UK economy grew £400bn less than forecast under Tories, TUC says

The UK economy has grown £400bn less than expected since the Tories came to power, TUC research has concluded, with public spending cuts and policies favouring wealth accumulation creating what the union body called an economic “doom loop”.

Analysis published by the TUC today argued that the economy since 2010 has been managed to “reward the wealthy” through policies such as introducing tax breaks for corporations, banks and wealthy individuals and implementing legislation to weaken workers’ wage bargaining power.

According to the union body, instead of recognising spending cuts as a cause of weak growth, Conservative governments have “doubled down” on cuts to departmental budgets and the real pay of public sector workers.

The TUC argued that the Tories’ approach to the economy has resulted in a “doom loop” of weak wage growth, weak GDP growth and weak revenue, which it warned is “set to keep turning” given the current government’s stance on public sector pay and departmental budget cuts and its refusal to consider wealth taxes.

The analysis found that the UK economy has missed out on £400bn of growth compared with a projection of an Office for Budget Responsibility forecast from 2010. The TUC said the loss forecast by 2027 was nearing £900bn.

Commenting on the report, TUC general secretary Paul Nowak said: “Wage growth is the fuel in the tank that drives the economy. Businesses need customers with money to spend. That’s the only way our economy is going to grow sustainably.

“But, since 2010, Conservative policies have held down wages year after year. And ministers have given more and more in tax breaks to banks, corporations, and high earners. The rich got richer, but living standards for everyone else fell.

“We need a fresh approach to the economy that restores economic power to working people. That is what will break us out of this doom loop of pay squeezes, low spending and low growth.”

The TUC is urging the government to end its “damaging fixation with boosting the wealth of the rich at the cost of a strong economy”. Its analysis concluded that shifting economic power from the wealthy to workers would “reinvigorate” the economy and could return it to a “sustained path of stronger growth”.

The federation of unions is calling on the government to fund decent pay rises for public service workers and outline an investment plan for public services. It is demanding that ministers create a fairer tax system, by equalising capital gains tax rates with income tax as a “first step”.

The TUC has also called on the government to strengthen and extend collective bargaining across the economy and to pursue international agreements to improve labour standards by allowing countries to control capital flows in ways that protect and promote decent jobs in all countries.

On the need for international agreements to raise standards, Nowak said: “Today, we too often find ourselves in a race to the bottom – losing jobs overseas, and downgrading the quality of jobs in the UK.

“It’s time to return to the approach that worked so well for our grandparents. Britain should once again go to our global partners with proposals for shared rules that protect and promote decent jobs in all countries.”

Rachel Reeves argued on Tuesday that 13 years of Tory rule have been a “drag anchor” on prosperity after the International Monetary Fund concluded that the UK would be the only major industrialised country to see its economy shrink in 2023.

Commenting on the IMF’s figures, Jeremy Hunt said: “The governor of the Bank of England recently said that any UK recession this year is likely to be shallower than previously predicted, however these figures confirm we are not immune to the pressures hitting nearly all advanced economies.”

In a speech earlier this month, the Chancellor outlined the government’s growth plan, based on “four E’s” – enterprise, education, employment and everywhere – which he claimed would make it possible to “unlock our national potential to be one of Europe’s most exciting, most innovative and most prosperous economies”.

Responding to Hunt’s speech, the Shadow Chancellor declared that the Tories “have no plan for now and no plan for the future”, adding: “It’s time for a Labour government that will build a better Britain.”