“Neoliberal economic policies have increased social tensions but have failed to revitalize the economy. They have impoverished people and turned city centers into economic deserts.

Prem Sikka is Emeritus Professor of Accountancy at the University of Essex and the University of Sheffield, a Labor member of the House of Lords and Editor-in-Chief of Left Foot Forward.

The disastrous effects of the government’s mismanagement of the economy, the pandemic and Brexit are becoming all too evident. The economy is stagnating, people’s incomes are falling, inflation is rising and there is a lack of investment in productive assets.

The government had placed its hopes in a post-pandemic economic recovery to bolster its popularity, but in October the economy grew only 0.1%, 0.5% below the pre-pandemic level of coronavirus in February 2020.

Brexit and the labor shortage

The government’s Brexit strategy persuaded many EU nationals to leave. As a result, many industries are facing labor shortages.

During their accession to the EU, many companies developed integrated supply chains, but with post-Brexit trade barriers they disintegrated. The result is empty shelves in stores and longer waiting times for the delivery of goods.

The prices of food, energy and other basic necessities are rising. At the end of November, the inflation rate rose to 5.1%, the highest in a decade, and is expected to increase. It will devastate family budgets and many workers have faced endless austerity and wage freezes.

The purchasing power of people’s savings will be eroded.

Normal people spend money on everyday things. It stimulates the economy and creates more jobs, but government policies have impoverished the masses and reduced their purchasing power. Since the 2019 general election, almost half of families are worse off by £ 110 a year, while the richest 5% have earned £ 3,300.

The poorest will pay the heaviest burden

The elderly are under attack. The suspension of the triple state pension lockdown will take £ 5.4bn out of the pockets of retirees.

Universal credit has been cut by £ 20 per week for millions of households. From April 2022, the current tax-free personal allowance of £ 12,570 will remain frozen until April 2026.

Income tax thresholds will also be frozen. The net result is that the masses will pay more income taxes. From April 2022, national insurance contributions will increase by 1.25% and further erode disposable household income. Indeed, taxes on the masses have been the highest in 70 years, with the poorest bearing the heaviest burden. The poorest 10% of households pay 47.6% of their income in direct and indirect taxes, against 33.5% for the richest 10% of households.

With high inflation and declining disposable income, people will cut back on discretionary spending and the hospitality, vacation and entertainment industry will take a big hit.

Rather than reviving the manufacturing industry or investing in new technologies to create skilled jobs, the government promoted a storage economy with low wages. Most workers are unlikely to own a home.

The financial sector regularly engages in fraud and forgery. Markets count private profits and do nothing to curb predatory practices. A study estimates that between 1995 and 2015, the bloated financial sector made a negative contribution of £ 4.5 trillion to the UK economy.

Yet governments have handed over an additional £ 895 billion to speculators through its quantitative easing program. The influx of money encouraged the emergence of a shadow banking system. Private equity is a key part of this unregulated world and has swallowed up and spit out a lot of companies. Its business model is based on low wages, high leverage, financial engineering, tax abuse, pension dumping, job losses and asset stripping.

His trail of destruction includes Silentnight, Bernard Matthews, Debenhams, Maplin, Cath Kidston, Toys “R” Us, Four Seasons and many more.

All businesses benefit from investments in education, health, housing, transport and social infrastructure, but the government has neglected social investment.

In 2015, the government promised to build 200,000 starting houses across England by 2020. In 2019, the National Audit Office reported that none had been built.

Instead of investing in new industries, the government has chosen tax cuts for the rich and for businesses on the assumption that all of this will spill over and magically create new industries.

UK has record billionaires

This is not the case. Despite the pandemic, the UK has a record 171 billionaires. The richest six people control as much wealth as the poorest 13 million. Some 42% of household disposable income is in the hands of the richest 20% of households, while the poorest 20% have only 7%. This is a huge obstacle to building a sustainable economy.

Historically, the UK economy has been built through a combination of public and private investment, with the state often taking the lead where the private sector did not want to go. He saved or built shipbuilding, railways, steel, water, gas, electricity, mining, biotechnology, telecommunications, and many other industries. They have all been privatized and the state’s ability to stimulate the economy has severely eroded.

A decade of low interest rates, inflation and corporate tax rates has failed to convince companies to invest heavily in productive assets. With 16.9% of its GDP invested in productive assets, the United Kingdom is languishing far behind its main European competitors.

Neoliberal economic policies increased social tensions but failed to boost the economy. They have impoverished people and turned city centers into economic deserts.

A complete change of direction is needed. Income and wealth must be redistributed. Public services must be rejuvenated. The state must be more active in rebuilding the economy and the financial sector must be cleaned up.

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