Why this election is suffering from amnesia about austerity
The Tory narrative about its economic record defies reality.
“For the past nine years, the Conservatives have been cleaning up Labour’s mess. Because of the tough decisions that our party made and our success in bringing down the deficit, the economy has continued to grow and the public finances have been restored… The strength of the UK’s balance sheet – the hard work done by all of us in this country – means that we are now in a position to invest properly in our future.”
This is from the Conservative Party’s general election manifesto. If it sounds familiar, that’s because a similar narrative has also been pushed by much of the media.
Last year I wrote a book called ‘Media Amnesia’, which was about all the misremembering, strategic forgetting and rewriting of history that has happened during the years of austerity following the 2008 financial crisis. As a banking meltdown morphed into a public debt crisis, blame shifted from greedy bankers and free market ‘casino capitalism’ onto the public sector, immigrants and people who didn’t have much money. This forgetting and misremembering helped make austerity, privatisation and corporate tax breaks seem like common sense responses to the crisis.
The Brexit referendum led to accusations that the media failed in its duty to help citizens make informed decisions. Since then, it has been heartening to see some attempt by the public service media to counter ‘media amnesia’, for example by confronting politicians with recorded footage of statements they would rather forget they had made.
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But it’s clear that, ten years after the crisis, the Tories and their friends in the media are still willing to rewrite even the most recent history to serve their own ends. Let’s take each of the above claims and examine them a little further.
1. The Conservatives have been cleaning up ‘Labour’s mess’
By ‘Labour’s mess’, the Tories typically point to the increase in the government deficit after 2008, accusing Labour of wasteful public spending. However, the main factor behind the growth in the deficit was the recession, which led to a loss of tax revenue and an increase in spending. The recession in turn resulted from the 2008 financial crisis, which had deep structural roots in the neoliberal economic model. Tony Blair’s New Labour does need to held accountable for its role in the crisis (which, of course, was global), but this had much more to do with financial deregulation than public spending.
The bank bailouts did add to the deficit, and in this respect New Labour could be accused of spending too much public money on the banks without properly nationalising them and putting them to public use. The Tories, however, supported the bank bailout, and it was under Thatcher’s ‘Big Bang’ that financial deregulation really got going in the first place. Overspending on public services or social security – the main targets of austerity – had nothing to do with any of it.
2. ‘Tough decisions’ were a necessity
At the time, the Tories and their coalition partners the Liberal Democrats claimed that austerity was an economic necessity. They had to stop borrowing and close the deficit because otherwise the bond markets would punish them by raising interest rates. There was even talk of the government no longer being able to borrow from the bond markets and having to go to the IMF for a bailout.
In fact, austerity flew in the face of established macroeconomic theory, which says that during a recession the government should step in and spend to maintain demand. Otherwise demand will keep falling and a recessionary spiral will set in. Moreover, there was never a risk that the UK would ‘run out of money’ because unlike the eurozone crisis countries like Greece, the UK has its own currency and its own central bank. The bond markets knew this and saw the UK as a safe haven, so interest rates stayed low.
The reality is that austerity was never an economic necessity, in fact it defied economics.
3. The ‘hard work of the British people’ (i.e. austerity) led to a strong recovery
When the coalition government took office in 2010, economists warned that cutting spending while the economy was weak would take demand out of the economy and lead to a ‘double dip’ recession. This is exactly what happened. Austerity has led to the slowest ever post-recession recovery. In fact, the coalition government had to roll back on austerity in order to dig itself out of recession. It then pretended that it hadn’t, and after their election win in 2015, the Tories carried on with their austerity agenda.
The government likes to claim that, under its stewardship, the economy is now doing marvelously. Growth is strong, unemployment at record lows, and even wages are increasing, we’re told. But as anyone who actually lives in the real Britain knows, there are serious problems with the economy. Annual growth has sunk to its lowest rate since 2010. GDP per person in 2023 will be 24% lower than it would have been had it grown at its long-run trend rate of 2.3% per year since 2008. Real earnings of those in work are still lower than pre-2008 levels. Productivity growth is almost at a standstill. There has been a profound shift in the nature of poverty, with the majority of people living in poverty either working or sharing a household with someone who is.
4. The government can now afford to 'invest properly in our future'
The Conservatives say they will not borrow to fund day-to-day spending, but have promised to “invest thoughtfully and responsibly in infrastructure right across our country in order to increase productivity and wages.” The new fiscal rules announced in their manifesto allow public sector net investment of up to 3 per cent of GDP per year.
There was nothing to stop them doing this is government nine years ago – but instead they chose to implement austerity. Now the damage this has caused is clear for all to see in the shape of the NHS crisis, the mental health crisis, the care crisis, the knife crime crisis, the homelessness crisis and the cost of living crisis, not to mention its likely role in the rise of the far right.
The Conservatives are now in a bind. They want to be seen to be investing in public services while still carrying on with what is essentially an austerity agenda. Their plans would leave public service spending excluding health still 14% lower in 2023-24 than it was in 2010-11. Meanwhile there are £3.8 billion in social security cuts still to come, and child poverty is predicted to continue to rise sharply under a Boris Johnson government.
All the electoral game playing over spending only highlights what many of us knew all along: that austerity has always been a political choice, and continues to be one now.
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