Seems Boris Johnson got out just in time.

Last week, the Governor of the Bank of England placed a bomb under the Tory leadership race by forecasting a 13 per cent inflation rate and a recession lasting until 2024.

It will be accompanied, he said, by the greatest fall in living standards since the 1960s. Since living standards have stagnated for most of the last decade, this is much more than an economic blip. It’s time to realise that Britain is becoming a poor country.

Not like an impoverished African state perhaps, or India where millions are close to the poverty line, but certainly one of the poorer developed countries in terms of prosperity and national income.

After two decades of low growth, poor productivity, booming debt and now a cost-of-living crisis, the country that launched the industrial revolution is now on the rough end of it. No wonder we are becoming a land of angry people, unable to control their frustration with shop assistants and call centre employees.

Some might think this relative impoverishment is good thing. That it will lead to a degree of humility in a nation, the UK, which for too long regarded itself as a great imperial power and a beacon of prosperity.

Irish ascent

IRELAND, which used to be regarded as a backward country whose main function was to provide cheap labour for the UK economy, now has a GDP per head that is twice that of the UK: $99,000 v $48,000 according to the OECD.

People in Northern Ireland are beginning to wonder if they might be better off being part of Ireland in the EU single market, than in the UK out of it.

Brexit is one of the UK’s more spectacular own goals of the last 20 years. The SNP say that Scotland could have been where Ireland is today had we not been umbilically linked to the UK. They have a point. It couldn’t be much worse.

Scotland has consistently lagged the UK’s poor growth over two decades, even though Scotland actually benefited from 100,000 high-wage jobs generated by the oil and gas industry. This industry is now being closed down.

Patrick Harvie’s Scottish Green Party may find cause for celebration over declinism, as it is called, because Greens opposes economic growth on moral grounds.

What might be called the “rewilding” of the economy. But this is very definitely not the vision Nicola Sturgeon has for this nation.

In 2014, the Scottish Government asked Scots whether they wanted to be in “one of the richest countries in the world”, presuming that an independent Scotland would naturally gravitate to the top of the income league. That economic boosterism is looking distinctly optimistic from our current vantage point.

After decades of industrial decline, Scotland has been left with a bootstrap economy with little to offer the world apart from whisky and tourism.

The blame game

THE SNP blames Scotland’s low growth on economic mismanagement by the UK, in particular by the Bank of England. Last week, the Bank put up rates on the eve of an economic recession, thus making it more likely that the economy will founder faster.

It might seem curious, therefore, that the SNP’s Sustainable Growth Commission Report in 2018 advocated retaining the Bank of England’s control over the monetary policy of an independent Scotland for at least a decade.

The truth is that Scotland, like the rest of the UK, has been living on borrowed time since the millennium. And there is no easy solution to this relative impoverishment in or out of the Union. UK debt has more than tripled in that period, as a proportion of GDP, from 32% to 102% today. Most of that borrowing happened during the years of supposed Tory austerity after the 2010 financial crash.

The ex-Chancellor Rishi Sunak borrowed another £350 billion during Covid leaving the UK debt pile at a record £2.4 trillion. No Labour government has ever borrowed on this scale since the Second World War. Indeed, when Gordon Brown was Chancellor in 2006, UK debt was £0.5tn. It’s why you don’t hear Keir Starmer agreeing with left wing critics that Britain should be borrowing its way out of the forthcoming recession.

Theory of note

BRITAIN has been living beyond its means for so long that people began to regard debt as a way of life. Proponents of modern monetary theory (MMT) said that because governments can print money they can keep borrowing and spending almost indefinitely.

Curiously, this was also the view of some Reaganite Conservatives in the US in the 1980s.

But British Conservatives were supposed to be followers of Margaret Thatcher’s “household” economics: you can’t spend more than you can afford.

Yet as the national debt figures show, it is the Tories who have been conducting a practical experiment in MMT. The Bank of England has been a willing accessory through its policy of quantitative easing (QE), printing money – almost £1tn worth since 2010. This is now crashing into reverse at the worst moment in the economic cycle.

The big payback

BRITAIN has now come up against the harsh reality that debt sometimes has to be paid back. The monthly interest repayments on index-linked UK Government debt doubled in June to £20bn – that’s for one month. Rising prices supposedly have the side effect of reducing people’s debts.

Though when this gets out of hand, as it did in the 1970s, and is again now, it does so at the expense of impoverishing the less well off. It also impoverishes public services.

With inflation at 13% some 5.3 million low earners will be financially wiped out, according to the National Institute of Economic and Social Research.

Elderly voters on fixed incomes, who misguidedly saved for their retirement, will also be impoverished as their savings evaporate.

Millions of public sector employees will be forced to accept below-inflation wage settlements. Though as the Bank of England’s Governor Andrew Bailey pointed out, they will be better off than low-wage workers because of their trades unions’ bargaining power.

Public services will be squeezed, as was revealed last month in a remarkably prescient appraisal of the economic situation by the Finance Secretary Kate Forbes in her Scottish Spending Review.

She said the public sector had to shrink to pre-pandemic levels, losing around 30,000 jobs, and that the public sector pay bill would have to be frozen for five years. Tell that to Aslef.

Is there an escape route? Would life be better outside the United Kingdom? Scottish Nationalists used to argue that Scotland could get rich, like Ireland, by slashing corporation taxes to 12%, becoming a haven for tax-averse multinationals like Facebook, Google and Apple. For good or ill, that route is now closed. The EU will no longer countenance beggar-my-neighbour tax policies.

It would take national optimism of heroic proportions to leave the UK during a recession. But eventually Scotland will have to decide whether to carry on as an appendix to a faltering UK or seek its fortune as an independent country.

Declinism, as the term implies, is a very slippery slope.