Saturday, 22 July 2017

Austerity: is it really a Tory blind spot?

A joke frequently told against Gordon Brown, when he was Chancellor of the Exchequer in the Labour governments led by Tony Blair, that he was having an extramarital affair. The object of his affections was a mystery woman known as Prudence. He simply couldn’t stop himself mentioning her whenever he spoke, so that the catchword for everything he did in dealing with the country’s finances was that it was down, he claimed, to Prudence.

“Mock on, mock on”, he might be saying today. And “what side of your face are you laughing out of now?”

After David Cameron brought the Conservatives to power, Prudence was unceremoniously dumped for a much less attractive siren known as Austerity. Far from seducing the Chancellor alone, Austerity seems to have bedded most of the senior figures of the Tory Party. Which isn’t to say they weren’t warned. Anyone at all familiar with the ideas of Maynard Keynes pointed out that there was a paradox at the core of the notion Austerity: when a government puts the brakes on spending the result isn’t necessarily a saving, but often the exact contrary. Reduced spending leads to reduced economic activity, and therefore reduced taxation, and far from emerging from indebtedness, the government merely sinks further into debt.

UK Debt as % of GDP: steadily growing under austerity
Source: BBC
Seven years on, it’s clear that this is exactly what has happened. Back in 2010, Cameron made a great deal of the supposedly unbearable cost of debt Labour had amassed, a toxic burden being passed on to the future generations. It was approaching the trillion-pound level at that time. Seven years on, it is now projected to reach £1.8 trillion by next March, but curiously the Tories have stopped talking about it.

Despite years of austerity, with constant cuts to essential public services, even the government’s deficit – the amount by which spending exceeds income – is rising again. In June, it was nearly 50% higher than it was in the same month last year. Keynes’s paradox of thrift is being verified with a vengeance: thrift cuts revenue and not just cost, so it can make things worse rather than better.

Anyone reading this piece might feel there’s nothing new in my making this claim. I’ve said it all before, haven’t I? So why am I saying it again now?

Because now we learn that the Tories are not only persisting with their austerity policies in the face of evidence that they aren’t working, but even in the face of evidence that they’re costing them votes

Now that’s truly odd. Because if the Tories are anything, they’re an election-winning machine, hypersensitive to any chance to win a vote, or any risk of losing one. It’s quite extraordinary that they’re sticking – for now – to a policy they know might lose them power.

Which leads to a further question. If it isn’t working financially; if it’s costing them votes politically; then why on earth are the Tories continuing to pursue austerity?

Could it really be that they are, ultimately, entirely heartless? Do they truly believe that the poor need to be punished for the offence of being, simply, poor? And the best way of punishing them is to impoverish them further?

I find it hard to believe that any but a few of the Tory leaders are quite that ruthless. Sadly, though, that leaves only one explanation: that they simply can’t see what they’re doing. Which suggests that the Parliamentary Conservative Party has simply lost all contact with reality.

Surely we wouldn’t want to suggest that Tories might be that benighted, would we?


Anonymous said...

Interesting how to tell half a story. From the BBC site where you found your data maybe the entire artical and especially the Derecit figures would have presented a more balanced view. If you want to make point on pick and mix statistics that what it will be pick and mix with a soft runny centre , no hard facts.

David Beeson said...

Ah, you didn't pick up that the deficit's climbing again. And that the timescale for wiping it out keeps me pushed back. Because the policy is hurting, but not working.

Awoogamuffin said...

Sadly Anonymous has a point in that these questions are so complex that someone on the other side could be throwing up graphs just as convincing to argue the opposite point. Also, what's the control? It certainly seems that America performed better with Quantitative Easing (not sure that could be a secret girlfriend's name... sounds more like a brothel) rather than Austerity, but Trump's victory suggests that not everybody over there agrees.

David Beeson said...

There's a lot one can argue about. But I can't see how anyone can deny that public debt has grown immensely - I don't know of anyone that does, and certainly no serious commentators do. The latest news is that the deficit itself is growing too (that, I admit, has yet to be confirmed, but that's where we seem to be heading). All this against a background in which we've had the longest peacetime stagnation in earnings recorded - except amongst the wealthiest.

These, I think, are accepted facts on all sides of the debate. We can of course argue about how to interpret them - necessary pain for a long-term gain, people on the other side might and often have said - but my view is that the pain has certainly been suffered, though I've yet to see any sign of the gain.