Why the UK economy stopped working

//SUMMARY//

The UK economy faces a historic challenge influenced by Brexit, the pandemic, Russia's war on Ukraine, and the resulting debt burden. Significant issues include inflation, high national debt, and increased tax receipts as a percentage of GDP. Raising taxes or increasing debt is not viable, leaving improved productivity and efficiency as potential solutions.

Austerity, costly crises, and pandemic spending have exacerbated the debt. The UK has experienced the most significant debt increase among major economies. Public services are underfunded, with the tax burden at a 70-year high. The energy crisis, driven by the war in Ukraine, has further strained households and increased living costs.

High inflation has led to increased interest rates, which raised the cost of servicing national debt from £40 billion to £100 billion annually, reducing available funds for other public expenditures. The economy has seen minimal growth, and productivity per worker has declined due to Brexit and the pandemic.

The workforce has also diminished, with many people unable to work due to long-term sickness or other issues, exacerbating the problem. The next government must boost productivity, manage high interest rates, and reduce national debt to strengthen public services and support the unemployed. The task is daunting, but the potential benefits are substantial.

1)
The UK's new government will inherit a historic economic challenge due to Brexit, the pandemic, Russia's war on Ukraine and the debt burden exacerbated by all three.

Inflation is just one obstacle facing Labour under leader Keir Starmer, the Conservatives under Prime Minister Rishi Sunak, or whomever the country elects.

While raising taxes or increasing debt are unlikely options, increasing productivity and efficiency is one potential solution to Britain's economic crisis.

2)
Britain's economy is under incredible strain—more than you may realise. Austerity through two successive, costly and damaging crises has left Britain with an enormous debt burden.

Compared with our friends here or any other major advanced economy, the UK's national debt has ballooned the most since COVID-19.

3)
But borrowing is not the only problem. Consider tax receipts as a percentage of GDP.

This is the proportion of the country's output that the government takes to pay for what the public needs. It's almost as high as when the public needed bomb shelters. And in an election year, that's a massive problem for anyone writing a new spending plan.

4)
We can't raise taxes or let the debt go much higher. Yet, public services are crying out for more money. Britain has had as many prime ministers as Taylor Swift has re-released studio albums in the last five years. Four, to be precise.

So, can a new British government solve the problem its predecessors couldn't? The next government will inherit a complicated legacy.

5)
The tax burden on the economy is at a 70-year high. Public services are creaking at the seams, with record waiting lists for the National Health Service.

Parts of the justice system have almost halved the number of courts in operation. You get the picture, and it's not a pretty one.

Some of this is due to government spending during the pandemic, which is more significant than any G7 economy apart from the US as a proportion of GDP.

6)
We are allocating £280 billion to get our country through the coronavirus. But here's the thing.

Most of that money was borrowed from creditors when interest rates here were low, at historic lows, and repayments were expected to be relatively manageable. And they might have been. But then... The Russian onslaught began.

7)
This is the most significant invasion of a neighbouring country in Europe since the Second World War.

The invasion has triggered an energy crisis, as sanctions and trade restrictions have choked Europe's access to vital Russian oil and gas.

British households will pay almost three times as much to heat their homes this winter as they did a year ago.

8)
We're in a national emergency. People are terrified, and families don't know if they will be able to heat their homes this winter.

The cost of living has started to soar, and the UK was once again the second most generous country in terms of financial support after Italy.

Some £400 billion of extra spending, all of it borrowed, gave us the most significant increase in debt as a proportion of our economy of any G7 economy.

9)
The twin effects of the pandemic and the energy crisis pushed our inflation rate to new highs, forcing the central banks to raise interest rates to stop it.

And if you're lucky enough to own your own home, you may remember when your mortgage payments went up by hundreds of pounds a month, seemingly overnight.

10)
Well, this is why. But for the UK government, it wasn't paying off a lovely house; it was paying off hundreds of billions of pounds of national debt.

These two events have increased the cost of paying off our debt from around £40 billion to around £100 billion a year.

11)
This £60 billion increase in spending on debt interest alone is equivalent to the entire defence budget. As a result, we have tens of billions of pounds less to spend on everything else, from health to policing to defence.

But the extra borrowing for these crises hasn't been matched by faster growth. The UK economy has barely grown above pre-pandemic levels.

12)
You can see that Germany grew less than the UK over this period because it was so dependent on cheap Russian gas that it faced an existential crisis when the taps were turned off. But Germany also spends a far lower proportion of its GDP on servicing its debt.

