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
Hamzah al Zobi
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Meet the Syrians using education to escape the refugee camps

On the bus to university with Syrian refugees in Jordan. 

The bus to Zarqa University leaves Jordan’s largest refugee camp at 7am sharp. The journey is one of the day’s highlights for the Syrian students who ride this route - a chance to plan weekend get-togethers, bemoan heavy course loads and even enjoy the occasional school-bus style sing-along. It’s also their daily ticket out of Za’atari camp and a means of escaping the dreary realities of refugee life.

“We are the lucky ones. Most had to give up their dreams of higher education” says 19-year-old Reema Nasser Al Hamad, whose family fled to Jordan five years ago when bombs destroyed her home in Dara’a, Syria. She shudders to think of the alternatives: aimless days spent sitting in a crowded caravan, or early marriage. “After the war, students in Syria lost their cities, their opportunities and their futures, so many of the girls just married when they got here. There’s a huge difference between the lives of those who study and those who don’t.”

Despite missing two years of school, Reema (pictured below) was able to pass her exams before securing a Saudi-funded scholarship to study Pharmacy at Zaraq’ University. “In Syria, I’d planned to do medicine and be a doctor because I always had high grades. There are fewer choices for us here but I’m happy to be studying at all,” she says. Hamza al Zobi, who’s studying Pharmacy on an the EU-funded EDU-Syria programnme, says young Syrians are hungry to learn. “We all have friends and relatives who didn’t get this chance and we feel so upset for them. If they’re not well educated, how can they go back and do the right thing for our country?”

More than a quarter of 18-24 year olds in Syria were enrolled in higher education when the war broke out. “Based on data provided by UNHCR we assess that around 20,000 young Syrians in Jordan would qualify for vocational education and higher education,” says Job Arts, Programme Manager Education and Youth, EU Delegation to Jordan, which is supporting some 1800 Syrians and disadvantaged Jordanians on degree courses in Jordan.

“While the number of places for Syrian students to pursue their education has increased dramatically over the past few years, there are still many more interested students than spaces available for study,” says Sarah Dryden-Peterson, non-resident Fellow at the Center for Universal Education at the Brookings Institution. “Without these possibilities, young Syrians will lose the kind of hope that is essential to productive futures.”

According to the Jordan Response Platform for the Syria Crisis, 1,250 Syrian youth were in higher education in Jordan in 2016. Building on commitments made by the international community at the London Conference on Syria last year, the Jordanian government hopes to secure funding to increase access to tertiary education and vocational training at the upcoming conference in Brussels this April.

“Jordan views higher education from a strategic point of view, specifically in terms of providing the Syrian youth with the education, skill and knowledge that will allow the opportunity to be part of rebuilding their country once the current situation comes to an end,” says Feda Gharaibeh, Director, Humanitarian Relief Coordination Unit at the Jordanian Ministry of Planning & International Cooperation.

Reema plans to return to Syria when the war is over. “After graduation a lot of students want to go to Europe. That would be fine for me too if it’s just to do a masters or doctorate, but then I want to go back to Syria and use what I’ve learnt to help my people.” Now four semesters into her course, she is making good progress but says adapting to the Jordanian education system was a challenge. “It’s really difficult for us. Classes are taught in English and the teaching style is different. They also have a lot more exams here.”

Only the brightest stand a chance of securing a scholarship but many young Syrians have seen their grades plummet after missing years of schooling. For, some, it’s too late to catch up. Accountancy student Ibrahim Mohammed, 23, came to Jordan in 2013 with his younger brother Khalil, now 19, who works in a print shop. “He stopped studying when he was 14. He didn’t even have a chance to get his high school certificate,” says Ibrahim.

Attempts to bridge the gap through open and distance learning programmes aren’t always effective. “It’s not a tool that is frequently used in the education environment in the Middle East,” explains Arts. Refugee students' access to electricity, internet connections, computers and space to study can be in short supply. Moreover, many students seek the escapism that a university education offers. “In our dialogue with parents and students, we often hear the phrase ‘being normal again’,” Arts adds.

Hamzah tries to help fellow students achieve this in his role as representative for the Syrian community at Zarqa University. He and Reema are part of a team that offers advice to new students and support for those from poorer families living in the camps. “There are 900 Syrian students here and each one has a different story of suffering,” says Hamzah, who organises group trips to restaurants and fairgrounds, helping to create a sense of regular student life. “It makes us forget what we are,” explains Reema.

During term time, she prefers to stay with her uncle in Mafraq, a city nearby. It’s hard to study in Za’atari. As soon as the power comes on at 5pm, her brothers switch on the TV, making it difficult to concentrate in the cramped caravan they share. There’s nowhere else to go; the camp is dangerous at night, particularly for young women. It’s even more crowded since the arrival of her baby sister. Reema remembers how her mother sobbed when she learned of the pregnancy, worried about bringing another child into the makeshift world of the camp.

But in five years a lot has changed. “In Syria, I had never left my village; now I feel there is another world to know,” says Reema. Like many Syrian students, she worries about life after university, particularly if they stay in Jordan where employment opportunities remain restricted for Syrian refugees. “It seems like work is forbidden to us Syrians and without a job we can’t take control of our lives. We’re studying hard but with no prospects,” says Hamzah. Few can see beyond graduation. “The future is opaque for us,” he adds, “We’re just living day by day.”

To date, the Jordanian government has issued some 39,000 works permits out of the 200,000 it pledged to make available for Syrians during the London Conference last February. However, with these opportunities built around low-income roles, primarily in the construction, agriculture, and textile manufacture sectors, the way for Syrian university graduates in Jordan still seems barred.

“Jordan is a small country with limited job opportunities,” says Ghaith Rababah Head of Projects & International Cooperation Unit (PICU) at the Ministry of Higher Education & Scientific Research. “Maybe the market will be better able to absorb educated Syrians at a later stage.”

In the meantime, higher education offers young Syrians a semblance of the security and stability their lives otherwise lack, Rababah continues. Given the opportunity to “use their talents for something good”, he adds, young people placed in difficult situations are less likely to fall prey to extremist ideologies and be “tricked into committing terrorist acts".