Osborne shouts bingo - but let's first keep up with Paraguay

The UK cannot achieve a sustainable recovery until it can pay its way in the world, and despite a 25% depreciation of the currency over the last 5 years it still fails lamentably to do so.

Osborne’s reckless boast that he has been proved right over the economy will come back to haunt him. None of his claims stand up to examination.

“Those in favour of Plan B” (i.e. stimulating the economy to produce growth), he asserts, “have lost the argument”. That will be news to employees whose real earnings at current rates will have shrunk by £6,660 during the 2010-15 parliament. It will also come as a surprise to the UK’s biggest companies still sitting on corporate cash stockpiles of £700bn because they doubt the level of demand justifies new investment in plant or services.   The stock exchange and finance markets may be frothing, but the real economy isn’t.

Nor is it likely to be any time soon. In the last 5 years UK investment has fallen by a quarter in real terms, which is devastating in terms of future growth potential. It now stands at just 14% of GDP, against a global average of 24%. Indeed in terms of the global investment-to-GDP league Britain now stands 159th, behind El Salvador, Guatemala and Mali. A recovery based on low wages, poor productivity and weak investment must be expected to stutter and slip back by 2015.

Nor does the historical evidence indicate that Osborne’s counter-intuitive plan, known by the oxymoron of ‘expansionary fiscal contraction’, has ever worked.  It has been tried three times before – the so-called ‘Geddes axe’ cuts in 1921-2, the May businessmen committee cuts in 1931, and the Howe budget in 1981. The first enforced expenditure cuts very similar in real terms to today and led to a decade of anaemic growth.   The second was only saved from a similar fate by Britain being forced off the gold standard. The third led to growth only because interest rates were eased, bank lending loosened and a reviving US helped to reflate the world economy. None of those conditions remain now to be applied, so there is no reason to believe the Osborne ‘recovery’ will defy historical precedent.

Osborne’s second claim is that “Britain is poorer because of a huge failure of economic policy in the past decade” (i.e. it was all Labour’s fault). In other words, falling incomes today are due, not to his own policies of austerity, but to Labour’s over-spending which caused the recession. But Labour didn’t over-spend, and didn’t cause the recession – the bankers’ crash did that. The budget deficit in 2007 just before the crash was only 2.9%, below the OECD average, and only rose to 11.6% in 2010 because of the enormous bank bailouts. Even by the time of the election in 2010 the UK national debt had only risen to 77% of GDP which compared with 75% for Germany, 84% for France, and 93% for the US. Labour spending was not out of line with other lead countries.

Equally it is disingenuous for Osborne to claim that today’s diminishing incomes – the longest fall in wages since the 1870s and on average 9% down in real terms since pre-crash levels – owes nothing to his austerity programme and all to the recession. Of course the latter has had a major impact, but to pretend that £81bn of expenditure cuts and £18bn (and counting) of benefit cuts have not significantly exacerbated the downward pressure on incomes is absurd.

Third, “nor are we seeing”, the Chancellor has claimed, “a return to unsustainable levels of indebtedness and household borrowing”. Well, actually, we are. Frighteningly, household lending is just 0.3% below its 2008 peak, while lending to firms is now 22% lower and if account is taken of inflation it’s fallen by a stunning 32%. There is no other way of describing this except as unsustainable. At the same time it’s clear that another major housing bubble is well under way, driven by Osborne’s own Help to Buy scheme, with estate agents the fastest growing sector in the workforce. Debt-to-income ratios, previously falling, have now turned up again. Plainly the recovery, such as it is, is propelled by borrowing.  And an economy dependent on consumer debt together with low wages, weak investment and poor productivity is likely once again to slip back after an initial short burst of expansion.

Osborne’s last assertion was that “growth had been too concentrated in one corner of the country – and HS2 will transform the UK’s economic geography”. The former statement is certainly true, with any recovery heavily concentrated in London and the south-east. But HS2, even if it goes ahead with a price-tag heading north of £50bn, will not remotely produce the degree of economic rebalancing required. The country’s finance sector is still too large and dominant, while manufacturing is shrivelled well below its potential.

The UK cannot achieve a sustainable recovery until it can pay its way in the world, and despite a 25% depreciation of the currency over the last 5 years it still fails lamentably to do so. The UK has only had a surplus in traded goods six times in the last 55 years, and last year the deficit on traded goods was £106bn, equal to 7% of GDP. HS2 won’t conceivably solve a problem of these proportions – only a fundamental revival of the UK’s capabilities for high-tech manufacturing will achieve that.

British Chancellor of the Exchequer George Osbourne speaks during the Conservative Party Conference in Manchester. Image: Getty
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How the Saudis are making it almost impossible to report on their war in Yemen

The conflict is not getting anything like the media attention it deserves.

This article has been co-authored by Ahmed Baider, a fixer based in Yemen's capital Sana’a, and Lizzie Porter, a freelance journalist based in Beirut who is still waiting for a chance to report from Yemen.

Ten thousand people have died. The world’s largest cholera epidemic is raging, with more than 530,000 suspected cases and 2,000 related deaths. Millions more people are starving. Yet the lack of press attention on Yemen’s conflict has led it to be described as the “forgotten war”.

