It makes no sense to pile on austerity as earnings fall

Mr Haldane is not alone in that. Just this week, David Cameron had another go at hailing the Coalition's "long-term plan". Before he was thrown into confusion by Ed Miliband's denunciation of the ignoble Lord Freud - a true expert on "pay-poor" - the Prime Minister was boasting of another fall in unemployment.

Not for the first time, it rang hollow. For one thing, it seems to many observers that there is less to the new army of the "self-employed" than meets the eye. Desperate expedience rather than entrepreneurialism is at work. Secondly, punitive sanctions might have driven people from the benefit rolls, but not in the direction of productive labour.

We know as much from income tax receipts. These disobliging numbers continue to fall below the expectations of the Chancellor, George Osborne. His only response is to cut public spending and go on cutting. It satisfies Tory prejudices but it also stalls one of the key engines of economic growth. Hence, in part, Mr Haldane's gloomy pronouncements in a speech in Warwickshire yesterday.

"But," say Tory sophisticates, "there is no money." That isn't exactly true. What the champions of austerity mean is that Britain is carrying a big debt and enduring a budget deficit that Mr Osborne, for all his promises and all his cuts, has failed to bridge. So if a lump of real money is a missing ingredient, how does £53.3 billion sound?

That was a figure identified in a Financial Times report earlier this month. It represents, according to Capita Asset Services, the "cash piles" held by the companies that make up the FTSE 100. Just them. The billions being held by other enterprises, not to mention private investors, is anyone's guess. The £53.3bn is four times the amount held by the top 100 in 2008. The figure is "two-fifths higher than the amount of net cash [the firms] held last year".

Cash piled up in such quantities is not productive: that much is elementary. So why are the FTSE 100 companies failing to invest in their businesses or, if the thought isn't too radical, in Britain? The standard answer is "uncertainty". So why is there so much uncertainty six years after the great financial fiasco? The eagerness of captains of industry to perch on cash mountains might have something to do with it.

The phenomenon involves a curious detail. How is it that firms are piling up billions hand over fist when, as Mr Haldane observes, British productivity is "flat-lining" and real interest rates are still stuck at around zero? Mr Osborne can answer that one, and provide a little lesson, moral and economic for the politician - of any party - who confuses common sense with cuts in corporation tax.

The Chancellor has reduced the impost in each of his budgets. Next year, the rate will fall to 20 per cent, easily the lowest in the G7. When it comes to a race to the bottom, Mr Osborne yields to no-one, least of all to Scottish Nationalists. What he fails to mention, however, when he applauds himself for "the largest reduction in the burden of corporation tax in our nation's history", is that his gestures are costing the Treasury £5bn a year.

By 2016-17, in fact, corporate Britain will be paying £8bn less annually than would otherwise have been the case. If this subsidy was going towards investment, or even - a rational economic choice - higher wages, you could make a case in its favour. There's £53.3bn that says otherwise. Firms have simply grabbed the cash and salted it away.

The context for a £5bn tax cut that is producing no economic benefit can be illustrated easily enough. Mr Osborne's announcement last month of a two-year freeze on benefits and tax credits for 10 million households - half of them containing people in work - will produce an estimated "saving" of just £3bn annually.

Since the working poor, having no other choice, actually spend their money, that's £3bn taken out of the economy. Alternatively, it's 60 per cent of the sum handed yearly to corporates who decline to put it to any use beyond the dividends from which executives benefit and the remuneration "packages" executives enjoy. Set morality to one side: this is witless.

It helps to explain two other facts troubling Mr Haldane: "falling real-wage growth" and a dangerously low inflation rate of 1.2 per cent. Again, this is simple enough if you refuse to be distracted by the "global conditions" invoked whenever reality is not to a politician's taste. People are not earning, therefore they are not spending, therefore prices are failing to rise or falling. Consumption, another traditional sources of growth, is not going to rescue Britain or Mr Osborne.

Big business and Tory chancellors regard wage restraint as axiomatic in all circumstances. They have been indoctrinated with the history of Britain's struggles with inflation. They consider it inconceivable that a low-wage, zero-hours economy could actually be lethal to a country's health. They refuse to grasp - Mr Osborne refuses, at any rate - that piling on austerity when earnings are falling and businesses are failing to invest is catastrophic. Britain's productivity failures ought to be proof enough of that.

At this juncture, ordinary voters should be asking about economic justice. In the aftermath of the crash, many accepted wage freezes, pay cuts, redundancies, or shorter hours because, so it was said, there was no alternative. Only a few guessed that employers would never restore pay and conditions if they had any choice in the matter. So it has proved, with dire results for the economy and, more importantly, for families.

Mr Haldane has described it well enough. "Growth in real wages," he said yesterday, "has been negative for all bar three of the past 74 months. The cumulative fall in real wages since their pre-recession peak is around 10 per cent. As best we can tell, the length and depth of this fall is unprecedented since at least the mid-1800s". All this while the FTSE 100 firms squirrel away tax cuts and pile up £53.3bn as the economy stagnates.

Traditionally, the last great engine of economic growth is exports. Needless to say, Uk plc, with its miserable productivity record, is doing badly. The outlook is not improved by the fact that the eurozone, our largest trading partner, is also being flattened thanks to German-led austerity. Britain is locked into a cycle of decline with Europe even as the Tories obsess over their Euro-referendum and ignore the obvious, if dismal, facts of trade.

They might despise the EU, but where growth and prosperity are concerned they have everything in common with Germany's Angela Merkel. The talent for being utterly wrong is shared political DNA. Between them, these politicians have turned a banking crash into a slump that will last for a generation.