The economy will end the year on the brink of recession and it is not hard to see why. After 13 years of Conservative misrule that reached its nadir last year during Liz Truss’s brief tenure as prime minister, the country is crawling towards a light that flickers dimly. Even the so-called recovery since Truss’s calamitous mini-budget has proved a mirage. Official figures on Friday showed that the economy shrank in the summer, when previous estimates told a story of modest growth. The signs are already flashing red for a further contraction in the autumn and winter months.
If a technical recession – one that charts a decline in gross domestic product (GDP) across a six-month period – comes to pass, it will reveal that Rishi Sunak’s mix of income tax rises and public sector cuts have backfired, as many experts said they would, leaving the UK worse off in almost every way possible.
The average family has very little spare cash with which to pay bills and afford a celebration at Christmas. A government devoid of ideas has sapped the life out of the private sector in the same way that its dogmatic adherence to austerity has hobbled investments in much-needed public services. Companies are reluctant to invest in the UK after more than a decade of stop-start planning that accompanied one of the most disastrous economic decisions that parliament was in a position to make – leaving the EU’s single market and customs union. Neither the Bank of England nor the Office for Budget Responsibility, the Treasury’s independent forecaster, have changed their minds about the huge hit to the UK’s trade and investment from Brexit.
A recession won’t trigger the usual dramatic rise in unemployment or a major spike in company failures. It will feel more like a prolonged period of stagnation.
For some Tory backbench MPs a long period of zero growth may seem more palatable than maintaining alliances with our European trading partners, but the situation leaves Sunak’s administration with only meagre resources to tackle the great issues of the day.
In every direction the government turns, there is a neglected area of the public sector desperate for support from Whitehall. And these public services, which provide the backbone of the economy and, never let it be forgotten, allow private firms to operate, don’t just need cash. They need an administration that is prepared to rethink how those services might be provided in a digital world, with the added complication that digital advances exclude millions of people from the community of users. But this rethink cannot rely on yet more doses of privatisation, as we show has happened in the care sector, where analysis of official data by the Observer reveals a dramatic rise in the number of centres providing care for vulnerable children that are fully or partially controlled by investment companies.
We have a housing crisis that depends on private sector property developers building the homes Britain needs, when it is clear they will only drip feed properties into areas at a pace that maintains prices.
There is a shortage of dentists in large parts of the country following the almost total collapse of dentistry inside the NHS for anything other than the most dire emergencies. Hospitals remain hampered by strikes, while the health ministry conducts a war with junior doctors. US health firms are waiting in the wings to capitalise on the public’s growing distrust of health services provided by the state, as they did in the 1990s when John Major’s privatising government chipped away at the NHS.
A programme for new hospitals announced by Boris Johnson has gone the same way of so many Johnsonian promises, while school repairs, despite a succession of ministerial pledges, are delayed again and again. Local councils are going bust at an alarming rate as they confront the spiralling costs of adult and children’s services, many of which they are legally obliged to provide. It’s true that the first batch of councils to declare themselves technically bankrupt – Tory and Labour – had made investments that went sour, or, like Birmingham, embarked on costly legal action.
But for the many councils warning that they too are likely to declare themselves bust, the theme is solely about budgets knocked sideways by the impact of inflation and the rising number of people – children and adults – falling into the arms of council officers when there is nowhere else to turn.
Britain needs an activist state that takes on some of the heavy lifting in the search for ways to provide public services, and without simply pouring extra cash into tired old systems and processes, often dating back several decades.
This level of engagement is anathema to the current Tory party, as it is in other areas of public policy. The Tories cannot see any other solution than a private one, even when it is clear that the corporations hungry for deals with the state are interested only in short-term profits, and not the long-term health of the economy.
