Analysis: May vows ‘austerity is over’ – but should we believe her?

Ben Wray

Ben Wray finds there’s good reasons not to believe the Prime Minister when she says ‘austerity is over’

PRIME MINISTER Theresa May has declared the end of austerity in her Tory party conference speech.

She told the party faithful that: “The British people need to know that the end is in sight…we get it…sound finances are essential, but they are not the limit of our ambition.

“Because you made sacrifices, there are better days ahead. So when we’ve secured a good Brexit deal for Britain, at the Spending Review next year we will set our approach to the future: debt as a share of the economy will continue to go down, support for public services will go up.

“Because a decade after the financial crash people need to know that the austerity it led to is over and their hard work has paid off.”

READ MORE: Leading health expert warns austerity could be halting 100 years of rising life expectancy

Should we believe her?

First, the statement contradicts that of the Chancellor Phillip Hammond yesterday [2 October], who said that he would resist the calls of “populists and demagogues” and continue with the austerity programme.

The Budget, which will be announced on the 29 October, will now make either Hammond or May look ridiculous. Yes, she has said that austerity will end at next year’s Spending Review following a Brexit deal (presumably if it’s No deal austerity goes on), but to declare the end of austerity and then deliver a Budget of austerity a few weeks later will look absurd. However, do not be surprised if that is what happens.

May’s announcement that the capital borrowing cap on local authorities will be lifted is anticipated by the Treasury to add an extra one billion onto the public debt, while another year’s freeze on fuel duty adds an extra £800 million. So Hammond already needs to find an additional £1.8 billion in savings or tax rises to stick with his deficit reduction plans.

READ MORE: What does JRF’s report tells us about child poverty, disability and gender in Scotland?

Let’s bear in mind that nothing has changed in terms of the debt numbers to warrant a change in approach to fiscal policy: UK debt was 85.8 per cent of GDP at the end of the 2018 financial year, up 21 per cent on when the Tories came to power, and nearly 26 per cent higher than the “reference value” of 60 per cent of GDP. If you ever took the idea of austerity as a serious and credible approach to reducing public debt – now you know it’s not.

Second, what does ending austerity so that Britons’ “hard work has paid off” actually mean? May’s comments indicate she sees it as starting to spend more than the Treasury takes in each year – deficit spending – but many people will think it means the money they’ve lost over the past decade in terms of wages and falling living standards will suddenly return. That would take something much bolder and more ambitious than is in May’s wildest dreams.

Third, it’s important to understand how ingrained austerity-led reforms to public services are. Universal Credit is the obvious example here. It has taken eight years of Tory Government for the benefit change to come to fruition, and is still a bureaucratic and IT nightmare, and has embedded in a policy which has forced millions below the poverty line.

CommonSpace has been reporting all week on new analysis on poverty in Scotland from the Scottish Government and Joseph Rowntree Foundation, and the one theme we keep returning to is welfare reform. It will take a government committed to overhauling the past eight years of austerity-driven public service reform to end austerity – that is not likely to be May’s Government.

What needs to be kept in mind here is that austerity was always about politics, and never economics. There was never any target in place for what national debt to GDP level would be acceptable to the Tories, because the aim wasn’t to get rid of the national debt (a fantasy notion) or even to seriously reduce it – it was to restructure the economy in favour of big business by running down public service provision.

At some point the politics of austerity was always going to turn sour electorally for the Tories, and thus they’d suddenly discover that reducing the debt and deficit is not such an urgent requirement after all. The problem for May is the public may notice the Tories massive lack of credibility here. The problem for the rest of us is she may not actually be serious at all about doing what it takes to end the savage destruction of the age of austerity. Austerity began life based on the big lie that the financial crash was a public debt problem – it may be naive to believe the same people when they declare it to be over.

Picture courtesy of OccupyMCR