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Austerity was never anything more than a big lie

The last 14 years have completely disproven the economic myths the Tories used to set us on the path of cuts and devastation – we need massive direct investment to rebuild the post-industrial communities, writes JON TRICKETT

IT’S time that we had an honest debate about the underlying assumptions which have been used for so long to drive the British economy into the doldrums.

Of course, it is true that the Conservatives have proved incompetent in economic management. But this poor fiscal administration has only compounded the mistakes which are baked into the whole neoliberal era which was kicked off in Britain by Margaret Thatcher.

It follows, therefore, that getting a more competent government will not be enough, although it is absolutely essential that the country kicks the Tories out of office.

The British economy is stuck in a cycle of low growth, low investment and low productivity. Even within a global economic system that has struggled to provide rising living standards since the 2008 financial crisis, the British economy increasingly resembles a basket case.

Let’s cut back to 2010 when the Conservative and Lib Dem coalition came to power. Chancellor George Osborne embarked on a programme of brutal public spending cuts.

This policy of “austerity” was based on the absurd belief in an economic theory called “expansionary fiscal contraction.” This is the idea that if you sharply cut public spending it will lead to economic growth.

Osborne argued that austerity economics was simply the only response to the large deficit Britain acquired by bailing out the banks that crashed the world economy in 2008.

“There is no alternative” became the mantra of Conservative and Lib Dem politicians. They ignored the numerous economists who, correctly, warned that austerity would in fact destroy growth.

The country was told that governments with high debt would see shrinking growth. Osborne amplified the theories of economists like Carmen Reinhart and Kenneth Rogoff who claimed that a country’s economy would shrink by 0.1 per cent if its debt surpassed 90 per cent of its GDP.

But this whole theory which Osborne and others relied upon to justify austerity turned out to be based on a spreadsheet error. It later became clear that if they hadn’t made this mistake, the corrected calculation would have shown that countries with a 90 per cent debt ratio grew on average by 2.2 per cent.

It is outrageous that the Tory austerity argument, echoed by commentators in the media and elsewhere, rested in part on a schoolboy error.

We know what underlies the Conservatives’ desire to cut, cut and cut again. They hate the public sector. Their austerity policies were driven by their ideological commitment to a small state and low taxes.

They want to cut taxes for the rich and big corporations, in the hopeless assumption that money in the hands of the rich will somehow magically “trickle down” to the rest of the population.

The last 14 years have proven that this too is a false ideological prejudice. How else can you explain the fact that Britain’s billionaires have seen their wealth increasing exponentially at the same time as the number of foodbanks rises?

The consequences for the people of our country have been disastrous. Since coming to power in 2010, the Conservative Party has cut the core spending power of councils in England by 18.9 per cent. Over half of councils in England have said they are unsure whether they will be able to fulfil their legal duties to deliver statutory services next year.

Councils provide vital services that we all rely on and many local amenities that form the bedrock of community life. Now everywhere you look the libraries are closed, disabled people aren’t getting the care they need and public spaces have fallen into disrepair.

It should come as no surprise that these cuts have hit northern England harder than other parts of the country. England’s most deprived 10 per cent of council authorities (nearly all in the north) have seen a cut almost three times as high as the richest 10 per cent of councils.

On average the poorest 10 per cent of councils in England have received a 28.3 per cent cut in the last 13 years (2010-11 and 2023-24), whereas the richest 10 per cent of councils have received a 10.1 per cent cut on average during the same period.

Now the Tories are claiming another falsehood. They say that their economic policies are now being rewarded by growth. The truth is rather different. The Resolution Foundation has demonstrated that British productivity growth per worker has been “atrocious” over the last 16 years since the financial crash.

There has been some growth, the Resolution Foundation concluded, but the prime driver was not investment in making the country more productive. Rather, it was being driven by the growth in the size of the population in part due to increased immigration.

As we move ever closer to election day, we need to expose the right-wing myths peddled by the Tories and reveal the damage they have done to the country. The mood in my constituency is one of anger at the government. It’s time to boot the Tories out of office for a generation. But equally, it is time to confront Toryism and its ideological assumptions head-on.

So let’s be clear that markets left to their own devices do not build social fabric. They seek to maximise profits. Our country will only move forward if the government actively intervenes in our economic life to secure our future.

I have long argued for the introduction of a “Marshall Aid” type of programme to rebuild the post-industrial communities. These areas feel abandoned by a cruel economic orthodoxy which turns its back on the very places which contributed so much to the wealth of our country.

But there is an even larger point to make, which is that working people alone create wealth. Yet they have been poorly rewarded over generations.

Democratic socialists would rather build a workers’ economy, as has been proposed by Unite, rather than an economic system which cuts services, drives poverty upwards, and is increasingly unproductive while rewarding a few hundred billionaires and mega-corporations.

Jon Trickett is Labour candidate for Hemsworth.


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