AUSTERITY. Such a pure and noble word, redolent of sacrifice and with a suggestion of character-building misery. The tragedy of austerity as an economic policy is that is inflicted on others and rarely, if ever, experienced directly by those in power who decree it.
David Cameron decreed an “Age of Austerity” when he was Conservative Prime Minister in 2009. It turned out to be an age that has felt like an eternity. In truth, it has been merely (and nearly) a decade, but an infinitely long one, and one which economists have characterised as a period of “unprecedented cuts”, with the worst growth since the Second World War.
Paul Johnson, director of the Institute for Fiscal Studies, has said that “we should never stop reminding ourselves just what an astonishing decade we have just lived through, and continue to live through”. To which we are tempted to say: please, no more.
In his Spring Statement last week, Chancellor Philip Hammond hinted that the worst of the misery might be over and of having the “capacity to enable further increases in public spending and investment in the years ahead”. Better late than never – if it ever happens – but it’s unlikely to be anything on the scale needed to undo the damage.
Austerity appears laudable – on paper. It is presented as a righteous necessity and sold to the people as the sort of thing they would do to their own household, only writ large for the nation. However, the analogy has never held water, unless anyone knows a household that has its own currency, prints its own money and influences interest rates, not to mention cutting back so the weakest family member suffers most.
The truth about austerity economics, particularly when undertaken at the wrong time, and especially as it has been practised by the Conservatives, is that it is an end in itself, a paper exercise aiming for a gold star in accounting and at securing voter approbation for financial self-discipline, regardless of the adverse effects on countless thousands of lives.
It’s not just the politically over-sensitive who have detected a vindictive undertone to the Conservatives’ economic approach, most notably on welfare. And it’s not just diehard Keynesians who will tell you that austerity is best practised in a boom, while deficits are the most advisable course in a slump, to keep unemployment down and encourage GDP to grow.
Austerity has affected those in work as well as those put out of it. It has caused households – ironically mimicking the Government – to rein in their spending, thus harming businesses, which invest less, if they do not go under. But people, too, go under. Austerity takes a toll on personal health (the treatment of which incurs a need for more public sector spending).
Austerity is the best recruiting agent for extremes and, while we have been spared that beyond – arguably – Ukip, in other parts of Europe parties of the far right are gaining traction as much for their opposition to austerity as to their stance against immigration. The sense of irony deepens in the UK when we factor in a Brexit divorce bill of £37.1 billion, which is not going to help.
Yesterday, it must be acknowledged, tiny glimmers of light appeared amidst the economic gloom, with wage growth of 2.6 per cent across the UK for the three months to January, and unemployment down 0.1 per cent. In Scotland, alas, unemployment rose, though no one here decreed austerity, and so the SNP blames Westminster, while the Tories blame Holyrood, and Labour blames both. No one will admit responsibility.
Austerity. A word that implies responsibility. Responsibility for political unrest, personal despair, poor public services, low productivity, low growth and low wages. That makes for a pretty low decade.
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