.

SafeSubcribe/Instant Unsubscribe - One Email, Every Sunday Morning - So You Miss Nothing - That's It


 

Levelling-Up

Boris Johnson has staked his future on this very large-scale policy agenda (assuming he makes it past next week). It is a policy that has been compared to Germany’s reunification of East and West Germany after the fall of the Berlin Wall. After twenty years and gobbling up a trillion Euros, things were looking up for the East Germans. A decade later and another 800 billion Euros later and East Germans have overtaken per capita GDP in the ‘left-behind’ north of our own country. That’s how much it cost.

Johnson’s ‘levellling-up’ fund is worth £4.8 billion to towns and cities. Then there’s the National Skills Fund. The chancellor announced an initial £375m for it in November 2020 with another £1.6bn coming in the following three years. The government set up a £23m support scheme to cover losses incurred in the farming and fishing industry, as well as a new £100m fund to modernise fishing fleets and rejuvenate coastal fishing facilities. And then there’s ten freeports. And I’m sure there’s a few more token projects but you can see where this is going. There’s nowhere near enough money to level up the north. There is if you drain wealth from the south – and that would not just be a disaster of epic proportions but a complete waste of time.

 

Other threats

I could go on about interest Rates, household debt and national debt. As for national debt, the UK now has the highest ratio of debt to GDP since 1963. At £2.3 trillion, each one of us is now paying £1,000 a year just to service the interest payments, which is costing £64 billion a year. Rising interest rates means less money for those most vulnerable. For comparison – Britain is spending more on debt interest payments than on its entire defence budget.

 

The ‘B’ Word

And then we have ‘B’ – the word no-one is allowed to talk about in social circles. The Centre for European Reform reports on Britain’s trading performance with its EU partners. The last two reports said (LINK):

“In October 2021, UK goods trade was 15.7 per cent, or £12.6 billion, lower than it would have been if the UK had stayed in the EU’s single market and customs union.”

“In September 2021, UK goods trade was 11.2 per cent, or £8.5 billion, lower than it would have been if the UK had stayed in the EU’s single market and customs union.”

If these two months are anything to go by, UK goods trade has fallen dramatically. In 2021, there has only been one month where trade fell by 10 per cent – all others fell by more. And as you can see, October fell by a staggering 15.7 per cent. This matters for all sorts of reasons, not least, tax revenues fall again. The very people who were ‘left-behind’ who voted to change the status quo – are about to pay because its always the most vulnerable who pay the most in real terms.

 

The ‘R’ Word

Not being spoken about yet. Recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters. As we come back from Covid and as Brexit is already hitting the economy quite hard at the same time, there’s quite a lot of margin for growth. But this won’t last long. By the end of 2022 the economy will not be in great shape and will be falling behind competitor nations and trading partners.

There is is self-fulfilling prophesy that is not hard to predict. If people feel worse off, they will tighten belts and restrict discretionary spending (assuming you have any left). When the cost of living crisis really gets to burn household incomes it will turn into a standards of living crisis. The 1 in 5 number for poverty will raise its head once again and reports this time next year could be heading for 1 in 4.

In recessions, tax revenues fall. The only real sustainable way out is economic growth. Don’t forget that traditional Keynesian economics are out the door if the government tightens fiscal policy and imposes ‘austerity’ which failed last time with George Osborne. But now, there’s no headroom to increase national debt unless the Bank of England turns on the printing press and quantitative easing kicks off again.

 

Outlook

Not good. Dire if you’re in the bottom quarter of the income pile. Not great if you’re in the next quarter upwards. In other words, this time next year, half of Britons will be worse off and feel it, for all sorts of reasons. It, along with other reasons, will likely start a recession.

Broken Britain was a term used by the Tory party led by David Cameron from 2007 to 2010 to describe a perceived widespread state of social decay in the UK under the tenure of Labour Party Prime Minister Gordon Brown. The irony of this term is lost with the current incumbents of No10. But they truly have Broken Britain by dividing its people, creating a border within its own territory in Northern Ireland and threatening to shear off the union – whilst making everyone poorer. It goes without saying that surely, Britain can do better than this.

 

 

At a time when reporting the truth is critical, your support is essential in protecting it.
Find out how

The European Financial Review

European financial review Logo

The European Financial Review is the leading financial intelligence magazine read widely by financial experts and the wider business community.