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24 April 2018updated 24 Jun 2021 12:23pm

Lower government borrowing doesn’t prove austerity has been a success

In a system of privatised Keynesianism, households are being forced to borrow more as the government borrows less. 

By George Eaton

After nearly a decade of austerity, the Conservatives are loudly proclaiming its triumph. For the first time in 16 years, the UK has achieved a current budget surplus. Total borrowing (£42.6bn) is at its lowest level for 11 years. This is still far short of the overall surplus the Tories originally promised, but Philip Hammond has proudly boasted of building “an economy that works for everyone”.

Other metrics, however, are less favourable to the government. In a phenomenon the political scientist Colin Crouch has described as “privatised Keynesianism”, households are borrowing more as the state borrows less. The meagre GDP growth forecast over the next five years is still dependent on household debt rising from 139 per cent of disposable income to 146 per cent.

Welfare cuts, rising housing costs and stagnant wages have forced households to resort to borrowing. As a recent Resolution Foundation study charted, 45 per cent of the poorest fifth of working age households now endure some form of debt distress. More than a third experience difficulty in paying for accommodation and one in six are in arrears on either their mortgage or consumer debts.

The former chancellor George Osborne recently tweeted of the fall in borrowing: “We got there in the end – a remarkable national effort”. But he did not mention the cost at which this aim was achieved.

As the New Statesman‘s Crumbling Britain series is documenting, after years of unending cuts, Britain’s public realm is in unmistakable decay. Homelessness, which fell by three quarters under the last Labour government, has risen by 169 per cent since 2010. The NHS has been forced to cancel operations and even urgent surgery as it struggles to meet ever greater demand. Schools have resorted to asking parents to provide essentials they can no longer afford such as stationery and books. Relative child poverty has increased for three consecutive years and now stands at 4.1 million or 30 per cent. Nearly 1,000 Sure Start children’s centres and 478 libraries are estimated to have closed since 2010. Unrepaired roads and uncollected bins reflect the scale of austerity borne by councils (real-terms funding for local authorities has been cut by 49 per cent).

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For the Conservatives, austerity has been neither a political nor an economic success. It was a significant cause of the 2016 Brexit vote and of the loss of their majority in 2017. For the first time in history, GDP is expected to fall below 2 per cent in every forecast year. Average annual earnings are still nearly £800 below their 2008 level and are not predicted to regain their pre-crisis peak until 2025. If this is success, one might ask, what would failure look like?

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