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?

Have the Tories converted to anti-Imperialism? But stayed true to the idea that the rest of us should pay?

The Conservative Party has always been the party of Empire, rejoicing in the grandeur of Britain’s imperial past. So it takes some courage for that party, of all parties, to turn its back on that juicy part of our island story.

Before, however, we get carried away with admiration for this refreshing change in viewpoint, we should bear in mind that they probably don’t realise that’s what they’ve done.

In his annual speech at the Mansion House in the City of London, the Chancellor of the Exchequer this year announced his commitment to keeping the government budget in surplus. Not just on his watch but, with legal backing, for all governments to come. That sounds like common sense, doesn’t it? Stop borrowing – sounds like good housekeeping. Wipe out debt – got to be liberating.

George Osborne
In his Mansion House speech, he disowned Britain's imperial tradition

Curiously, though, it’s the opposite of what, for Tories, put the Great in Britain. Which was the building of an Empire and becoming a world power. 

When the process started, at the end of the 17th century, the British national debt was pretty much zero. But by 1763, the end of the Seven Years War when Britain won pre-eminence in India and North America, the debt had grown to £123 million – £21 billion in today’s terms.

Now that’s not much compared to the current British national debt, which is £1.56 trillion. However, today’s figure represents 82% of GDP; the figure in 1763 represented an eye-watering 156% of GDP.

By the end of the Napoleonic Wars, when Britain had won undisputed world leadership, the debt stood at 237% of GDP.

It seems it was by incurring debt that Britain became Great. At least in the terms Tories understand greatness, equated with dominance over others. Interestingly, the worst setback to Britain’s growth as a global superpower, came when it tried to reduce debt.

From 1765 onwards, Britain decided that it was time that the colonies it claimed to be protecting in the Seven Years War, should help it defray some of its expenses. Over the next five years, it attempted to impose a series of taxes on its North American possessions. But that only led to increasing bitterness among the colonists, flaring up into first resistance, occasionally violence, followed by open war in 1775 and a Declaration of Independence in 1776.

Finally, in 1783, Britain’s attempt to reduce its debt on the backs of the North Americans, led to its definitive loss of the colonies. And at a cost of £250 million, to boot – over twice the amount of the debt in the first place. 

Ironically, this was the result of attempting to do the exact opposite – reduce debt – or, in other words, to pursue the very policies of their Tory successors today. The policies championed by George Osborne. 

It’s strange how attempts to make brutal reductions in national debt can backfire – adding to the debt, while at the same time denying the nation success in achieving its goals.

On the other hand, many of us on the left are glad to see the end of Empire. It did little for the common people of Britain, and was often gained at the price of their sacrifice – if the colonised peoples suffered most, the poor of Britain were frequently not far behind in undergoing privations imposed by imperialism: they provided the foot soldiers for the forces on which it rested, and for the industries that kept them operating.

You might think that as a result we ought to be pleased by Osborne’s decision to take the anti-imperialist route of reducing national debt, instead of the road to national greatness that traditionally involves incurring more.

The trouble is that one thing will not have changed, between the phase of growing Empire and Osborne’s latter-day conversion to anti-imperialism. Between Tory drives to incur debt or to reduce it. To extend British power or to reduce it.

It will, as ever, be the ordinary citizen who will foot the bill for their policies.