Austerity – Is It Really Over?
Theresa May recently stated in her speech at the Conservative Party Conference in October, that austerity is “over”. A bold and almost revolutionary comment from the Prime Minister, the government under her leadership will seek to bring about an end to austerity, of which has been the flagship policy of the Conservative government since it came to power eight years ago. After Brexit, she will aim to reinvest into the public sector, letting people know that their “hard work has paid off” and the “end is in sight”.
It’s a very controversial statement to make, however obvious that is to state. May claims she will bring an end to a policy that has ravaged the country for years, has barely helped, if at all, economic stability, and has exacerbated poverty and social deprivation to such a point that the United Nations have had to point out the sheer extent of the problem the UK faces, primarily because of austerity. But what she said provokes some interest. What has the economic impact been, as well as the social impact? And is it really over?
The economic impact
Austerity was introduced in 2010 in light of the financial crash and subsequent recession. At its worst, the UK’s deficit hit a peak of 10% of its GDP. It was introduced in the hope of stabilising the economy, cutting government spending, and reducing the structural deficit. Since it was introduced in 2010, however, it has not had a significant impact on economic growth and development. In fact, austerity has contributed to a sluggish economy since 2010. Though there have been other causes of economic stagnation, such as the eurozone crisis and the effects of the financial crash around the world, austerity is nonetheless necessary to consider. A report by John Van Reenen in 2015 outlined that the austerity programme introduced by the coalition government has “knocked off at least 1% per year off growth in the first two years of this Parliament”. Economic growth hasn’t improved very much, with the economy verging on another recession in 2011 and 2012. The Bank of England couldn’t save the government either during the recession, with interest rates being remarkably low over the years; right now, it is at 0.75%. And in another report, by the TUC, austerity has, over the years, been a “vicious cycle” that involves reducing government demand, which in turn holds back economic growth, and with that labour markets are affected, and government revenue subsequently falls.
The social impact
What is perhaps forgotten or at least understated, is the social impacts of harsh economic measures introduced through austerity. And it’s even more incredible to consider in a country such as the UK, of which has the fifth-largest economy in the world. In recent days, Philip Alston, the United Nation’s rapporteur on extreme poverty and human rights, concluded his investigation into the state of poverty in the UK. In his report, he states bluntly that the imposition of “mean-spirited” austerity has caused “great misery” for its people. Issues of child poverty, increased use of foodbanks, rises in rough sleeping and homelessness, and the catastrophic implementation of Universal Credit are all cited in his broader point that Britain just isn’t doing enough to help its vulnerable people and that austerity has been a social disaster. Alston also mentions the Institute for Fiscal Studies, which have claimed that child poverty will rise in the UK by 7% between 2015 and 2022, reaching potentially 40%. Groups such as women, children, the disabled and others, in particular, are affected, and with prominent issues like Brexit continuing to create economic uncertainty, their situations do not look like they are improving anytime soon. It was also reported that between 2010 and 2017, austerity has been linked to some 120,000 extra deaths. Cuts to vital services like the NHS, the calamitous introduction of Universal Credit, and dependency on foodbanks could all be argued as factors in this tragic situation. Poverty, as reported by the Joseph Rowntree Foundation in 2016, costs the UK a total of £78bn per year.
Will austerity end?
Theresa May states that her government will bring about the end of austerity, a programme that has, without doubt, caused traumatic and outright terrible effects on much of the population of this country. Regions left undeveloped, vulnerable people made to feel even more alone and helpless, austerity has been a destructive force of politics that could have and should have, been stopped years ago. In fact, it should never have been introduced.
Austerity can end, and it will. As the years go by and the impacts of this programme are felt increasingly in a negative way, more and more people will become frustrated from the pain and torment this has caused them, and in doing so, the government will have to concede. Austerity is not an electorally-appealing idea, either, and as such will have to be sidelined or even removed from the manifesto in order to give the Conservatives a chance of winning the next election. As we have seen from Jeremy Corbyn’s big focus on public spending and revival of investment in the economy, it indicates that the public mood has shifted away from the days of the financial crash and are now looking towards reinvesting and rebuilding a country that has long been tarnished by the impact of austerity.
And with Brexit looming over the economy, questions have been raised over its impact on the economy. An even greater force has now overshadowed austerity as a force of destruction. A no-deal Brexit could cost the UK economy between 5% and 8% of its GDP, according to the IMF. Demonstrating that while austerity could end, it doesn’t resolve the problem of social despair and poverty. The issue is not confined to simply ending austerity, and now the government needs to address a wide range of causes of poverty and economic stagnation. Change is necessary.
Has austerity come to an end? Not yet. But even when it does come to an end, its impacts will be felt for a very long time.