The End of Austerity

It was on 26th April, 2009, in the politically volatile aftermath of the Financial Crash that David Cameron first announced that “the age of irresponsibility is giving way to the age of austerity”, and established the Conservative Age of Austerity 2010-2019. The first Conservative Coalition Government objective, sustained for ten years, was to eliminate the structural budget deficit, and by direct implication, at least cap if not reduce, the National Debt. By 2012 George Osborne already realised, from the bitter experience of poor decisions, that the consequences of austerity were serious for the underlying health of the economy, and the Government responded from 2012 by shifting the burden of austerity from ‘we are all in this together’; principally to the shoulders of the welfare state. Those with least would proportionally pay the most. Now that is Austerity.

On 7th June, 2019 Theresa May resigned as PM. She announced the Conservative legacy of ten years austerity: “We have completed the work that David Cameron and George Osborne started: the deficit is almost eliminated, our national debt is falling and we are bringing an end to austerity.” Boris Johnson has reaffirmed the triumph: ‘Austerity’ has ended. In September this year Sajid Javid, Conservative Chancellor of the Exchequer made this statement to the House of Commons: “Next year I will add £13.4 billion to the plans for total public spending, including £1.7 billion added to capital spending.These extra funds take the real increase in day-to-day spending to £13.8 billion, or 4.1%. That means I’m delivering the fastest increase in day-to-day spending for 15 years. That funding allows us to start a new chapter for our public services and fund the people’s priorities.”

Since announcing the General Election the Conservative Party has clearly established that it intends to increase public spending substantially (we may suspect beyond the levels announced by Javid, at least as an election promise nobody can ever cash), without announcing substantial tax increases. It is clear that the Conservatives are prepared to increase the deficit, and increase the national debt.

The problem with this is quite simple. I will not bother to challenge the credibility of the Conservative economic strategy. I seek only to establish whether the Conservatives actually believe their own rhetoric; at least sufficient to use it. Clearly not. The Conservatives have abandoned the dogma: ’the Government is just like a Household Budget’: no votes in that any more: ergo, dump it. The problem is that economic reality does not fit with the whole economic proposition that has sustained the Conservative Party: Austerity can now be abandoned, although the national debt has increased by £600Bn+ since 2011, increased in 2018 and there is still a deficit. Nothing has changed. The reductions in deficit achieved have not eliminated the deficit, nor has the impact on the national debt (only reduced when transcribed to a percentage of GDP figure, which then invites economists to arbitrarily select ‘acceptable’ statistical abstractions according to their political predilections), and not sufficient even there to give headroom to increase it, if the Conservative Party actually believes the neo-liberal economics it assiduously claims to follow and to propagandise.

How can we say this?

Here are the ONS statistics below (Table 1 and Table 2: Deficit and Debt). In ten years Austerity all that pain and self-denial has achieved very little to eliminate the Deficit or cap the Debt, according to the standards of economic prudence religiously followed by orthodox Conservative Party economic piety. Austerity has decisively failed to achieve its targets, by its own standards.

The deficit is not eliminated, nor decisively reduced to levels of insignificance. The National Debt is not dented. These statistics are not my chosen figures. I use them because these are the key statistics that have been used and insisted on by Government for over ten years to justify Austerity. They are now being comprehensively dumped by the Conservative Party because they are politically inconvenient in this general election. What happens after the election, I leave to your imagination.

The Conservative Party, in other words, has discovered the magic money tree.

 

Comments (11)

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  1. Mark Bevis says:

    The magic money tree of course, will only be used to enrich their already rich mates as soon as the election is over. Whilst Labour are proud to say they will dhut down the DWP and replace UC, with McDonnell seriously looking at UBI trials, Boris may well copy Labour and say “I’ll abolish UC too!” But with the intent of not replacing it with anything at all. As furthering Cummins’ eugenics programme, I can foresee the next Tory government abolishing the benefit system altogether, with it being marketed as “Look, no austerity and no poverty, no one needs benefits anymore!” Or some such nonsense.

  2. Dougie Blackwood says:

    Those of us that take heed to what has happened and listen to the election promises take the thrust of this article as confirmation of what is glaringly obvious.

    There are a couple of options:
    After the election, regardless of the outcome an excuse will be found not to splurge on the promises, “blown off course” or what we found when we saw the books prevents it.
    Money will be spent and the debt will balloon until the international money men call a halt and we have another round of even more draconian austerity, think Greece.
    Some money will be spent and taxes are raised to compensate. We can be sure that there will be no significant increase that will bear on the richest in our society, more likely is another increase in VAT to perhaps 25% , a tax that bears most heavily on those struggling to manage who spend all of their income.

    The magic money tree will be put away for another time.

    1. Derek Henry says:

      Complete nonsense !

      As per usual Japan destroys everything you write.

