Economist Michael Burke writes exclusively for the People's Assembly Against Austerity.
George Osborne is once again set to impose austerity, cutting jobs, pensions, public services and social welfare. The pretence is that this is supposed to reduce the public sector deficit. But the last time he did this the economy slowed to a crawl and in 2012 the deficit actually rose.
The economy only began to recovery modestly in following years and the deficit fell when he stopped imposing new austerity measures as part of the election strategy.
In reality austerity is a transfer of incomes, from poor to rich and from workers to business. In his very first Budget Osborne hiked VAT, which affects those on ordinary incomes and the poor far more than the rich, for a supposed ‘saving’ of £13 billion. He also cut corporation tax at the same time, giving big business exactly £13 billion. This clearly has nothing to do with reducing the deficit and is a prime example of austerity really works.
This is likely to be repeated in a different form in this Budget, with giveaways for business and the rich, while those on average incomes and below are worse off. Of course it is ordinary people who struggle when the NHS and the education system are cut in real, per capita terms. The rich rely on private health care and private education.
Apparently, Osborne’s struggle is driven by a determination t lower the debt. But the truth is very different. Government debt has soared under the Tories as the economy has not been able to achieve lift-off. Household debt has increased. And overseas debt has also risen sharply.
None of this is sustainable. To get re-elected Osborne promoted increased consumption, most especially by boosting housing demand. But in textbook fashion as the supply of housing was not also increased by building new homes, the main effect was simply to boost prices and make homes even more unaffordable either to rent or buy.
Now he wants to rule out any borrowing at all, even for investment and while in the interest rate on government debt is at historic lows. This stands economic reality on its head. By this token, no-one would ever take a mortgage to buy a home if all borrowing for investment was outlawed. Business would never borrow to buy machinery or build a factory. A farmer would be unable to borrow if her tractor broke down. It is Neanderthal economics which condemns us all to permanently low growth.
There is an alternative. It is investment. Without investment we would still be living in the Dark Ages. Investment allows the economy to grow sustainably because it increases the productive capacity of the economy. This is the real alternative to austerity; investment not cuts.
Inside parliament, on the picket lines and on the streets there is a growing opposition to this government and militant mobilisations to back it up.
The fightback against the Tories is growing.
See you on the streets.