While the Conservatives endlessly laud their economic achievements from the parallel universe they inhabit, their fantasies are countered by the growing evidence that all is not well. The stories of the rise in child poverty, homelessness, hunger and destitution are rarely out of the headlines these days and those affected by their policies struggle behind closed doors often alone or supporting families to keep their heads above the water.
Disability campaigner Frances Ryan’s recently published book ‘Crippled’ charts the tragic personal stories of those affected by reforms to social care and the benefits system; stories that are an indictment of the Tory austerity regime which has hit hardest those in most need, causing suffering and financial hardship. Politicians and the media have not only combined to make the case that the unemployed, sick and those with disabilities are a drain on the public purse, but they have also shamefully and cruelly demonised them; transforming compassion into hatred, encouraging verbal insult and violence. The language of “scroungers” and “benefit cheats” versus “hardworking taxpayers”.
We live in the fifth largest economy in the world and we have a government that is in denial about the consequences of its austerity policies. When asked to comment and defend its policies it does so with words that contradict the stark realities of people’s lives; it has consistently ignored the views of those organisations, working locally and nationally, who witness at the sharp end the destructive effects of cuts to public spending on those they are trying to support. Philip Alston noted in May, when he published his final report on the State of Britain, that the government response was that it was a ‘completely inaccurate picture of our approach to tackling poverty’ and had claimed instead that the UK ‘was among the happiest countries in the world’. In response, Alston stated that the government was in denial about the extent of the poverty, inequality, unaffordable housing or hunger which had been caused by the decision to cut public spending on public services and social programmes along with the cuts to benefits paid to those in need.
He commented:
What is most puzzling to me is why the government is so defensive. Starting in 2010, it pursued a radical re-engineering of the welfare state, making poverty and its related outcomes foreseeable. If the government is being honest, it should “own” the consequences and say “yes, poverty is rising, inequality has increased, economic and social insecurity are rampant, and children are going hungry, but this is the price of trimming the budget and incentivising work.” Instead, it is denying the predictable effects of its own policies.”
Last week the charity Buttle UK published its report (you can read it here) following a survey of 1,200 support workers which brought home the scale of the tragedy being played out in homes across the country. Amongst its findings were that:
- 60% of support workers are often (i.e. more than once a week) seeing families who are unable to afford the basics (food, household items, fuel).
- 50% of support workers are often seeing children fed breakfast and/or dinner at school because families cannot afford to feed them themselves.
- 48% of support workers are seeing families unable to afford the costs of children’s clothes and shoes.
- 53% are seeing families unable to afford food and childcare during the holidays.
- Support workers report that 54% of families being supported are living in destitution, and nearly three quarters of these support workers (74%) have seen an increase in the number in the last year.
- 49% of support workers see families who are working but are not earning enough to make ends meet more than once a week, and 21% of workers see this problem on a daily basis.
- 18% of support workers have seen an increase in the number of families needing financial support when at least two people in the household are working, and 39% have seen an increase where one person in the family is working.
These statistics are a savage indictment of this government’s austerity policies. Something has gone very wrong when more than 4 million children are living below the breadline because their parents are unable to meet their material needs from their financial resources.
Figures also show that there are as many as 1.8m million children at risk of hunger in the UK and this is particularly in evidence during the summer holidays. In Wales, food banks reported a 14% increase in the number of parcels handed out last summer and they are expecting a further rise this year. For many, food banks are the difference between being able to feed their children or going hungry. The Metro also reported last week that teachers in a school in Tower Hamlets, one of the most deprived boroughs in the UK, will be providing breakfasts to tackle holiday hunger in partnership with Magic Breakfast. This is not an isolated incidence; it is a scenario which is being repeated across the country. Parents are being reduced to relying on charitable donations in order to feed their children.
What we are witnessing today are the harmful consequences of cutting public spending and the public has swallowed the line that there is no alternative because the government had to repair the ‘public purse’. Who wouldn’t when the public compares it to their own finances? A government in deficit by our own household budget definition of being ‘in the red’ is regrettable, but a government in surplus sounds very positive and to be commended. The irony is that the public, through the relentless repetition of a false narrative, has got the wrong end of the stick about how money works in the real world. These wrong-headed ideas have allowed governments to justify cuts to public spending with horrendous costs to human life, whether through involuntary unemployment, having the misfortune to fall sick or having to manage a disability not to mention the consequences for the public and social infrastructure which underpins a healthy society and economy.
