ECONOMISTS have dubbed the last 10 years a period of “unprecedented cuts”
and the worst period of growth since the Second World War.
The term Age of Austerity was popularised by former Conservative Prime Minister David Cameron when he was in opposition in 2009 after the recession as he promised to rein in what he dubbed “excessive” spending.
The Tory and Liberal Democrat coalition rolled out the programme of strict economic measures including reduced spending and increased taxes to reduce the deficit the following year.
Herald View: The age of austerity has amounted to a decade of despair
The policy has been blamed for worsening a range of problems including pressures on the health service and the housing crisis, sparking a series of anti-austerity protests.
Paul Johnson, director of respected think-tank the Institute for Fiscal Studies (IFS), said earlier this month “we should never stop reminding ourselves just what an astonishing decade we have just lived through, and continue to live through”.
He said the economy is “at least £300 billion smaller than we might have expected based on 2008 forecasts”, growth remains subdued and earners have been left no better off in real terms than before the recession.
He went on: “The economy has broken UK record after UK record – record low earnings growth, record employment levels, record low interest rates, record low productivity growth, record cuts in public spending.”
The Tories have been under increased pressure to ease austerity after last June’s snap General Election in which the party lost its House of Commons majority, with anti-austerity Labour making gains. In September, analysis from the Local Government Association (LGA) found more than two million British families will be £50 a week worse off by the end of 2020 due to welfare reforms, inflation and rising rents. The report claimed that, of the 2.14 million working-age households set to be affected, 1.34 million are in work.
Herald View: The age of austerity has amounted to a decade of despair
As part of the austerity programme, public sector workers have been subject to a one per cent cap on annual pay rises since 2012, following a two-year freeze.
Last summer a study by the Resolution Foundation said only significant tax rises or higher levels of debt would end austerity, and that lifting the public sector pay cap would merely tinker with it. It estimated that the cost of allowing public sector wages to rise in line with private firms from next year would be £9.7bn by 2021-22.
Letting the workforce increase in line with the general population would cost £11.5bn over the same period.
It has been suggested that ending austerity could cost Chancellor Philip Hammond £33bn a year.
Herald View: The age of austerity has amounted to a decade of despair
An IFS report said this would require the Chancellor to ditch his target of balancing the nation’s books by the middle of the next decade and instead leave the national deficit at its current level of 2.4 per cent of GDP.
This would allow additional borrowing to fund a £17bn boost for public services, says the IFS.
It would also let him cut £5bn of taxes while increasing benefit spending by £11bn. Yet state debt would still fall as a share of national income so long as the economy continued to grow as expected.
Mr Hammond has said he is preparing to use his autumn Budget to ease the austerity policies in place since Conservatives took office in 2010.
In his spring statement earlier this month, he hinted the worst of the economic misery they have suffered might be over.
He said real wages would start growing again from the second quarter of this calendar year.
Herald View: The age of austerity has amounted to a decade of despair
But although the OECD has raised its UK growth forecast for this year marginally to 1.3%, it is still well adrift of the 2.3% expansion being projected by the think-tank for the eurozone.
The OECD is projecting global growth will accelerate from 3.7% in 2017 to 3.9% this year – three times the rate of expansion it expects in the UK.
The Government’s own spending watchdog the Office of Budget Responsibility has edged up its 2018 growth projection for the UK from 1.4% to 1.5%.
But this is also way adrift of forecast eurozone growth and of the 2.9% in the US.
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