By Shaun van Eeden
Since the Conservative party came into power in 2010, we’ve been given a healthy dose of austerity to cure what was portrayed as a debt problem caused by a spendthrift Labour government. This austerity pill would cure the illness of public debt that the Tories said was holding the economy back. We had to ‘live within our means’.
This position implied that our debt to GDP position was firstly a result of too much public spending which was, to put it lightly, a deliberate misrepresentation of the facts. It was the bank bailouts arising from the global financial crisis that caused the huge deficit. It implied, secondly, that our debt levels posed an immediate existential crisis – que the inevitable comparisons with Greece and other Eurozone member states with budget crises – that required drastic cuts to public expenditure.By
To put our current debt/GDP ratio, which stands at 89.3%, into some historic perspective, Britain funded and created the NHS from scratch, with a debt to GDP of 200%. Furthermore, cautionary comparisons with Greece were mere scaremongering rather than reality for too many reasons to go into in this article. However, judging the Tories by their own economic standards of ‘getting the debt down’ so we don’t ‘saddle future generations with debt’ – have they delivered on their ‘strong and stable’ mantra?
Debt to GDP
So-said David Cameron in his Tory Conference speech in 2011. The Conservatives answer to getting the debt down was a policy of Austerity; cuts in public expenditure at a time that the private sector was in trouble. So how much has this policy reduced the UK’s debt to GDP (gross domestic product) since 2010? Err, it hasn’t.
According to tradingeconomics.com, the level of British debt as a percentage of the overall size of the economy has increased from 76.6% in 2010 to 89.2% in 2015. This is completely at odds with what we were told would happen. Tough decisions would have to be made, times would be difficult but we had to get the debt down, or so they said. In fact, the thing so striking about the Tory austerity agenda is that, not only has it failed to get the debt down, but a debt increase was actually a predicted consequence of its implementation.
We were often told that economists support the Tory economic policies; however this was not the case – a number of high profile economists were vocally opposed to austerity. Take Nobel Prize winning economist and New York Times economic writer Paul Krugman. A vocal critic of the Tory Austerity agenda, Krugman explained that cuts in public expenditure in this financial climate would have the effect of damaging economic growth in the short term and in the long run. In a must-watch Newsnight interview, Krugman highlighted that Austerity under these conditions would hurt the economy’s long-run potential, reduce future revenues and thus worsen the long-run budget position. If you have a situation where both the private and public sectors are slashing spending at the same time, you ‘run up against the fundamental fact that we are not a household we are an economy and that your spending is my income and my spending is your income’. A rebuke to the Tory ‘cutting household spending’ analogy.
What about the budget deficit? In his 2010 Budget Osborne said ‘the formal mandate we set is that the structural current account deficit should be in balance in the final year of the five-year forecast period, which is 2015-16 in this Budget’.
George Osborne never met his 2016 pledge for eradicating the deficit. In fact, he never met a single one of his own budget deficit targets.
The social consequences of Austerity
Austerity was supposed to be the medicine that would shock the economy into life. It would be tough for a while, but then everything would be great again. A narrative which, as above, was false. So what was the human cost of this unnecessary economic policy?
Whilst debt to GDP is one way to measure economic health, too much focus on it fails to account for the fact that inequality is the best measure of economic health (i.e an economy that works for most people – as GDP growth can mean benefits for only a tiny percentage of people). In the UK, according to Oxfam, the poorest tenth of the population was the hardest hit by the cuts, seeing a 38% decrease in their net income between 2010 and 2015. At the very top, Britain’s richest 1,000 individuals saw their wealth increase by £138bn in real terms between 2009 and 2013. Even measures designed to stimulate the economy have resulted in significant gains for the richest – the richest five per cent of households hold 40 per cent of the assets that increased in value as a direct result of quantitative easing.
According to the Child Poverty Action Group (data from the Department for Work and Pensions) the number of children living in ‘absolute poverty’ has increased by 500,000 since 2010. Oxfam highlighted that over the decade to 2020, an additional 800,000 children are expected to be living in poverty – almost one in four British children. The Tory response? Change the definition of poverty so you can show no increase in child poverty.
Research published by the Journal of the Royal Society of Medicine in 2016 found that Austerity was linked to an increase in deaths of pensioners aged over 85. They found a ‘significant association’ between cuts to pension credit spending and the number of over 85’s dying. The lead researcher, Dr Reep Loopstra of Oxford University stated that 90% of the 4.6% rise in over 85 mortality observed in 2012 was down to the cuts. In summary, your Grandad / Grandma is more likely to die under a Tory government.
A recent United Nations investigation into the impact of the cuts on disabled people’s lives found that the Austerity policies led to a ‘grave and systemic violation of disabled people’s rights’. The cuts had “hindered disabled people’s right to live independently and be included in the community” and that the government had portrayed disabled people as “being lazy or putting a burden on taxpayers”.
I could, of course, go on. The truth is that the Tories, by their own measure, cannot be trusted with the economy. The debt has increased and every deficit reduction target has been missed. This record of failure was delivered whilst implementing nasty, ideologically-driven cuts which, although affecting us all, have wreaked havoc on the lives the most vulnerable in our society. They achieved all of this whilst delivering no benefit to the economy.
Is this what you call a strong and stable government?
To find out more about austerity and the anti-austerity movement visit www.thepeoplesassembly.org.uk