Reproduced with kind permission of TUC – Trades Union Congress
The UK has experienced the second slowest export growth of all G7 countries since 2010, with only Japan faring worse, the TUC said on Monday 18th February as it published its submission to the 2013 Budget.
With the Chancellor identifying an economic ‘global race’ as the defining challenge of the government, the TUC report shows how George Osborne’s own strategy is causing the UK to fall behind its competitors.
Recent figures from the International Monetary Fund (IMF) show that over the last two years export growth in the UK has been slower than five of its G7 competitors – the US, Germany, France, Italy and Canada. Only Japan, whose economy is still reeling from the 2010 tsunami and earthquake, is doing worse than Britain when it comes to exports.
The Chancellor cannot blame Europe for the UK’s economic woes as the three biggest Eurozone countries are all performing better on exports, says the TUC.
In terms of economic growth since 2012, the UK is ranked just 158th of the 184 countries monitored by the IMF.
Instead, the TUC believes that a combination of self-defeating austerity and a complete absence of a strategy to grow the economy are dragging the UK down.
The TUC Budget submission calls for an immediate stimulus to boost demand. This should include stopping damaging welfare cuts that are reducing people’s living standards – particularly those of low-income families – and reversing cuts in capital spending that have badly affected the construction and housing sectors.
But as well as an immediate stimulus, the TUC submission calls for the government to deliver a proper growth strategy, along with stronger tools to deliver it.
The Chancellor should start by introducing many of the measures championed by Lord Heseltine in his recent report ‘No Stone Unturned’, says the TUC. This should include an active industrial policy, led by a National Growth Council that would also include business and union representation.
The submission also says that the government needs to address another key blockage in the UK economy – a lack of lending to firms outside of finance and real estate. To address this problem the Chancellor should set up a publicly-owned business bank that targets growing industries, such as green technology and high-value manufacturing.
In order to work properly, a new business bank should have sufficient capital says the TUC, and suggests £40bn initially over four years. It should also have the ability to raise funds on capital markets.
The Budget submission also calls for more action to tackle growing pay inequality which, if left unaddressed, could result in most workers receiving no benefit from future economic growth.
The submission proposes tackling soar-away directors’ pay by forcing companies to disclose pay ratios between the lowest, median and best paid company staff, as well as introducing employee representation onto remuneration committees.
The Chancellor can also raise revenues by simplifying the tax system through the closure of tax loopholes, says the TUC. This should include aligning capital gains tax with the top rate of tax and strengthening the proposed General Anti-Avoidance Proposal.
TUC General Secretary Frances O’Grady said: ‘The UK is currently gripped by two big crises – falling living standards and economic stagnation. For all the Chancellor’s talk of the UK paying its way in the world, his own strategy is dragging the economy down.
‘On growth, exports and investment the UK is falling behind its competitors in Europe and across the globe. In order to address this, the Chancellor must announce a change of direction next month.
‘He can start by taking up Lord Heseltine’s proposal for a new growth council and prioritising new infrastructure projects. It is far better to invest in improving our transport and energy networks than to pay for the costs of economic failure that high unemployment and falling wages bring.
‘But the Chancellor also needs to do more to help families suffering through the UK’s living standards crisis. With real wages falling since 2009, the government has heaped on the pressure by raising VAT, cutting welfare support and freezing pay for public servants.
‘Giving low-paid families a few hundred pounds in a tax break is no good if they are also losing thousands more in tax credits and when wages are failing to rise as the economy stagnates. Instead we need to see a reversal of benefit cuts and policies that can secure better wages, including measures to tackle soar-away pay at the top.’