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Economist Simon Wren-Lewis has made a crucial point about the aftermath of the Global Financial Crisis (GFC).

In a post on his Mainly Macro blog, Wren-Lewis showed that while most people think of the crash as the reason for Britain’s stagnation, the far bigger driver of the UK’s trajectory was the policy response.

When the crisis hit in 2008–09, governments had two main levers:

• Fiscal policy (government spending and borrowing).

• Monetary policy (interest rates and quantitative easing).

In the UK, the Coalition government that sidled into office in 2010 slammed on the brakes with austerity.

Then-Chancellor Gideon George Osborne and his prime minister David Cameron cut back spending and rejected further fiscal expansion, despite financial markets being more than willing to lend cheaply to governments.

That left the Bank of England as “the only game in town” — slashing interest rates to near zero and unleashing waves of quantitative easing.

As Wren-Lewis notes, the decade of ultra-low rates that followed was not some inevitable legacy of the GFC. It was a political choice.

Fiscal stimulus could have revived demand, allowing interest rates to normalise. Instead, austerity prolonged stagnation and kept the monetary taps wide open.

And those monetary taps had a predictable consequence: an asset price boom.

• House prices surged, driven by cheap borrowing and a lack of supply.

• Financial assets inflated, with QE boosting stocks and bonds.

• Those who already owned property or shares got richer.

• Those shut out of ownership — younger people, renters, the less wealthy — were left further behind.

Professor Wren-Lewis wrote:

The long period of ultra low interest rates that began during the GFC but lasted for the next decade, and which helped create a boom in asset prices including house prices, was not a result of the GFC but was instead due to fiscal austerity.

If the 2010 Coalition government, and governments around the world, had responded to the GFC recession by continuing rather than reversing fiscal expansion, as financial markets were crying out for them to do (because all interest rates were so low), then the period of ultra low rates would have ended in the early 2010s, and we would not have seen such a marked increase in asset prices.

This is where politics bites.

Were Osborne and Cameron blind to these effects?

Or were they reckless as to the consequences — willing to entrench inequality so long as their base of older, asset-owning voters stayed happy?

The evidence suggests the latter.

The Conservatives resisted policies that could have countered the boom’s skewed effects:

• They failed to back large-scale housebuilding.

• They rejected serious wealth taxation.

• They doubled down on a “homeowner democracy” model that privileges those who already hold assets.

The result is the Britain we see today: a gulf between asset-rich and asset-poor, with property ownership out of reach for millions, and wealth concentrated in fewer hands than at any point in living memory.

As Wren-Lewis shows, this was not an unavoidable accident of history. The post-GFC wealth gap was not “caused by the crash”. It was caused by deliberate political choices.

Which leaves the question: Did the Tories want to create the UK’s wealth gap?

At the very least, they wanted policies that would protect the wealthy, whatever the collateral damage.

At worst, they saw the deepening divide as a political strategy — rewarding their supporters while locking out those who might oppose them.

And now the asset train is out of control. The super-rich are buying up everything that becomes available to them, including the assets of the government itself, forcing politicians to deplete the public purse by renting them back, and meaning even more assets have to be sold off to provide the cash.

Insanity.

And that is not the story of a financial crash.

It is the story of 14 years of Conservative government.

Unless Labour finds the courage to break with this, Britain’s future will look no different: asset-rich winners, and the rest locked out.

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