Tory candidates are on a spending spree, but austerity has not been defeated. There is still a risk that the next recession is followed by cuts that make it worseby Tom Clark / July 16, 2019 / Leave a comment
Back in 2013, in what still felt like a slump, I reported on “Winston,” a stick-thin, lonely and unemployed 47-year-old who spoke for a bewildered nation: “where is all this money, all this electronic money that’s gone missing? How has it gone missing? Who is accountable for it?” Subject to brutal benefit sanctions, Winston was at the sharpest end of austerity, but most of the country was affected somehow, whether through the big squeeze on wages or cut-backs to services. Everyone else, too, was just as baffled as him about what exactly had gone wrong with the banks, and why the rest of society had to pay for the damage.
The age of austerity blew in with a cloud of confusion. “Sound money” Treasury officials seized their moment straight after the 2010 election to warn nervous new ministers—including those, like Liberal Democrat Vince Cable, who weren’t instinctive slashers—that Britain would go the way of crisis-stricken Greece without deep retrenchment. There was indeed a large government overdraft, but the comparison was deeply misleading. Greece had a long record of defaulting on debt, whereas we had been credit-worthy for centuries, and outside the euro retained freedom Athens could only dream of. No matter. The mood was panic, a plan was needed, and austerity looked like a plan. It stuck. Cutting the deficit became the government’s animating mission, and the framework for every decision it took.
Within two years of the cuts starting, economists pointed out that—when viewed from Mars, or even the bond markets—the biggest problem for the UK economy was not the deficit, but the low-productivity trap it was sinking into. But such pointy-headed objections didn’t cut through. The overriding political story was still about the books—witness the support for David Cameron’s cuts-based “long-term economic plan” in the 2015 general election. And without unemployment ever spinning entirely out of con- trol, the deficit was eventually reduced. But it is hard to regard the austerity doctrine as an economic triumph: we have been through nine unremittingly cash-strapped years for public services, and the most anaemic recovery in centuries.
This summer, though, the Conservative Party suddenly decided that the public finances didn’t matter a jot. The judgment has been that the 150,000 or so party members empowered (for the first time in history) to pick a…