The scant media coverage is not without reason, or wholly because the general public is too cold-hearted to care. It is very hard to get into Yemen. The risks for the few foreign journalists who gain access are significant. And the Saudi-led coalition waging war in the country is doing its best to make it difficult, if not impossible, to report from the area.

Working in Sana’a as a fixer for journalists since the start of the uprisings of the so-called Arab Spring in 2011 has sometimes felt like the most difficult job in the world. When a Saudi-led coalition started bombing Yemen in support of its president, Abdrabbuh Mansour Hadi, in March 2015, it became even harder.

With control of the airspace, last summer they closed Sana’a airport. The capital had been the main route into Yemen. Whether deliberately or coincidentally, in doing so, the coalition prevented press access.

The media blackout came to the fore last month, when the Saudi-led coalition turned away an extraordinary, non-commercial UN flight with three BBC journalists on board. The team – including experienced correspondent Orla Guerin – had all the necessary paperwork. Aviation sources told Reuters that the journalists’ presence was the reason the flight was not allowed to land.

The refusal to allow the press to enter Yemen by air forced them to find an alternative route into the country – a 13-hour sea crossing.

After the airport closure in August 2016, an immensely complex set of procedures was created for journalists travelling on the UN flights operating from Djibouti on the Horn of Africa into Sana’a. The level of paperwork required offered only a glimmer of hope that the media would be allowed to highlight the suffering in Yemen. Each journalist’s application required visas, permits, return ticket fees of $1,100 per person (later reduced to $250) and a great deal of bureaucracy.

But there were other issues, too: equipment that all journalists take with them to war zones as standard – flak jackets, helmets and satellite phones – were not allowed on the UN flights, increasing fears about operating in the country.

The new arrangement significantly increased the cost and time involved – two things that most media organisations are short of. A team of two would have to budget for several thousand dollars for a week-long reporting trip. This was limiting for even large media organisations with big budgets.

Still, the system worked. A few journalists started to come and cover the situation from the ground. Yemenis were happy to share their stories. On one assignment to villages on the west coast, people ran to talk to us and show us their malnourished children as soon as we arrived. It was obvious from the look in their eyes that they wanted to tell people what had been happening.

That changed after last October, when three or four large international media teams had reported from Yemen, broadcasting images of starving children and bombed-out homes to TVs around the world. The Saudi-led coalition began refusing to let journalists fly in with the UN. They said that the flights were for humanitarian workers only, or that the safety of journalists could not be guaranteed. Members of the press who had been preparing trips suddenly had their plans quashed. Time assigned to reporting the conflict had to be given to more accessible stories.

Over the next few months, media access was again opened up, only to be followed by U-turns and further paralysis. And when the Saudi-led coalition did grant access, it was only under certain, excruciating conditions.

As well as a press visa granted by the opposition authorities in the capital, from February this year, journalists have required a second visa granted by the Saudi-backed government in Aden.

It felt impossible. Why would they give press visas for journalists to visit opposition territory? The doubts were proved correct when trying to convince Hadi government officials to issue press access. The consular envoy in Cairo refused. A call to their team in London resulted in another “no”. 

This meant applying to the authorities in Aden for secondary visas for the tenacious journalists who hadn’t already been put off by the cost and access hurdles. One example of the petty requirements imposed was that a journalist’s visa could not be on paper: it had to be stamped into his or her passport. Of course, that added a week to the whole affair.

After months of media blockade, journalists were finally able to access Yemen again between March and May this year. At present, members of the media are officially allowed to travel on the UN flights. But how many more times journalists will be refused entry remains unknown. Not all crews will have the resources to make alternative arrangements to enter Yemen.

The New Statesman interviewed one French documentary producer who has reported from Yemen twice but who has not been able to access the country since 2015, despite multiple attempts.

Upon each refusal, the Saudi-led coalition told the journalist, “to take commercial flights – which didn’t exist…” he explained, requesting anonymity. “Saudi Arabia and its coalition are doing everything they can to discourage journalists as well as organisations like Human Rights Watch and Amnesty International.”

He said that blocking media access was part of the Saudi-led coalition’s strategy to “bring [Yemen] to its knees in an atmosphere of silence and indifference.”

Access is not the only problem. Reporting in Yemen carries great risks. The British Foreign Office warns of a “very high threat of kidnap and unlawful detention from militia groups, armed tribes, criminals and terrorists”. It specifically mentions journalists as a group that could be targeted.

Editors are increasingly nervous about sending journalists into war zones where kidnap is a significant danger. The editorial green light for arranging assignments to Yemen is – understandably – ever harder to obtain.

Although they are willing to work with recognised press teams, the Houthis and Saleh loyalists have also been known to be suspicious of journalists.

“Even before the Saudis banned access to Yemen, it is important to remember that Yemen is one of the most difficult countries for journalists to access,” added the anonymous journalist.

The amount of press attention dedicated to Yemen simply does not reflect the extent of country’s suffering and political turmoil. Journalists’ rights groups, international organisations and governments need to step up pressure on Saudi Arabia to ease media access to the country.

The coalition last month proposed that the UN take control of Sana’a airport, which it refused. Whoever runs it, the hub must be opened, so that journalists can get in, and Yemenis desperately needing medical treatment abroad can get out.

Failing this, coupled with the extreme risks and costs of reporting, the world will never see the graves of 10,000 people. Yemenis will continue to die starving and invisible, in destroyed homes.