A “hard lesson” for George Osborne

In 2011 George Osborne proclaimed that “We have already asked the British people for what is needed, and today we do not need to ask for more.”  Yet today, in 2014 on the feast of the epiphany no-less, George Osborne commands that this will be “A year of hard truths”.

Of course Osborne will no doubt wish to forget most of the “hard truths” of 2013. A year which saw the Conservative dominated Coalition Government accrue more UK state debt than the entire period of the previous 13 year Labour Government.  Growth effectively strangled till autumn 2013, and UK public sector net deficit stubbornly lingering despite claims in June 2010 that it would be eradicated by 2015.

No, we all now need to prepare for further cuts for the foreseeable future now according to Osborne. Gone are the claims of the original Osborne “plan A” that it all be over by May 2015.

And why? Well with SME investment collapsing by £30bn since 2011, industry and business are sweating assets rather than investing, all desperately wondering how the current period of growth is in any shape or form sustainable. This is not “a march of the makers”. Current growth is based on what Osborne used to refer to as “bad growth” or consumer debt led growth.

Except it is and it isn’t. It’s actually worse. It’s a growth based on record levels of savings being spent, as household savings have declined to levels seen since the early 1970s.  Savings being spent plus pay day loans offers up a heady toxic mix of UK state debt, vast personal debt, rising prices and falling wages.

Worker productivity has collapsed through the floor, with people doing much less for less pay.

But it’s the stark facts on the ground that Osborne needs to take on board. For people working in my constituency, average real gross weekly pay has fallen by 35.2% since 2010. This is a huge weekly earnings loss, and with prices running away from earnings Osborne will be desperate for a levelling out of living standards.

Today Osborne says “the plan is working…for the first time in a long while, there’s a real sense that Britain is on the rise.”  Whose Britain is this?  And which plan is working?  This is certainly not what I hear on the doorsteps of Guisborough, Loftus and Park End.

This Government has a real disconnect with what most people are thinking and experiencing

The real threat for Osborne, and he knows it, is any forward guidance decision to raise interest rates. Implicitly, Osborne is admitting there is a cost of living crisis by hoping he can avoid such an interest rate rise as already struggling household budgets, of low and middle income families, would almost certainly haemorrhage.

The point is people are now beginning to ask themselves, do I feel better off more now than I did in May 2010? And the answer for the majority is no. That is the hard lesson for Osborne in 2014 and one he is culpable for.

Tom Blenkinsop is the Labour MP for Middlesbrough South and East Cleveland