Britain faces a “lost decade” of no or low growth, Ed Miliband has warned, as he claims the Budget proves that George Osborne is now resigned to such a dismal fate.
The Labour leader said that the UK could endure a repeat of the prolonged Japanese downturn of the 1990s unless measures are taken to stimulate growth. Mr Osborne was dealt a further blow by the credit rating agency Fitch, which signalled it is likely to strip the UK of its AAA credit rating next month.
Speaking in Birmingham, Mr Miliband admitted that his party will not automatically benefit from the public losing confidence in the Coalition Government and will have to earn people’s trust at a time when many are giving up on politics. He argues that a Japan-style “lost decade” is not inevitable because there is an alternative to Mr Osborne’s economic strategy, saying that Labour’s task is to convince people that “it does not have to be this way”.
Mr Miliband, addressing the People’s Policy Forum, which gives the public, business and charities the chance to influence Labour’s programme, warned that the Budget showed Britain is in the slowest recovery for 100 years – and yet Mr Osborne offered only “more of the same”.
He claimed: “This Government is now leading Britain into that lost decade. They’re shrugging their shoulders. They have run out of ideas. They are resigned. It is One Nation Labour’s task to show people it does not have to be this way. Not promising overnight answers. Not promising that things will be easy.”
Mr Miliband, who is being urged by some Labour MPs to spell out more detailed economic policies, insists that he has already unveiled several key measures. Today insists his party can turn the tide with policies such as a “real jobs guarantee” for young people, apprenticeships for the 50 per cent who do not go to university, reforming the banks and energy market, investing in infrastructure and a 10p income tax rate.
Claiming people have lost confidence in David Cameron, the Labour leader admitted: “I know that however discredited, divided and damaging this Government is, I will not assume that their unpopularity will mean people turn to Labour. Indeed, many people will believe that the failure of this Government means they should give up on politics altogether.”
Mr Miliband pledged that a future Labour government will ensure a recovery “made by the many, not just a few at the top”. He added: “Our economy is always more successful when it works for all working people. And our country is always stronger when we can all play our part. They [the current Government] think wealth comes from a few at the top. I think wealth comes from the people who work in the supermarkets, the factories, in small businesses on your high street, doing the shifts, putting in the hours.”
Mr Miliband said: “I don’t just offer a change of management. I want to offer a change in the way this country is run and who it is run for.”
Insisting he has learnt from the mistakes of the Blair and Brown governments, the Labour leader said: “I have sought to understand why people left Labour. From banking regulation to immigration to Iraq, I have been clear about what we got wrong.”
A similar warning about a “lost decade” of stagnation was sounded by Vince Cable, the Liberal Democrat Business Secretary, in 2011. He said then the ingredients were in place for a “perfect storm”. This week, Mr Osborne rejected Mr Cable’s call for the Budget to include higher borrowing to fund pro-growth measures.
The rating agency Fitch last night said it was placing Britain’s top-notch rating on negative watch, citing concerns about the deterioration of the public finances revealed this week. The agency said it would complete its review of the UK’s sovereign rating by the end of April, but warned of a “heightened probability” of a downgrade.
A rival agency, Moody’s, stripped the UK of its AAA status last month, in a humiliation for Mr Osborne who had pledged to safeguard the gold-plated rating when he took office in 2010.
Warning signs: Japanese lessons
The fate of Japan in the 1990s haunts political leaders around the world. Company values and property prices soared during the previous decade as its economy boomed so strongly that it looked on course to overtake the United States.
The bubble suddenly burst in 1989, sending the Tokyo stock market into free fall and leaving the country facing an acute debt crisis.
Its economy bumped along the bottom for much of the 1990s, achieving zero or minimal growth. At the same time it had to watch the rapid expansion of the economies of regional neighbours China and South Korea.
When the “lost decade” ended, most Japanese people were poorer than at its beginning and lavish consumption on cars and consumer goods had long been abandoned.
More than 20 years on, the after-shocks linger. Interest rates remain at rock bottom, economic growth modest and the stock market value half of its peak.