Budget Deficit Cleared – More Austerity on the Way

In 2010 when the Tory government was elected, in coalition with the treacherous Lib Dems, lest we forget, the UK economy had started a very fragile recovery from the 2008 financial crash. The Tory chancellor at the time, George Osborne, proceeded to drive the economy straight into a ditch. The public spending cuts introduced by Osborne, failed to bring the budget deficit down, and after two years he changed tack to basically introduce the austerity light that Labour had proposed in the 2010 general election.

Low and behold, the budget deficit started to reduce, slowly, and finally will be in balance by 2019-20, according to the Office of Budget Responsibility. The deficit refers to the amount of tax money coming into the exchequer, less the money the government spends, or to put it another way, we have been spending more than we are raising in taxes. This is often confused with the amount of money that the government is borrowing in total, but that figure has almost doubled over the last 8 years to around £1.8 trillion.

This is due to the government’s austerity policies, as you can’t cut your way out of a recession. The austerity policies have had the effect of depressing economic growth even more than the recession, hence the need to borrow more. At the same time the government cut taxes for the highest earners, further reducing the tax take, and we find ourselves where we are today, massively in debt.

News of finally balancing the budget, has been greeted with cheers from the government’s supporters, but in truth it is a woeful record. Along the way, public sector wages have fallen, with public service union the PCS calculating that public sector workers are now on average £5,000 a year worse off in real terms than in 2010.

Real wages overall, including the private sector have fallen by 10.7% since the Tories came to power. The cruel cuts to benefit payments, and accompanying regime of sanctions have caused much misery, and deaths in some cases. Public services have been cut to bone, which are often relied on by the most vulnerable in our society. There is a spike in the thousands of rough sleepers on our streets. Growth in the economy has only been modest. Hardly a record to be proud of.

What the Tories did manage to do, was frame their austerity policy as a result of Labour’s profligacy, but the depth of the recession in 2008 made Labour’s public spending necessary, and as I say, it was working to an extent. Why Labour let the Tories get away with their narrative, is still a mystery to me. Maybe they believed it themselves?

We should remember also that the Tories when in opposition advocated sticking to Labour’s spending plans (before the financial crash), so they shouldn’t have been allowed to revise history as they did. They in effect blamed the recession on Labour, although the Tories agreed with Labour’s deregulation agenda, and in fact wanted to go further.

The current chancellor, Philip Hammond, released his Spring economic statement today, in which he confirmed that higher than expected tax receipts mean that the current account budget is now nearly in balance. But he would go only as far as promising the possibility of ‘jam tomorrow,’ with the prospect of increasing public spending in this year’s Autumn budget. He wants to keep money available to cushion against any economic shocks caused by Brexit.

But more than this, austerity is an ideological fetish for the Tories. They are obsessed with cutting down the size of the public realm, believing in ‘small government’ just like their tea party compatriots in the US. They see it as an end in itself, whatever the cost.

Dr Faiza Shaheen, director of the think-tank CLASS (Centre for Labour and Social Studies), said: “Local Councils are almost bankrupt, workers are overworked and underpaid, and we are losing the race with our competitors in the G7.

Britain can’t afford more of the same failed dogma, especially given the uncertainty of Brexit. We need to see the public sector pay cap lifted, public services properly funded, and more borrowing for investment.”

Amen to that.