No one voted for Rishi Sunak to return the UK to crippling austerity
OPINION: Sunak wants yet another round of cuts to public spending. And just like in 2010, we didn’t vote for it
When Rishi Sunak resigned as Boris Johnson’s chancellor in July, Westminster lobbyists whispered that the real reason was a disagreement about austerity ahead of a looming speech on the economy.
Johnson, so the rumour went, was against austerity and keen to stick to the agenda set by his 2019 manifesto. Sunak, it was said, wanted to be, as he saw it, “more realistic”.
In his resignation letter, Sunak alluded to this difference of opinion, talking about private disagreements and the need to “make sacrifices and take difficult decisions” in order to achieve a “low tax, high growth economy”.
In the race to replace Johnson as Tory leader and prime minister, Sunak denounced his opponent Liz Truss’s plans – not because she wanted to slash tax rates for the rich, but because doing so would involve borrowing, which, he argued, would boost inflation.
“My strong point of view is, if the government goes on a huge borrowing spree, that is only going to make that situation worse. And that will mean that the problem will last longer,” he told radio station LBC.
But the Tory membership baulked at Sunak’s economically hard-Right agenda, and voted for insanity with Truss instead. At this point, the markets weighed in. Truss didn’t have any credible plan to get the UK economy back on track. And as we’ve all seen, in our era of globalised capitalism, financial markets still have real muscle.
This time around, following Truss’s humiliating departure after six weeks in office, Sunak’s campaign website didn’t explicitly mention austerity. But the first point in his ten-point plan is “A long-term plan to beat inflation.”
This suggests that with Sunak set to become prime minister, the UK is headed for another round of devastating cuts to our public services – cuts that we did not vote for.
Instead, in the 2019 election, the Tories ran on a manifesto that promised significant spending increases across a slew of public services, and a bid to ‘level up’ the country. If they had tried to argue for swingeing spending reductions, they would have lost.
2010: Austerity part 1
These cuts will come on the back of another brutal round of austerity – which the UK also didn’t vote for. Before the 2010 general election, Labour, the SNP and the Greens all proposed investing to boost the economy after the 2008 financial crash. The Lib Dems promised not to cut spending within the first year after the election, waiting until, they hoped, things had got better. Between them, these parties won 54.7% of the vote and a majority of MPs.
It was only because the Lib Dems ditched their promise – signing up to a coalition agreement with the Tories that included taking the axe to public services immediately – that the austerity programme masterminded by then-chancellor George Osborne went ahead.
At the time, most serious economists called out Osborne’s agenda as the nonsense it was. A basic understanding of economic history showed that cutting public spending in a recession just takes money out of the economy, driving down spending and wages, and prolonging the slump.
Austerity drove millions of people into poverty. Homelessness soared, and the NHS was damaged
Get our free Daily Email
Get one whole story, direct to your inbox every weekday.
Again and again, Osborne trotted out one particular academic paper to justify his assault on the welfare state – a 2010 study by Carmen Reinhart and Kenneth Rogoff, which compared GDP growth rates in various countries against their public debt and seemed to show that higher debt slowed growth.
But in 2013, that paper fell apart. A postgraduate economics student in the US looked through their spreadsheet and discovered they had made some serious copy/paste errors. Fix the typos, and their findings – the only justification for austerity – disappeared.
In reality, the cuts did what most economists said they would: they prolonged the recession, drove down wages and did a decade of damage to the UK economy. With tax receipts failing to rise – which is what happens when wages fail to rise – government debt ballooned as a percentage of GDP.
Millions of people were driven into poverty. Homelessness soared, and the NHS was damaged. A decade in which serious investment was needed to switch the UK to a zero-carbon economy was wasted.
But its advocates didn’t mind, because austerity was never actually about a desire to cut government debt. It was always about an ideological obsession with slashing the public sector and letting capitalism run free. The point was to allocate as much as possible of society’s wealth through the market – one pound, one vote – rather than democratically – one person, one vote.
This time, that’s clearer than ever.
Alternatives to austerity
Across the Western world, other governments are choosing a different path out of the pandemic.
Under its post-Covid “recovery plan for Europe”, the EU has issued its first-ever bonds to deliver more than two trillion euros of investment in infrastructure across the bloc. This is the continent’s largest-ever stimulus package, which is particularly focused on the low-carbon infrastructure needed to lessen the climate crisis.
In the US, Joe Biden is doing the same with his Inflation Reduction Act, which will inject hundreds of billions of dollars into cleaning up the US economy, reducing price hikes by trying to wean the country off fossil fuels.
It’s true that, unlike in 2010, borrowing now is more expensive. Back then, interest rates were so low, money was almost free, making Osborne’s vandalism pointless. But now, the cost of not borrowing is even greater – because the threat of a slump is bigger, the climate crisis is even more urgent, and our public services and infrastructure are at greater risk of collapse.
Despite this, Sunak seems to be planning to slash and burn the UK economy, directly against the wishes and express promises of his party to Britain’s voters.
And there is little sign that Keir Starmer’s Labour Party will oppose him, which means the rest of us will have to.
We've got a newsletter for everyone
Get our weekly email
CommentsWe encourage anyone to comment, please consult the oD commenting guidelines if you have any questions.