Why I pity the Lost Generation and their 15 long years without a pay rise

ON BUDGET day, it’s easy to become disoriented by the miasma of statistics. The Chancellor is hawking his numbers and the Office for Budget Responsibility its own.

The Opposition chips in its take, followed by business leaders and unions. Then duelling experts start to pop up in TV studios, at which point you come to appreciate the old joke about putting two economists in one room and getting three opinions.

But there’s one fact you mustn’t miss from Philip Hammond’s prescription of fiscal medicine. Indeed, you won’t be able to avoid it.

It’s not the manifesto-breaking tax raid on White Van Man or the welcome news of £350million extra for Scotland. It’s the detail spotted by respected think-tank the Institute for Fiscal Studies.

Responding to Mr Hammond’s Budget, IFS director Paul Johnson found that the average Briton will be no better off in pay terms 15 years after the credit crunch.

He told reporters: ‘On current forecasts average earnings will be no higher in 2022 than they were in 2007. Fifteen years without a pay rise. I’m rather lost for superlatives. This is completely unprecedented. All of the productivity – and with it earnings growth – we would normally expect has been lost forever. This remains the big story of the last decade – a decade without growth, a decade without precedent in the UK in modern times.’

Stagnate

The mild-mannered economist is not given to histrionics. When he talks like this, you sit up and take notice. He is describing what will come to be known as the Lost Generation, those who entered the workplace as the markets crashed and who have seen their careers stall and their salaries stagnate.

This is a generation that will, for the first time in modern history, be worse off than its parents’ generation.

The aspiration of owning a home, democratised in the 1980s, is once again a dream for those on modest incomes. Families who can afford to buy are buying smaller, sacrificing holidays, sharing one car instead of two, and cutting back on luxuries. Cash left over, which would once have gone into a rainy day account, is now used to pay off this bill or that. A savings crisis is in the offing.

As if that wasn’t bad enough, the Lost Generation is being squeezed from the other end, as government borrows more (after Budget 2017, Britain will borrow £30billion beyond what was expected just one year ago). The piper will eventually have to be paid – which means, in the estimation of Mr Johnson, ‘a third parliament of austerity’.

Your wages may be staying put but don’t expect the services you rely on to do the same. There will be more cuts, more pain, and in all likelihood, a second Lost Generation.

No mainstream party has an answer to this. The Tories say the books must be balanced, although Theresa May seems less ideologically committed to austerity than her predecessor. The SNP tells us cuts are bad – at least when they’re imposed by the UK Government – but has nothing so bold as an alternative plan. Labour, now barely a party let alone a mainstream one, has no coherent view.

Moderates on the backbenches appreciate the need for fiscal restraint, even if they deplore callousness in the Tory approach, while Jeremy Corbyn serves up a salmagundi of sentiment with a side order of command economics.

Liberals are very cross indeed with the public. We told you, quite clearly, to vote Remain and you disappointed us. This is

obviously because you are stupid and mean-spirited and don’t like foreigners. But we long ago accepted that most of you aren’t as sophisticated as we are. It’s the defiance that we cannot – nay, will not – tolerate. Now, if you don’t mind, we’ve got another petition for a second referendum to sign. This prolonged tantrum, which has been running since June 24, has occluded the central part played by economics in our political crisis. Of course, some did vote Leave because of sincere hostility to the European project and others still because they wanted an end to freedom of movement. And, yes, there were boxes crossed with the scrawl of prejudice.

But the impulse to ‘take back control’, so cynically exploited by the Brexiteers, was not simply about borders and bendy bananas. Many on low and lower-middle incomes, heaved and hauled in an eddy of low pay and rising prices, debt and job insecurity, grabbed at the first splinter of driftwood to pass by in almost a decade. Such was their crime.

Populist

Similar lessons can be drawn from the victory of Donald Trump, the Corbynite takeover of the Labour Party, and the perilously high support for Scottish independence. Different circumstances; specifics apply – but in each case the germ begins with the Great Recession. That convulsion, tremoring out from subprime mortgages and casino banking, suspended the laws of political gravity and may have changed them altogether.

Thus could Nigel Farage and Boris Johnson, clever-idiot scions of privilege, lead a populist revolt against the ‘elite’; thus did billionaire Trump become tribune of the American working class; thus has Nicola Sturgeon convinced almost half of Scotland that an independent country with a larger deficit as a percentage of GDP than Suriname would be a land of milk and heather honey.

When they stop having a fit over Brexit, and finish rehearsing emotional censures of Trump in the bathroom mirror, the political class might take time to reflect on how they got here. They may even forgive the public its trespasses and give them a last chance. At which point, perhaps a mainstream response to populism will begin to emerge, one rooted in economics rather than moral superiority. Top of the agenda should be how to grow an economy dynamic enough to boost wages while encouraging job growth.

Until then, the Lost Generation will be out there lost on its own.