The Tory wealth trap is making the rich richer, while the rest of the population either stands still or gets poorer. There is no drip down effect caused by the squeezing the real economy with ill-timed austerity, while flooding the financial markets with cheap money, QE. All this achieves is to boost asset wealth while eroding wages, through pay freezes and inflation.
This wealth trap is caused by the desire of the Tories is to preserve their own wealth, but is exacerbated by the failure of George Osborne’s original economic policy, of expansionary austerity, whereby companies would be inspired by the cuts to invest. When that didn’t happen and the economy froze for three long years, he resorted to creating a debt bubble through subsidised mortgages.
The Tory policies are about to get worse. The current mortgage subsidy is £3.5bn. But this was only to buy new builds, which is excusable if it helps create shovel-ready jobs. However, the £3.5bn is about to be expanded to £12bn for all mortgages, just for the year running up to the general election. There couldn’t be a more blatant bribe than pumping up house prices in the run up to an election, without a care for the damage this will do to the economy in the medium and long run.
The most cynical aspect is that the pumping up of debt is all done “off-balance sheet”. George Osborne used to accuse Labour of not regulating the banks, who did off-balance sheet accounting, so who is regulating George Osborne, when he does exactly the same as a cover for his failed policies? The total amount of mortgage guarantees should be added to deficit, not recorded off-balance sheet, as this is the amount we are liable to if they go wrong.
It has always been Labour’s policy to invest in the real economy, the place where people have jobs and businesses. The original QE program was limited to creating liquidity in finance, oiling the wheels following the banking crisis. The Tories have transformed it into a massive hand out for the rich, at the expense of the rest of the economy.
Labour’s economic policies were always conceived to cause wealth to drip down. We would have undertaken a massive house building program, with all the money concentrated on building, not buying. We would have given young people a guaranteed six months of work, to help them get on the ladder. This policy would pay for itself according to a study by the DWP. If the economy needed it, we would reduce VAT to give “a shot in the arm” to boost spending.
These are policies where the resources of the state are invested in the real economy for the benefit of all, not in high finance for the benefit of the rich.
This is the difference between the Tories and Labour. With their policies there is no drip down effect. With our policies, everyone benefits. That is the distinction we should highlight to the British people.