As Bill Mitchell explains:
“One of the principles of modern monetary theory is that a particular value of a fiscal balance a deficit or a surplus is a meaningless thing without a context and it’s the context that is important, not the actual figure and so this idea that has emerged in the neoliberal era that the actual value of the fiscal balance is something that is all important and can be considered in isolation of the context is leading to poor economic decisions being made.
You can watch the video here
It is regrettable that even those institutions such as The Resolution Foundation, along with many journalists reporting on key issues of poverty and inequality, do so using a household budget framework which seems to suggest that the potential for manoeuvre is limited by the health of a government’s finances, rather than a government’s political choices. Yesterday’s public finance figures from the OBR focused, as might be expected, on borrowing, taxing and public debt. The Resolution Foundation’s own analysis of the OBR’s figures is yet another tale of household budget style income and spending, borrowing costs and debt. It added to that the claim that the UK policy makers ‘do not have quite the same room for manoeuvre as they did ahead of the Global Financial Crash’ because the debt to GDP ratio had jumped from 35% in 2007/8 to nearly 85% in 2017/18 (never mind that post second world war it jumped to 248% and nobody blinked an eyelid and the government didn’t go bankrupt then, any more than it can today!) They are worrying about the wrong debt and should be concerned rather with the burden of private debt on the economy and people’s lives.
They also claimed that there are ‘few weapons left in the armoury, with interest rates at record lows and national debt up by 72% since 2018.’ Whilst it acknowledges that the scope for conventional monetary policy (interest rate management) to reduce the effects of a coming recession is limited, the elephant waiting patiently in the room, known as fiscal policy, is mentioned in passing but not directly and is still scarcely on the radar as an option.
It is a matter of regret that such journalists and Institutions, whilst reporting on the effects of cuts to public spending and its consequences, still talk about the size of the deficit and debt as if this were an appropriate measure of a government’s economic record. The real questions they should be asking are:
- What is the context of the deficit or indeed any surplus?
- Have government taxation and spending policies delivered a healthy economy and societal well-being or have they increased inequality and the gap in wealth distribution?
Instead of looking at the accounts as if they were by themselves a measure of economic health, they need to make the connections with the state of the nation’s well-being.
The narrative of tax and spend is also still firmly entrenched in the political and institutional description of how money works. Indeed, with Boris Johnson’s leadership contest proposal to cut taxes on the wealthiest, the discussion focuses on its potential effects on the government’s finances, reducing what it sees as tax income rather than the effects of reducing tax on the wealthy in terms of equity and wealth distribution. The reality is that if you give ordinary people a tax cut, they then spend it into the real economy. Give it to the already wealthy or big corporations on the basis that wealth trickles down then you just reinforce wealth inequality.
The government’s announcement this week that the public sector is going to get an above inflation pay rise was countered by the news that the rise would, apparently and according to the BBC, come from existing budgets. The idea that the government must rob Peter’s department to pay Paul’s or that governments have budgetary constraints is yet another distortion of how governments spend. The pretence is that there is only so much money in the tax pot and therefore hard decisions will have to be made about how the money is redistributed, meaning in effect there will be winners and losers. It cannot be stressed too many times that the government is the currency issuer and has no income arrived at through taxation, nor does it need to borrow in order to spend. While such misrepresentations continue to be employed by politicians, the media and institutions we will deny ourselves the ability to deal with the pressing issues of our time.
With so many challenges ahead, from the climate and addressing poverty and inequality, it is vital that we work hard to bring about the necessary shake-up in thought aimed at shifting the current paradigm towards one that firstly recognises how money works in the real world and secondly what options this offers for government policies and delivering a progressive agenda.
Excellent article thank you, everyone should read this and share far and wide to expose the myths and reveal the truth.
Only blind and callous ideological dogma can explain what the Troy government did. The truth is that governments that are currency issuer are never financially constraint, and therefore the austerity measures imposed by the Troy governments were totally unnecessary. In fact, their application during a recessive setting in which many people in the UK experienced hardship was and remains totally devoid of any economic sense.