So, the new government's challenge is paying off a massive debt without raising taxes, borrowing, or squeezing public services even more. One of the best ways to grow an economy is to make a nation more productive.

13)
When productivity improves, you get more out of the same amount of work. This doesn't mean what many people think it means: you must work harder.

If you work in an old-fashioned newspaper and you move to a tech company, the tech company is more profitable, has more significant margins, and you can work less hard.

14)
However, your contribution to the economy in terms of productivity could be more significant because you are working smarter and effectively. In the wake of Brexit and Covid, the UK is uniquely positioned here.

We inherited a situation in which productivity per worker in the economy had already weakened quite dramatically after the global financial crises of 2008 and 2009.

15)
You can see here that Brexit has changed a trend that has been going on since the 1970s. Then you have the impact of Brexit, which had a powerful effect on investment.

We saw almost immediately that this impact fed through to growth, again pulling down our overall efficiency and output per capita. COVID has added this extra legacy.

16)
Which means we need to make our brains work even more brilliantly. But right now, we also need bodies in the workforce. And here we have another problem.

Across the major advanced economies, every country has seen an increase in the proportion of people finding work and entering the workforce or trying to do so after the pandemic.

17)
But look at the UK. We lost workers. More people fell into long-term sickness, and people just dropped out.

A million people are missing from the workforce; in a sense, many are on incapacity benefits or NHS waiting lists.

The increase in the participation rate was one of the drivers of growth in the last decade or two before the pandemic.

18)
The proportion of people able to work actually does so. Going into reverse has caused a very particular British problem. Participation has not come back since the lockdowns.

That represents a lot of missing productive capacity. This is all monumental pressure for the next government to withstand and relieve.

19)
They have to get the population to work and to work more productively.

Then, there's room to deal with high interest rates and reduce the national debt, freeing up tax revenues to strengthen public services and support the unemployed.

Everyone agrees it's an enormous challenge, but the potential rewards are massive if the new government can meet it.

Add info No1)

UK Elections: Last Week Tonight with John Oliver (HBO)

https://www.youtube.com/watch?v=tkAqwHiAR-g

Add info No2)

John Oliver on the Tories: Their 'relentless cruelty has tainted the last decade and a half of British life'.
Last Week Tonight host looks at the surprise UK general election and Britain's previous 14 years of Conservative rule.

https://www.theguardian.com/tv-and-radio/article/2024/jun/24/john-oliver-last-week-tonight-uk-election

//SUMMARY//

On his show Last Week Tonight, John Oliver discussed the upcoming UK general election and the Conservative Party's (Tories) 14 years in power. Prime Minister Rishi Sunak called a snap election amidst the Tories' plummeting popularity after recent local election defeats.

Oliver reviewed the legacies of the last five Conservative prime ministers, starting with David Cameron, who implemented harsh austerity measures that drastically cut government services. Cameron's Brexit referendum led to his resignation and tumultuous successors, including Theresa May, Boris Johnson, and Liz Truss. Each faced significant criticism, notably Johnson for his mishandling of the COVID-19 pandemic and Truss for her brief, ineffective tenure.

Oliver highlighted the profound social and economic issues stemming from Conservative policies, such as the severe underfunding of the National Health Service and increased reliance on food banks. He emphasised the damaging effects of austerity, including malnutrition and diminished public services.

Despite Labour leader Keir Starmer's lack of solid public presence or clear policies, Oliver argued that removing the Tories from power would be a significant and necessary change for the UK. He concluded that the end of Conservative rule would be a cause for celebration, marking the end of what he described as their "relentless cruelty" over the past decade and a half.

A)
John Oliver looked home on his latest Last Week Tonight as Prime Minister Rishi Sunak called a snap election for next month.

(The Prime Minister can call an election whenever he wants, if there is one every five years. "Like a lot of things, the way Britain works is kind of like the US, but capriciously worse," Oliver explained).

B)
Sunak's party, the Conservatives, or Tories, are currently "wildly unpopular" in the UK after being trounced in local elections this year.

"To put it mildly, the Tories are in trouble, which is a remarkable fall from grace for a party that's been in power for 14 years in a row," Oliver said. "This could be a massive couple of weeks for the UK."

C)
Birmingham-born Oliver took the opportunity to delve into the key players in this election, the hallmarks of Conservative rule in Britain, "why people are so angry at the Conservatives, and why they are right to be".

D)
He started with the Tories, likely to be defeated by Labour, currently led by Keir Starmer.

