ECONOMIC truth is often surrounded by spin and myths, and not just from politicians. Often, the politicians merely do what the Treasury tells them. UK economic policy is largely set by the Treasury. The Chancellor, George Osborne, is still learning economics after a misspent youth, and, apart from the Conservative policy of protecting the rich, speaks the Treasury’s words.
But Treasury civil servants, too, are weak. They tend to think in tramlines, and the only policy is now sovereign-debt reduction. In earlier years they gave us a vast public-pleasing credit boom, and they are now managing the mess. Behind the yah-boo of the politicians, it is the Treasury ruining the UK’s economy. And we are not told the economic truth.
One fact that no one is telling us is that we are a nation in huge external debt. We owe something like $5.75 trillion overseas, or roughly £100,000 for every person in the UK. This is because, for decades, even in spite of North Sea oil, we have spent what we do not have, and sold our businesses to all-comers: ASDA, Eon, HSBC, Santander, Pilkington Glass, The Sun, Manchester United, and Worcester sauce, and some 42 per cent of Stock Exchange shares are owned overseas.
Beginning with Mrs Thatcher, we have pawned our economy overseas, so that we can live in debt-driven, shallow luxury — and the Treasury has supervised the process. But it will come home to roost.
Along with this, de-industrialisation has taken place on a massive scale. We no longer produce things, but, instead, ship them into Felixstowe from China and India. Fewer than three million workers are employed in manufacturing in the UK, and the biggest area of manufacturing is beer and cigarettes. We have relied on North Sea oil and bankers instead of manufacturing, undoing the Industrial Revolution. The Treasury has supervised this process.
Third, the Treasury and the Bank of England have allowed a credit-financed boom, which has skewed the economy towards finance. The result has been lax, unregulated banking, which has committed every error in the book, and yet its practitioners are rewarded with vast bonuses.
Finally, the economy’s supposed main problem is mis-stated. The Treasury says that sovereign debt is the overriding problem. Yet we do not ask: what is national debt? It is merely the money that the Government has failed to raise in taxes and has borrowed from the rich. This simple analysis provides the key to the problem.
The Treasury has failed to raise tax from the rich. Estimates of tax avoidance by the rich range from £15 to 70 billion a year. Moreover, far from being a progressive tax system, the richest fifth of the population pay proportionately less in tax than the poorest fifth. So, essentially, the national debt has grown because the rich have had a tax holiday for 30 years. They holler loudly, but pay less than those with a fraction of their income. They get the tabloids to go on about benefit fraud, while tax frauds and tax havens are ignored.
The Treasury ignores these inequalities. The top ten per cent have 44 per cent of personal wealth and the bottom 40 per cent have a mere seven per cent of it — that is the unbalanced structure of our economy. The rich have avoided tax, and are ruining the economy through financial capitalism.
So we now focus on the myth that the eurozone is creating our economic problems. It may in the future, but it is not at present. In truth, our economy faces huge external debt, and has destroyed its manufacturing base. Led by the Treasury and bankers, we have worshipped Mammon and consumption, and it is turning to sawdust. Only the economic truth will set us free to address this mess.
Dr Alan Storkey is the author of Jesus and Politics (Baker Book House, 2005).