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5 July 2017

Leader: Austerity’s cruel pantomime

The vote for Brexit was about much more than the EU – it was a symptom of national discontent.

By New Statesman

The Conservatives’ victory at the 2015 general election was hailed by the right as a vindication of austerity and of David Cameron’s so-called long-term economic plan. The loss of their majority this year was a repudiation. Although there were many factors behind the result, the public’s weariness with stagnant wages and spending cuts was crucial. NHS waiting times have risen and school class sizes have increased; roads are left unrepaired and rubbish is uncollected. Libraries and children’s centres are being closed. Having failed to eliminate the deficit by 2015 as promised (a Budget surplus is now not forecast until 2025), the Tories struggled to make a convincing case for more austerity.

In a newly hung parliament, Theresa May has been forced to abandon previous pledges to remove the state pension “triple lock” and to means-test winter fuel payments. She has bought the support of the Democratic Unionist Party.

Yet even before the Tories lost their parliamentary advantage, there were signs that the political limits of austerity had been reached. Backbench rebellions had forced the government to abandon its planned cuts to tax credits and disability benefits and, after Mrs May became Prime Minister, a rise in National Insurance for the self-employed.

From the start of her premiership, Mrs May appeared to recognise that the vote for Brexit was about much more than the European Union. It was a symptom of national discontent. In her first speech in Downing Street, she promised to tackle “burning injustice” and to lead a government committed not to “the privileged few” but to the common good.

Although she did not repeat the Tories’ promise to achieve a Budget surplus by 2020, however, austerity endured. Headline measures such as the public-sector pay cap and the freeze in working-age benefits were retained. After their electoral humbling, Conservative ministers are now engaged in an unseemly public debate about fiscal policy.

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Boris Johnson, Jeremy Hunt, Justine Greening and Michael Gove have suggested that the 1 per cent cap on public-sector pay rises should be lifted. Oliver Letwin, the chief ideologue of the Cameron government, has said that tax rises might be necessary. Damian Green, the new First Secretary of State, has called for a review of university tuition fees (which are presently capped at £9,250 a year).

By contrast, the former chancellor Norman Lamont, who is anxious about the overall stock of national debt, has declared that public spending cuts are “unavoidable” and that austerity is “just another word for living within one’s means. It’s not really austerity.” Mr Lamont would do well to put such a claim to the patient waiting more than six months for an operation, the mother struggling to find a school place for her child, or the working family that has lost thousands of pounds in benefits.

By any reasonable measure, Britain has endured austerity. Although debt repayments and an ageing population have limited the fall in overall spending, departmental budgets have been cut by an average of more than 20 per cent since 2010 (the Department for Communities and Local Government by more than 50 per cent).

The NHS has been protected from the harshest cuts, but as a result of health service inflation (the rising cost of technology and drugs and increased life expectancy), modest real-terms increases will not suffice. The number of nurses and midwives leaving the profession, faced with the pressures imposed by austerity, has risen by 51 per cent in just four years.

The national debt, as Mr Lamont correctly noted, presently stands at 86.5 per cent of GDP (which is unremarkable compared to the higher national debt of other developed countries, such as Japan, France and the United States).

The UK, which still has an annual Budget deficit of £46.6bn, faces profound economic challenges, not least because of its ageing population and the uncertainty created by Brexit. GDP growth slowed to 0.2 per cent in the most recent quarter, living standards are falling and the Brexit debacle is stalling investment. What we need is an honest national conversation about how to fund our public services. Yet what we have instead is a pantomime of evasion and obfuscation as the clock ticks ominously on our departure from the EU. 

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This article appears in the 05 Jul 2017 issue of the New Statesman, Corbyn mania