"Fun fact about Keir: there isn't one," Oliver said. "His most notable quality may be that he doesn't have any notable qualities," he said, citing a poll that showed half the country didn't know what he stood for.

E)
"Do you know how hard it is in the modern age to have less than half the population know what you stand for?" Oliver mused.

"Thanks to social media, I know what my high school chemistry teacher thinks about vegans who eat honey. I know my brother's roommate's ex-girlfriend thinks Lee Harvey Oswald couldn't have acted alone, and I know Shaq doesn't fit in the seats at Knott's Berry Farm.

F)
"We know too much about everyone in the world, but we don't seem to know much about the man who is about to lead the world's sixth-largest economy.

G)
Oliver also reviewed the last five Conservative prime ministers, starting with David Cameron, who took office in 2010 and embarked on one of the most significant deficit reduction programmes of any advanced economy since the Second World War.

While many countries raised taxes to deal with budget shortfalls, Cameron focused on austerity, "essentially making brutal cuts to government services and blaming Britain's problems not on the 2008 financial crisis but on years of reckless spending under Labour," Oliver said.

H)
Cameron's measures drastically cut central government funding to local authorities and reduced housing benefits, grants for pregnant women, and benefits for working-age families, among other programmes.

I)
Cameron also appeased Eurosceptic party members by calling a referendum on Brexit that he thought would fail. It didn't, and he immediately resigned in disgrace, leaving his successor, Teresa May, to deal with the mess.

Over three years, May was unable to hammer out a Brexit deal that her party would accept, so she handed over to Boris Johnson, "whose time in office has been a total shambles", Oliver said, calling Johnson's handling of Covid "an unmitigated disaster".

J)
One aide claimed Johnson saw the virus as "nature's way of dealing with old people", and he caused widespread outrage by hosting parties at 10 Downing Street while Britain was under lockdown.

Johnson made way for Liz Truss, who had the shortest tenure as Prime Minister in the country's history and was "as if 'hold for applause' was a person", Oliver joked.

K)
"It's objectively fun to look back at what a collection of lunatics ran Britain for years," Oliver said. "But it gets considerably less fun when you look at what they've done to the country," starting with Brexit.

The pitch was that it would free British businesses from European restrictions. However, trading goods with the EU became so demanding that many British companies opted to move to mainland Europe.

L)
But austerity "may be the most insidious legacy of Cameron and his successors", Oliver argued, "because it has in so many ways shredded the social safety net".

Years of underinvestment in the National Health Service have left it "gutted and understaffed". More than 7.5 million people are waiting for non-emergency treatment, up from 2 million when the Conservatives took office.

"It's got to the point where significant numbers of Britons are now going to Europe and paying out of pocket to get treatment," Oliver said.

M)
In addition, "the Tories have starved the country," Oliver said, citing a massive increase in families being referred to food banks and more hospitalisations for malnutrition; British five-year-olds are now, on average, one centimetre shorter than they were in 2010.

"It's pretty hard for the Conservatives to say they are working for Britain's future growth when its generations are shrinking," Oliver quipped.

N)
The host pointed to the case of a disabled person forced to sell his cutlery to pay for medication. "That's the natural endpoint of austerity: punishing people for circumstances beyond their control," he said.

And yet Sunak has promised more austerity, saying: "I'm apprehensive about benefits becoming a lifestyle choice."

O)
"Which is a rich fucking statement from a rich fucking man who would probably go into anaphylactic shock if he ever had to fly coach," Oliver retorted.

P)
Given all this, "it's no wonder Britons want a change," Oliver said, "and I would want the changes to be a little more sweeping than some of what Starmer is proposing," such as maintaining the Conservatives' tax spending plans until growth returns and keeping the two-child benefit cap.

But Oliver understood why people weren't focusing on Starmer: "If a wild badger broke into your house and trashed it for 14 years, tearing everything apart, you'd think: 'OK, you know what, we'll worry about the redecorating decisions later. Right now, that badger has got to fucking go.

Q)
"If the UK can successfully rid itself of the Tories next month, that's not a cause for a shrug. It's a cause for celebration," he said.

"And I know that celebration is not something that comes naturally to the British," he added, noting that the "morale booster" Keep Calm and Carry On essentially amounted to "I know you're about to die, but there's no need to make a scene".

R)
"But if Britain can rid itself of the party whose unrelenting cruelty has stained the last decade and a half of British life," he concluded, "it deserves to be marked".

