There was much media coverage of a letter from 100 business leaders to the Daily Telegraph on Wednesday praising the Coalition Government’s economic strategy over the past five years.“We believe this Conservative-led Government has been good for business and has pursued policies which have supported investment and job creation,” they wrote, adding: “We believe a change in course … would put the recovery at risk.”
The letter was warmly received, particularly by the Prime Minister.
On the same day, the Centre for Macroeconomics, which brings together economists from Cambridge University, the LSE, University College London, the Bank of England and the National Institute of Economic and Social Research, polled experts on whether the "austerity policies of the coalition government have had a positive effect on aggregate economic activity (employment and GDP) in the UK.” Its result was a decisive no. Two-thirds of the 33 economists who responded disagreed with the proposition that austerity had been good for the UK.
The reaction from the Labour Party to the Telegraph letter was that the business leaders were wrong, and that while the economic approach may have benefited them, for the mass of ordinary people there has been little sign of recovery.
The 1.8 million people on zero-hours contracts have become a focus for the Government’s critics, who claim that while millions of jobs may have been created, they are insecure and low paid.
Critics from the Trade Unions critics point to the two in five of new jobs created over recent years being classified as self-employed work. Figures from HM Revenue and Customs show that of the growing number of people who work for themselves, 35 per cent earn less than £10,000 a year. Part-time jobs account for half of all jobs created between 2010 and 2012, despite many of the people concerned wanting full-time employment, according to the unions.
The low-paid nature of much of the work created has been reflected in the tax take, which has not gone up in the way that Government hoped with the economy recovering. Put crudely, people in low-paid jobs are often not earning enough to pay much tax. (One credit to the Coalition is that they have also raised the threshold so people have to be earning over £10,000 before they pay tax.)
Many business people, such as those who signed the letter, have been doing very nicely thank you with their pay and share portfolios benefiting as their companies profits have risen. They, though, often won’t be spending that money in the British market place, thus fuelling our economy, but instead investing it elsewhere.
It is the lopsided nature of the recovery that enables the Labour Party to argue that the mass of people are not feeling that life is getting any better.
In its most grotesque form, the polarisation of wealth that is resulting from this type of economic approach sees more than 100 billionaires living in a country where more than 900,000 go to food banks – a large number of them employed.
Business clearly has its role but it must also serve the common good. So the letter’s signatories might have more credibility across the board if their companies were beacons of good business practice, paying the living wage to all employees, ensuring the company paid full tax in the UK and encouraging trade union membership. These types of developments would lead to the more equal society resulting in the long term – so that when the economy recovers it benefits all, not just the few