      You really do need to understand the difference between the Euro that Greece uses and the £. The differences are HUGE !

      http://bilbo.economicoutlook.net/blog/?p=38040

  3. Indyman says:

    Given the oil wars still going on in the Middle East, the price of fuel is suspiciously low. Am I being unduly paranoid in thinking that the rich boy’s party has done some kind of back room deal with the oil companies to hold price increases till after the election, so that if Labour get in the Tories will blame them for the increases but if the Tories stay in power they will just say “tough, sh*t happens”?

    1. Mark Bevis says:

      You assume Britain, sorry, the Westminster village, still has an importance on the world stage.
      Latest peak oil review:
      https://www.resilience.org/stories/2019-11-11/peak-oil-review-11-november-2019/
      “The 16-month trade war between the world’s two biggest economies has slowed economic growth around the globe and prompted analysts to lower forecasts for oil demand, raising concerns that a supply glut could develop in 2020.

      Saudi Arabia has bounced back from the mid-September attack on its oil facilities, with its crude output in October recovering to pre-attack volumes, according to the latest S&P Global Platts survey of OPEC production. The kingdom pumped 9.80 million b/d in October, leading OPEC’s total production back to 29.71 million b/d, a 1.26 million b/d rebound from its lowest level since the depths of the global financial crisis in 2009.”

      1. Indyman says:

        Thanks for the link, very interesting, what I was wondering about was whether the Westminster posh boy’s club could do some kind of deal with their corporate buddies relative to just the UK market. Sorry if I didn’t make that clear. I’m not even sure if that is possible but I wouldn’t be at all surprised if those bastards were up to something like that.

  4. Peter Johnston says:

    The simple fact is austerity was just a con to cut the public sector. If we had true austerity it would have affected all sectors.
    Instead the lower economic classes were affected more than the higher classes, the higher classes have benefited from this so called “austerity”.

    1. grafter says:

      We are an oil rich country. Where has all that money disappeared to and who exactly has been benefitting from it ?

  5. Derek Henry says:

    None of which applys to the £ of course.

    As the government accounts clearly show the government budget deficit is the private sector surplus

    Don’t believe me ? just look at the real data instead of listening to the ideologues

    https://pbs.twimg.com/media/BDo30xhCAAAuRjh.png:large

    The national debt is just that surplus moved into gilts overtime which is mainly our pension funds to earn interest.

    Don’t believe me ?

    I’ll let Mike Norman explain it so I child gets it.

    https://www.youtube.com/watch?v=w5aE7N8Cc5Y&t=7s

    It is hilarious to listen to the idealogues trying to explain Japan’s debt to GDP ratio of 250% of GDP.

  6. Derek Henry says:

    No wonder a large majority in Scotland voted to stay in the EU.

    When they don’t even know the HUGE differences between the £ and the Euro and still believe the UK treasury operates like a household budget.

    The EU ref was an IQ test. Scotland scored a -F

    Of course there are bond vigilantes in the Eurozone it is one of the tools they use to control nation states who pretend to be sovereign and what Scotland will pretend to be at the heart of Europe.

    https://www.spiked-online.com/2019/10/04/the-revenge-of-the-elites/

    In the UK, Japan, New Zealand, Australia, US the bond vigilantes do NOT exist.

    http://bilbo.economicoutlook.net/blog/?p=34830

    These central banks can maintain yields at whatever level they choose, at whatever maturity range they targets, and for as long as they like. The bond market investors are incidental to that capacity and are supplicants rather than drivers. Operationally they can set rates out to 40 years if they want to and make a two way market at their desired rates, and that’s where interest rates will be.

    Not the Eurozone a HUGE flaw in its set up. Which of course was in there on purpose.

    https://www.theguardian.com/commentisfree/2012/jun/26/robert-mundell-evil-genius-euro

    1. John S Warren says:

      It does not follow from the fact that Governments are not like Households, or that Austerity policy relied on a propagandised, calculated Government fixation with the deficit and debt, that it was also simultaneously ignoring; and established targets it probably knew were neither necessary nor achievable; that it follows Brexit is a good idea. I am sure that someone as intelligent as you claim to be, will have understood the whole point of the article?

      At the same time, exluding the UK, eight EU members do not use the Euro. Some of them have no intention of using the Euro in any forseeable future; and are under no pressure to do so. Candidly, I am not quite sure what point you are trying to make with your two comments. Perhaps I misunderstand, but under the weight of your extravagant condescension, directed indiscriminately at a substantial majority of the Scottish people, misunderstanding the thrust of your argument is perhaps not entirely surprising. Incidentally, while my advice may have little to recommend it, I never think it a good idea to insult the intelligence of most of the Scottish population, even if you believe they are wrong; at least if your intention is to persuade them, rather than simply to draw attention gratuitously to your own distinctive, although, if I may say so – from this evidence – somewhat narcissitic merits.

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