Add info No.3)

UK Election 2024: The headlines | BBC News

https://www.youtube.com/watch?v=QmpohAK99fY

Labour leader Sir Keir Starmer has accused Rishi Sunak of a "total lack of leadership" in handling betting allegations. He says the prime minister should suspend the Conservative candidates charged with betting on the general election date.
Sunak repeated that anyone who has broken gambling rules will be kicked out of the Conservative party, adding that a criminal investigation is now underway into the matter.

Liberal Democrats leader Ed Davey made the most of the excellent weather in Norfolk by taking a dip in the North Sea. Today, the party focused on its NHS dentistry policy, pledging an extra £750m in funding in England.
Meanwhile, Nigel Farage, the leader of Reform UK, said during an interview with the BBC that Europe and NATO provoked the war in Ukraine.

New figures have revealed how much money political parties raised during the second week of the campaign—Labour received more than £4.3m, Reform raised almost £750,000, and the Conservatives received less than £300k. This is lower than the amount brought in by the Lib Dems, which stood at £335,000.

Biden vs. Trump TV debate: exchange of criticism... Who will win in this battle of the elders?

A TV debate was held for the November US presidential election. It was the oldest battle between 81-year-old President Biden and 78-year-old former President Trump.
https://www.youtube.com/watch?v=EGMjky28Khk&t=10s

Why is Macron's Centrism So Unpopular in France?

Macron recently warned that a far right or far left victory could spark a 'civil war'. While that isn't the case, Macron's centrist agenda seems to have failed.
https://www.youtube.com/watch?v=NV6AIepLxZA

Add info No4)

Q1. Can British people provide kind support to the weak, use finance, economy and culture to sell better services and products, and teach immigrants to be good citizens who pay their taxes properly, no matter who comes?

A1->
The measures you proposed are ideal, but in reality, there are some challenges:

Achieving both support for the weak and economic growth: Promoting economic development while providing sufficient support to the feeble is difficult. Increasing social security costs will help put pressure on the finances.

Immigrant profile: "The guide to being a good citizen is to pay taxes properly no matter who comes," but this is difficult to implement. Integration has many challenges, such as cultural background and language differences.

Competitiveness of financial, economic and cultural services: After leaving the EU, there are concerns about a decline in competitiveness in areas such as financial services. A new strategy is needed to maintain and improve our advantage in these areas.

Political disconnect: As the debate over leaving the EU has made clear, British society is profoundly disconnected. Reaching a consensus on these issues is not easy.

Leadership Challenges: Establishing leadership that can address such complex challenges is a tall order.

But tackling these challenges is different. Possible measures include:

1. Increase contributions to education and culture and improve the skills of our people.

2. Create integration programs for immigrants and promote language education and cultural understanding.

3. Implement policies encouraging innovation in new areas, such as financial technology (FinTech).

4. Implement initiatives to promote social dialogue and understand those with different views.

5. Implement political leadership with a vision and concrete policies to make it a reality.

Please pay attention to these initiatives; they will be critical objectives for the UK.

Q2. Are there any leaders in the UK who would take the following measures?

1. Increase contributions to education and culture and seek the benefit of the people.
2. Create an immigrant integration program and provide language education and cultural understanding.
3. Implement policies encouraging innovation in new areas, such as financial technology.
4. Engage in social dialogue and work to understand those with different opinions.
5. Implement political leadership that has a vision and can present concrete policies to realise it.

A2->
Unfortunately, no leader in current British politics can fully promote comprehensive and forward-looking policies like you propose. However, some politicians support some of these policies or propose similar policies:

1. Labour leader Keir Starmer proposes investing in and improving education, promoting social dialogue, and realistically addressing challenges after Brexit.

2. Chancellor Rishi Sunak (Conservative Party) promotes financial technology (FinTech) and positively accepts highly skilled workers into the country.

3. Former First Minister of Scotland Nicola Sturgeon (Scottish National Party): Presented a policy of integrating immigrants, multicultural coexistence, and maintaining an open society even after leaving the EU.

However, these politicians have not yet fully promoted a decisive vision like the one you propose.

A. Political division: British society is deeply divided, as the debate over Brexit has made clear.

B. Short-term political agenda: They look forward to saving money to deal with urgent economic issues such as inflation and the cost-of-living crisis and realising a long-term vision.

C. Sharing opinions: They share opinions.

D. Influence of media and public opinion: The reactions of the media and public opinion must be considered when it comes to sensitive issues such as immigration policy.

In conclusion, we do not currently see any leader who can fully promote comprehensive and forward-looking policies like the ones you propose. Still, a wide range of politicians support some of these policies. Due to social changes and the emergence of new political leaders, such a flexible approach may be possible.