Tories wedded to austerity because of effects not despite them

By Economist Michael Burke

There have been widespread reports of a sharp break from austerity by Chancellor Philip Hammond in the Budget on November 22. There has been speculation of big infrastructure spending, tales of large scale investment in housing. It won’t happen.

 

The Tories are wedded to austerity. This is not because they are nasty people, although the party of ATOS and Universal Credit clearly doesn’t do human decency. The BMJ reckons 120,000 people have died prematurely because of austerity. The Tories are wedded to austerity because of its effects, not despite them.

It’s possible there will be some tinkering with Universal Credit, or another pointless scheme that makes homes even more unaffordable rather than builds new homes. There has even been a fake campaign of sympathy for the Hammond’s ‘impossible job’. The only thing that’s impossible is that the Tories will start to cure the economic crisis of their own making.

Since the beginning of 2008 the UK economy has grown by just 9.3%. This is almost a decade after the recession – the slowest recovery on record. But on the same basis real average weekly pay has fallen by just over 6%. As GDP measures the total level of output, expenditure and incomes in the economy as whole, this means that the wage share of national income has fallen dramatically, and that the income has been directed elsewhere. Where is that profits have risen by 13% in real terms.

This is logical. If your pay hasn’t risen, yet your rent, your energy costs or your food bills have all risen, it means your landlord, the energy companies and the supermarkets are all taking a bigger chunk of your income.

Austerity is just a new term for a policy that has been implemented many times in the past, under different guises; of monetarism, or bearing down on inflation, prices and incomes policy, or curing the ‘sick man of Europe’. Capping wages, cutting public spending and privatisation was the same policy with different marketing.  The effect is always precisely to transfer wealth and incomes from poor to rich, from workers to business, from state to private sector.

For the Tories this policy only has one end-point. When business has clawed back so much more from ordinary people that it begins to invest again, the Tories have done their job. Usually, at that point the Tories then stoke the boom by cutting taxes and similar measures, so that the boom soon turns to bust. In reality, this is a summary of British economic performance for most of the last 70 years.

How do we know when the policy will end? Usually, when there are signs of a sharp pick-up in business investment. That hasn’t happened, and with the big car makers in particular saying they will postpone investment, it doesn’t look like it will happen anytime soon.

Austerity is an anti-worker, pro-business policy. If we don’t get rid of the Tories it will only end when business has signalled workers have been hammered enough, and then businesses graciously deign to increase investment.

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